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Annual Report
2006
BW GAS
BW Gas ASA
Visiting address:
Drammensveien 106
0273 Oslo
Norway
Mail address:
P.O. Box 2800 Solli
0204 Oslo
Norway
Annual Report 2006
Tel: +47 2212 0505
Fax: +47 2212 0500
[email protected]
www.bwgas.com
KEY FIGURES
KEY OPERATIONAL AND FINANCIAL DATA
2006
2005
2004
2003
Operating revenue
729.9
517.3
432.6
360.5
Timecharter (TC) income
629.1
411.1
339.4
283.9
Operating profit before depreciation and disposals
345.1
222.5
162.0
96.5
Operating profit
258.7
186.0
106.3
25.8
Net profit from continuing operations
224.7
280.2
-7.5
34.7
Net profit incl. discontinued operations
223.7
448.0
128.6
86.1
1.7
2.1
-0.1
0.3
248.9
354.3
242.7
143.8
1,605.7 1,349.2
1,615.6
896.6
Earnings per share, continuing operations
Cash and cash equivalents
Interest bearing debt
ROE (%)
21.7
31.6
-0.7
2.5
ROACE 1 (%)
11.2
10.3
5.6
1.4
1
Return on adjusted capital employed = operating profit/(average total assets
- intangibles - newbuildings - non-interest bearing debt)
TC income 2006
EBITDA 1
MGC
15%
MGC
16%
LNG
26%
LNG
34%
LGC
16%
BW Gas – the leading clean energy carrier
LGC
18%
VLGC
43%
VLGC
32%
LPG segment 66%
LPG segment 74%
1
Operating profit before depreciation and disposals
Annual Report
2006
BW GAS
BW Gas ASA
Visiting address:
Drammensveien 106
0273 Oslo
Norway
Mail address:
P.O. Box 2800 Solli
0204 Oslo
Norway
Annual Report 2006
Tel: +47 2212 0505
Fax: +47 2212 0500
[email protected]
www.bwgas.com
KEY FIGURES
KEY OPERATIONAL AND FINANCIAL DATA
2006
2005
2004
2003
Operating revenue
729.9
517.3
432.6
360.5
Timecharter (TC) income
629.1
411.1
339.4
283.9
Operating profit before depreciation and disposals
345.1
222.5
162.0
96.5
Operating profit
258.7
186.0
106.3
25.8
Net profit from continuing operations
224.7
280.2
-7.5
34.7
Net profit incl. discontinued operations
223.7
448.0
128.6
86.1
1.7
2.1
-0.1
0.3
248.9
354.3
242.7
143.8
1,605.7 1,349.2
1,615.6
896.6
Earnings per share, continuing operations
Cash and cash equivalents
Interest bearing debt
ROE (%)
21.7
31.6
-0.7
2.5
ROACE 1 (%)
11.2
10.3
5.6
1.4
1
Return on adjusted capital employed = operating profit/(average total assets
- intangibles - newbuildings - non-interest bearing debt)
TC income 2006
EBITDA 1
MGC
15%
MGC
16%
LNG
26%
LNG
34%
LGC
16%
BW Gas – the leading clean energy carrier
LGC
18%
VLGC
43%
VLGC
32%
LPG segment 66%
LPG segment 74%
1
Operating profit before depreciation and disposals
HISTORY
1935 Bergesen d.y. is founded by Stavangerbased shipowner Sigval Bergesen d.y. The
first vessel is an oil tanker of 14,290 dwt,
Président de Vogüé
1942 Bergesen takes control over Rosenberg
Shipyard in Stavanger to be able to build
larger vessels for the fleet
1966 Bergesen enters into the drybulk business
1969 After 27 years and 43 vessels built, the
company sells Rosenberg Shipyard. It has
become increasingly clear that the shipyard is unable to serve the future needs
of the company
1974 First entry into gas shipping as Bergesen
takes over four newbuilding contracts
from the Norwegian shipping company,
Fearnley & Eger
1980 The founder, Sigval Bergesen d.y., passes
away, leaving a fleet of seven million dwt
and NOK 1 billion in the bank
1986 Bergesen is listed on the Oslo Stock Exchange, being the fifth largest company
quoted
1996 Bergesen acquires the Norwegian gas
carrier company Havtor, increasing the
total fleet to more than 90 vessels
2002 Breaks through in the LNG market by
ordering seven LNG newbuildings at
Daewoo, all with 20-year contracts
2003 Sohmen family interests, with long tanker
shipping traditions in Asia, buy all the
shares in Bergesen, combining two of the
world’s leading shipowners. Bergesen is
delisted in June
2005 Bergesen is restructured into a pure gas
shipping company by separating out offshore and dry-bulk into stand alone
entities within Bergesen Worldwide Ltd.
The gas segment, with the world’s largest
fleet, is renamed Bergesen Worldwide
Gas ASA (BW Gas) and is listed on the
Oslo Stock Exchange in October
2006 BW Gas enters into an agreement with
fertiliser company Yara to take over its
ammonia fleet consisting of ten vessels.
A partnership agreement states that BW
Gas will provide shipping services to Yara
BW GAS
CORPORATE STRUCTURE
is a leading global provider of gas marine
transportation services. The company is the
largest owner and operator of LPG (liquefied
petroleum gas) carriers and one of the largest
independent owners and operators of LNG
(liquefied natural gas) carriers. BW Gas owns,
part-owns and/or operates a fleet of 98
vessels (including newbuildings), of which
83 are LPG vessels (transporting mainly
LPG and ammonia) and 15 are LNG vessels. Currently the company employs approximately 1,750 seagoing personnel and
160 onshore employees.
BW Gas operates the business of gas marine transportation in
two main segments: LPG and LNG.
Following the listing of BW Gas on the Oslo Stock Exchange in
October 2005, and the acquisition of Yara’s shipping business in
April 2006, the corporate structure was reviewed in order to
establish a more efficient structure.
As a result, the group was divided into separate holding companies
for each of the two business areas, reflecting the commercial
and operational differences and the related risks of the LPG and
LNG segments, as well as enhancing the financial flexibility.
The holding companies are 100% owned by BW Gas and have
separate boards and commercial managements. The restructuring
was implemented during 2006.
MISSION
VISION
We carry clean energy
BW GAS
LPG/AMMONIA
LNG
MARINE TRANSPORTATION
MARINE TRANSPORTATION
83 LPG CARRIERS
15 LNG CARRIERS
42 VLGCs
15 LNGs
20 LGCs
21 MGCs
To be the world’s leading
clean energy carrier by 2012
Berge Sisu, built 1978, was the first newbuilt gas vessel to enter the company
Connecting
consulting • consept • design: cox.no
photo: ole walter jakobsen
print: TS-trykk tm
HISTORY
1935 Bergesen d.y. is founded by Stavangerbased shipowner Sigval Bergesen d.y. The
first vessel is an oil tanker of 14,290 dwt,
Président de Vogüé
1942 Bergesen takes control over Rosenberg
Shipyard in Stavanger to be able to build
larger vessels for the fleet
1966 Bergesen enters into the drybulk business
1969 After 27 years and 43 vessels built, the
company sells Rosenberg Shipyard. It has
become increasingly clear that the shipyard is unable to serve the future needs
of the company
1974 First entry into gas shipping as Bergesen
takes over four newbuilding contracts
from the Norwegian shipping company,
Fearnley & Eger
1980 The founder, Sigval Bergesen d.y., passes
away, leaving a fleet of seven million dwt
and NOK 1 billion in the bank
1986 Bergesen is listed on the Oslo Stock Exchange, being the fifth largest company
quoted
1996 Bergesen acquires the Norwegian gas
carrier company Havtor, increasing the
total fleet to more than 90 vessels
2002 Breaks through in the LNG market by
ordering seven LNG newbuildings at
Daewoo, all with 20-year contracts
2003 Sohmen family interests, with long tanker
shipping traditions in Asia, buy all the
shares in Bergesen, combining two of the
world’s leading shipowners. Bergesen is
delisted in June
2005 Bergesen is restructured into a pure gas
shipping company by separating out offshore and dry-bulk into stand alone
entities within Bergesen Worldwide Ltd.
The gas segment, with the world’s largest
fleet, is renamed Bergesen Worldwide
Gas ASA (BW Gas) and is listed on the
Oslo Stock Exchange in October
2006 BW Gas enters into an agreement with
fertiliser company Yara to take over its
ammonia fleet consisting of ten vessels.
A partnership agreement states that BW
Gas will provide shipping services to Yara
BW GAS
CORPORATE STRUCTURE
is a leading global provider of gas marine
transportation services. The company is the
largest owner and operator of LPG (liquefied
petroleum gas) carriers and one of the largest
independent owners and operators of LNG
(liquefied natural gas) carriers. BW Gas owns,
part-owns and/or operates a fleet of 98
vessels (including newbuildings), of which
83 are LPG vessels (transporting mainly
LPG and ammonia) and 15 are LNG vessels. Currently the company employs approximately 1,750 seagoing personnel and
160 onshore employees.
BW Gas operates the business of gas marine transportation in
two main segments: LPG and LNG.
Following the listing of BW Gas on the Oslo Stock Exchange in
October 2005, and the acquisition of Yara’s shipping business in
April 2006, the corporate structure was reviewed in order to
establish a more efficient structure.
As a result, the group was divided into separate holding companies
for each of the two business areas, reflecting the commercial
and operational differences and the related risks of the LPG and
LNG segments, as well as enhancing the financial flexibility.
The holding companies are 100% owned by BW Gas and have
separate boards and commercial managements. The restructuring
was implemented during 2006.
MISSION
VISION
We carry clean energy
BW GAS
LPG/AMMONIA
LNG
MARINE TRANSPORTATION
MARINE TRANSPORTATION
83 LPG CARRIERS
15 LNG CARRIERS
42 VLGCs
15 LNGs
20 LGCs
21 MGCs
To be the world’s leading
clean energy carrier by 2012
Berge Sisu, built 1978, was the first newbuilt gas vessel to enter the company
Connecting
consulting • consept • design: cox.no
photo: ole walter jakobsen
print: TS-trykk tm
Our aim is to be the preferred partner for our
customers and to create value for the shareholders
through profitable growth.
The company seeks to achieve this by implementing
the following strategies:
• Combine stable cash flow from LNG with
cyclical opportunities in LPG
• Use partnerships and joint ventures when
necessary to secure new business
• Use the large LPG fleet size to provide
flexible solutions
• Expand the LPG fleet through well-timed
transactions
• Expand the LNG fleet by focusing on projects
with a good risk/return
• Evaluate speculative LNG investments when
opportunities arise
• Operate a high quality fleet based on stringent
ship management standards
• Seek attractive merger and acquisition
opportunities
• Maintain a capital structure reflecting the
underlying business risks
• Maintain a strong standing in the capital markets
• Attract and retain competent people both
onboard and ashore
FIRST QUARTER
THIRD QUARTER
FOURTH QUARTER
• Edda Gas KS was fully consolidated as a
subsidiary.
