Delivering Energy for a Sustainable World · BW LPG in 2016 • Acquisition of Aurora LPG enhanced...
Transcript of Delivering Energy for a Sustainable World · BW LPG in 2016 • Acquisition of Aurora LPG enhanced...
Delivering Energy for a Sustainable World
8 March 2017
BW LPG at a glance
Total assets
billion USD 2.6
Presence in
9 Countries
Total no of Employees
1537 People
Global presence
World’s largest fleet of VLGCs
Global LPG exports carried by BW LPG in 2016
million tonnes
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Average worldwide port calls per day in 2016
4.1
Global Seaborne LPG trade in 2016
91
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BW LPG in 2016
• Acquisition of Aurora LPG enhanced BW LPG’s position as a market leader in the LPG transportation segment.
• Consistent with BW LPG strategy of investing counter cyclically and growing through market downturns
• Took delivery of 6x modern, fuel efficient 84,000 cbm VLGC newbuildings from Hyundai Heavy Industries & Daewoo Shipbuilding & Marine Engineering
• VLGC BW Broker loaded the first commissioning cargo from the new P66 Freeport LPG Export Terminal
• BW LPG retired 1x LGC (25 years old) using green-recycling methods, as a part of our broader aim to maintain a young and efficient fleet in an environmentally sustainable manner
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2016 In Six Graphs
Source: Steem 1960; BW LPG Analysis
VLGC Shortage / (Surplus) vs. Spot Rates ($ per day) Quarterly VLGC 8yr Old Prices ($ MM)
VLGC rates have fallen by 75% YOY in 2016 leading to a 23% reduction in secondhand prices
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$10,000
$20,000
$30,000
$40,000
$50,000
$60,000
$70,000
$80,000
$90,000
$100,000
(20)
(15)
(10)
(5)
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5
10
15
20
2012 2013 2014 2015 2016
VLGC Shortage / (Surplus)
VLGC Rates $/day (RHS)
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2016 In Six Graphs
Source: Waterborne; BW LPG Analysis
VLGC Fleet Development 2000 - 2020 Historical Far East – U.S. Propane Price Spreads ($ Per Ton)
This is due to VLGC fleet growth of 43 ships or 22% as well as a collapse in the arbitrage to $91/ton from $240/ton in 2015
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2016 In Six Graphs
Source: Waterborne; BW LPG Analysis
2016 VLGC Trade by Exporter (MM Tons) Change in LPG Imports FY 2016/ FY 2015 (MM Tons)
However global VLGC trade has grown by 7mt or 12% with China (29%) and Korea (20%) driving import growth
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VLGC Trade Heatmap 2012
Source: Steem 1960
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VLGC Trade Heatmap 2016
Source: Steem 1960
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Historical Cost of VLGC Shipping VLGCs continue to represent an efficient method of transport
VLGC earnings are near the 15-year historical low as a proportion of the cargo value
Freight Rates ($ per Ton) as % of Asian CIF Propane Prices
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5%
10%
15%
20%
25%
30%
Jun-11 Dec-11 Jun-12 Dec-12 Jun-13 Dec-13 Jun-14 Dec-14 Jun-15 Dec-15 Jun-16 Dec-16
Source: Waterborne; BW LPG Analysis
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Historical VLGC Investment Performance vs Rates Over the last 16 years, VLGCs have shown poor aggregate investor returns
Source: Clarksons; BW LPG Analysis
Assumptions continued • DD/SS expense between USD $2-2.5m • Opex of USD $7,250/day (2% inflation) • General & Administration of $1,000/day (2%) • Recovery of Owners Equity = (Equity – Scrap) / Total Days
Historical spot rates leave tight margins for covering costs and depreciation of equity, even before offhire
VLGC Investment Breakeven by Component
Margin
$2,993
$- $10,000 $20,000 $30,000 $40,000
Operating Expenses Amortized Drydocking Cost
Historical Finance Costs G&A
Recovery of Owners Equity Utilization
Margin
$31,027 Average Blended Spot
Rate (since 2000)
Assumptions • Long term NB price of USD $75m • Delivery cost of USD $2M • Useful life of 25 years (scrapped) • Scrap price of $300/ldt • Historical blended spot rates for 82k, 84k VLGCs
Assumptions continued • Loan-to-value of 60% • Quarterly payment of principal and interest • Loan profile of 15 years • Long term LIBOR (389 bp) plus margin (250 bp) • Utilization at 14 year historical average of 85.9%
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Historical VLGC Investment Performance vs Rates Over the last 16 years, VLGCs have shown poor aggregate investor returns
Source: Clarksons; BW LPG Analysis
Historical Annual VLGC Investment Cashflows ($m) vs. Spot Rates
Due to prolonged periods of lower freight rates, VLGCs have frequently operated below breakeven levels
$(1.0)
$(0.5)
$-
$0.5
$1.0
$1.5
$2.0
$2.5
$3.0
Cumulative Spot Earnings
Net Cashflow From Asset
Long Term Breakeven
STRICTLY PRIVATE & CONFIDENTIAL
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Cash Flows Of Recently Listed VLGC Owners Large financing gap due to shortfall between heavy growth capex program and insufficient, volatile cash flows
Source: Company filings Note: Recently Listed VLGC Owners consists of Dorian LPG, Avance Gas & Aurora LPG
Despite periods of high vessel earnings, VLGCs developed a substantial financing gap over the last three years
Financing Surplus / (Gap) For VLGC Owners By Year ($m)
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Historical VLGC Fleet & Ton-Mile Demand Growth Demand has been very strong with 3 consecutive years of >15% growth; unfortunately, so has fleet
growth
Cumulative fleet growth outpaced demand growth in 2016, with further deliveries due in 2017VLGC Fleet & VLGC Ton Mile Growth (Base 100 = Q1 2014)
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5
10
15
20
25
30
35
40
100
110
120
130
140
150
160
170
180
VLGC Forecast Deliveries (RHS)
VLGC Deliveries (RHS)
Total Ton Mile Demand Growth
VLGC Fleet Growth
Source: Waterborne; BW LPG Analysis
The use of LPG
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LPG Demand Outlook
Substantial medium term growth potential for retail LPG demand across developing economies, driven by population growth
2015 Retail LPG Consumption (Kg per Capita)
11.0
8.3
0.6 1.4
3.2
13.3
16.9
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4.0
8.0
12.0
16.0
20.0
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400
800
1,200
1,600
2,000
Vietnam Philippines Bangladesh Pakistan Sub-Saharan Africa India China
Population (MM People) Kg/Capita
Global Average - 17.4 kg
Charter Earnings
Slow steaming to increase the number of vessels required per tonmile of trade, reduce bunker cost
Layup or demolition to tighten the supply of available tonnage
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VLGC Owner Strategies Ship owners are exposed to both demand & supply side risk, which limits their ability to influence
freight
VLGC owners maximize their profitability by reducing cost, tightening supply or seeking
competitive advantage
Market Position
Joint ventures or pooling agreements to share risk, grow revenues and build competitive advantage
Consolidate through acquisition of assets
Increase LPG demand
Cost Minimization
CapEx reductions through restructuring, refinancing, minimizing G&A
OpEx reductions through efficiencies in purchasing & operations
Delivering Energy for a Sustainable World
Thank You!
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world’s leading LPG carrier, we deliver
clean energy through competitive and
sustainable solutions, creating lasting
value for society and our stakeholders.