GDF Suez Cape Ann deal heralds new liquidity for FSRUs
Höegh-owned, Engie-chartered GDF Suez Cape Ann will be the first floating storage and regasification unit (FSRU) based in India. H-Energy has fixed the vessel at Jaigarh in the west of the country from June next year. Various India-based FSRU projects have stalled, mostly because of cost and projected demand. H-Energy chief executive Darshan Hiranandani tells LNG World Shipping that he fixed GDF Suez Cape Ann for a very keen price. “Two years ago FSRU charter rates were so expensive that only governments or super-majors could afford these ships, to support 20-year offtake contracts,” he said. Mr Hiranandani’s comments raise an intriguing question – what does it cost to charter an FSRU? LNG carrier charter rates are transparent. In May, modern ships lifting Atlantic Basin LNG spot cargoes were earning US$30,000-US$45,000/day. “General LNG rates have fallen substantially, but that has been a trend for longer than two years,” says MSI director Stuart Nicoll. “ A lot of old LNG ships are seeking conversion, which should mean more interested parties bidding for FSRU work. “That should certainly make the FSRU market a lot more competitive.” Simpson Spence Young (SSY) Gas director Debbie Turner says that without knowing how Engie will support the H-Energy charter, it is impossible to determine the rate. “H-Energy got a cheaper deal [because they] have a small FSRU,” Ms Turner says. No market If GDF Suez Cape Ann is affordable, this must be because the market is deteriorating or oversupplied – or because the ship’s circumstances have changed, Mr Nicoll says. “The ship is on long-term charter to Engie, at what seems to be a very high rate if you take Höegh’s accounts at face value, having cost nearly US$300 million to build. “There was a break clause in the initial 20-year charter last year or at any time thereafter giving two year’s notice, but it doesn’t seem to have been exercised. That would imply that Engie needs a decent income on the vessel to cover its costs. This is especially the case after GDF Suez Cape Ann’s employment fell through on the Tianjin project.” There is not yet a market for FSRUs, says Drewry senior research analyst LNG Shresth Sharma. “Usually, there is no general charter rate for FSRUs. It depends on the vessel specification – new-built or old, contract duration, vessel-employment flexibility, and so on,” he says. Rates that FSRUs have fixed in four earlier deals suggest a figure for some tonnage, see table. “In 2013-2015, the rate has hovered between US$120,000-US$150,000/ day,” Mr Sharma says. “However, of late the charter rate for FSRUs has also been coming under pressure and rates are currently around US$100,000 per day.” Another broker, speaking off the record, highlights the variables: “I am intrigued by H-Energy’s comments. FSRUs have not come down that much in price. They are still around US$110,000-US$135,000/day, depending on the project requirements. “This really is the question. Project requirements saw an Excelerate vessel fixed into Israel at around US$170,000/ day. Why? They took the infrastructure from the Gulf Gateway and placed it offshore Israel, then put the total cost into the charter hire. And within a one-year time period.” The broker says Golar LNG Partners fixed its larger FSRUs for US$125,000-US$135,000/day. Other deals offered a golden handshake. “The second FSRU that went into Egypt gave a very cheap rate for the first six months, then went back up to the US$120,000s for the remainder,” the broker says. “These vessels are all in the region of 170,000m³ and can process up to 7.4 million tonnes a year.” A second broker says Turkish project partners Kolin, Kalyon and Etki Liman fixed GDF Suez Cape Ann sistership Neptune for a very low US$20,000-30,000/day, “plus significant additional operating expenditure, increasing the total costs to US$50,000-70,000/day. From the shipowner point of view, this may be a competitive deal; this project had an element of urgency”. Segments This second broker sees FSRU charters as a three or four-tier market: • First-generation FSRUs, built in the 2000s • Modern, standard-sized FSRUs circa 170,000m³, owned by Höegh, BW Gas and Golar • Barge-based FSRUs/converted floating storage units (FSUs) • Mitsui OSK’s 260,000m³, 2017-built FSRU, now seeking a short-term fixture “Charter rates for some of those older ships can be quite competitive, particularly when the vessel in question has been unemployed as an FSRU,” this broker says. “It probably doesn’t cost much more than US$100,000/day to charter such a ship.” The fourth tier is a category of one: