The Hindu : Business : Essar Shipping to sell tankers

Online edition of India's National Newspaper
Friday, Nov 05, 2004

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Business

Essar Shipping to sell tankers

By Our Special Correspondent

MUMBAI, NOV. 4. Essar Shipping has entered into an agreement with Top Tankers Inc. for the sale of up to five Suezmax tankers. The gross value of the sale is $256.5 million. The sale is subject to Top Tankers fulfilling certain capital markets formalities and the same has to be completed on or before November 25.

In the event Top Tankers is not in position to fulfil the formalities on or before November 25, it will be required to pay a substantial penalty to Essar Shipping. The vessels will be delivered to Top Tanker by Essar Shipping before April 2005.

The deal offers an opportunity for Essar Shipping to take advantage of high asset valuation now prevailing in the shipping market and also gets rid of older tonnage, the five Suezmax tankers are on an average 14 years old. Essar Shipping over the last four years has been moving in the direction of becoming a major worldwide player in sea and supply chain logistics arena. It is understood that the company has drawn up plans to invest over the next three years in excess of $1 billion in the acquisition of new building tankers and large bulk vessels.

In 2003, the company acquired India's largest and youngest 310,000 dwt tanker, MT Ashna.

The valuation of tankers in 2003 has gone up significantly as per Clarksons Research and over the last year tanker values have increased by 34 per cent.

Research reports by industry analysts suggest that over the next three years considerable supply of new buildings is likely to dampen the now buoyant freight markets and subsequently the vessel values.

Essar Shipping perhaps has envisaged this opportunity to sit on substantial cash for its future organic and inorganic growth opportunity.

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