• Signed an agreement with Maran Gas to take
a 50% ownership share in four 84,000 cbm
VLGC newbuildings ordered by Maran Gas
from Daewoo for delivery in 2008 and 2009.
• The VLGC, Berge Ningbo (82,000 cbm), which
is chartered-in on a 12-year timecharter with
purchase options, entered the fleet.
• LNG Benue (145,952 cbm) was delivered
from Daewoo Shipyard in March, the final
vessel on the first contract with Nigeria LNG.
• The Yara transaction was closed and seven
of the ten vessels entered the fleet.
• Entered into an agreement with Mitsui and
Meiji Shipping Group for a 15-year timecharter
with purchase option of two VLGC newbuildings for delivery 2009/2010. The deal is a
cooperation with Exmar and Maran Gas.
• Declared the option to acquire the 2001-built
VLGCs, Formosagas Bright and Formosagas
Apollo. The timecharter was replaced by a
bareboat charter from mid August 2006 until
delivery end March 2007.
• Declared the option to purchase VLGC Berge
Trader (built March 2006). The ownership was
transferred in July.
• The VLGC newbuilding Berge Nantong, which
is chartered-in on a 12-year timecharter with
purchase option, was delivered earlier than
scheduled.
• BW Gas issued two Norwegian bond loans
with three and five year maturities, with NOK
700 million borrowing limit. The loans were
used to part-finance the Yara fleet purchase
and to increase the company’s financial
flexibility going forward.
• The MGC newbuilding BW Sombeke
(38,436 cbm), owned 50/50 with Exmar
was delivered.
• The timecharter on MGC Marola (37,314 cbm,
2003 built) as part of the Yara deal, entered
into effect.
• The part owned LGC Helice (57,206 cbm,
1991 built) was sold to an Indian buyer.
SECOND QUARTER
• Entered into an agreement with Yara to take
over its ammonia fleet consisting of seven
fully owned and three chartered-in vessels.
The deal also included a partnership agreement, under which BW Gas will provide
shipping services to Yara. The vessels are
timechartered back to Yara for periods ranging
from three to 15 years.
• Berge Racine took up station at Punta Arenas
Anchorage, Puerto Bolivar in Ecuador to operate as a Floating Storage Unit (FSU) for the
next two years.
2007
STRATEGY
2006
HIGHLIGHTS 2006
FIRST QUARTER 2007
• VLGC Leto Providence was delivered on period
timecharter to BW Gas, Exmar and Maran with
one third interest each.
• BW Gas increased the 5-year Norwegian bond
loan with an additional amount of NOK 100
million, from NOK 250 million to NOK 350
million.
• VLGC BW Sisu (75,989 cbm, 1978 built) was
sold for captive trade/storage in the Middle
East.
• The company entered into a renaming process
in January, changing the name from
Bergesen Worldwide Gas to BW Gas, with
legal effect after the annual general meeting
3 May 2007.
• The part owned MGC Havpil (12,061 cbm,
1977 built) was sold for scrap.
CONTENTS
3
4
8
world markets
14
24
30
38
44
45
50
110
112
114
Highlights 2006
Letter from the CEO
Clean energy
The board of directors’ report
Corporate governance report
Market and business report - LPG
Market and business report - LNG
Company management
Shareholder information
Accounts and notes
Fleet list
Glossary of shipping terms
Addresses
BW Gas annual report 2006
3
Letter from the CEO
SAME SHIPS, NEW WRAPPING
forts to reduce emissions from coal
and oil products. With abundant reserves of gas in the world and liberalisation of the world’s gas markets,
international trade of gas is expected
Last year we also established a new to increase substantially in the coming
vision – to be the leading clean energy years. As the largest gas shipping
This year we are in the process of
carrier by 2012. We will measure our company in the world, we stand to
changing our name from Bergesen success, not in terms of the number benefit from this development.
Last year I reported on a solid start
Worldwide Gas to BW Gas. This deci- of vessels, but in delivering the best
for BW Gas as a listed entity. I told
Although the market developed
you that we are in this business to
positively through most of 2006, we sion is a result of a group-wide ini- returns and the highest equity market BW Gas recognises that shipping
affects the natural environment.
deliver customer satisfaction and
experienced a severe downturn for our tiative to leverage on the combined capitalisation in our industry. This
means that we must continue to
competitive returns, and that in order VLGCs in the fourth quarter. Although size of the companies and create a
We take this responsibility seriously.
to achieve this we cannot just sit back all fundamentals were pointing to- stronger, more unified voice in the
While we are already meeting and
strive to find new market opportuwards a continued healthy market, industry. By keeping the initials of
nities with good returns. We need
exceeding industry standards, we
and enjoy good markets. We will
need to continue our relentless search months of record warm weather took Bergesen and Worldwide in our logo, to keep up with the growth in gas
would like to focus on how we can
for good business opportunities and their toll on the market. The suppos- we are emphasising that we are not
shipping, and we need to keep
contribute to a greener world. Much
edly warmest winter in 500 years
leaving our traditional values behind. ahead of the competition.
internal work is going into this effort,
ways to improve ourselves.
prompted cuts in OPEC oil and gas
We are the same company, the same
and this annual report will include a
The most significant progress we
production, which negatively impact- employees, and the same ships. We Our vision statement also demonspecial section covering the topic of
will continue to deliver the operational strates that we carry the most envi- clean energy.
made last year was the establishment ed LPG production. The production
of a partnership with Yara and the
cuts combined with technical proexcellence that we have always been ronmentally friendly fossil fuel on our
acquisition of their ammonia fleet.
duction problems and unfavourable known for. At the same time we
vessels. Natural gas emits only half
would like the new name to symbol- the carbon dioxide (CO2) of coal, and
The partnership with Yara, the world’s changes in transport distances exise progressiveness – a fresh approach virtually no other greenhouse gases.
leading ammonia producer, was an plains some of the volatility of the
important strategic step for BW Gas. LPG shipping market. With many new to how we do business. By being
Gas as a fuel emits less nitrogen ox- Jan Håkon Pettersen
It has improved the utilisation of our LNG facilities coming on stream over approachable, personal, and service- ide, particulate matter and CO2 com- Managing director and CEO
fleet, and strengthened our position the next few years, this situation is minded we believe that we can build pared with coal, gasoline and fuel
as the world’s leading shipping
expected to improve. I feel confident stronger relations with our stakehold- oil, and we are confident that the
world finally will make serious efservice provider to the gas industry. that the LPG market has bottomed out ers. By being open to change and
I am pleased to announce another
record year for BW Gas. Well-timed
transactions in the past, combined
with a healthy LPG market throughout most of 2006, enabled us to
deliver double digit returns on our
total capital.
During the year we also issued two
bond loans at attractive prices in the
Norwegian bond market. The proceeds contributed towards our strategy of maintaining a capital structure
that reflects the underlying business
risks, and will increase our financial
flexibility going forward.
for now, but we will be experiencing
fluctuations again in the future as new
vessels are delivered from shipyards.
By anticipating these changes, we can
seek to make timely investments and
turn this volatility to our advantage.
creative in finding new commercial
and technical solutions we shall not
only keep up with a dynamic gas
market, but lead the development.
‘The most significant progress we made last year was the establishment
4
BW Gas annual report 2006
Letter from the CEO
Operating profit from continuing operations
300
250
(USD mill)
200
150
100
50
0
2003
2004
2005
2006
of a partnership with Yara and the acquisition of their ammonia fleet’
BW Gas annual report 2006
5
COOKING
China has vast deposits of coal that are
easily accessible at low cost. Coal covers
almost 70 per cent of the primary energy
consumption in the country. The use of
coal for cooking and heating is widespread among the population. This results
in high emission of greenhouse gases
and has negative health impacts, including an increase in respiratory diseases. To
offset some of these problems, several
regions in China have started to use LPG
as a replacement for coal. Many of the
largest cities have also started to use gas
powered public buses to improve the environment. China consumed 20.6 tonnes
of LPG in 2006, of which 5.4 million
tonnes were imported.
LPG is today the cleanest
6
BW Gas annual report 2006
CONTENTS
8
Clean energy
fossil fuel alternative in China
BW Gas annual report 2006
7
Clean energy
CLEAN ENERGY
Energy has fuelled global economies since the industrial revolution,
and is now influencing the climate
of our planet and its geopolitics.
Many regions in the world are dependent upon oil and coal, but gas is
becoming an increasingly more important primary energy source, with
lower green house emissions.
-163oC, propane at -42oC and butane
at -0.5oC, different types of vessels
are used. Vessels transporting liquefied natural gas and petroleum gases
are called LNG carriers and LPG carriers respectively.
holds for cooking and heating. In other
regions natural gas is distributed in
tanks as LNG or as compressed natural gas.
Natural gas is also the most important
feedstock for ammonia production.
Natural gas/LNG
In recent years natural gas has
About 20 per cent of world energy emerged as an alternative automoconsumption comes from natural gas. tive fuel for public transport services
Global natural gas production was
in particular. Many countries are build2,750 billion cubic metres (bcm) in ing up an awareness to encourage
2005. About seven per cent of this, people to invest in cleaner gasequivalent to 140 million tonnes of driven automobiles.
GAS USES
Natural gas extracted from a well is LNG, was transported by LNG carriers
called rich gas and contains several while approximately 20 per cent, or Natural gas can also be used to produce hydrogen for hydrogen-powered
components that are split apart. Meth- 530 bcm, was transported through
ane is the main component, consti- pipelines. The remaining share was vehicles, but this is still a very energytuting about 70–90 per cent of the
intensive and expensive process.
consumed locally.
rich gas. Propane and butane are the
two other main components and have The main use of natural gas globally During 2006, BW Gas transported
a higher value as separate products. is in electrical power generation. Other seven million tonnes of natural gas
for its customers worldwide. This
In order to transport gases over long areas of use include the industrial
distances gas is sent via pipelines in sector, agriculture, the commercial
amounts to about five per cent of
its gaseous state or cooled down to and public services and residences. world seaborne LNG transportation.
a liquefied state and transported on In countries with a well developed The demand for LNG transportation
natural gas infrastructure, the gas is over the next five years is expected
special purpose vessels. Because
natural gas (methane) is liquefied at delivered via pipeline grids to house- to grow at about nine per cent per
BW Gas is the leading clean energy
carrier, transporting gas around the
world on its vessels. By doing this,
the company is contributing to the
reduction of global greenhouse gas
emissions.
World primary energy consumption by fuel
Petroleum gas/LPG
Petroleum gas is called associated gas,
as it is produced from both crude oil
and natural gas production, as well as
from refineries. In the coming years,
the main driver for new LPG volumes
will be new natural gas production
projects. Global LPG production was
220 million tonnes in 2006. Twentyfour per cent of this, or 53 million
tonnes, were transported by LPG
carriers.
