Firm to launch product to help shippers hedge their fuel bills

Ahead of new IMO rules

Enerjen Capital, a group comprising former executives of A.P. Moller-Maersk A/S, Vitol Group and Bank of America Corp., will introduce a product for shipping companies to hedge their fuel bills ahead of new rules that could roil the oil market next year.

The company -- which has legendary oil trader Andy Hall on its advisory board -- will close the Enerjen Capital IMO 2020 Note offering in February and return profits to investors in early 2021. The note will be made up of a basket of hedging instruments in crude and oil products, but won’t sit on a company’s balance sheet as a derivatives hedge, founders Stephen Schueler, Gus Majed and Jake Greenberg said in an interview in London.

International Maritime Organization rules curbing the amount of sulfur allowed in shipping fuel are set to come into effect in just under 12 months, on Jan. 1, 2020. A Bloomberg survey of analysts suggested that crude alone may rise by $4 a barrel in 2020 as a result of the rules, while analysts at Jefferies Financial Group LLC have said the impact on the global economy could reach $1 trillion. At a meeting in October, the IMO all but guaranteed the rules would start in 2020, by banning high-sulfur fuel consumption on ships.

“This is not going to go away,” said Schueler, a former chief commercial officer of Maersk. “It’s a necessary change, but an extremely disruptive one and will impact shippers, airlines and miners. The note is an elegant solution to many of the problems shipping companies have when they want to hedge.”

The note has the backing of three major banks, who would finance as much as 50 percent of participation, the three founders said, with those banks being announced later this quarter. Enerjen, which estimates that only 4 percent of shippers currently have a fuel-hedging program, also plans to introduce a separate note for airlines later this year. (Bloomberg)