US$1.1b tanker joint venture to boost China’s energy shipping capacity

PUBLISHED : Tuesday, 12 August, 2014, 1:59pm
UPDATED : Tuesday, 12 August, 2014, 1:59pm

Two Chinese state-owned tanker giants are setting up a joint venture in a US$1.1 billion deal that could boost the energy shipping capacity of the world’s top crude-importing country.

Shanghai-listed, Hong Kong-based China Merchants Energy Shipping (CMES) said in a stock exchange filing it is partnering with Sinotrans & CSC, China’s third-largest shipping and logistics conglomerate.

CMES is taking a 51 per cent stake in the new venture, injecting its supertankers and cash.

Sinotrans & CSC will pay cash for its share of the venture.

CMES, a subsidiary of Hong Kong-headquartered China Merchants Group, will put all of its 19 very large crude carriers (VLCCs), both live and on order, valued at US$565.9 million, into the new venture.

The transaction, subject to regulatory approval, is slated to be completed before September 30, the statement said. The vessels will be managed by CMES subsidiary Associated Maritime Company (Hong Kong).

The proposed entity will specialise in the operation of VLCCs, each of which is capable of carrying 2 million barrels of crude and has a deck area about the size of three standard football fields.

The new company, to be incorporated overseas, “will further expand the fleet through means such as but not limited to acquisition of secondhand or new vessels” and “will make contribution to ensuring the security of national energy transportation”, the statement said.

Sinotrans & CSC, with its main energy shipping subsidiary Nanjing Tanker, is ranked as the world’s ninth-largest VLCC operator by live fleet size, according to Clarksons data.

CMES is in 22nd place, but could leapfrog into the world’s top 10 after the delivery of 10 VLCCs starting later this year.

The statement did not say whether the joint venture will take over the VLCC fleet from beleaguered Nanjing Tanker, which was delisted from the Shanghai Stock Exchange in June after four consecutive annual losses, the first time such a penalty was imposed on a state-owned enterprise.

Nanjing Tanker has been undergoing a restructuring administered by a local court since last month.