Smoother ride for MISC
Its tank terminal division set to provide stable recurring income
AFTER an epoch of stormy weather, it looks like the now leaner and more focused MISC Bhd is set to sail in calmer waters going forward as its tank terminal business that has begun operation last April, is expected to provide stable recurring income to the shipping giant.
Although the tank terminal operation is yet to relatively reflect a significant contribution to the groups earnings – compared with its energy shipping, offshore and heavy engineering businesses – MISC and its partner Vitol Group, one of the world’s largest independent energy trading company, are banking on each other’s expertise to further grow the tank terminal operation.
In 2009, MISC partnered VTTI B.V., a wholly-owned subsidiary of Vitol to develop ATB oil storage terminal in Tanjung Bin, Johor
This eventually led to MISC acquiring a 50% stake in VTTI for US$840mil (RM2.55bil) in 2010, transforming it into a global player in the tank terminal business in the process that owns and operates a network of petroleum products terminals with a gross combined capacity of 8.5 million cum spanning over 12 countries globally.
ATB’s phase one development, with an 890,000 cu m capacity for the storage of liquid petroleum products such as fuel oil, jet fuel, petrol and diesel, was completed in April 2012.
ATB is the first VTTI terminal in South-East Asia and is able to handle tankers of all sizes, including very large crude carriers.
As the capacity of the first phase of the tank terminal has already taken up, VTTI is keen to embark on the second phase of the expansion of ATB in stages that will eventually see the doubling up of its current capacity by 2016.
Located in Tanjung Bin, ATB is adjacent to Port of Tanjung Pelepas and Singapore – two hubs of major shipping lines in South-East Asia to unload and reload their cargo as well as sought bunkering services that could bode well for ATB clients that are generally energy traders.
MISC and Vitol could take advantage of the spill-over demand for ship refuelling services from Singapore as it is the biggest bunkering port globally that supplied a record of 43.2 million tonnes in 2011 according to a Bloomberg report.
VTTI chief executive officer Rob Nijst said the company had intended to grow further and its partnership with MISC, which had vast experience on the marine side, would in turn complement their land logistic knowlegde.
“We do see opportunities in Asia, Africa and Latin America where currently, we are building terminals in Antwerp, Cyprus and Spain.
“But Asia remains an extremely interesting region for us. We do not have any concrete plan as yet now besides ATB.
“ATB first phase of development had been a success – all the capacity had already been taken up and the next level of expansion had also garnered a lot of interest,” Nijst said.
He added that MISC, being part of Petronas, would also come in handy and hopefully, would help the partnership identify growth opportunity going forward.
Nijst said the terminal was build for energy trader that would like to utilise their services to store their commodities and Vitol was one of our biggest clients.
“For a terminal like this, as long as there are movements in oil price that promotes the flow of oil, it will bode well for us. The worst that could happen is oil price stays the same and does not move,” he said adding that it did not matter whether the oil price went up or down as long as there were movements.
For MISC, after making a wise decision to sell off its liner business – which is blamed for dragging the shipping giant into the red – has returned to the black in the ninemonth cumulative period ended Sept 30, 2012.
MISC posted a net profit of RM55.6mil from a net loss of RM41.6mil year-on-year.
According to MISC, this was due to higher profit in the tank terminal business following an increase in business activities and lower losses in the petroleum business.
The results show MISC was slowly sailing away from troubled waters after it made a tough decision to cease its liner operations late last year due to competitive and saturated operating conditions.
It was reported that MISC had to make a hefty provision of RM1.67bil together with higher impairment charges on its vessels due to deterioration in the shipping market.
Besides the tank terminal business, MISC is still bouyed by the stable and long-term contract nature of the liquefied natural gas shipping division, offshore division as well as heavy engineering via Malaysia Marine and Heavy Engineering Holdings Bhd.