finance
Finance options need careful consideration
In the current financial climate, OSV owners should look at the full range of financing options available when considering ordering new vessels
W
hile the offshore sector is a rare jewel in the shipping sector at present, with many companies looking to invest in new vessels and technology, ongoing troubles at many banks are causing owners to worry about the availability of finance. It was no surprise therefore that the conference stream on financial concerns played to a packed room as delegates sought to find out more about how some of the finance providers view the situation and to learn of the experiences of fellow owners. It was only appropriate that the session was chaired by Geir Sjurseth, managing director of the offshore support group and general manager in Singapore at DVB Bank, one of the leading shipping finance banks (see page 9 for his interview).
Among the alternative sources of financial support for shipping investments are national export credit agencies that provide finance and guarantees as a way of supporting domestic shipbuilding and equipment supply industries. Export Credit Norway, which was established in its present form in July 2012, superseding the former Eksportfinans, plays an important role in providing financial support for that sector in Norway. Senior vice president and head of shipping at Export Credit Norway, Tellef Tellefsen, told the conference that his organisation’s great strength is that it is fully owned by the Norwegian Ministry of Trade and Industry. “Our source of capital is the Norwegian government, which is very strong financially due to the country’s strong revenue from oil and gas. Export Credit Norway, together with GIEK, which provides financial guarantees, has been important in supporting investment by providing finance and guarantees at a time of difficulty for many commercial banks,” Mr Tellefsen said. One of the requirements for such support is that projects being financed have at least 30 per cent local content. “At present there is no problem for Norwegian companies to meet the 30 per cent local content requirement for financial support as the domestic ship equipment market
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Arnfin Eilertsen: companies will have to spend more time accessing finance is still strong and producing equipment for
the international market, including Norwegian shipbuilders. On the basis of high activity level, particularly within the offshore support vessel segment, and high demand for export financing, we expect a large volume of loans to the offshore shipping segment in the years ahead,” Mr Tellefsen said. He anticipated that by the end of 2013 Export Credit Norway’s total lending will reach about US$10 billion, of which about half will be accounted for by offshore supply vessels. One of the biggest Norwegian providers of debt finance for offshore vessels is DNB Bank. Arnfin Eilertsen, senior vice president shipping, offshore and logistics, outlined the key considerations for successfully accessing debt finance for OSV projects, especially in the context of the global credit crunch. “This means that the companies investing in OSVs will have to spend more time and effort accessing and securing finance for their investments,” he said. Mr Eilertsen said that the time needed to secure an attractive financing structure should not be underestimated, and it is increasingly important for companies to have a clear strategy for investment and fleet development. This is mainly because it is challenging to obtain debt financing without secured employment for vessels. He advised that companies should share as much information as possible with their banks “We do not know what the future will bring and it is important to use financial institutions that are supportive in difficult times. A constructive and solution-oriented bank is more important in the long run than the lowest margin in the short run,” he told delegates. He also indicated that the debt finance market
will continue to be challenging through 2013, so “it is crucial to keep a close dialogue with your lenders both on ongoing relations and future plans. Make sure there is capacity with your lenders for future investments and refinancing”. Other financing options include the increasingly popular bond markets, and various forms of equity. Among the most active private equity providers in the maritime sector, including the offshore support industry, is US-based Oaktree Finance. Senior vice president Nicolas Moute outlined some of the benefits of using private equity. Oaktree’s current investments in the offshore sector include Harkland, Floatel, and Deepocean.
He pointed out that banks are currently focusing on existing customers and European banks in particular are still fragile with many closing their shipping desks, and it is not always clear whether OSV projects fall within banks’ shipping or energy divisions. As banks limit the loan/value ratio the equity portion becomes more critical. In the panel discussion, Roy Donaldson, chief operating officer
at Topaz Energy and
Marine, voiced a positive view of investments in the offshore sector and said that his company had experienced no particular problems raising funds as the sector is currently strong. Summing up the session, Mr Sjurseth said that there was a positive overall view of future prospects. “So far, there are no major problems in accessing finance for investment but the problems being faced by some western European banks mean that companies need to look at some alternative options for securing finance, providing more equity into deals,” he concluded. OSJ
Annual Offshore Support Journal Conference and Awards 2013 I 13
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