Shanghai: China Merchants Energy Shipping (CMES) has signed an agreement with Sinotrans & CSC to establish a tanker joint venture overseas through their subsidiaries.
The total value of the new entity will be $1.11bn. CMES will provide $566m worth of assets including nine VLCCs and 10 VLCC newbuild contracts, some equity of its subsidiary Hong Kong Haihong Shipping and some cash to get 51% equity in the joint venture, while Sinotrans & CSC will invest $543m cash to get the remaining 49%.
The joint venture will purchase more vessels once it is officially established, as the two national shipping firms aim to build the leading VLCC fleet in China in order to meet the country’s rising demand for oil imports.
CMES currently operates 17 VLCCs with a total capacity of 3.71m dwt. Sinotrans & CSC’s oil shipping arm, Nanjing Tanker, delisted from the stock exchange this year and is now in the process of restructuring.
The deal is expected to be finalised before September 30.
One Hong Kong shipping analyst commented to SinoShip News: "This is a the latest in a series of enforced consolidation moves that Beijing has demanded among the big four state-run shipping firms in the wake of years of poor financial results." [12/08/14]