I.M. Skaugen SE Annual General Meeting IMS Innovative Maritime - - PowerPoint PPT Presentation

I.M. Skaugen SE

Annual General Meeting

IMS – Innovative Maritime Solutions

Oslo, March 18th 2011

1

IMS ‐ Specialized marine transport services

2

IMS ‐ Marine transport niche markets

Petrochemical gas transport Marine transfer services Integrated Construction Small‐scale LNG

The IMS strategy

We have succeeded in identifying and leveraging higher growth/higher margin market niches “Being global” “Innovative” “Cost and Service” leadership Focus on higher growth markets

Transport market niches

Above average market returns of the more traditional shipping industry

IMS business activities

Petrochemical gas transportation Small‐scale LNG Petrochemical gas transportation Small‐scale LNG Shipbuilding Manufacturing Crew training Petrochemical gas/LPG river transportation Marine equipment trading Shipbuilding Manufacturing Crew training Petrochemical gas/LPG river transportation Marine equipment trading Crude oil transfer services LNG transfer services Support services worldwide Crude oil transfer services LNG transfer services Support services worldwide

5

IMS – think global and act local

With a focus on development in ”East of Suez”‐ Mainly Middle East region and China ‐ with a base in Singapore and headquarter functions in Oslo

• A global business with physical

presence in offices worldwide to be on same “time zone” and speak the language adopt to the culture.

 China, Shanghai and Wuhan  Bahrain  Singapore  Russia, St. Petersburg  U.K., Sunderland  Norway, Oslo  USA, Houston

• Over 2 000 employees Worldwide, in

excess of 85% of these are from Asia

• 41 Ships in operations Worldwide, but

the majority in Asia

Our strategic positioning ‐ “East of Suez”

500 1 000 1 500 2 000 2 500 3 000 3 500 4 000 4 500 1960 1970 1980 1990 2000 2010 2020 2030 2040 2050

Millions of people

The Expanding World Middle Class

China India World World ex China and India

5 10 15 20 25 30 35 40 G7 BRIC N‐11 Other Developed Markets Other Emerging Markets 2010 US$trn

BRICs' GDP Will Continue To Gain On The G7

2000 2010 2020

Source: Goldman Sachs

Why East of Suez?

• Higher economy growth
• More focus on logistic needs to enhance trade and

growth

• Increasing global trades
• Higher energy consumption and a rising middle class

How do we do it?

• From Middle East to China
• Focus
• n

China from a base in Singapore + entrepreunurial and technological support from Norway

• Developing Small‐scale LNG to aid countries/regions in

Asia to achieve higher growth by making natural gas available in the form of LNG .

7

IMS Core focus

‐Petrochemical gases and Small scale LNG

Source: Bloomberg

2 4 6 8 10 12 14

20 40 60 80 100 120 140 160

USD/MMBtu USD/barrel

Crude oil & Natural gas historical price comparison

WTI Crude spt HenryHug NG spt

Natural gas WTI crude spot price Last Friday $101.16 $24.30

* US Henry Hub natural gas spot price

Price for energy equivalent of one barrel of oil*

Emerging economies

8

• Industrialization, modernization and urbanization will increase demand for the products we transport
• China and India have low per capita consumption of plastics as of today
• What will happen with the total consumption if consumption per capita increases in these two countries to

more like the US, Japan or WE?

• In2050, there will be 10 billion people on earth?!

Source: Pardos Marketing

Brent crude oil, Naphtha & Ethylene prices

Source: Bloomberg

20 40 60 80 100 120 140 160

200 400 600 800 1 000 1 200 1 400 1 600 1 800 USD/bbl USD/ton

Historical Price Comparison

Ethylene JAP Naphtha JAP Brent crude oil

10

• 2010 was mainly driven by increased imports into Asia and inter Asian trade due to the quite buoyant demand for

petrochemicals in this region. Positive market momentum starting in 3Q continued in Q4, with December closing rate reaching the highest index level since April 2009

• Higher Ethylene export volumes from the Arabian Gulf increased nominations under COA Contracts. Total fleet utilization in

Q4 at 94% with 50% utilization under COA

• The newly commissioned polyethylene plants in the Middle East Gulf will need regular supply of other petrochemical gases,

thereby reducing ballast days and increasing our fleet utilization

Market developments

Source: BRS Feb11

200 400 600 800 1000 1200 1400

USGC (E) USGC (N) W. Canada

• M. East W. Europe

Japan

• S. Korea

SE Asia

Cost of Production of Ethylene

(Leader Plants, Fourth Quarter 2010)

Variable Cost Fixed Costs Freight to SE Asia Price (CFR SEA) US Dollars per Ton

Source: Nexant ChemSystems 4Q10

400 450 500 550 600 650 700 750 jan. 10 feb. 10 mar. 10 apr. 10 mai. 10 jun. 10 jul. 10 aug. 10 sep. 10

• kt.

