RIGA - Latvian Shipping (LASCO) signed contracts last week for the purchase of three medium-size tankers. The tankers, all ice-class and built in 2003, could fly under the Latvian flag as soon as May or June, the company said.
Crown Navigation, a subsidiary of LASCO, signed contracts with the shipping companies Pink Star Shipping, Purple Star Shipping and Coral Star Shipping on Feb. 18. LASCO officials declined to reveal the value of the deal, through local press reports have stated that similar tankers cost approximately $33.2 million, which would bring the total value of the deal to some $100 million.
LASCO spokeswoman Marita Ozolina-Tumanovska said the shipper planned to use the tankers, each of which has a capacity of 37,000 tons, for oil product deliveries to Northern Europe, though she added they might sail to other regions as well.
LASCO tanker department director Alvis Akmens said the decision to buy the tankers was necessary since several ships had been written off as scrap.
LASCO also closed a deal last week on four medium-size tankers with South Korean shipbuilder Hyundai Mipo Dockyard, and last year subsidiary Crown Navigation signed a deal with Croatian 3 Maj on the construction of eight ice-class tankers for oil and chemical products transportation.
Analysts saluted the deals, saying that the hefty sums the company would have to borrow would not pose a threat to the company's financial position.
Janis Lecinskis, financial analyst at Parex Asset Management, said that the shipper, which is controlled by the Ventspils Nafta oil terminal, could afford to invest large amounts of money in renewing its fleet. The company can borrow extensively since the ratio of its liabilities against own capital was only 50 percent, compared with 120 percent in the industry, he said.
According to Lecinskis, the significant loans would not dampen investor interest since the markets will perceive the purchase of new tankers as a move to ensure the company's long-term business operations.
Latvijas Krajbanka analysts agreed with this assessment.
"As to potential growth of liabilities, LASCO's ratio of liabilities against own capital is considerably lower than in most Western companies," an analyst from the bank said.
Earlier LASCO said its investments in renewal of the tanker fleet could reach some $300 million over a period of seven years.
At the beginning of 2003, LASCO's fleet consisted of 52 vessels, including 36 tankers with an average age of 18 years, 13 refrigerator ships with an average age of 16 years, two gas carrier ships with an average age of two years and one 20-year-old dry cargo vessel.
Other major changes might be in store for the shipper. Ventspils Nafta Board Chairwoman Olga Petersone recently stated that terminal management was continuing to streamline its holding structure and did rule out selling its shares in LASCO.
"Streamlining of the structure has just started, and one of its aims is to spot clearly the source of our loss to be able to make the right decision... We are trying to understand which VN's subsidiaries are profitable and which are less profitable," she said in a recent interview with Dienas Bizness.
Asked about LASCO, Petersone said that so far the shipping company had not been an active area of operations but rather a short-term financial investment. "Today I cannot state for sure that we will take involvement in LASCO's operations or retain it as a temporary investment object," she said.
She said an auditor company is right now analyzing the holding operations. "I think we will have clarity regarding this aspect in a year and specific decisions will be made regarding each area of VN's operations," said Petersone.
Also last week the government announced that it had concluded privatization of LASCO, with all 200 million shares sold. Privatization officials said they had raised 112 million lats (165 million euros) from the privatization of the shipper, of which 34.4 percent was paid in cash and the rest of in privatization vouchers. Fifty-one percent of company shares were sold on the Riga Stock Exchange for cash.
The government stressed that the privatization of the company would be regarded as complete when all the obligations under the privatization terms were fulfilled.