The main areas for use of LPG are
domestic cooking and heating, and
as a raw material in the petrochemical
industry. Other areas of use include
the industrial sector, agriculture,
autogas (a transport fuel that can be
used instead of petrol and diesel),
and in refineries.
LPG can be stored in bottles and tanks
and is a favoured fuel source in remote areas where electricity and gas
pipeline grids are not established.
World primary energy consumption by region
Middle East
4.8%
Nuclear energy
6%
Hydro electricity
6.3%
annum.
Oil
36.4%
South & Central America
6.2%
Africa
3%
Asia Pacific
32.5%
Natural gas
23.5%
North America
25.2%
Coal
27.8%
8
BW Gas annual report 2006
Source: World LPG association
Europe & Eurasia
28.3%
Source: World LPG association
Clean energy
LPG burns so cleanly that it is possible to use it indoors in gas cookers.
In the petrochemical industry LPG
is a major feedstock together with
naphtha. LPG and naphtha are converted to basic chemical building
blocks and used to produce plastics,
synthetic rubber, synthetic fibres,
drugs and detergents. In the industrial sector LPG is used for a variety
of applications, including cutting, heat
treatments, space heating and as
fork-lift truck fuel.
LPG demand in the petrochemical
industry and power generation are
dependent upon the relative price
of LPG versus other alternative fossil
fuels and feedstock, such as natural
gas, naphtha and other oil-related
products.
LPG is, in many countries, used as
automotive fuel. In the United States,
butane is also used as an octane
booster in gasoline during the summer driving season. Butane is suitable
for countries with a tropical climate
due to its higher boiling point (-0.5oC).
Propane, with its lower boiling point
(-41oC), can also be used in very cold
conditions in the northern hemisphere.
During 2006, BW Gas transported 16
million tonnes of LPG for its customers
worldwide. This amounts to about 30
per cent of world seaborne LPG trade.
The demand for LPG transportation
over the next five years is expected
to grow at about seven per cent per
annum.
Natural gas splitting
Crude oil refinery process
Natural gas
(Methane)
LPG
Natural gas
(rich gas)
Naphtha,
gasoline
Crude oil
Ammonia
Ammonia is a compound of nitrogen
and hydrogen produced mainly from
natural gas. Total global production
of ammonia was 150 million tonnes
in 2006. Eleven per cent of this, or
16.5 million tonnes, were shipped
by ammonia carriers.
The main uses for ammonia are as
a raw material in urea fertiliser production or directly applied on crops
as a single fertiliser. Urea is a product
Jet fuel
Diesel
Heavy oil
Lubricating oil,
asphalt
LPG and other heavier
components (propane,
butane)
GAS SPLITTER/FRACTIONATOR
FURNACE
DISTILLATION COLUMN
‘LPG is one of the cleanest automotive fuels available’
BW Gas annual report 2006
9
Clean energy
containing nitrogen and is widely used
in the agricultural industry as an animal feed additive and as fertiliser.
Other uses for ammonia are as a raw
material in the production of chemicals, explosives, plastics and some
pharmaceutical products. It is also an
ingredient in certain household
cleaners.
production. This has a strong effect
on the demand for fertiliser in order
to obtain higher-yield crops.
an important role towards reaching
the objective of reducing greenhouse
gas emissions.
During 2006, BW Gas transported
three million tonnes of ammonia for
its customers worldwide. This amount
corresponds to about 18 per cent of
the world seaborne ammonia trade.
The demand for seaborne ammonia
transport over the next five years is
Ammonia transported at sea often
originates as exportable surplus from expected to grow at about three per
combined ammonia and integrated cent per annum. Increasing distances
urea fertiliser production plants. The between production and consumption
price of natural gas accounts for more could result in a somewhat higher
than 85 per cent of the total ammonia tonnemile demand growth.
production cost. Therefore, most new
ammonia production is set up or
GAS – A CLEANER ALTERNATIVE
moved to regions with abundant low- Natural gas is a clean-burning fuel
cost natural gas supply such as in the with about 30 per cent less carbon
Middle East, Australia and the Black dioxide (CO2) emissions compared
with burning oil and 50 per cent less
Sea region.
CO2 emissions than coal. Natural gas
Increasing world population, economic contains virtually no other harmful
growth and growing demand for
gases such as nitrogen oxide (NOx)
energy-intensive food, increases the and sulphur oxide (SOx). While gas
demand for food supply and crop
is not emission free, it will still play
However, socio-political issues also
play a part in choosing energy sources. The cost of electricity depends
much on the natural availability of
different energy sources. Though coal,
for instance, is the cheapest and most
abundant energy source in the world,
it is also responsible for high greenhouse gas emissions. Nuclear energy,
while efficient, has to deal with the
added problem of radioactive waste
and the fear of nuclear accidents.
Renewable energy sources, like largescale wind farms and solar power,
have still not come to a stage where
they are economically feasible and
accepted by local communities.
GAS FOR THE FUTURE
In a resolution for climate change the
European Union has recently proposed
to cut greenhouse emissions by 20
per cent compared to 1990 emissions
LPG worldwide consumption by sector
Natural gas worldwide consumption by sector
Refinery
6%
Transport
8%
Other sectors
12%
Power generation
38%
Industrial
25%
Green times two - BW Gas had two SMART cars converted
to run on LPG for use at the head office in Oslo.
Industry
12%
Agriculture
2%
Domestic
50%
Petrochemical
22%
Residential
and services
25%
10
BW Gas annual report 2006
Source: EIA
Source: World LPG association
Clean energy
vehicles running on gas reduce the
emissions of carbon dioxide, nitrogen
oxides, hydrocarbons and carbon
monoxide. Autogas emits almost no
particulate matter, which are beIn order to reach some of these goals, coming a significant problem in urban
it is expected that energy policies will areas due to an increased number of
promote greater energy efficiency
diesel-powered cars. More than nine
and the use of renewable energy. It million cars worldwide are already
is imminent that there will also be an fuelled on LPG, and the number is
increase in the use of natural gas in increasing rapidly.
power generation and thus gas transportation to reach these targets.
The awareness regarding biofuel,
a renewable energy source mainly
For instance, one of the cleanest ways produced from biomass such as maize
to generate electricity from fossil fuel and sugarcane, has lead to an inis from power plants with combined crease in crop and fertiliser demand.
cycle natural gas turbines. These
In order to meet future biofuel repower plants utilise the spill-heat
quirements, crops must give higher
from the generating process for a
yields with the use of fertiliser and
two-step electricity production.
new arable land must be taken into
production.
More and more people are now
Stranded gas reserves are reserves
converting their cars to gas power,
that are too far away or too difficult
because of increased environmental to develop. About 60 per cent of the
consciousness and higher gasoline
global natural gas reserves are classified as such. The strong demand for
prices. Compared with gasoline,
by 2020. Many governments are also
trying to reduce their dependency on
oil and consider gas as an alternative
energy source.
OPPORTUNITIES FOR BW GAS
The production of energy is often
far away from where the energy is
consumed. The increased development of offshore and stranded energy
reserves, demands higher competence and the ability to develop suitable solutions in remote areas. It also
requires complex logistics to get
the energy to the end-market.
An increase in the demand for cleaner
fuels will benefit the demand for
natural gas as an energy source.
Whatever the reason, increased demand for seaborne transportation of
natural gas is expected.
The main drivers for increased growth
in LPG volumes are natural gas and
crude oil production and refining. A
large share of the new volumes in
the LPG market will be heading out
of the Middle East Gulf to the US
petrochemical industry. Today only
0.5 million tonnes of LPG moves that
way. More long-haul trade to the US
is expected to have a strong positive
impact on VLGC demand.
BW Gas is positioned to take advantage of the strong shipping market
outlook and exploit any short-term
cyclical movements.
We believe that with a large fleet,
competence and high quality we will
be able to offer the best transportation
solutions for our customers also in
the future.
CO2 emission by fuel type
for electrical power generation
BW Gas shipments by cargo type
(million tonnes)
Ammonia 3
natural gas has strengthened the
need for the exploration of pure gas
fields, stranded gas and the development of gas-gathering solutions
to reduce gas flaring (gas burning)
in oil production. Oil majors and
smaller international oil companies
have difficulties getting access to
many of the oil fields as a result of
nationalism and declining discovery
rates. Stranded gas reserves will
therefore be an important source
for energy in the future.
900
CPP 0,2
800
LPG 16
LNG 7
(Kg CO2eq./MWh)
700
600
500
400
300
200
100
0
Coal
Source: BW Gas
Oil
Natural Nuclear
gas
Source: European Commision
Wind
BW Gas annual report 2006
11
PETROCHEMICAL INDUSTRY
In the petrochemical industry, naphtha and
LPG are converted to chemical building
blocks to produce different types of plastics,
synthetic rubber, synthetic fibres, drugs and
detergents. The petrochemical market is
price sensitive, choosing its feedstock based
on price and accessibility. The US petrochemical industry is expected to import
a significant part of the additional LPG
volumes coming from new natural gas
projects in the Middle East. The US LPG
consumption amounted to 50.4 million
tonnes in 2006, of which 4.7 million
tonnes were imported by sea.
LPG is an important
consumer
12
BW Gas annual report 2006
CONTENTS
14
24
The board of directors’ report
Corporate governance report
raw material in many
products
BW Gas annual report 2006
13
The board of directors’ report
THE BOARD OF DIRECTORS’ REPORT
2006 was a record year for
BW Gas, with improved freight
rates in all gas segments.
FINANCIAL RESULTS
Both the LPG and the LNG segments
increased operating profit significantly
compared to last year; LPG because of
an increase in the number of vessels
from 36.9 to 46.0 and increased freight
rates, and LNG because of an increase
in the number of vessels from 5.2 to
7.3. All fleet sizes (i.e. VLGC, LGC and
MGC) within the LPG segment experienced higher freight rates. The
best performance was achieved by
the VLGCs with an improvement in
the average TC income of 21% in
2006 compared with 2005.
BW Gas recorded an operating profit
from continuing operations (the LPG
and LNG segments) of USD 258.7
million, compared with USD 186.0
million in 2005. The figures include
a net gain on sale of vessels of USD
15.5 million in 2006, compared to
USD 34.4 million in 2005.
The 2006 accounts show net financial
expenses of USD 27.2 million (2005:
net financial gain of USD 95.2 million,
including an exchange gain of USD
108.1 million, mainly related to the
repayment of the NOK loan from
Bergesen Worldwide Limited).
Profit before tax from continuing
operations was USD 231.5 million,
compared to USD 281.2 million in
2005. Income tax expense was USD
6.8 million in 2006, compared to USD
1.0 million in 2005. Net profit from
continuing operations amounted to
USD 224.7 million (USD 1.7 per share),
compared with USD 280.2 million
(USD 2.1 per share) in 2005.