10 nov. 10 des. 10 jan. 11 feb. 11

TC & TCE to Spot 2010/2011

Eth/C 8000 Cbm TC Eth/C 8000 Cbm TCE S/Ref 8000 Cbm TC S/Ref 6500 Cbm TCE S/Ref 20/22500 Cbm TC S/Ref 15000 Cbm TCE

• While the Middle East will continue to play a significant role in changing global supply/demand dynamics, an equally

important region is Asia.

• We expect the ethylene exports to reach 1.5 million tons/year in the ME during 2011
• However, due to derivative capacity coming on stream as of 2012, ethylene exports could temporarily be lower

between 2012 and 2014 as we have seen partly in 2010

• Above graph illustrates the sensitivity of 1% on the seaborne ethylene exported, which would represent an

additional 1.25 million tons of ethylene exports per year. In this case, it will require 20‐25 ships of > 8000 cbm able to carry average 50‐55000 tons per year for transporting the equal amount of ethylene exports. 11

Market outlook

109.7 115.3 109.1 111.7 119.1 125.7 131.0 137.1 141.0 4.19 4.47 5.03 5.24 5.49 5.64 3.84 4.04 4.36 3 4 5 6 7 8 9 80 90 100 110 120 130 140 150 160 170 2006 2007 2008 2009 2010 2011 2012 2013 2014 Million Tons Year

Ethylene World Capacity Ethylene World Production Seaborne trade 3% Seaborne trade 4% Seaborne trade 5% Seaborne trade 6%

Ethylene world capacity and seabornetrade

Source: Norgas

12

• Ethylene prices remained strong on the back of bullish crude oil and naphtha prices
• The Chinese economy is expected to continue to grow and its appetite for petrochemical products is increasing
• Despite the fact that China is expanding its own capacity in order to gain on self‐sufficiency, the country is still relying on

much of the import from especially low cost producers in the Middle East.

Positive market trend

Source: Drewry

0 % 10 % 20 % 30 % 40 % 50 % 60 % 5 000 10 000 15 000 20 000 25 000 30 000 35 000 40 000

04 05 06 07 08 09 10 11 12 13 14

Domestic Deriv. Ethylene Demand Net Equiv. Imports (Exports) Self‐Sufficiency

China Ethylene Self Sufficiency

Thousand Tons Sufficiency

Source: Sinopec

Small scale LNG

IMS innovative regional distribution of tomorrows fuel

13

“Small‐scale LNG is an effective solution for making natural gas available to energy users not currently connected to pipeline networks.”

Norgas Innovation – I.M. Skaugens first LNG Multigas vessel

Need for more and cleaner energy

14

Source: EIA Source: EIA

• China and India alone are expected to account for about the same amount of energy that IEA members currently

use, the rest of the world will require an equal amount.

• Strong economic growth in China and India over the projection period, with their combined energy use more than

doubling and accounting for 30 percent of total world energy consumption in 2035 in the Reference case.

• Energy use in non‐OECD Asia (led by China and India) shows the most robust growth of all the non‐OECD regions,

rising by 118 percent from 2007 to 2035

5 10 15 20 25 30 1990 1995 2000 2007 2015 2020 2025 2030 2035

United States China India

Figure 14. Shares of world energy consumption in the United States, China, and India, 1990-2035

% of world total

Projections History

100 200 300 400 500 1990 2000 2007 2015 2025 2035

Figure 13. World marketed energy consumption: OECD and Non‐OECD,1990‐2035

quadrillion Btu

History OECD Non‐OECD

Promising Small‐scale LNG developments

• With an increasing crude oil price and decoupling with natural gas price, it will speed up the shift within power generation,

heating and transportation from traditional diesel or heavy fuel to natural gas in the form of LNG. The environmental and economic benefit is significant and it will facilitate to ease the energy shortage many emerging countries are facing as the bottle‐neck of the overall economic growth

• Compared to large scale projects the Small‐scale LNG requires less CAPEX, provides fast track solution, a unique scalability

and flexibility

• We see potentials within many of our core geographic focus areas such as South‐East Asia, alongside the Yangtze River in

China, South East Asia, the Indian sub‐continent and the GCC region in the Middle East.