Mitsui OSK’s (MOL’s) giant FSRU to be delivered this summer and chartered to Uruguay-based Gas Sayago to import up to 4 mta. However, Montevideo will not need the FSRU until autumn 2018. MOL director Takeshi Hashimoto told this publication in January that he hoped to fix the FSRU “for about one year”. Industry sources name Turkey, Argentina and Hong Kong as prospective suitors. MOL is said to be negotiating a short-term deal of US$130,000/day – if the counterparty is solid. Höegh LNG president Sveinung Støhle says Hong Kong Electric (HKE) wants a 170,000m³-260,000m³ FSRU. Enarsa of Argentina is said to be looking for an FSRU the size of a Q-flex or even a Q-max LNG carrier for the Puerto Rosales project. Brokers doubt these large FSRUs will become the norm. “We don’t anticipate a trend towards building bigger units,” says the second. “Ships on this scale do not offer the flexibility that is the unique selling point of an FSRU. “To build it for a specific project, you need a 20-year charter agreement to justify the cost – all of that comes at a price. You can only justify having so much more storage for a market of significant demand. “Bigger FSRUs might seem the perfect solution to a high-demand market. But ordering such a unit presents a greater risk than usual for owner and financier.” Liquidity All the brokers feel the FSRU business is changing, in terms of pricing and liquidity. By June, Höegh and BW Gas had received the first two of six FSRUs
Gujarat Gas enters into non-binding MoU with PLL
Gujarat Gas has entered into a non-binding MoU with Petronet LNG (PLL) for exploring – dispensing and marketing of LNG including the L-CNG at GGL CNG stations. Earlier in January, Petroleum and Natural Gas Regulatory Board (PNGRB) had granted permission to the company to lay, build, operate or expand city or local natural gas distribution network (CGD) in Ahmedabad, Gujarat. Gujarat Gas (formerly known as GSPC Distribution Networks ), has emerged as India’s largest city gas distribution player with presence spread across 19 Districts in the State of Gujarat and Union Territory of Dadra Nagar Haveli and Thane GA which includes Palghar district of Maharashtra. Kareem Martin Womens Jersey
GAIL India To Invest Rs 10 billion To Help Dabhol LNG Terminal Operate All Year
GAIL India will invest. Rs 10 billion on the liquified natural gas terminal at the Ratnagiri Gas and Power Private (RGPPL) to make it an all-weather port by 2019, said BC Tripathi, chairman, GAIL. RGPPL, the second avatar of the troubled Dabhol power project, is in the process of demerging the power plant and the LNG terminal to make the project financially more viable as the project continues to struggle to keep afloat even after a decade since banks and public sector units stepped in to revive it. We will hold over 70% in the demerged LNG terminal and our aim would be to convert it into an all-weather port so that we can run it at full capacity, Tripathi said. After the original promoter of the project Enron declared bankruptcy in 2001, it was taken over for revival by RGPPL, backed by the government, in 2005. GAIL and NTPC are the biggest shareholders with 25.1% each, while the government of Maharashtra owns 13.51% and lenders have a 35.47% stake. Post the demerger, GAIL would be a majority stakeholder in the LNG terminal, while NTPC would lead the power project that would run a 500 mw unit. We hope to give the contract for the breakwater project and expect it to be operational by monsoon in 2019, said Tripathi. A breakwater is an offshore structure built to break the intensity of the waves so that the terminal can work all year. Right now, this terminal cannot operate for almost five months between June and September since the choppy sea poses risks to the ships. The company had hoped to award the project by October last year but it has been delayed. The demerger of the power plant and the LNG regasification unit has been delayed since lenders such as Power Finance Corp and LIC had put forth conditions. The power plant is in pact to supply 500 mw to the Indian Railways Jordan Hicks Authentic Jersey
India’s record diesel demand to continue in 2017, growth to slow