Net cash flow from operating activities amounted to USD 343.4 million
in 2006 (2005: USD 245.5 million).
Net cash flow from investing activities
for 2006 was USD -512.6 million
(2005: USD 331.1 million) and net
cash flow from financing activities
amounted to USD 63.8 million (2005:
USD -465.0 million).
The consolidated financial statements
of BW Gas and all its subsidiaries (the
group) are prepared in accordance
with International Financial Reporting
Standards (IFRS) as adopted by the
EU in accordance with the Norwegian
Accounting Act. The financial statements have been prepared under the
going concern assumption in accordance with the Norwegian Public
Company Act § 3-3a.
MAJOR TRANSACTIONS 2006
March
BW Gas signed an agreement with
Maran Gas, to take a 50% ownership
share in four VLGC newbuildings ordered by Maran Gas for delivery in
2008 and 2009. The vessels will be
commercially operated by BW Gas and
technically operated by Maran Gas.
The final vessel on the first contract
with Nigeria LNG, LNG Benue, was
delivered.
The VLGC, Berge Ningbo, which is
chartered in on a 12-year timecharter with purchase options, entered
the fleet.
April
BW Gas entered into an agreement
with Yara to take over its LPG/ammonia fleet consisting of seven fully
BW Gas declared the option to acquire the VLGCs Formosagas Bright
and Formosagas Apollo. The vessels
had been on timecharter to BW Gas
350
300
(USD mill)
250
200
150
100
50
0
2003
BW Gas annual report 2006
July
The Yara fleet transaction was successfully closed. Five of the ten vessels
had accounting effect from July.
Further delivery of Yara vessels: two
LGCs in September 2006 and three
timecharter vessels in November
2006, September 2007 and December
2007, respectively.
BW Gas, in cooperation with Exmar
and Maran Gas, entered into an agreement with Mitsui and Meiji Shipping
Group for a 15-year timecharter with
purchase option of two VLGC newbuildings for delivery 2009/2010.
Operating profit before
depreciation and disposals
14
owned and three chartered-in vessels.
The deal also included a partnership agreement under which BW Gas
provides shipping services to Yara.
The vessels are timechartered back
to Yara for periods ranging from
three to 15 years.
2004
2005
2006
The board of directors’ report
from March 2002. The timecharter
was replaced by a bareboat charter
from mid August 2006 until the
physical delivery will take place
end March 2007.
October
The MGC newbuilding BW Sombeke,
which is owned 50/50 by BW Gas
and Exmar, was delivered.
December
BW Gas declared the option to pur- The part owned LGC Helice was sold
chase VLGC Berge Trader. The own- to an Indian buyer. The sales price
was USD 60 million with a profit of
ership was transferred in July.
USD 11.5 million in the fourth quarThe VLGC newbuilding Berge Nantong, ter 2006.
which is chartered-in on a 12-year
timecharter with purchase option, was SUBSEQUENT EVENTS
In January 2007, VLGC Leto Providence
delivered earlier than scheduled.
was delivered on period timecharter
BW Gas issued two Norwegian bond to BW Gas, Exmar and Maran with
loans with three and five year matu- one third interest each.
rities. The 3-year bond issue totalled
NOK 700 million (USD 112.4 million). BW Gas increased the NOK 250 million
The 5-year bond issue has a borrow- (USD 40.0 million) 5-year bond loan
ing limit of NOK 700 million, of which with an additional amount of NOK
NOK 250 million (USD 40.0 million) 100 million (USD 15.5 million) in
was issued. The proceeds and interest January 2007.
have been swapped into USD. The
loans were used to part-finance the VLGC BW Sisu was sold in February
Yara fleet purchase and will increase 2007 for captive trade/storage in the
the company’s financial flexibility go- Middle East. The sales gain is USD
ing forward. Listing of the two loans 6.4 million in the first quarter 2007.
took place 15 August on Oslo Stock
Exchange’s bond list.
The part owned LPG Havpil was sold
for scrap in March 2007 with a total
sales price of USD 2.2 million.
VLGC
The VLGC fleet (gas carriers above
70,000 cbm) recorded operating revenues of USD 312.2 million in 2006,
compared with USD 244.8 million in
2005. Operating profit amounted to
USD 84.9 million in 2006, compared
with USD 81.2 million in 2005. The
increase resulted from stronger freight
rates. There was no sale of VLGCs in
2006, compared to sales gains of USD
24.5 million in 2005.
GAS MARKETS AND PERFORMANCE
LPG segment
The LPG shipping market improved for
all vessel sizes due to higher seaborne
trade in LPG and in ammonia. Fleet
growth was limited which resulted in
a tighter supply and demand balance
for most of the year. The most significant market improvements were
recorded for the VLGCs. The LGCs and Stronger market fundamentals for the
MGCs showed smaller improvement. very large gas carriers resulted in
average TC income for the BW Gas
VLGCs increasing from USD 22,800
The BW Gas LPG fleet generated
per calendar day in 2005 to USD
operating revenues of USD 523.7
million in 2006, compared with USD 27,600 per calendar day in 2006.
408.3 million in 2005. Operating profit
The market continued to improve due
amounted to USD 172.8 million in
to increased trade volumes, longer
2006, compared with USD 138.9
million in 2005. The increase resulted shipping distances and modest growth
mainly from higher freight rates and in the VLGC fleet. However, rates
an increase in the number of vessels showed significant volatility through
(from 36.9 to 46.0). Net gain on sale the year due to seasonality and large
fluctuations in Saudi spot shipments,
of vessels was USD 11.5 million
reinforced by the cuts in OPEC crude
(2005: USD 34.2 million).
production from November.
TC income per day LPG
30
(USD 1,000)
25
20
15
LGC
MGC
VLGC
10
2003
2004
2005
2006
BW Gas annual report 2006
15
The board of directors’ report
According to Poten & Partners, a total
of 52.6 million tonnes of LPG were
carried by sea in 2006, an increase
of 1.1 million tonnes or 2.1% on
2005. Total exports from West and
North Africa increased by 0.7 million
tonnes, mainly associated with increasing production of natural gas
in Nigeria, Angola, Equatorial Guinea. Exports from Asia/Pacific declined by 0.7 million tonnes due to
declining production from Indonesia.
Exports from Europe stayed flat
while the Middle East showed an increase of 1.0 million tonnes. Imports
to Asia grew by a modest 0.4 million
tonnes, constrained by high international LPG prices. Weaker US natural
gas prices and less attractive LPG prices relative to crude and naphtha in
the second half of the year resulted in
a decline in US imports to 4.7 million
tonnes, down by 0.8 million tonnes
(15%) from 2005. High LPG values
in the Atlantic area (mainly Europe)
maintained the east to west trade at
3.1 million tonnes, same as in 2005.
to an increase in average number of
vessels from 5.3 to 11.7 with the delivery of the Yara vessels. Operating
The LGC segment experienced a slow profit amounted to USD 32.2 million
first half due to maintenance of LPG in 2006, compared with USD 21.8
terminals in the North Sea and am- million in 2005. There was no gain on
The world VLGC fleet consisted of 110 monia terminals in the Black Sea.
sale of vessels in 2006 (2005: USD
vessels at year-end 2006, compared Rates improved in the second half of 9.7 million). The MGCs showed an
with 106 in 2005. Eight newbuildings the year as export volumes normal- average TC income of USD 20,900 per
were delivered, two vessels sold for ised and shipping distances increased calendar day in 2006, compared with
scrap and one for conversion to FSO/ for both ammonia and LPG. The supply USD 19,400 per calendar day in 2005.
FPSO. BW Gas operated 33 vessels and demand balance did not change
at year-end, of which 26 are owned much over the year as a reduction in The MGC pool enjoyed a high contract
or chartered-in by the company.
long haul ammonia trade was com- cover at improved rate levels. Ampensated for by growth in short and monia contract business continued to
LGC
medium haul ammonia trade and a account for a high proportion of the
employment. Idle time increased in
The LGC fleet (70-50,000 cbm) saw constant fleet.
fourth quarter when COA liftings sufa moderate improvement in average
earnings during 2006 and generated The world LGC fleet consisted of 28 fered from lower volumes out of the
operating revenues of USD 109.5
vessels at the end of 2006. Six new- Middle East due to ammonia plant
million in 2006, compared with USD buildings are on order all for 2008
maintenance. Firm market conditions
105.5 million in 2005. Operating profit delivery. BW Gas operated 21 vessels, for trade in petrochemical gases reamounted to USD 55.7 million in 2006 of which 13 are fully or partly owned duced competition from semi-refrigerated vessels competing for LPG and
compared to USD 35.9 million in 2005. by the company.
The 2006 figure includes a sales gain
ammonia cargoes.
on Helice of USD 11.5 million. TC in- MGC
come for the LGCs showed an average The MGC fleet (50-22,000 cbm) re- The world MGC fleet consisted of 68
corded operating revenues of USD
of USD 25,500 per calendar day in
vessels at year-end. Thirty-one new2006, compared with USD 23,200 per 102.0 million in 2006, compared with buildings are on order. The company’s
USD 58.0 million in 2005, mainly due 13 fully or partly owned MGC vessels
The market for CPP (clean petroleum
products) was weaker than the LPG
market throughout most of 2006 and
only two VLGCs were traded in CPP
for a short period early in the year.
calendar day in 2005. The increase
resulted mainly from improved rates.
are operated in a pool of 27 vessels
managed by Exmar.
LNG segment
The BW Gas LNG fleet generated total
operating revenues of USD 152.0
million in 2006, compared with USD
92.1 million in 2005. The LNG fleet
generated an average TC income of
USD 52,400 per calendar day, compared with USD 48,400 per calendar
day in 2005. All of the company’s
LNG vessels are on long-term time
charters (20.5 years), except for the
two small LNG carriers Havfru and
Century (1973/74 built). Excluding
these two vessels, the LNG fleet
generated an average TC income of
USD 66,400 per calendar day, compared with USD 66,600 per calendar
day in 2005.
The LNG carriers recorded an operating profit of USD 86.9 million in 2006,
compared with USD 51.1 million for
the same period in 2005. The increase
was attributable to the delivery of
three large LNG vessels during the
year, increasing the average number
‘BW Gas operated 33 of the world’s 110 VLGCs at year-end 2006’
16
BW Gas annual report 2006
The board of directors’ report
In accordance with IFRS, the charter
agreement for Berge Arzew was reclassified from operational to financial
lease in fourth quarter 2006. Due to
the insignificant size of the corrections,
the comparable figures for 2005 have
not been changed, and the accumulated effect for previous periods has
been charged to the 2006 consolidated
income statement without affecting
the segment report.
