Frontline’s acquisition of six VLCC resales off-the-block is an indicator that some owners expect an upturn in the tanker market, but also a practical solution for near-term deliveries when other vessel types have filled the large vessel slots
Frontline has agreed to acquire through resale six latest-generation eco-type VLCC newbuilding contracts. The six VLCCs are currently under construction at the Hyundai Heavy Industries shipyard in South Korea and are being acquired for an aggregate purchase price of US$565.8M, including an estimated US$25.7M in additions and upgrades to the standard specifications.
The original contractor of the six VLCCs has not been named, but VesselsValue data reveals there is only one company with six VLCCs on order at Hyundai Heavy Industries and that is Evangelos Pistiolis’ Central Mare. At least four of these were contracted at around US$90M, which suggests an on-paper gain of around US$4M before the increase in specification.
According to Frontline, the six VLCCs are designed to operate on different fuels, including biofuel, have the potential to be converted or retrofitted to consume fuel such as LNG or ammonia and consequently there is an ability to cut CO2 emissions to zero when technology, logistics and the regulatory framework allows for it.
The newbuildings will also be fitted with exhaust gas scrubber technology, high-end anti-fouling systems, digital energy performance solutions and will be compliant with specific ExxonMobil lightering requirements to allow for maximum trading flexibility.
Five vessels are due to be delivered during 2022 and the last vessel in Q1 2023.
The payment profile for this transaction means the largest portion of the instalments on each vessel will be made on delivery of each vessel. Frontline will meet the financing of this acquisition with existing borrowing facilities and will establish long-term financing closer to delivery of the vessels.
Frontline Management’s interim chief executive Lars Barstad said, “This transaction is consistent with our core company goals to increase exposure to the VLCC market without adding to existing vessel supply. It further cements Frontline’s position in respect of owning a modern, high-quality, fuel-efficient fleet.”
He added, “The delivery schedule for these vessels is particularly attractive, in a timing window regarded closed for new orders. With this acquisition Frontline is tangibly moving on our journey towards lower carbon emissions.”
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