India’s diesel demand is expected to rise to record levels again this year as a slew of infrastructure projects boosts use of the transport and industrial fuel, although a government-induced cash shortage will hold growth to its slowest in three years. Increased fuel efficiency, a fall in commercial vehicle sales, and the use of other fuels for power generation are also expected to dent demand growth for diesel, analysts and traders told Reuters. “The first quarter saw delayed effects of demonetisation but I think (diesel demand) should improve as there are a number of projects going on such as road and railways, which should drive diesel demand up,” said Tushar Bansal, director of Ivy Global Energy, a Singapore-based consultancy. India has budgeted a record $59 billion for 2017/18 for infrastructure such as ports, roads, railways and power. The world’s third largest oil consumer guzzled 6.955 million tonnes of diesel in April, the highest so far this year and near a record of 6.958 million tonnes hit in May 2016, the latest government data showed. Still, a weak first quarter is expected to hold India’s diesel demand growth at 1.6 to 3 percent this year, a gain to 1.63 million to 1.65 million barrels a day, analysts from energy consultancies FGE and Wood Mackenzie said. This is the slowest annual growth for diesel since 2014, down from a rise of more than 5 percent in 2015 and 2016. “The slowdown is a result of the demonetization drive, which dampened economic growth for a few months since its implementation in November last year,” said Sri Paravaikkarasu, head of FGE’s East of Suez Oil. April sales of India’s commercial vehicles, which consume mainly diesel, fell 23 percent year-on-year, for instance. Sales of passenger cars and motorcycles, however, mostly powered by gasoline, have started to recover. Woodmac expects India’s diesel growth to moderate at 3.2 percent a year over 2017 to 2025, down from an average annual growth rate of 3.9 percent from 2010 to 2016. “The main reasons for a slowdown lies in increasing fuel efficiency, more substitution (for) oil, primarily diesel, in the power sector and a bearish outlook for diesel cars in India,” said Sushant Gupta, research director for Woodmac’s Asia-Pacific refining. Still India’s diesel demand growth in 2017 accounts for one third of Asia’s demand growth for the fuel, he said. “It is a positive story compared with China, where we expect diesel demand to be in slow decline. Mike Hull Womens Jersey
Road EPC companies set for 15% topline growth in FY18: Crisil
The road ministry’s efforts to improve the financial health of road companies in the country have paid off. According to ratings agency Crisil, credit profile of road engineering, procurement and construction (EPC) companies have shown a sharp turnaround. The Crisil report added that these road EPC companies are set for 15% topline growth in current financial year. “Driven by the Ministry of Road Transport and Highways (MoRTH) and the National Highways Authority of India (NHAI), over 80% of the highway projects in the past three years have been bid out under the hybrid – or engineering, procurement, construction (EPC) – model. Not surprisingly, 50 road EPC companies rated in the investment-grade by Crisil, have benefited from the trend and delivered 20% compounded annual growth in revenue in the past three years,” the report said. According to the report, better working capital management and capital structure, sharp focus on execution and judicious bidding has led to a significantly improved credit ratio, with the ratio of upgrades to downgrades in the sector improving to 2.0 in the last financial year, up from 0.11 in financial year 2015- 2016. The trend is expected to continue for current financial year. “Crisil-rated companies are expected to maintain their revenue growth momentum this financial year, fuelled by a strong order book of Rs 85,000 crore (as of FY17 end), and expected order-book-to-revenue ratio of three times this financial year, which provides good topline visibility,” said Sachin Gupta, Senior Director, Crisil Ratings. The combined order book of these 50 companies is likely to touch Rs one lakh crore this financial year, driven largely by increased government spending in the roads sector, the report said. However, the trend may hold true only for pure road EPC companies. ” In contrast, many large diversified EPC players are yet to wade out of the credit profile morass they entered in the past because of aggressive bidding, leveraged balance sheets, policy bottlenecks and a sluggish economy,” the Crisil report said. Crisil also expects the interest coverage ratio or (ICR) for road EPC companies to further improve. “Along with healthy revenue growth, Crisil-rated players have maintained a comfortable capital structure, with aggregate gearing of close to 0.5 times. And despite scaling up in business, what helped them control borrowings was efficient working capital management, lower capex, and policy support for build-operate-transfer projects. That has brought about a gradual improvement in key credit metrics such as interest coverage at four times in financial year-2016-2017, which is expected to rise to five times this financial year,” the report said. Linval Joseph Authentic Jersey