According to Maritime Strategies International (MSI), world LNG trade
is estimated to have increased by
14.3 million tonnes to 155.7 million
tonnes, up 10.1% from 2005. Interest in developing new LNG projects
remained high but large cost escalations delayed final investment decisions on a number of projects.
The short-term market was firm,
supported by diversion of cargoes
from the Atlantic to markets East
and the use of vessels as floating
storage.
OPERATING CONDITIONS
AND PERFORMANCE
The company’s objective is to maintain a high-quality fleet. Every vessel
in the fleet, owned or partly owned,
is of a high technical standard. This
means that BW Gas uses its experience to furnish the new vessels with
the most reliable equipment available
at the time of building, maintaining
them continuously and, when required, upgrading them to stay competitive in the market. Over the years,
the company has applied a consistent
life-cycle maintenance philosophy,
ensuring a high standard of maintenance throughout a vessel’s lifetime.
BW Gas believes that the quality of
the vessels is one of the main reasons
why the company has been able to
retain global, blue-chip companies
amongst its customers and to extend
the trading life of the older vessels.
BW Gas drydocked 13 gas carriers for
scheduled maintenance in 2006, compared to seven in 2005. The operation
of the LPG fleet was satisfactory
during 2006 with no significant offhire in the fleet beyond scheduled
maintenance. The smaller LNG carrier
Havfru experienced idle time for three
quarters of 2006. LNG River Orashi
experienced 45 days off hire in fourth
quarter of 2006. The offhire was due
to damage on stern tube bearings,
which BW Gas considers to be a
product guarantee issue. Three sister
vessels have experienced the same
problems, and are planned to be drydocked for repairs during first and
second quarter of 2007.
There were no fatal accidents during
the year, and none of the vessels in
the company were involved in material accidental discharge of oil.
stable during the year mainly due to
improved fleet performance. We do
not expect any notable increases in
the company’s marine insurance
premiums for 2007.
for funding new vessel acquisitions.
The facility is priced at LIBOR plus a
margin of 60 basis points for the first
five years and 65 basis points for the
last two years.
FINANCING AND LIQUIDITY
BW Gas had cash and cash equivalents of USD 248.9 million at the end
of 2006. (2005: USD 354.3 million).
Total assets were USD 2,870.8 million
(USD 2,390.5 million in 2005). Shareholders’ equity amounted to USD
1,142.5 million (USD 928.9 million in
2005). Total liabilities amounted to
USD 1,728.3 million (USD 1,461.6
million in 2005). Interest-bearing debt
amounted to USD 1,605.7 million
(USD 1,349.2 million in 2005). The
equity ratio increased from 38.9%
at year-end 2005 to 39.8% at yearend 2006.
In January, the outstanding amount
under the 5-year Norwegian bond
loan was increased with NOK 100
million (USD 15.5 million) from NOK
250 million to NOK 350 million (USD
55.5 million). Total outstanding NOK
bonds are NOK 1,050 million (USD
168 million).
BW Gas has adopted an interest rate
hedging strategy related to the longterm LNG contracts financed over the
The company takes out insurance
balance sheet. LNG contracts have a
fixed capital expenditure rate element
cover for injuries to crew, damage to
vessels and cargoes, loss of income
and the company is thus exposed to
and third-party liabilities. This insurchanges in interest rates. The comance covers losses resulting from acts
pany hedges an amount equivalent
of war and terrorism. Cover for oil
By year-end 2006 USD 1.1 billion of to the lower of 50% of the LNG expollution is limited at USD 1 billion per the unsecured USD 1.5 billion revolv- posure and 50% of total net debt.
incident, while oil pollution caused ing credit facility was drawn. The
Hedges are limited to a maximum of
by war and war-like actions, is limited credit facility has a term of seven years 10 years duration. BW Gas has a total
at USD 700 million per incident. The (final maturity in 2012) with five years of USD 544 million of interest rate
same levels will apply for 2007. In- grace period and provides flexibility
swaps. The swaps have an average
surance premiums have been kept
TC income per day LNG
55
50
(USD 1,000)
of vessels from 5.2 in 2005 to 7.3
in 2006.
45
40
35
LNG
30
2003
2004
2005
2006
BW Gas annual report 2006
17
The board of directors’ report
interest rate of 4.89% and an average
duration of 7.4 years. The mark to
market value of the interest rate swaps
was USD 4.1 million at the end of
December 2006. The company has
also entered into USD 213 million in
interest swaps with forward start
related to two LNG vessels financed
through a French single investor lease.
These swaps have 12.5 year duration
starting in December 2008 and an
average interest rate of 5.25% and
will be treated according to the IFRS
hedge accounting rules.
The USD depreciated from NOK 6.75
to NOK 6.24 during 2006 and averaged NOK 6.41 (2005: NOK 6.44).
Currency movements resulted in a
foreign exchange gain for accounting
purposes of USD 5.9 million (2005:
USD 108.1 million, mainly related to
the repayment of the NOK denominated loan from BW Ltd.)
CORPORATE GOVERNANCE
BW Gas is dedicated to maintaining
high standards of corporate governance. Corporate governance addresses
the interaction between the shareholders, board of directors, management, employees and other stakeholders. Maintaining high standards
of corporate governance improves the
quality of discussions and decisions by
the corporate bodies and strengthens
confidence among shareholders and
the investor market, contributing to
value creation. Being incorporated in
Norway and listed on the Oslo Stock
Exchange, BW Gas has implemented
corporate governance policies in accordance with the Norwegian Code
of Practice dated 8 December 2005.
The code comes in addition to the
Norwegian Public Limited Companies
Act and other relevant Norwegian and
international law applying to the operation of the business. The corporate
governance policies are further described in the separate corporate governance report in this annual report.
HEALTH, SAFETY AND ENVIRONMENT
BW Gas is committed to continuously
working for improved health, safety
and environment (HSE). Therefore,
HSE is an inherent part of the BW
Gas quality and management system
(TQM). Internal requirements and
procedures are introduced at sea and
ashore to as far as possible prevent
injuries, accidents and pollution from
normal operations and emergency
scenarios.
An important part in the HSE-work
is structured training programmes.
Measurements and evaluation of the
effects from this is a key element
enabling documentation of knowledge
and competence. Officers spent an
average of 2-3 days on a variety of
courses and seminars during the year.
Interactive PC-based training systems
are in use onboard the vessels, and
all crew reporting for duty must undergo a set of HSE training programmes.
The number of worked hours onboard
the vessels increased from 11 million
in 2005 to 12.5 million in 2006. The
increase reflects the growth of the
fleet. The total number of repatriations
due to illness and injury amounted
to 58 last year (2005: 33). Accidental
injuries accounted for 12 cases. Lost
‘BW Gas is committed to continuously
18
BW Gas annual report 2006
The board of directors’ report
Time Injury Frequency (LTIF = lost time
injury per million working hours) was
0.96 (2005: 1.0). Since the exposure
time for the LTIF is based on 24 hour
per day, injuries sustained during
recreational activities are included.
This is significant and represents 25%
of the cases. Further work to improve
personnel safety shall to a larger degree address the total living environment onboard. To keep the safety
awareness at the highest level we are
running a safety campaign called the
‘Buddy program’ onboard all our
vessels. For the fourth year in a row,
no fatal accident occurred in 2006.
Statistics include incidents to crew and
contractors. This result leads us to
believe that past efforts have been
fruitful.
Emissions to the atmosphere are
largely caused by the consumption
of heavy fuel oil (HFO) and diesel oil
(DO) in the vessels’ diesel engines
and boilers. The fuel is mainly consumed to provide propulsion and
electric power. The constituents of the
emissions are largely carbon dioxide,
nitrogen oxides, sulphur oxides and
particulates. The consumption in 2006
was 573,384 tonnes HFO (2005:
533,392 tonnes) and 33,167 tonnes
DO (2005: 48,422 tonnes). The reduction of the diesel oil consumption
is seen in connection with idle periods
for older tonnage towards the latter
part of the year. Another effect from
idle periods is that the increase of the
total fuel consumption does not correspond to the increased capacity of the
fleet. The average sulphur content
was 2.92 % for HFO (2005: 2.95%)
and 0.5% for DO (2005: 0.68%).
environment, leading to concern regarding release of such substances
into the ocean. BW Gas has tested
several alternatives to traditional
paints as part of an R&D programme
managed by Marintek, concluded in
2006. With results showing that the
performance of these systems are
equal or better than the previously
used paint system, there is now an
extended use of non-toxic paint
systems in BW Gas.
a sea water washing of the exhaust
gas, as an alternative to low sulphur
fuel qualities. At current time there
are several aspects that need to be
clarified before this process can be
employed. Though the technology
exists, requirements have to be establised for discharge to the sea and
other related issues. These will then
have to be approved by IMO and
other authorities. To this effect the
forum has, in co-operation with
Wärtsilä and others, made proposals
BW Gas has also been participating for further discussions and proposal
in the Low Sulphur Heavy Fuel Oil
to the authorities. Another topic that
Forum. The new IMO-regulation for has been raised in 2006 is energy
conservation. This concerns energy
BW Gas continues to identify means maximum sulphur contents in the
to reduce emissions to air and sea. Sulphur Emission Control Areas
management and onboard practices
BW Gas has been involved in inves- (SECA’s) has raised several questions as well as technical solutions. After
tigations into more effective and less to the availability and quality of such a cautious start last year, the matter
fuel as well as operational aspects
harmful anti fouling coatings (i.e.
will be increasingly pursued, and a
under water paint). An effective under of engine operation. This is a forum special one week course for engineers
water paint system reduces marine for exchange of information and in- – ‘Extended Engine Operation’- was
growth on the hull and thereby keeps itiation of R&D projects of various
developed. The course is not only
the fuel consumption and exhaust
characters and gathers participants aimed to increase operational knowledge of engine safety, reliability and
gas emission as low as possible.
from the entire industry.
cost. More optimal engine tuning will
However, until recently such paint
systems have been based on com- In 2006, BW Gas participated in an
contribute to reduced fuel consumppounds not naturally occurring in the investigation in the use of scrubbers, tion and exhaust gas emissions.
A pilot accounting system to calculate
and record emissions to air (exhaust
and other gases), ballast water exchange and garbage handling has
been put on test.
EMPLOYEES
BW Gas had 162 office employees
as of 31 December 2006. The total
number of Norwegian and foreign
seamen (including those in temporary employment) was 1,755 at yearend 2006 compared to 1,566 in 2005.
BW Gas aims to offer a good working
environment. The total absence
through illness for employees ashore
was reduced from 3.3% in 2005 to
2.6% in 2006.
As of 31 December 2006, 31.5% of
the BW Gas office employees were
women (35% in 2005). The female
portion of our workforce is distributed
evenly throughout the organisation.
