Cosco Shipping Energy Transportation (CSET) has finally received approval from Chinese securities authorities for a private placement to fund a 16-tanker newbuilding programme.
In an exchange filing, the Shanghai and Hong Kong-listed company said China Securities Regulatory Commission gave the green light to the issue of up to about 806m new shares in Shanghai.
The planned issue, which has Guotai Junan Securities as lead underwriter, is equivalent to 20% of CSET’s outstanding shares. Its share price closed at CNY 5.6 ($5.05) on Thursday.
The company, which is part of state-owned giant China Cosco Shipping, submitted the proposal for the placement to the Chinese securities in December 2017.
In May, CSET said in a filing that it planned to sell the new shares to at most 10 investors for CNY 5.4bn in cash. State-owned China Cosco Shipping, the parent group of CSET, has committed to buying shares worth up to CNY 2.4bn.
According to the filing, the money raised will be used to fund CSET’s newbuilding investments totalling $97.2m. The orders are for four VLCCs, three suezmaxes, three aframaxes, two LR2s and four panamaxes.
Of these, two 72,000-dwt tankers were delivered in 2017.
In 2020 and 2021, Dalian Shipbuilding Industry Co will deliver the VLCCs and the suezmaxes, and Guangzhou Shipyard International will deliver the aframaxes, the LR2s and two 65,000-dwt panamaxes.
“While we are one of the world’s largest tanker owners…we are in urgent need to expand our shipping capacity further to become more competitive,” CSET said. “Also, to reduce our operational costs, we need to renew our fleet in time.”
“Old ships cost more to maintain and they consume more fuel.”
Riding on improved tanker earnings, net profits of CSET rose to CNY 187m in the third quarter, up from CNY 22.6m in the same quarter of 2018.
But its fourth-quarter performance is expected to be hit after Cosco Shipping Tanker (Dalian), one of CSET’s main subsidiaries, was put on the US sanctions list on 25 September for allegedly transporting Iranian oil.
Based on Huatai Research estimates, Cosco Dalian contributed 39% of CSET’s net profits in the first half of this year.
In late October, Washington announced that companies would have until 20 December to wind down their dealings with Cosco Dalian, providing some relief.