Delhi-Saharanpur highway: State recommends CBI investigation
The State government on Tuesday recommended a CBI investigation in allegations of embezzlement of around Rs 700 crore by a Hyderabad-based private firm that was awarded the contract to construct the Delhi-Saharanpur four-lane highway. Principal Secretary (Home), Arvind Kumar confirmed that the letter to Department of Personnel & Training (Ministry of Home Affairs) recommending CBI probe into the matter had been sent on May 16. Former Principal Secretary UP State Highway Authority (UPSHA) Navneet Sehgal told The Indian Express that the contract, worth Rs 2500 crore, was awarded to the firm in 2010 and work had started in 2011. However, the firm stopped work citing environment clearance and despite it being cleared later, the work wasn’t completed, added Sehgal. Upon inspection of the work that it did, he said, it was discovered that the firm had used only Rs 100 crore of the Rs 700 crore it had withdrawn from public and private banks against the state government project. Since it was a matter of misuse of public money, a CBI probe was recommended and forwarded to the then SP government in February this year, added Sehgal. A police case was also registered in Lucknow in this regard. UPSHA principal secretary Avanesh Awasthi, who took over from Sehgal, said, “After taking charge of the office, I came across the serious irregularities and recommended the CBI investigation to the government.” Andre Dawson Jersey
Why Indian roads are always work-in-progress
On a road trip from Mumbai, the ‘go-slow’ signposts are commonplace on the National Highway 48 (formerly NH4) that connects the financial capital with Bengaluru. The first 200km of Thane-Satara stretch has 16 fly-overs under construction currently, some moving at a snail’s pace, some others abandoned midway, a few pillars built by the contractor ensuring perennial traffic mess on the busy highway. In India, building roads, flyovers and bridges is a never-ending process. Apart from the National Highway Authority of India (NHAI) and contractors appointed by it, state public works departments and municipal corporations are busy building roads. Some roads take several years to complete and by then, it’s time to start widening them, considering India’s vehicle population growth. Then, monsoons and unusually high heavy-duty traffic take a toll on the road, some bridges and flyovers remain constantly under repair. The work-in-progress signboards, an inevitable part of Indian roads, should, in fact, read ‘work-never-ends’. Nearly a decade after the Vajpayee government executed Golden Quadrilateral project and linked Indian cities with the hinterland, India is attempting a re-run of the dream project. The road transport minister Nitin Gadkari’s recent claim that India has built 8,144 km of roads in 2016-17 and awarded another 16,800km of roads to be built, creating a ‘world record’ of sorts, should definitely cheer every Indian. He said efforts are being made to further improve the road construction target to 40km a day, up from the current 23km. This, according to Gadkari, is several times what the previous UPA government achieved when it was in power. But as you travel along highways, what strikes you is the slow-paced road development, with the poor land acquisition, unkind court orders and cash-strapped contractors all contributing to the delay. Bankers are wary of lending to contractors even after the government conceived the new hybrid-annuity model (HAM) to minimise risks for promoters. HAM is a combination of engineering-procurement-construction (EPC) and build-operate-transfer (BOT) formats, with the government and the private companies sharing project cost in 40:60 ratio. The government also shoulders the responsibility of revenue collection. While most of our highways are still 2-laned or 4-laned, and always try to catch up with the increasing vehicle density, countries like China go with 12-lane highways and more. For us, access-controlled, high-tech roads are still a long way off. Liquor shops are shut now, but there are stray dogs and unattended cattle all along our highways, threatening the seamless journey. On the NH66 that connects Goa to Mangalore, cement mixers and mud excavators are busy at work, slowing your pace. Mumbai-based IRB Infrastructure, which won the mega contract to widen the 189-km stretch from Kundapur to the Goa border, has sized down several hills – either for laying the road or amassing mud needed for road widening. The Rs 2,400 crore project, with Rs 536.22 crore in viability gap funding from NHAI, was awarded in August 2012 and was to be completed in 910 days. But nearly five years later, the road work has not reached anywhere. Like in every delayed project, users on NH66 will end up paying a heavy toll for a longer tenure to cover the cost overrun. Joaquin Benoit Authentic Jersey