Norgas Invention, the third Multigas vessel delivered in early January 2011

SR Fleet and development 2010

The growth in the supply or the fleet will be somewhat mitigated by ship recycling in the period with 15 % of the capacity (348 514 cbm) that are now 25 years or more and thus eligible for recycling or alternative uses in the coming years. During 2010 there were 16 Semi Refrigerated ships scrapped. The normal age for scrapping of such vessels has been in the period between 27 and 30 years of age. However at about 25 years of age it is quite normal for such ships to cease carrying ethylene and concentrate on other less demanding products to trade. There are 15 Semi Refrigerated newbuildings of 4 000 cbm and above (both short and long haul vessels) delivered during 2010, with 9 of these having ethylene capacity. The existing world fleet (4 000 cbm and above) of 243 Semi Refrigerated vessels has now an order book of 39 vessels to be delivered before end of 2014. Norgas has now 4 new ships capacity to be delivered in this period and that is about 17 % of the ethylene capacity to come in this period.

Source: BRS 4Q10 Source: BRS 4Q10

China Activities

2010 2009 2008 Revenue 723,5 559,9 427,1 EBITDA 99,7 86,4 51,3 EBIT 75,8 70,6 41,3 Net profit 51,3 59,1 34,0 EBITDA % 13,8 % 15,4 % 12,0 % EBIT % 10,5 % 12,6 % 9,7 % Net profit % 7,1 % 10,6 % 8,0 %

Shenghui historical performance (MRMB)

• Skaugen

Marine Construction (SMC)‐As an EPCS contractor delivering very advanced ships to Norgas at a competitive cost.

• Shenghui Gas and Chemical Systems (SGCS) IMS bought

into the company in 2006 as a necessary strategic supplier to our newbuilding program of gas carriers. In the up‐coming years we have agreed with our partners in the company that we will facilitate an IPO process to visualize the values created in this company

• TNGC Hubei Tian En Petroleum Gas Transportation Ltd.‐

the only certified foreign shipping JV company operating

• n the Yangtze river.

We expect the company to experience further growth in seaborne transportation of not only LPG, but more so petrochemical gases and LNG in the Chinese domestic market.

The Marine Transfer Activities suffered from very weak crude tanker markets over the whole of 2010 and more so in the 4Q, and with the second half of the year being more difficult than the first. It seems not very likely at this point that the output gap will be closed for crude tankers in 2011. For the SPT tanker business we will continue to focus and grow in the global support segment in order to reduce

• ur exposure to the very volatile tanker markets, a

market that continues to look challenging ahead, as the massive delivery of newbuildings still seems to be the case in 2011.

Source: RS Platou 4Q10

SPT ‐Marine transfer activities

A Joint Venture company with Teekay Corp, an add on service to customers with a global range

Vessel Delivery Schedule (light blue delivered)

Source: Internal

Vessels Type CBM Ex.Del Mei Wen Ti Fully pressurized LPG carrier 3 200 1Q 2007 Qin Shi Huang Fully pressurized LPG carrier 3 200 2Q 2007 Xi Shi Fully pressurized LPG carrier 3 200 3Q 2008 Norgas Pan Semi ref LEG/LPG and chemical carriers 5 800/9 600 2009 Norgas Cathinka Semi ref LEG/LPG and chemical carriers 5 800/9 600 2009 Norgas Camilla Semi ref LEG/LPG and chemical carriers 5 800/9 600 1Q 2011 Norgas Innovation Semi ref LNG/LEG/LPG/VCM carriers 10 000 2010 Norgas Creation Semi ref LNG/LEG/LPG/VCM carriers 10 000 3Q 2010 Norgas Invention Semi ref LNG/LEG/LPG/VCM carriers 10 000 2011 Norgas Conception Semi ref LNG/LEG/LPG/VCM carriers 10 000 3Q 2011 Norgas Unikum Semi ref LNG/LEG/LPG/VCM carriers 12 000 1Q 2011 Norgas Vision Semi ref LNG/LEG/LPG/VCM carriers 12 000 3Q 2011 To be confirmed Type CBM Ex.Del TBN Semi ref LNG/LEG/LPG/VCM carriers 12 000 ‐ TBN Semi ref LNG/LEG/LPG/VCM carriers 12 000 ‐ TBN Semi ref LNG/LEG/LPG/VCM carriers 12 000 ‐ TBN Semi ref LNG/LEG/LPG/VCM carriers 12 000 ‐

