Heavylift newcomer eyes IPO to take on big boys in the trade

Singapore

IF THE founder and chairman of GPO Heavylift Holdings has his way, his company would be competing with the global big boys as an entity listed either in Singapore or Hong Kong.

Kenny Cai told The Business Times that the aim is to go public later this year. Details are still in the works.

While investor appetite remains soft in the offshore and marine (O&M) sector, Mr Cai, who is also an executive director of mainboard-listed Falcon Energy Group, said opportunities remain in the heavylift sub-sector, which is still above water amid a multi-year industry downturn.

Mr Cai founded GPO Heavylift Holdings in 2014 to own and operate four new semi-submersible heavylift vessels. These vessels are being built at a total cost of more than US$400 million, or over US$100 million per ship, at CSBC Corporation's shipyard in Taiwan.

BT understands the intent back then was to float the new business when it starts generating operating cash flows.

GPO Heavylift is set to embark on its first project later this year: the first of its four newbuild vessels, GPO Grace, is contracted to Stavanger- headquartered Aibel to deliver the largest of three modules to go on a drilling platform in Statoil's Johan Sverdrup oilfield development off Norway.

The value of its first contract was not disclosed but GPO Heavylift is following up with 80-90 prospective projects ranging from US$30 million to US$80 million each. These projects are to be executed through to 2019.

Amid a protracted downturn in oilfield services contracting brought on by multi-year lows in oil prices, Mr Cai acknowledged that heavylift demand may have softened for at least the transport of offshore rigs.

But he argued that the heavylift segment is far less saturated than those of other O&M assets besieged by excess capacity from over-investments during the last industry upswing.

He qualified that the worldwide heavylift fleet, numbering over 30 vessels, is owned by just about a dozen companies. Twenty-nine of these vessels are competing for work globally but just four are on a par or of higher specifications than the vessels GPO has under construction in Taiwan.

GPO vessels are also being offered for work outside the upstream oil and gas sector that is adversely affected by low oil prices. These include transportation of large civil and military vessels and structures and modules for mid- and down-stream oil and gas projects.

Mr Cai is particularly bullish about the prospects for liquefied natural gas (LNG) module transportation, which he believes is still supported by increasing investments - despite the low oil price environment - in gas-to-power projects, LNG plants and LNG terminals.

Pareto Securities Pte Ltd chief executive David Palmer described the heavylift segment as "somewhat insulated from the full effect of declining (oilfield services) demand in the oil and gas (O&G) market" because "these ships are very versatile".

While not spared a huge dip in activity in 2016, these vessels can handle a wide variety of large cargoes and find work in offshore wind projects, decommissioning of O&G structures that have reached the end of their production lives and as floating shipyards, he said.

But Mr Palmer also noted that successful heavylift players have to stand out as custom transport service providers and not just compete as pure freight carriers.

Having pulled together a management team with decades of heavylift experience, Mr Cai has set out to position his startup among the cream of the crop. For instance, the man responsible for the design of GPO's vessels and its standing executive director, Dagfinn Thorsen, was also behind the design and construction of two vessels in the fleet of leading player in the heavylift trade, Royal Boskalis.

GPO Heavylift has forked out 20 per cent in downpayment for the shipbuilding contract with CSBC. The outstanding amount can be funded by a mix of equity and ready bank facilities on hand. Mr Cai said, however, that the company is still evaluating other bank financing options.

GPO Heavylift is also in talks with the Maritime and Port Authority of Singapore to explore reflagging and flagging GPO Grace and the three other vessels under the Singapore Registry of Ships. A final decision will be made after weighing the incentives and support offered by the flag states, Mr Cai said.