under the flags of foreign countries

By 2010, OJSC Novorossiysk Shipping Company (Novoship) intends to increase its fleet to 73 units. As it was decided at the company’s board of directors at the end of last week, the increase will occur through the purchase of Aframax class tankers and Handymax class product carriers being built at shipyards in Croatia and Korea. At the same time, the tanker fleet will rejuvenate to 18 years, and the bulk carrier fleet to 23 years. However, according to analysts, the exceptionally high taxes imposed on ships flying the Russian flag could make Novoship’s expensive new buildings uncompetitive. As Kommersant was told by the management of Novoship, the main issue of the board of directors of the company held in the capital under the chairmanship of Deputy Minister of Transport of the Russian Federation Alexander Misharin was the approval of the fleet renewal and development program of the company for 2006–2010. According to the program, Novoship plans to increase its fleet from 56 to 73 units through the construction of Aframax class tankers (dwt 80–119 thousand tons) and Handymax class product tankers (40–49 thousand tons). According to the management's plan, simultaneously rejuvenating the fleet by 2010 will reduce the age of tankers to 18 years, bulk carriers and LPG tankers to 23 years.

As Tatyana Prokopenko, assistant to the company's president, noted to Kommersant, by 2007 Novoship plans to increase the number of its Aframax class tankers to 27 and become the third shipowner in the world for vessels of this type. At the same time, the company's management refused to name the total amount of investment in the fleet modernization program, citing a sharp increase in prices for the construction of ships at foreign shipyards over the past three years. In particular, the cost of building conventional Aframax class vessels (150-250 thousand tons deadweight) for transporting bulk cargo at the Korean Hyunday Heavy Industries Offshor shipyards, where Novoship orders its tankers, has risen over the past 2.5 years from $35 to $60 million According to the president of the company Sergei Terekhin in an interview with Kommersant, a new vessel today costs him $40–60 million, despite the fact that borrowed funds amount to 60–70%.

At the same time, according to Ms. Prokopenko, the Novorossians plan to continue purchasing Aframax in Korea, but the question of the Croatian Tragir shipyard, which made product carriers, is still open - Novoship has not yet decided on the carrying capacity of the new ships, which they may order from another shipyard.

The main shareholders of OJSC Novoship are the Federal Property Management Agency (60.73% of voting shares), the Russian Federal Property Fund (6.4%), OJSC Novoshipinvest (8.49%), Intrigue Shipping (14.41%). The company's fleet currently consists of 56 vessels with a total deadweight of 3.3505 million tons (1% of world tonnage) and an average age of 9.5 years. The average market value of the operating fleet is about $1.5 billion. During 2006, the company's fleet will be replenished with 10 new modern tankers with deadweight from 40 thousand tons to 105 thousand tons. For the first six months of 2006, in accordance with international accounting standards, income amounted to $260 million. Net profit for 7 months of 2006 amounted to $95.5 million. For 8 months of 2006, the group's vessels transported 43.88 million tons of cargo, of which 6.06 million tons (13.81%) were cargo of Russian charterers. At the same time, analysts emphasize that, along with the modernization of the fleets of leading Russian shipping companies, maritime cargo turnover has been steadily declining in recent years - in 2005 it decreased by 4.7% - to 54.1 billion ton-kilometers (65 million in 2003). At the same time, it is expected that in 2007-08, due to the large number of ships under construction, there will be a peak in the fall in freight rates, which could seriously affect Novoship's income. According to Brunswick UBS analysts, exceptionally high taxes in Russia, which are imposed on ships flying the Russian flag, can make the company's new buildings uncompetitive. According to experts, customs duties on imported equipment add up to 24% VAT, and all this adds up to an increase in the cost of the vessel by tens of millions of dollars. Experts believe that there is no need to talk about the competitiveness of such a fleet on the world market.

According to Mr. Terekhin, Novoship today has 44 ships sailing under a foreign flag, and 12 under a Russian flag. At the same time, Western banks make it a mandatory condition when concluding a deal to register a new vessel outside the Russian Federation. In his opinion, the annual confirmation of the vessel’s registration in the Russian International Register of Ships will certainly not arouse the owner’s desire to transfer new vessels to the Russian flag.

SERGEY KISIN

Kommersant (Rostov) No. 159 from 08/29/2006, p. 12

"Novoship" will rejuvenate and grow