I.M. Skaugen Capital issues

Source: Internal

• The process of improving some of the key balance

sheet ratios through optimization of debt and working capital will continue through 2011, with the completion of the current newbuilding program in 2011

• The delivery of these vessels will significantly reduce

working capital provisions, and improve our key balance sheet ratios. We envision that for future newbuildings we will contract vessels through a more traditional shipbuilding setup which is less working capital intensive

• From the proceeds of the 3 remaining vessels sold to

Teekay LNG partners (the ships are all scheduled for delivery in the 1H of 2011), we are able to improve

• ur company liquidity and repay outstanding debt

maturing in 2012.

‐40 ‐20 20 40 60 80 Capex commitments Sale & leaseback proceeds Cash 4Q 2010 China WC loans Net

IMS net capex commitments

20

IMS bonds‐refinancing

‐ 20 000 40 000 60 000 80 000 100 000 120 000 140 000

IMS ‐ Bond maturity schedule (000' USD) Dec 2010

Year end 2010 Year end 2009

I.M. Skaugen SE has successfully completed a new bond issue of NOK 350 million. The bonds will have final maturity on 15 March

• 2013. The issue is a floating rate bond with a coupon margin of 6.00% above NIBOR. It is unsecured and with other relevant

covenant terms similar to our previous bond issues. An application will be sent for listing of the bonds on the Oslo Stock Exchange. In connection with the bond issue, I.M. Skaugen SE has bought back a nominal amount of NOK 200 million in IMSK05 with ISIN NO0010457856 and NOK 8.5 million in IMSK08 with ISIN NO0010534613. After the buy‐backs, the nominal amounts outstanding are NOK 0 million in IMSK 05 and NOK 142.5 million in IMSK08. Proceeds from the completed bond issue will cover the outstanding amount maturing for IMSK08. 21

Source: Internal Source: Internal

• 10 000

20 000 30 000 40 000 50 000 60 000 70 000

IMS - Bond maturity schedule (000' USD) after refinancing 2011 After refinancing 2011 Year end 2010

Key figures

22 USD million 3Q 2Q (except per share data) 2010 2009 2010 2010 EBITDA 19.4 24.7 4.8 4.6 7.9 2.3 EBIT

• 3.8

3.8

• 0.7
• 0.6

3.4

• 2.3

Financial items, investments and associates

• 14.3
• 20.3
• 8.4
• 3.4
• 4.2
• 2.1

Exchange gain/loss 1.0

• 6.1

0.8 1.2 0.8

• 0.1

Net result before tax

• 14.3
• 10.0
• 4.0
• 2.8

0.0

• 4.5

Net debt 77.9 62.1 77.9 62.1 76.0 72.1 Net interest bearing debt 145.8 116.3 145.8 116.3 148.5 128.5 Net interest bearing debt (incl. changes in hegding derivatives) 149.1 119.1 149.1 119.1 142.9 136.7 Interest rate coverage ratio ** 1.2 1.6 1.2 1.6 1.7 1.00 Total liquidity 40.0 96.1 40.0 96.1 55.3 57.7 Equity ratio* 28.5% 27.1% 28.5% 27.1% 26.9% 27.2% Book equity (excl minority interests) 78.7 94.0 78.7 94.0 84.5 84.5 Book equity per share - USD 2.9 3.5 2.9 3.5 3.1 3.2 * = book equity/total assets ** = EBITDA/net interest Improved balance sheet ratios with the equity ratio increasing from 26.9% to 28.5% Changes in notional amounts of the NOK bonds are secured with basis swaps 4Q 2010 2009

Further information about I.M. Skaugen Company Activities Please visit our website: http://www.skaugen.com

23

Thank you for your time!