The state owned logistics mammoth, Ethiopian Shipping and Logistic Services Enterprise (ESLSE) discloses that it is on the final stage of swapping its two tanker vessels after clearing all its credit stemming from the takers.
It can be recalled that the successful logistics had embarked to purchase nine vessels at a total price tag of USD293.5million courtesy of a loan backing from the Export Import (EXIM) Bank of China. ESLSE is now planning to make a swap for the two tankers targeting to make more profits through purchase of bulk carriers.
From the onset of the arrival of the tankers in Djibouti, which is the major port site for Ethiopian vessels, both vessels laid idle for six months until a Kuwaiti company which is affiliated with Ethiopia, through an oil supply partnership, took administration on behalf of the Ethiopian vessel operator.
After the administrative takeover, the vessels were then transferred to a Dubai based management company.
As per the agreement, the Dubai based company handled the ship and technical management while ESLSE look over the chartering. This however was not a profitable venture.
“The crew and the management are not ours,” Roba Megersa, CEO of ESLSE pointed out whilst reminding that the tankers were not profitable since their arrival.
As Roba further shed light on the matter, he expressed that the logistics enterprise thought it best to part ways with the vessels but faced delays due to debt, “Now the vessels are free from any credit. So we shall move on with the plan.”
As per the information Capital obtained from the CEO, the process has begun to let go of the tankers through a swap arrangement or sale and purchase agreement (SPA).
A Singapore based brokerage, Stanford Shipping, has taken up the process to transfer the tankers to interested operators.
As planned, the enterprise has targeted to swap the two tanker vessels with bulk carriers which are vessels that ESLSE is conversant with. “Dry bulk carriers are more profitable and highly on demand in the global logistics business,” the logistics firm’s head opined.
“We are finalizing to conclude the process. We hope that the process is fully completed in the coming six months,” Roba explained.
In the past fiscal year, ESLSE successfully closed the credit that it paid for the financer, which now makes for a swifter conclusion to a swap modality.
The logistics guru explained that the conventional swap scheme targets second hand vessels, “Nonetheless, if we want a new built ship it may take up to two years to receive the vessel.”
“We can get relatively younger vessels with the SPA. This will lead to us resuming operations swiftly,” he added.
The shipping company’s target is to acquire dry cargo carriers with a range of five years. It is worth noting that most ESLSE tankers have passed almost a decade of service.
“Such business acumen in our sector is common. For instance, MSC is operating vessels obtained from the second hand market,” he explains, adding, “Once you have management of a vessel that is relatively new, then operation will be smooth which automatically leads to profits.”
According to the plan, ESLSE has targeted to get an ‘ultramax’ dry bulk carrier, a midsize vessel, with up to 64,000 DWT on the swap of the two tankers.
“We are also considering swapping the two tankers with two ‘supramax’ vessels that have a capacity from 50,000 to 60,000 DWT with some additional charges,” the CEO added.
Both types of vessels will be the first for ESLSE, which is currently operating nine ‘handysize’ vessels with about 28,000 DWT. Nevertheless, it has operated the supramax and ultramax dry bulk carrier through lease to ship cargos like fertilizer and coal.
The two vessels that ESLSE wants to swap were built in November 2012 and January 2013 and have about 42,000 DWT capacity. They are also significant in that they are the first oil carrier ships for the operator.
The latest vessels of ESLSE got into business at different periods but have played a pivotal part in the first Growth and Transformation Plan.
ESLSE was initially established in the mid-1960s as a shipping company and was then amalgamated with some other public logistics enterprises in 2011 to form ESLSE. The firm is the strongest vessel operator and is the only cross continent operator in Africa.
When the seven 28,000 DWT multi-purpose vessels were built they cost USD 32.5 million each while the two oil tankers price points was USD 37 million each.
About 16 years ago, the enterprise also bought two multi-purpose vessels from China, ‘Shebelle’ and ‘Gibe,’ named after two rivers in Ethiopia.
In the last budget year, besides services to Ethiopian cargo, cross trade services amplified the performance of ESLSE leading it to amass over 5.6 billion birr in profit before tax for the year.
In the budget year, a total 7.2 million tons of cargos shipment have been managed through different operations including vessel, inland, freight forwarding and port and terminal services.
In regards to marine operation, the firm managed operations of 3.6 million tons which is 93 percent of its target.