Tuesday, October 25, 2011

Major Chemical Tanker Operators continue to expand in liquid storage with new acquisitions and innovative financial partnerships

Both Stolt Tankers and Odfjell AS continue to leverage their considerable franchise in chemical transportation expanding in the chemical storage business. Both have a chemical logistics operation with sizeable cargo books. They control a major share of the chemical transport market. Liquid storage is a healthy growing business with good return on asset and attractive risk profile. This diversification enhances bottom line results, provides increased earnings stability and gives them competitive edge over peer competitors.

The chemical sector is traditionally a very low margin business with high operating costs and asset values, suffering from poor returns on investment. These companies have created a valuable franchise in chemical transportation, but they need earnings stability and improved returns on investment for their investors.

They have built up a global presence in chemical storage facilities that assists in meeting these goals. Sometimes, they have gone into new facilities alone like the recent Stolt acquisition of Den Hartogh Holdings bulk-liquid storage terminal in the Netherlands, other times in partnership with peer storage operators like VOPAK, Oiltanking and Vitol in select locations.

Odfjell chose a novel approach to finance the expansion of their terminal business in Europe and North America: a strategic partnership with Lindsay Goldberg LLC, a U.S.-based private equity firm. This firm has been involved in chemical projects in the past with their holdings in PL Propylene LLC (an evolution of an earlier Lindsay Goldberg sponsored venture, PetroLogistics). PL Propylene is now constructing the largest propane dehydrogenation plant in the world to service Gulf Coast propylene consumers. Lindsay Goldberg first entered the PetroLogistics venture by supporting their purchase of an ethylene pipeline.

It will be interested to see how the Odfjell-Lindsay Goldberg partnership evolves in the liquid chemical storage business.

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