SCF Exits From Non-Core Dry Bulk Segment

SCF Group continued to grow its long-term industrial business portfolio, with a focus on implementation of the most advanced and environmentally sound technologies. As of 30 June 2021, SCF operated a fleet of 43 industrial vessels with one vessel – the LNG carrier SCF Timmerman – added to the fleet in January 2021.

SCF Group continues to focus on the development of its liquefied gas transportation services. In addition to a contract for a newbuilding 174,000-cbm Atlanticmax LNG carrier concluded with TotalEnergies, in January 2021, in July 2021 SCF received confirmation from TotalEnergies to exercise its option for two more similar LNG carriers.

The vessels will be chartered for a period of up to seven years and add USD 360 million to SCF’s contract backlog. Delivery of the vessels is scheduled for Q3 2023 and H2 2024.

roundtable meeting
Credits: scf-group.com

As a part of its offshore business development, two LNG-fuelled tankers will be equipped to shuttle crude oil and serve the Sakhalin-2 project under ten year contracts starting from 2024, with extension options for up to three years providing an additional contract backlog of USD 215 million.

CONVENTIONAL TANKER BUSINESS

A recovery in freight rates continued to be deferred during Q2 2021. The temporary seasonal relief in the Aframax sector, over March-April 2021, was insufficient to positively influence the first half results for the conventional tanker fleet. There are a number of developments creating a base for rates improvement.

Medium-term OPEC+ production rises, need to replenish depleting stockpiles as consumption picks up in line with easing of pandemic-related restrictions, and respective return of more normal refining activity should trigger additional demand for conventional tanker fleet while rising prices for newbuildings should limit supply of new fleet.

As a part of the ongoing fleet modernisation and optimisation programme, Sovcomflot disposed of some aging vessels. During H1 2021, two MR oil products vessels and two Panamax oil product tankers (partly owned through equity-accounted JVs) have been sold. In addition, two Aframax tankers, two Suezmax tankers and two Panamax dry bulk carriers were sold after the reporting date. By selling two Panamax dry bulk carriers, Sovcomflot has completed its exit from non-core dry bulk segment. A total net sale proceeds of USD 112 million will be used to finance Sovcomflot new projects.

CAPITAL AND FINANCING

Three leading international rating agencies upgraded Sovcomflot’s credit ratings to investment grade level: Fitch (BBB-/stable) and S&P Global (BBB-/stable) in April 2021 and Moody’s (Baa3/stable) in June 2021.

On 26 April 2021, PAO Sovcomflot completed a USD 430 million 7-year unsecured Reg S/144A Eurobond issue with a coupon of 3.85%. SCF utilized the proceeds to fund a concurrent tender offer for the Company’s outstanding Eurobonds maturing in 2023. The deal was debt neutral for SCF Group, whilst allowing it to smooth out and extend its debt repayment profile and reduce pricing of its unsecured debt.

In April 2021, Sovcomflot reached agreements with lenders to reduce the fixed interest rate for two secured bank loans by an average of 0.6% for the total outstanding loan balances of USD 410 million.

Marine Money, an international maritime finance publication, recognised SCF’s IPO on the Moscow Exchange in October 2020, as The IPO Deal of the Year. The award-wining transaction brought total gross proceeds of RUB 42.9 billion (equivalent to USD 550 million as of the date of issue). The Russian Federation, which owned 100 per cent of the company prior to the offering, lowered its stake to 82.8 per cent.

Reference: scf-group.com

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