Financing China s Energy Transportation:

Transcription

1 SHIPPING CHINA ENERGY 2008 Financing China s Energy Transportation: Ship Lending and Leasing Dr. Yan Jun Industrial and Commercial Bank of China April 25, 2008 Shanghai -1-

2 AGENDA I. I. CHINESE FACTOR IN IN SHIPPING ENERGY II. II. ENERGY SHIPPING FACING CHALLENGES III. III. FINANCE IN IN ENERGY SHIPPING IV. IV. LEASING AS A FINANCE ALTERNATIVE V. V. CONCLUSIONS -2-

3 CHINESE FACTOR Higher growth rate of GDP than the global average Growth Rate of GDP China is the world s most populous country and has a rapidly growing economy. 12% 10% 8% 6% 4% 2% 0% Chi na Wor l d -3-

4 CHINESE FACTOR The huge demand for energy The biggest producer and consumer of coal. The second biggest consumer of oil. Global consumption of coal Global consumption of oil 17.5% 18.4% 28.7% 24.1% 7.7% 38.6% USA Total Europe & Eurasia China India Others 17.9% 6.0% 9.0% 7.2% USA Total Middle East Japan 24.9% Total Europe & Eurasia China Others -4-

5 CHINESE FACTOR The increasing demand for energy China s consumption of crude oil has increased on an even keel, and the external dependence degree increased year by year. External Dependence Degree 60% 50% 40% 30% 20% 10% 0% in 100 million tons Pr oduct i on I mpor t vol ume Consumpt i on

6 CHALLENGES Characteristics Energy shipping distinct from ordinary shipping. More sensitive to the fluctuation of energy market Higher technique requirement Stricter environmental standards Closer link with politics Stronger financial demands -6-

7 CHALLENGES The challenge chain Increasing energy demand Shortage of shipping Need to expand the fleets Meet the difficulties in finance

8 CHALLENGES Shortage needs expansion In China more than 95% crude oil transportation relies on shipping. There is a temporary shortage in China s tanker fleet. Chinese Oil Tankers to be replaced Expected Expansion of Chinese Crude Tonnage 25 m. Dwt 20 64% 15 36% 10 5 Built Before 1985 Built After COSCO China Shipping China Merchant Nanjing Tanker Sinotrans

9 CHALLENGES Financial problems Demander Supplier The external financing costs are increasing. And the internal returns cannot match the investment. Tight monetary policy RMB appreciation Subprime lending crisis Durative of Shipping prosperity The scales of both RMB and foreign currencies are limited. And the financing risk is increasing. -9-

10 ENERGY SHIPPING FINANCE Characteristics Capital-intensive Long-term High-volatility International -10-

11 ENERGY SHIPPING FINANCE Ordinary products provided by banks Loans for vessels on-building Loans for second-hand vessels purchase Secured shipping financing Vessels finance backed by official export credit agency Rental guarantee and counter guarantee -11-

12 BANK S SHIP LEASING Bank s Leasing Company (BLC) Chinese authority permits banks to set up financial leasing companies. Banks enjoy benefits from setting up financial leasing companies. Double controls in risks management Decreasing the risks in the enforcement of law Enhancing the quality in post-lease management Reducing the periodical risks -12-

13 BANK S SHIP LEASING Comparison between lease and loan In favor of financial demander Lease Loan Ownership Leverage Repaymen t Tax Term Profit BLC Unlimited Flexible Favorable Longer Adjustments for finance costs Shipping Company Limited Limited Fixed Shorter Interest for finance costs -13-

14 BANK S SHIP LEASING Services and products Sales leaseback Structured tax new building lease ICBC Leasing Text Ship export Lease Overseas SPV Internationally synthetic -14-

15 BANK S SHIP LEASING Introduction New building -15- Salesleaseback Structured tax BLC purchases ships selected by shipping company from shipyard and leases such ships out to the shipping company. After the lease term expires, the ships shall be owned by BLC. Shipping company sells its ships to BLC at fair value and then leases back from BLC. BLC legally owns the ships, but risk and compensation generated from the ships are taken by the lessee. Taking advantages of overseas preferential tax policies, BLC leases ships through cooperation with overseas institutions and then subleases it to the lessee with a view of sharing preferential tax policy with the lessee.

16 BANK S SHIP LEASING Introduction Ships export International synthetic Overseas SPV BLC purchases ships from domestic shipyards through financial or operating leasing, and then leases it out to overseas lessees or importers in the form of leasing. BLC designs and arranges comprehensive leasing structure jointly with other international institutions to provide the lessee with the most convenient leasing services at the lowest costs. BLC purchases ships through overseas SPV and leases such ships to overseas lessee in the form of financial or operating leasing. -16-

17 CONCLUSIONS The development of China energy shipping brings opportunities to financial industry. The financial institutions are aware of the demands in energy shipping. Traditional finance tools have limitations, and innovation are needed. BLC Leasing is an effective and trusted method for financing energy shipping. -17-

18 SHIPPING CHINA ENERGY 2008 Thank you! ICBC LEASING Tel: Fax: Post code: Website: www. icbcleasing. com All opinions, views and estimates or expressed in this report constitutes the individuals judgment as of the date of this report and are subject to change without notice and provided in good faith, fairness and reasonableness but without legal responsibility. -18-