Avance Gas kick-starts VLGC deliveries to BW LPG as part of $1B deal

Norwegian ship owner and operator Avance Gas Holding has delivered the first very large gas carrier (VLGC) to Singapore-based counterpart BW LPG as part of the $1 billion sale unveiled in mid-August 2024.

As informed, the ship in question is the 2015-built non-scrubber Chinook. The 83,000 cbm gas carrier, renamed BW Chinook, was handed over to its new owner on November 1, 2024.

On August 15, 2024, Avance Gas decided to sell twelve VLGCs, four of which are dual fuel, to BW LPG, for $1.05 billion. Specifically, the transaction encompassed four 91,000 cubic meter dual-fuel VLGCs, of which two are 2022-built and two are 2023-built, and eight 2015-built 83,000 cubic meter units of which six are scrubber-fitted.

The sale of the fleet was agreed to be settled with approximately $585 million of cash, novation of approximately $132 million of debt obligations under a sale leaseback agreement with the remainder being settled in 19.282 million shares in BW LPG where the parties agreed a fair value of such compensation at $333 million or a net asset value basis of $17.25 per share.

The overall book gain from the transaction was estimated to be $315 million of which $10 million was assumed to be depreciation savings as all vessel depreciation was discontinued on August 15, 2024, when the sale of the ships was announced.

As part of the Chinook transaction, 1.35 million shares in BW LPG have been issued to Avance Gas corresponding to approximately 1% ownership share.

Once the transaction is finalized and all shares are received, Avance Gas will be the second largest shareholder in BW LPG with approx. 12.8% ownership share.

In connection with the sale, the ship mortgage has been repaid and the company expects to receive net cash proceeds of $18.5 million, in addition to the 1.35 million consideration shares in BW LPG.

The vessel is currently on a variable time charter with an energy major expiring in mid-2025 and the time charter has also been successfully novated to BW LPG, the parties said.

The eleven remaining vessels are scheduled for delivery to BW LPG prior year-end. As of today, eight vessels are expected to be delivered to BW LPG in November while the remaining three VLGCs are expected to be delivered in December.

Two of the ships are subject to closing procedures in connection with novation of the lease while customary closing procedures under the memoranda of agreements apply to all ships.

“We are pleased to start executing deliveries of the VLGC fleet to BW LPG with the first delivery of Chinook successfully executed according to plan. During the next few weeks, we will deliver the remaining 11 VLGCs to BW LPG. While the winter market for VLGCs has so far been on the soft side, we are glad to see that BW LPG has been able to capture more of the value chain economics though its integrated operations. Hence, we are looking forward to becoming the second largest shareholder of BW LPG with a 12.8 per cent shareholding before year-end,” Øystein Kalleklev, CEO of Avance Gas, commented.