That is, women represent an equal
portion of the workforce across divisions and levels. The company has one
female division director, out of five.
working for improved health, safety and environment’
BW Gas annual report 2006
19
The board of directors’ report
There are no significant wage differ- • Use partnerships and joint ventures
when necessary to secure new
ences between men and women who
business
have similar qualifications and similar
positions. All employees are ensured • Use our large LPG fleet size to
provide flexible solutions
a compensation that is fair and competitive based on market standards. • Expand our LPG fleet through welltimed transactions
Furthermore, all decisions regarding • Expand our LNG fleet by focusing on
recruitment, promotions and training
projects with a good risk/return
are based on criteria such as educa- • Evaluate speculative LNG investtion, experience, results and other
ments when opportunities arise
relevant qualifications.
• Operate a high quality fleet based
on stringent ship management
BOARD OF DIRECTORS
standards
The board held seven meetings during • Seek attractive merger and
acquisition opportunities
2006. Two of the five shareholderelected board members are women. • Maintain a capital structure reflecting the underlying business risks
CORPORATE STATEMENT
• Maintain a strong standing in the
BW Gas’ vision is to be the world’s
capital markets
leading clean energy carrier by 2012. • Attract and retain competent people
The aim is to create value for the
both onboard and ashore
shareholders through profitable
RISK FACTORS
growth. The company seeks to
achieve this objective by impleThe most important market risk for
menting the following strategies:
BW Gas is related to the highly cyclical
nature of the LPG shipping industry,
• Combine stable cash flow from LNG which may lead to volatility in freight
with cyclical opportunities in LPG
rates and vessel values. Approximately
73% of the company’s time charter
revenue and 66% of operating profit
before depreciation was generated
from the LPG segment in 2006. Demand for LPG ships is primarily explained by the production of LPG from
exporting countries. Much of the future expansion in LPG production is
related to gas projects, and delays
in such projects may cause delay in
projected seaborne LPG volumes.
Another demand factor is changes
in trading patterns, which affects
transportation distances. The most
important factors that influence the
supply side of LPG shipping are the
number of newbuilding deliveries and
the scrapping rate.
An important growth strategy is to
expand the LNG operations. This will
depend on continued growth in the
global LNG market. The growth of the
company’s LNG business also depends
on the ability to expand relationships
with existing customers and to obtain
new customers. BW Gas derives all of
its LNG revenues from four customers,
and the loss of any customer, time
charter or vessel could result in loss
of revenues and cash flow.
tracts are concluded without bunker
clauses. When COAs are entered into
without bunker clauses, revenues are
fixed or partly fixed while fuel costs
are exposed to bunker oil price fluctuations. A system for hedging parts of
the bunker oil risk connected to fixed
COAs has been implemented. However, as of 31 December 2006, BW
Gas had no bunker hedge contracts.
BW Gas has implemented strategies
for managing interest rate, foreign
exchange and bunker fuel risks. The
interest rate risk is mainly related to
corporate debt related to LNG vessels with long-term fixed timecharters. The company has entered into
long-term interest rate hedging instruments to mitigate the effects of
BW Gas has established a credit risk
changing US dollar interest rates re- policy to secure that all cash and delated to the LNG contract exposure. posits are located in banks and other
financial institutions with international
BW Gas is a US dollar based company good reputation and high credit ratwith all revenues, debt and a signifi- ings. The vessels are contracted to
cant part of the operating costs in the charterers with high credit ratings or
US currency. However, approximately with additional guarantees. Current
35% of the operating expenses are receivables are mainly freight receivdenominated in NOK and a hedging ables. Based on credit ratings and the
programme is in place to mitigate
short term due dates on the receivthe effects of changes in the USD/ ables, the company regard credit risk
NOK exchange rate.
to be limited for these receivables.
The strategy of building up a Contract
of Affreightment (COA) cover for the
VLGC fleet has increased the bunker
price exposure as most of the con-
Due to the dynamic nature of the
underlying business, the liquidity risk
management associated with financial
instruments (loan and debt) implies
‘The board proposes a dividend of NOK 4.40 per share,
20
BW Gas annual report 2006
The board of directors’ report
maintaining sufficient cash for daily
operations via short-term cash deposit
at banks and unutilised portion of
revolving credit facilities offered by
financial institutions.
Transporting gas across the world
creates risk of business interruptions
due to political circumstances in foreign countries, terrorist attacks, hostilities, labour strikes and boycotts.
There is also a potential for changes
in tax rates or policies and the potential for government expropriation
of vessels. Any of these events may
result in loss of revenues and/or
increased costs.
The company will be required to make
substantial capital expenditures in order to modernise and expand the
fleet of vessels owned. BW Gas is
in the process of renewing its fleet
through vessel acquisitions and longterm charter-in contracts with options
to purchase the vessels.
dividends depends on the performance of the subsidiaries and their ability to distribute funds to the holding
company. While BW Gas continuously
seeks to manage cash flow from its
subsidiaries in the most tax efficient
manner, the company cannot assure
that it will be able to upstream income from the subsidiaries without
incurring tax.
BW Gas’ perceived overall strengths
are the position as the world’s largest
independent gas marine transportation company, strong industry relationships, the high quality of vessels and fleet management and a
strong cash position combined with
a stable cash flow stream from the
LNG operations.
ment. Shareholders’ return consists
of payment of dividends and share
price appreciation. The company aims
to pay a stable and preferably rising
dividend over time, depending always
on market conditions, the results of
operations and future capital requirements.
PARENT COMPANY ACCOUNTS
In 2006 the company has restructured
its activity. The subsidiaries have been
placed in different sub-holding companies according to segment (LPG or
LNG) and taxation scheme. The restructuring has been implemented
through sale of shares in subsidiaries
to sub-holding companies.
The financial statements of the parent
company BW Gas ASA are prepared
in accordance with NGAAP. The parent
DIVIDEND POLICY
The board of directors has adopted a company recorded a profit after tax
dividend policy with a goal to have of NOK 10,952 million in 2006 (2005:
an equity capital that appropriately NOK 748 million). The profit is proreflects the company’s goals, strategy posed to be allocated to a dividend of
and risk profile, aiming to provide an NOK 564 million and retained earnings
As a holding company, the ability to attractive long-term return in order to of NOK 10,388 million. This would
build up distributable reserves and pay make BW Gas an interesting invest- leave the company with distributable
reserves of NOK 9.9 billion. In accordance with the company’s dividend
policy, the board proposes a dividend
of NOK 4.40 per share, totalling a
payment of NOK 564 million (USD
90.2 million at USD/NOK 6.24).
SHAREHOLDER INFORMATION
BW Gas has one class of shares and
each share carries one vote. All shares
are freely transferable.
During 2006 the BW Gas share price
depreciated by 7.0% (from NOK 88.75
at the beginning to NOK 82.50 at the
end of the year), whereas the Oslo
Stock Exchange Benchmark Index
(OSEBX) climbed 43.4% during same
period. A total of 72.3 million shares
were traded during 2006, representing 56.2% of the total outstanding
shares. The average daily trading
volume was 280,000 shares.
The largest shareholder, World Nordic
ApS, held 59.7% of the shares and the
company’s ten largest shareholders
held 76.7% of the shares at year-end
2006. Investors outside Norway
owned 94.2% of the company.
totalling USD 90.5 million’
BW Gas annual report 2006
21
The board of directors’ report
OUTLOOK FOR 2007
General
The outlook for the global economy
is still positive but the rate of expansion is expected to level off. The
outlook for the US economy, which
has improved lately, is still expected to
slow down as manifested by a weak
housing market and build-up in inventories. Japanese growth prospects
are mixed with a strong business
sector performance and a disappointing consumer sector. The outlook for
Western Europe reflects weaker
growth in 2007. The fast economic
expansion in China, India and Russia
is expected to continue. According to
Consensus Economics, world gross
domestic product (GDP) is projected
to expand by around 3.3% in 2007
compared to 3.9% in 2006. Key risk
factors internationally are: a weaker
US economy and USD exchange rate,
high raw material prices and a decline in real estate prices.
LPG
The gas specialist brokers Poten &
Partners forecast LPG shipments to
grow by 2.8 million tonnes, or 5.3%
in 2007. Saudi Arabian exports are
expected to decline short and medium term due to the impact of the
OPEC crude production cuts and the
increase in domestic petrochemical
demand from ethylene crackers.
Qatari exports are expected to grow
by 0.7 million tonnes in 2007. Iranian
LPG should see a moderate increase
this year from the Pars project and
the build-up of LPG exports from
phases 4-5. The projected increase in
LPG exports from Abu Dhabi appears
to be on course with a moderate
expansion of 0.4 million tonnes in
2007. West African exports should
grow by 0.7 million tonnes in 2007
with new production originating mainly from Equatorial Guinea and Angola.
Strong growth in exports both from
the Middle East and from West Africa
is expected in 2008.
Ammonia
New ammonia export capacity in
2007 will come from Australia and
the Middle East. Russian export volumes are expected to remain high,
supported by high international
ammonia prices due to firm world
market demand. There is a potential for Russian exports to increase,
but higher production costs for
Ukrainian exporters will make production volumes more exposed to
international price fluctuations.
Growing ammonia export capacity
in the Middle East is expected to
find outlets mainly in Asia and replace volumes previously imported
from Russia, which will have to find
markets in the west.
Qatar, Trinidad and Australia. Global
production is expected to grow by 23
million tonnes, up 15% from 2006.
According to Cedigaz, LNG trade
should grow at a rate of 7.6% p.a.
over the next ten years. Re-gasification capacity is no longer regarded
as a constraint to US import capacity
as existing terminals are expanded
and more new import facilities are
approved by the authorities.
Interest in developing new LNG
projects remained high both on the
production and on the receiving (regasification) side. However, the deThe VLGC market has bottomed out velopment costs and project lead
and is expected to recover in the
times have increased substantially
second quarter of 2007. The LGC and over the last two to three years. Many
new projects under planning now
MGC segments, which enjoy high
contract cover, are expected to remain require considerably higher future
firm in 2007 as fleet growth is largely gas prices to be profitable. This has
led developers to reconsider the ecooffset by growing ammonia trade.
nomics of a number of projects and
LNG
final investment decisions (FIDs) have
New LNG production capacity in 2007 been postponed. With the possible
will come on-stream in Egypt, Nigeria, exception of Pluto LNG in second
quarter, NLNG in fourth quarter this
year and possibly Brass LNG also this
year, no new FIDs are expected until
2008. This could reduce the growth
in new liquefaction capacity beyond
2010.
LNG vessels employed in the spot/
short term market are expected to
face weaker market conditions in
2007 due to a softening supply and
demand balance. The LNG fleet is set
to grow by more than 25% this year,
based on scheduled deliveries, compared to the more modest growth of
about 15% in trade volume. Except
for the small LNG carrier Havfru, BW
Gas is not exposed to the short-term
market.
