Finding fuel partners
COMMENT: The underlying shipping markets seem to be gathering steam, if presenters at recent ship finance conferences are to be believed, writes Barry Parker.
In one interesting deal recently announced, Brookfield Asset Management - the large Canadian investor known for its holdings of- 36 ports in North America, the UK, Australia and Europe - has invested in an operator of offshore shipping assets.
Brookfield, through its infrastructure group, has made a $640m equity investment in Teekay Offshore Partners, which is struggling amid cost over-runs and a backdrop of weak oil prices.
According to the presenters at the recent Marine Money Forum in New York, this investment - which also involved refinancing of existing debt - "significantly strengthens Teekay Offshore's balance sheet and improves liquidity".
The lengthy contracts at Teekay Offshore, as operator of equipment serving offshore oil fields, are similar to the long-lived deals that owners of ports infrastructure desire. But, also similar to ports where a changing palette of alliances and merger partnerships has forced revamps of deals, the dynamic nature of energy markets has pushed a drift in the deals thought to be set in stone forcing creative structuring responses to protect revenue streams.
Will Brookfield’s investment in a quasi-shipping company be the start of a new mega-trend? Probably not, but it offers port planners and strategists important food for thought. Infrastructure funds have certainly discovered the world of terminals; but what other assets and businesses within ports’ cargo supply chains might be suitable for such investors?
At least one nascent area which comes to mind might be fuel supply; at this moment, LNG fuelling is the rage. Announcements in the past month show that vessel owners, evaluating upcoming regulatory changes that will mandate the use of marine fuels with lowered sulphur content, are now making decisions to burn LNG in their vessels.
The time is ripe for longer term deals with energy companies that wish to establish footholds in ports. One other Marine Money presenter, Zenith Capital, confirmed that it is investing in LNG-related terminal facilities. Port authorities - even those who are actually running day-to-day operations - may not handle refuelling businesses, but they can still play an important role as a facilitator of conversations that are mutually beneficial to the port, terminal, investors, and, importantly, to lines that will now be considering fuel supplies in their decisions of where there vessels might call. Having an LNG source (or other low sulphur fueling capability) could make all the difference in attracting the vessels.
And when the talk turns to such supply lines, infrastructure investors may be interested in being part of these conversations.
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