BW LPG, in conjunction with the announcement made on 15 August 2024 regarding the acquisition of 12 modern VLGCs from Avance Gas, held a conference call to discuss an Investor Presentation. The call was hosted by Kristian Sørensen (CEO) and Samantha Xu (CFO) on 15 August 2024 (Thursday) over Zoom.
Download Conference Call Presentation Slides here
Download the Video Recording here
Download a transcript of the Recording here
See our Press Release here
Overview and Strategic Interest
This acquisition will increase our own VLGC fleet on the water by more than 40%, positioning BW LPG firmly in the VLGC market with continued robust prospects. For us to grow our own fleet at the current point in the cycle, we had a clear preference for a strategic transaction with scale and vessels on the water. With the current lead time at the yards, VLGC newbuildings can only be delivered in 2027, if not 2028, while vessels on water can immediately generate cash flow from when they are delivered. And through this transaction, we are acquiring a modern fleet of 12 VLGCs with earnings power already from next quarter. All 12 vessels have eco specifications, four have been fitted with LPG dual fuel propulsion technology, and six are equipped with scrubbers. The fleet has an average age of 6.8 years and thereby contributes to fleet renewal.
Financial Highlights
BW LPG has agreed to acquire the 12 VLGCs for a price of US$ 1.05 billion including total debt of US$ 500 million with the following breakdown. On the equity side, BW LPG will issue 19.282 million new shares amounting to US$ 333 million; for the balance of the equity side there is a cash component of US$ 217 million. The total debt of US$ 500 million is split between bank debt of US$ 368 million for 10 ships and US$ 132 million pertaining to two lease facilities which are to be novated. Adding it all up, there is a total cash payment in this transaction of US$ 585 million where US$ 235 million will be drawn from our available cash resources and US$ 350 million will be financed by a shareholder loan from BW Group, BW LPG’s largest shareholder.
Maximizing Shareholder Value
With this Transaction, we add commercial scale and operational leverage in a fundamentally strong VLGC market. We are expanding and renewing our fleet without growing the global orderbook. The acquired fleet is already on water and can be chartered out and generate revenue after delivery in next quarter. Before this transaction, the Company’s balance sheet has been very robust with a high equity ratio to serve and through this transaction we optimize our balance sheet. Our net leverage ratio will increase from 7% reported for Q1 to a range of 30-35% post transaction, and thereby maintaining a balance sheet to support continued shareholder distribution.
A Market Leader with the World’s Largest Fleet of Very Large Gas Carriers
Following this transaction, BW LPG will have not only the world’s largest fleet of VLGCs on water, but also the highest number of dual-fuel and scrubber-fitted vessels. This positions our company for improved commercial operation with better optimization, lower operational risk per vessel, and increased earnings potential. This transaction also represents our long-term commitment to our core shipping business, and belief in the LPG market and export growth. With this acquisition, we will be able to deliver even more flexible service to our customers and expand our fleet at an opportune time with solid market prospects.
Valuing our Stakeholders’ Support as the LPG Growth Story Continues
In summary, we are excited to announce this significant transaction. We believe that this transaction will enhance our commercial scale and increase our operational leverage in a robust VLGC market. We believe that this will also solidify our earnings and dividend potential, and we look forward to your continued support for BW LPG.