FINANCIAL PERFORMANCE
The board’s goal is to deliver an
operating profit for 2007 which
will be comparable to 2006.
Oslo, 20 March 2007
The board of directors
Helmut Sohmen
Andreas Sohmen-Pao
Chairman
Deputy chairman
Knut Brundtland
Jan Håkon Pettersen
22
BW Gas annual report 2006
Managing director
Clare M.J. Spottiswoode CBE
Kathryn M. Baker
The board of directors’ report
THE BOARD OF DIRECTORS
Andreas Sohmen-Pao has served as vice
chairman of the board of directors since 2003.
Sohmen-Pao is managing director of BW
Shipping. He also serves as a board member of
the Maritime and Port Authority of Singapore
and as a member of the Advisory Board of
Deutsche Bank SHL (Schiffshypothekenbank zu
Lübeck Ag). Sohmen-Pao holds a double first
class honours degree (B.A. Hons) from Oxford
University and an MBA with distinction from
Harvard Business School.
Knut Brundtland was partner in Advokatfirma
BA-HR from 1993-2005. He now acts as a professional company director and is chairman of
the board of directors of various companies
such as Bluewater Insurance ASA, Creditsafe
Business Information N.V., Futuris Asset
Management AB, Try Reklamebyrå AS,
Contopronto AS, Youngstorvet Eiendom AS,
VOSS of Norway ASA, Sealbay AS and
ContextVision AB. Brundtland is also a member of the board of directors of various companies. He has a law degree from the
University of Oslo.
Kathryn M. Baker joined Reiten & Co in 1999
as a partner. In the course of her role at the
Private Equity firm Reiten & Co, she currently
leads the investments in Heimstaden and
Euroskilt where she is chairman. She has the
lead role in Factor Insurance Group, where
she is also a member of the board of directors. In addition she is the fund manager for
Reiten & Co Capital Partners V. Baker holds a
Bachelor degree in Economics from Wellesley
College and an MBA from The Amos Tuck
School of Business Administration at
Dartmouth College.
Clare M.J. Spottiswoode, CBE, was director
general of Ofgas from 1993-98, the independent regulatory office for gas in the United
Kingdom, and served as a member of the
Government’s Deregulation Task Force in 1993,
and the Public Services Productivity Panel in
1998. Spottiswoode is currently chairman of
Economatters Limited and deputy chairman
at British Energy. She is also currently a nonexecutive director of Anker, Tullow Oil plc,
BioFuels and Petroleum Geo-Services. She holds
an MA degree (Mathematics and Economics)
from Cambridge University and an M.Phil
degree in Economics from Yale University.
Helmut Sohmen has served as chairman of
the board of directors since 2003. He has been
an executive and board member of companies
within the family-owned former World-Wide
Shipping group since 1970, and chairman since
1986. He was previously a president of the
Baltic and International Maritime Council,
Chairman of the International Maritime Industries
Forum, Chairman of the Hong Kong Shipowners
Association, Chairman of The International
Tanker Owners Pollution Federation, and served
as a committee member of several P+I Clubs.
He holds three law degrees from Austrian and
American universities and two honorary
doctorates.
BW Gas annual report 2006
23
Corporate governance report
CORPORATE GOVERNANCE REPORT
BW Gas is dedicated to maintaining high standards of corporate
governance. Corporate governance
addresses the interaction between
the shareholders, board of directors, management, employees
and other stakeholders.
Maintaining high standards of corporate governance improves the quality
of discussions and decisions by the
corporate bodies and strengthens
confidence among shareholders and
the investor market, contributing to
value creation.
Being incorporated in Norway and
listed on the Oslo Stock Exchange, BW
Gas complies with the Norwegian
Code of Practice for Corporate Governance (Code of Practice) dated 8
December 2005 as explained below.
The code comes in addition to the
Norwegian Public Limited Companies
Act and other relevant Norwegian and
international law applying to the
operation of the business.
• Articles of Association
• Guidelines for Corporate Governance
• Guidelines for information and
reporting
• Nomination committee instructions
• Instruction to the chief executive
officer
• Instruction to the chief financial
officer regarding compliance with
Norwegian security legislation
• Instructions to the board of directors
• Information to all employees
• Insider trading and disclosure of
information to the market
• Instruction to all employees
• Inside information
• Instruction to primary insiders.
The Code of Practice requires the
company to ‘comply or explain’, which
The corporate governance policies are means that a company must either
incorporated in the company’s Total follow each of the recommendations
Quality Management system (TQM) of the Code of Practice, or explain why
and described in the following doc- the company has chosen another
uments which are available on the solution. Below is a statement of BW
company’s website www.bwgas.com: Gas’ compliance with the Code of
Practice item by item.
1. IMPLEMENTATION AND REPORTING
ON CORPORATE GOVERNANCE
The board of directors of BW Gas has
adopted Guidelines for Corporate
Governance, which are incorporated
in company’s TQM system. The company’s ethical performance is further
described in the guidelines.
2. BUSINESS
The business of BW Gas is defined in
article 3 of the Articles of Association
as follows: The objective of the company is to engage in shipping and
related activities and participation in
other related business as shareholder
or otherwise, and is further described
in this annual report and on the
company’s website.
3. EQUITY AND DIVIDENDS
BW Gas has an equity capital that
appropriately reflects its goals, strategy and risk profile. BW Gas’ goal is
to provide an attractive long-term
return in order to make the company
an interesting investment vehicle.
Shareholders’ return consists of payment of dividend and share price
appreciation. BW Gas aims to pay a
stable and preferably rising dividend
over time, provided always that the
company’s results and future investment requirements are duly taken
into account. There are currently no
authorisations to the board of directors
from the general meeting to increase
the company’s share capital or to buy
own shares.
4. EQUAL TREATMENT OF SHAREHOLDERS AND TRANSACTIONS
WITH CLOSE ASSOCIATES
BW Gas has one class of shares
and each share carries one vote. All
shareholders shall be treated on an
equal basis, and shall not be treated
differently unless in the company’s
and the shareholders common interest. The company has adopted
Guidelines for Corporate Governance
ensuring that members of the board
‘Maintaining high
24
BW Gas annual report 2006
Corporate governance report
standards of corporate governance contribute to value creation’
BW Gas annual report 2006
25
Corporate governance report
of directors and management notifies
the board if they have any material
direct or indirect interest in any transaction entered into by the company.
In the event of any material transaction between the company and
any of the shareholders, the board
members, the executive management or close associates of any such
parties, the board will arrange for
evaluation to be obtained from an
independent third party. This also
applies to transactions between the
company and other companies within
the BW group.
5. FREELY NEGOTIABLE SHARES
All shares in BW Gas are listed on the
Oslo Stock Exchange and are freely
transferable.
to the agenda, meet, speak and vote
at the general meetings. The annual
general meeting is held each year
before the end of June. The board of
directors, the company’s auditor or
shareholders representing at least 5%
of the total share capital may call
extraordinary general meetings. The
general meeting elects the members
of the board of directors, determines
the remuneration of the board of
directors, approves the annual accounts and makes decisions in such
other matters which by law or by
the Articles of Association shall be
resolved by the general meeting.
7. NOMINATION COMMITTEE
BW Gas has a nomination committee
of three members elected by the
general meeting for a period of up
6. GENERAL MEETINGS
to two years as described in the
Nomination Committee Instructions.
Through the general meeting, the
shareholders exercise the highest
The committee will present a recomauthority in the company. All share- mendation to the general meeting,
holders are entitled to submit items proposing candidates for members of
26
BW Gas annual report 2006
the board of directors to be elected
by the shareholders, when board
members are due for election or if a
supplementary election is necessary.
The nomination committee shall also
present a recommendation to the
general meeting regarding election of
the chairman of the board of directors
and deputy chairman, and remuneration of the members of the board of
directors. The chairman of the board,
representing the main shareholder
of BW Gas, will offer himself for reelection to the nomination committee
and the company therefore does not
fully comply with the Code in this
matter.
8. CORPORATE ASSEMBLY AND
BOARD OF DIRECTORS, COMPOSITION AND INDEPENDENCE
BW Gas is a shipping company and
as such does not have a corporate
assembly. On the same basis no employees are members of the board.
In accordance with the articles of
Corporate governance report
12. INFORMATION AND
COMMUNICATIONS
The company has adopted Guidelines
for Information and Reporting.
Communication with shareholders,
investors and analysts is a priority for
BW Gas. Pursuant to the Oslo Stock
Exchange regulations the company
11. REMUNERATION OF THE
promptly discloses inside information.
EXECUTIVE MANAGEMENT
It is the objective to ensure that the
9. THE WORK OF THE BOARD OF
The board of directors has established financial market and shareholders
DIRECTORS
guidelines for the remuneration of the have sufficient information about the
The proceedings and the responsibilities of the board of directors are members of the executive manage- company to be certain that pricing
ment. BW Gas shall at all times offer reflects underlying values. Care will
governed by the Instruction to the
its executive management compet- be taken by the company to ensure
board of directors adopted by the
board of directors. The board is pre- itive remuneration based on current an impartial distribution of information
pared to make use of board commit- market standards, company and in- when dealing with shareholders,
tees whenever appropriate. In addi- dividual performance. The remuner- analysts and the financial market.
tion to the nomination committee as ation programme shall promote value The BW Gas website is continuously
provided for in article 7 of the Articles creation and ensure that the executive updated with press releases, stock
of Association, the board has appoint- management and shareholders share market notices and other relevant
information for investor relations.
ed a compensation committee. The common interest. The elements of
committee shall prepare guidelines for remuneration to the executive man- The website also includes an overview
agement for 2006 is reported on
of the dates for major events such
the remuneration of the executive
as annual general meeting, interim
page 84.
management.
reports, public presentations and diviassociation, the board of directors shall
consist of three to seven members.
At present the board consists of five
members, of whom the following
three are independent of the company’s main shareholder: Kathryn M.
Baker, Knut Brundtland and Clare M.
J. Spottiswoode CBE.
10. REMUNERATION OF BOARD
OF DIRECTORS
The nomination committee proposes
remuneration of the board of directors
to the general meeting. The proposed
remuneration to each board member
for 2006 is reported on page 83.
dend payment date. The company
arranges open investor presentations
in connection with publication of interim and annual reports and arranges roadshows and other external
investor meetings on a regular basis.
13. TAKE-OVERS
It is the company’s policy to comply
with all applicable laws and regulations in take-over situations.
14. AUDITOR
Audit work should have the auditor’s
top priority and performance on nonaudit work must not be prioritised to
the detriment of audit work. The
management must assure that no
conflict of interest may potentially
arise as a consequence of the auditor
performing both auditing and nonauditing work for the company. Nonauditing work should not be assigned
unless there are beneficial reasons
for the company to do so.