DGCA to get more teeth soon
The country’s civil aviation regulator Directorate General of Civil Aviation (DGCA) is likely to get new powers including that of imposing penalties for violations. At present, the watchdog can debar, suspend and even cancel the permission to fly for the carriers as well as individual pilots and engineers. However, it cannot impose any monetary penalty. The government has started working on the proposal, which has been in the works for some time. A senior official from the civil aviation ministry said the procedure to amend the Aircraft Act, 1934 has been initiated and the idea is to have “more graded granular penal provisions” for the DGCA in dealing with violations. The government is actively working on the proposal considering the country’s domestic aviation sector has been seeing healthy double-digit growth for over two years and entry of new players are expected with the inauguration of more flights under the regional connectivity scheme. Lenny Dykstra Jersey
Abolishing FIPB: Would be even better if India modified restriction in aviation, retail
Nothing symbolises how far, and fast, India has moved in terms of opening its markets than last week’s abolition of the Foreign Investment Promotion Board (FIPB). Set up as part of the 1991 economic reforms, the FIPB was a high-level inter-ministerial group that cleared foreign investment proposals in the country at a time when most investment avenues were off bounds. At a time when bringing in foreign investment also meant a plethora of clearances from various ministries, the FIPB served as a one-window clearance—and no matter which ministry it was housed in, the prime minister’s office was always keeping a watch on it. Over a period of time, as the economy grew stronger and corporate India became more competitive, various restrictions on foreign investment started getting relaxed. Indeed, relaxing of FDI restrictions went almost hand in hand with the lowering of import duties since both symbolised the ability of Indian firms to take on global competition. In the initial years, for instance, India restricted how much foreign investment was allowed in the telecom sector; later, however, even 100% FDI was allowed. Till even a few years ago, while foreign pharmaceuticals firms were allowed to set up new plants in India—greenfield, in jargon—they were not allowed to take over Indian firms; indeed, at one time, the fear was foreigners would buy out Indian firms and that this would raise medicine prices and reduce availability. DeMario Davis Authentic Jersey
Sure Mr Jaitley, Air India Can Be Sold But You May Have To Pay Someone To Buy It
No statement made by any NDA minister made so far is as significant as the one made by Finance Minister Arun Jaitley on Saturday (27 May), where he called for the divestment of Air India. “If 86 per cent of the flying can be handled by the private sector, they can handle 100 per cent also,” he said. But his views on public sector banks were underwhelming. While pointing out that we don’t need 30-32 public sector banks of various kinds, his solution seems to be the merger of weak banks. He said, “we want fewer banks, but bigger and stronger banks…”. This is a vain hope. Bigger does not always mean stronger, as the sharp drop in State Bank of India’s consolidated profits post the merger with its five subsidiaries and the Bharatiya Mahila Bank shows. Merging the other losers in the banking sector is hardly going to build a stronger bank. The point is simple: why should not the Air India logic work for public sector banks too? If 30 per cent of banking can be handled by private sector banks, why not 70 per cent – the current share of public sector banks? Why not reduce the public sector banking footprint to a level at which it will not sink the government’s fiscal boat whenever the business cycle goes for a toss? One political answer could be that financial inclusion and social needs are better met by public sector banks, since the private sector is unenthusiastic about creating customers who only entail costs. Out of the 286 million Jan Dhan accounts now in operation, barely 10 million was contributed by private sector banks. Sam Reinhart Jersey