Norwegian clients also owners at Canadian yard

Published Apr 23, 2009
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Quebec Davie

Shipbuilding interests in Cecon ASA of Norway have secured a large ownership stake in Canada’s already Norwegian-dominated shipyard company Davie Yards Inc., after the yard’s US$20 million share launch triggered an agreed equity buy.

The deal transforms Cecon from Davie’s biggest client into a 33-percent owner with ambitions of becoming a key offshore construction company. In the convoluted style of Norwegian ownership patterns, Davie’s other client, Ocean Hotels, also has an interest in Davie via its chairman, Tore Enger, founder of Davie’s Norway-based holding company.

Davie’s share issue and Arendal-, Norway based Cecon’s ownership stake mean the latter is now elligible to draw on USD$200 million in construction loans from Canada’s Export Development Corp., a government gesture matched in 2008 by Oslo’s US$7 billion in export guarantees.

Cecon will debt-finance it’s share subscription via US$10 million worth of 12-month senior secured bonds tied to Davie shares and carrying a 25 percent coupon. Most of the bonds were snapped up fast.

Norwegian interest in the storied shipyard has coincided with revived Canadian Federal Government vows to rehabiliate shipbuilding in Canada, although so far Norwegians are dictating the types of ships Davie builds. Cecon’s focus is offshore construction vessels, a current growth industry, and three large vessels of the Vik-Sandvik design VS4220 are under order.

The work of the 130-metre-long vessels, with their 250-tonne and 400t cranes, will be overseen by the experienced Norway-based chief exec, Terje Tellefsen. He’s understood to be ready for new records in deepwater installations of flexible and rigid steel pipelines by ship.

The first two ships ordered by Cecon will work to 3,000m and 4,000m ocean depths using National Oilwell Varco cranes and winches from DNM of Norway. Their hulls will arrive at the yard by August 2009.

A “more powerful” ship No. 3 is due late in 2009 with rooms for 100 persons.

Loans from Davie’s big Norwegian shareholer Offshore Holding AS, formerly Davie AS, and a French-Canadian development fund have been more than matched by $300 million offered by Canadian officials to ensure the ships get built.

“We have five vessels on order with a total contract price of $740.6 million and our order book takes us to first quarter of 2011,” said Davie chief exec Steinar Kulen, a former Kleven Maritime, Ulstein, Vickers and Rolls Royce Marine man.

He said oil and gas’s “fundamentals” are positive as offshore activity heads for deeper water. “We also see that new fields will be developed in the near future for which some vessels have not yet been contracted.”

Whatever the state of the oil and gas industry, various Norwegian yard and ships-gear interests look set to benefit from their Canadian holding and Canadian government money. In December 2008, a new Norwegian company, called Newco in a Davie document and owned by Cecon and the yard group Bergen Group, was brought in for a $10 million share buy-up.

Whatever the price of the ships, none have looked set to loose, although the Canadian taxpayer would be tapped a bit more and earlier. In February 2009, Davie’s contracts with Cecon and Ocean Hotels were declared a total $95 million more expensive, but with ship buyers also being Davie and its suppliers’ owners, all price changes were quickly agreed.

Even the December loan from Norway-based Offshore Holding is made less painful by the major shareholder’s $23.3 million rebate for brokerage services that ostensibly landed Cecon and Ocean Hotels as clients.

As mentioned, Ocean Hotels’s chairman Enger is founder of Davies’s Norwegian holding company, but also founder, chairman and shareholder of TECO Group which includes a yard services specialist.

It was TECO Martime, not Cecon, Davie in Norway or Ocean Hotels that first flashed a bulletin to Oslo shareholders that the Canadian export-enabling agency was onboard with $350 million in ready shipbuilding money.

Tags: Bergen Group Dreggen, Cecon, Davies Yards


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