Norwegian Limited Partnerships: Case Study

Transcription

1 15th Annual Ship Finance Forum Norwegian Limited Partnerships: Case Study 12 November

2 Disclaimer This Presentation is intended for general guidance and information purposes only. This Presentation is under no circumstancesintended to be used or considered as financial or investment advice, a recommendation or an offer to sell, or a solicitation of any offer tobuy any securities of other form of financial asset. The material in the Presentation is obtained from various sources per dating of the report. While all reasonable care has been taken to ensure that the material is true and not misleading, no guarantee about its accuracy or completeness is made. This Presentation does not regard any specific investment objectives, financial situation or the particular needs of any specific person. Investors should seek financial advice regarding the appropriateness of investing in any securities or investment strategies,and should understand that statements regarding future prospects may not be realised. Investors are also cautioned that any forward-lookingstatements are not guarantees of future performance and are subject to risks and uncertainties and the actual results, performance or achievements may differ materially from those expressed or implied by the forward-looking statements as a result of various factors. Factors that could cause or contribute to such differences include, but are not limited to, those described in the presentation. Investors should also understand that past performance is not necessarily a guide to future performance. All investments mentioned in this report have attached risk of considerable losses. This Presentation is only intended for the recipients, and should not be copied or otherwise distributed. NRP FinansAS does not accept any form of liability, neither legally nor financially, for loss (direct or indirect) caused by the understanding and / or use of this Presentation or its content. 2

3 Summary of the Norwegian Project Finance market USD 12,500,000,000 Total capital raised in the Norwegian project finance market since 2004 USD 700,000,000 Total capital raised in the Norwegian project finance market YTD % NRP s market share of the Norwegian project finance market last 10 years USD 600,000,000 Aggregate value of the current NRP shipping & offshore portfolio 100 About NRP Number of shipping projects arranged by NRP (representing more than 150 vessels) Independent and privately owned investment services company Founded in 2000 by Christian Ness and Ragnvald Risan Focus on Shipping, Offshore/Oil Services and Real Estate Currently employs approximately 50 professionals Licensed by the Financial Supervisory Authority of Norway Note: Numbers are estimates based on figures from the largest project finance providers in Norway 3

4 Norwegian Project Finance market - Capital raised Norwegian Project Market (USD mill.) Since 2005, the four largest project finance providers have placed projects for a total value of around USD 12.5 billion and with total equity raised of around USD 3.5 billion A typical project range from USD million on an EV basis (equity and debt) Experienced shipping / lead investor subscribe between 10-30% of the equity, with the remainder subscribed by other investors: High net worth individuals and family offices Institutional investors and private equity Exit, through sale of assets after 3 5 years YTD Total project price Paid-in equity Annualized For 2014 we estimate the level of new equity raised to reach USD million, which will be the second largest amount raised since 2007 Source: Per August Pareto Project Finance, Platou Finans, Fearnley Finans, NRP Finans 4

5 Current themes in global Ship Finance Investors are yield focused Lack of yield in public shipping stocks Norwegian Limited Partnership Model Most projects include running yield / dividend Focus on risk adjusted returns Pure play ability to target specific segments Two-tiered ship finance market Limited capital sources for smaller ship owners Capital provider to private, small ship owners Offer access to new equity investors Broad network of banks / lending institutions Free cash flow do not support current asset values Commodity shipping still in a recovery mode Full financial and operational flexibility Various transaction models can be considered: sale and leaseback / asset play / financial lease transactions Public equity and bond markets are highly volatile Window of opportunity tend to be short in public markets Direct investments open through the cycle Competitive cost of capital; no dilutive offerings Documentation light; quick access to capital 5

6 Project Finance examples - Sale and leaseback transaction Equity Buyer Debt Lead investor (~10-30%) Other investors Purchase Price Special Purpose Company (SPC) Shipowner Seller / Charterer Charter Hire Sellers credit Mezzanine Bank debt Transaction Rationale Shipowner has a funding need (growth or refinance) or seeks to reduce asset exposure Solution Shipownerenters into a sale/leaseback transaction for one or several vessels with a NRP arranged SPC Outcome The SPC becomes owner of the vessel Shipownercharters the vessel back for a fixed period at a pre-agreed charter rate Shipownermaintains full operational and commercial control of the vessel Financial Result Model Explained Shipownerobtain financing at an attractive cost of capital Investor receives competitive risk-adjusted return on investment 6

7 Project Finance examples - Panamax Bulk Carrier Project Description Equity Returns Deal type: Sale and leaseback High Case (call option): 25.5% IRR p.a. Segment: Drybulk Base Case: 17.7% IRR p.a. Vessel: Panamax bulk carrier Low Case (put option): 11.1% IRR p.a. Bareboat charter period: ~3 years Capital Structure (USD million) Return Illustration 20,0 15,0 10,0 5,0 0,3 17,3 4,4 2,7 10,6 30,0 % 25,0 % 20,0 % 15,0 % 10,0 % 5,0 % Equity IRR (%) 11,1 % 11,1 % 17,7 % 25,5 % 0,0 Uses Sources Purchase price Fees & Exp Mortgage debt Sellers credit Paid-in equity 0,0 % Scrap value Put option Base case Resiudal Value Call option 7

8 Project Finance examples - Joint Venture Industrial Investor (Shipowner) 100% Commercial Management Technical Management 50% Special Purpose Company (SPC) 100% Financial Investor (Private Equity) 50% Mezzanine Bank Debt Transaction Rationale Shipowner looking for fleet expansion Solution Shipownerand Financial Investor establish a special purpose company (SPC) SPC acquires vessels Outcome Shipownerenters into technical and commercial management agreements with the SPC Employment strategy an important element; no requirement for Shipowner to charter the vessels Financial Result Model Explained Shipownercontrols two vessels, where as the alternative would be one wholly-owned vessel Financial Investor obtains pure play exposure to a segment of his/her choosing Returns dependent on SPC employment strategy 8

9 Selected recent NRP Shipping projects Vessel Project Name Segment Type of Project Jupiter Bulker DIS Drybulk Sale and leaseback Deep Cygnus KS Offshore support Joint venture Arca Shipping DIS Container Asset play Mount Lyderhorn LLC Drybulk Sale and leaseback BB Troll DIS Offshore support Asset play Cresco Shipping DIS Container Asset play 9

10 Norwegian Project Finance market - Key takeaways The market is open and capital can be raised at competitive rates It is a flexible market place; sale and leaseback / financial lease / asset play / JV Investor focus on attractive risk adjusted returns and running dividend yield We believe this to be an attractive time to invest in the shipping cycle 10

11 NRPGroup: Haakon VIIs gate 1, 8 th floor,po Box 1358 Vika, 0113 Oslo, Norway Project Finance: Shipping: Real Estate: Sales and analysis: Ragnvald Risan Founding Partner r.risan@nrp.no Tom R. Kjeldsberg Head of Corporate Finance trk@nrp.no Mats Olimb Project Broker mats.olimb@nrp.no Nicolai Rosenberg Project Broker nicolai.rosenberg@nrp.no Christian Ness Founding Partner c.ness@nrp.no Knut Ekjord Partner k.ekjord@nrp.no Morten Berg Partner m.berg@nrp.no Erlend Torsen Partner erlend.torsen@nrp.no Thor A. Mjør Head of Sales tm@nrp.no Anne Elisabeth Næstvold Analyst a.nastvold@nrp.no Markus Leandersson Corporate analyst markus.leandersson@nrp.no Fredrik Holter Compliance fredrik.holter@nrp.no 11