BW Gas annual report 2006
27
BIOFUEL
The use of biofuel has tripled in the USA,
and is now representing about one per cent
of the total fuel consumption for road
transportation. Biofuel, primarily produced
from maize and sugarcane, makes for an
increase in fertiliser demand. Moreover,
the crops must give a higher yield in order
to sustain food production and other
agricultural products. It is projected that
already in 2007/2008, more than 25 per
cent of the US maize yield will be used in
biofuel production. The USA consumed 20
million tonnes of ammonia in 2006, of
which 7.5 million tonnes were imported.
One of the main uses was as
feedstock for fertiliser.
The booming biofuel
to stronger demand
28
BW Gas annual report 2006
CONTENTS
30
38
Market and business report - LPG
Market and business report - LNG
consumption leads
for ammonia
BW Gas annual report 2006
29
Market and business report – LPG
MARKET AND BUSINESS REPORT – LPG
The LPG shipping market
continued to improve in 2006.
However, earnings for the largest
vessels declined significantly in
the fourth quarter. World LPG trade
grew by 2.1%, which was below
expectations.
THE LPG SEGMENT
The LPG segment provides transportation of liquefied petroleum gas, ammonia and clean petroleum products
(CPP). The LPG segment is divided into
VLGCs (Very Large Gas Carriers, with a
capacity above 70,000 cbm), LGCs
(Large Gas Carriers, with capacities
ranging between 50,000 and 70,000
cbm) and MGCs (Medium Sized Gas
Carriers, with capacities ranging between 22,000 and 50,000 cbm).
Almost all of BW Gas’ LPG vessels are
operated under pool arrangements
in the following pools: the VLGC pool,
the LGC pool and the Exmar midsize pool.
The vessels in the BW Gas LPG fleet
operate on spot voyages, contracts of
affreightment (COAs) and short- to
medium-term timecharters, which are
considered to include all timecharters
for a period of five years or less.
The LPG shipping market improved
in 2006 for all vessel sizes due to
higher seaborne trade in LPG and
ammonia. Fleet growth was limited,
which resulted in a tighter supply and
demand balance for most of the year.
BW Gas showed improved earnings in
all fleet sizes within the LPG segment.
The VLGC and LGC vessels improved
the most although earnings volatility
was higher than for the MGCs.
The LPG fleet recorded an operating
profit of USD 172.8 million in 2006
compared to USD 138.7 million in
2005. The 2006 figures include a net
gain on sale of vessels of USD 11.5
million compared to USD 34.2 million
in 2005. The average number of
owned and chartered-in LPG vessels
increased to 46.0, up from to 36.9
in 2005.
TC INCOME
VLGC
The TC income from the VLGCs increased to USD 243.4 million in 2006,
compared to USD 184.1 million in
2005. This increase was primarily attributable to an improvement in charter rates during 2006, particularly in
the second and third quarters, and by
an increase in the average number of
vessels owned and chartered in to
SEGMENT ANALYSIS LPG
(USD million)
Operating revenue
Voyage expenses
TC Income
Charter hire expenses
Salaries and other operating expenses
Operating profit before depreciation and disposals
Depreciation
Net gain on sale of tangible fixed assets
Operating profit
2006
523.7
-97.2
426.5
-79.2
-120.7
226.6
-65.3
11.5
172.8
2005
408.2
-106.0
302.2
-51.0
-99.6
151.6
-47.1
34.2
138.7
Key figures
Average number of owned and BB vessels (cal. days)
Average number of chartered in vessels on TC
TC income per calendar day (USD 1,000)
Operating expenses per day (USD 1,000)
37.2
8.8
25.4
8.9
30.7
6.2
22.4
8.9
VARIANCE ANALYSIS LPG
(USD million)
Operating profit 2005
Operating profit 2006
138.7
172.8
Variance operating profit
34.1
Increase in spot and TC rates for LPG vessels
Net investment/decrease in number of LPG vessels
Increase in no. of chartered-in vessels
Depreciation of USD vs NOK, effect on operating expenses
Net gain on sale of tangible fixed assets
Depreciation of vessels
Other
49.6
29.5
-1.4
-0.2
-22.7
-18.2
-2.5
Total variance explained
34.1
‘BW Gas showed improved
30
BW Gas annual report 2006
Market and business report – LPG
24.2 in 2006, up from 22.1 in 2005.
However, the market came under
strong downward pressure in the
fourth quarter as the number of spot
cargoes declined sharply due to the
unusually mild winter and OPEC production cuts. Average TC income for
the group’s VLGC fleet increased to
USD 27,600/day in 2006, compared
to USD 22,800/day in 2005. Idle time
for the BW Gas operated fleet increased to 8.2% in 2006, up from
6.2% in 2005.
LGC
Freight rates for the LGCs followed a
similar trend as the VLGCs. As a result,
TC income from the LGCs increased
to USD 94.0 million in 2006, compared to USD 80.5 million in 2005.
The average number of LGC vessels
increased from 9.5 in 2005 to 10.1 in
2006. The group achieved a moderate improvement in the average TC
income for the LGC fleet, from USD
23,200/day in 2005 to 25,500/day in
2006. Idle time increased to 11.0%,
compared to 7.5% in 2005.
MGC
The MGC market improved in 2006.
Earnings showed a higher degree of
stability compared to the LGCs and
VLGCs. The TC income from MGCs
increased significantly to USD 89.1
million in 2006, compared to USD
37.6 million in 2005. The increase in
TC income was due to the increase in
the average number of vessels as a
result of the limited partnership Edda
Gas KS being fully consolidated as of
1 January 2006 (consolidated according to the equity method in 2005),
the acquisition of the Yara fleet in
July 2006 and the delivery of BW
Sombeke at the end of October 2006.
The average TC income for the MGCs
improved to USD 20,900/day in 2006,
compared to USD 19,400/day in
2005. Idle time was reduced to 5.5%
in 2006, down from 9.2% in 2005.
The Exmar-operated MGC pool performed well and continued to enjoy
high levels of charter cover with the
exception of the month of December.
At that time gaps in the COA cargo
programme developed as nominations were minimized due to plant
earnings in all fleet sizes within the LPG segment’
BW Gas annual report 2006
31
Market and business report – LPG
maintenance and technical problems.
The high contract cover led to reduced
earnings, as spot rates were generally higher than the contract rates.
were drydocked for scheduled main- Exports from West and North Africa
tenance during 2006, compared with increased by 0.7 million tonnes, which
seven LPG vessels in 2005.
was attributable to higher production
in Nigeria, Angola and Equatorial
DEPRECIATION
Guinea. Exports from Asia and the
Timecharter rates for a modern 35,000 The depreciation of vessels increased Pacific declined by 0.7 million tonnes
cbm vessel were firm throughout
to USD 65.3 million in 2006, comdue to a sharp fall in exports from
Indonesia. Exports from Europe stayed
2006, but with some seasonal vari- pared to USD 47.1 million in 2005.
ations. The market’s tightness led to The increase was attributable to the flat while the Middle East increased
exports by 1.0 million tonnes.
COAs for 2006 set above the levels higher number of vessels.
of 2005.
NET GAIN ON SALE OF VESSELS
Historically, the LPG market has shown
Net gain on sale of vessels decreased substantial seasonal variations, with
CHARTER HIRE EXPENSES
to USD 11.5 million in 2006, compared peak activity in the winter months
Charter hire expenses increased to
USD 79.2 million in 2006, compared to USD 34.2 million in 2005. The LGC from October through March. However,
with USD 51.0 million in 2005. The vessel Helice was the sole contributor 2006 deviated considerably from this
to the gain on sale in 2006. In 2005 typical pattern. The LPG price (Saudi
increase was primarily attributable
to the number of chartered-in VLGCs, two VLGCs were sold to MC Shipping contract price) came under strong
(with a five-year timecharter back to pressure in March as the Middle East
which increased to 8.8 vessels in
2006, up from 6.2 vessels in 2005. BW Gas) and four MGCs were sold to producers chose to clear excess stocks
the limited partnership Edda Gas KS. by discounting spot sales. LPG then
became highly price competitive
TOTAL OPERATING EXPENSES
relative to naphtha for petrochemical
Total operating expenses increased THE LPG MARKETS
to USD 120.7 million in 2006, com- VLGC
buyers in US and Europe as the price
pared to USD 99.6 million in 2005.
Preliminary figures for 2006 from
of crude and oil products continued
The increase was mainly attributable Poten & Partners show an increase to escalate. Record levels of LPG spot
to the increase in the average number in world LPG trade of 1.1 million
sales with destination west over the
of vessels to 37.2 in 2006, up from tonnes to 52.6 million tonnes, an
summer months boosted shipping
demand. The combination of record
increase of 2.1% from 2005.
30.7 in 2005. Thirteen LPG vessels
high volumes and increased shipping
distances as more trade shifted to
markets west of Suez led to a rapid
escalation of tonnage requirements,
which triggered a sharp increase in
freight rates.
In the third quarter, the volume of LPG
marketed by the Saudis was substantially reduced. This coincided with an
increasing number of vessels returning to cargo position in the Middle
East following the completion of longhaul shipments. The accumulation of
VLGCs seeking cargo in the Middle East
resulted in heavy downward pressure
on freight rates. Further weakness in
LPG trade followed with declining
crude and natural gas prices. Early in
the fourth quarter OPEC announced
cuts in crude production with effect
from November. This had a negative
effect on LPG production and the
availability of volumes for export.
Technical production problems in
Kuwait, Abu Dhabi, Iran and Qatar
reduced the spot cargo availability
further.
LPG traders faced another challenging
year in 2006 as LPG FOB (Free on
VLGC
TC income per calendar day/OPEX per day
2006
312.2
-68.8
243.4
-73.0
-61.2
109.2
-24.2
-0.1
84.9
2005
244.8
-60.7
184.1
-45.6
-59.7
78.8
-22.1
24.5
81.2
Key figures
Average number of owned and BB vessels (calendar days)
Average number of owned and BB vessels (voyage days)
Average number of chartered in vessels on TC
TC income per calendar day (USD 1,000) 1)
TC income per voyage day (USD 1,000) 2)
Operating expenses per day (USD 1,000) 3)
Carrying value vessels
2006
16.5
16.1
7.7
27.6
28.0
10.2
393.8
2005
16.9
16.7
5.2
22.8
23.0
9.7
280.2
30
25
(USD 1,000)
LPG - VLGC
Operating revenue
Voyage expenses
TC Income
Charter hire expenses
Salaries and other operating expenses
Operating profit before depreciation and disposals
Depreciation
Net gain on sale of tangible fixed assets
Operating profit
20
15
10
5
TC income
Opex
0
2003
32
BW Gas annual report 2006
2004
2005
2006
Market and business report – LPG
Board) prices frequently moved out
of line with crude derived LPG prices
in the final markets, creating insufficient and even negative margins for
shipping and trading. The LPG market
east of Suez continues to be dominated by Saudi Arabia, the largest
exporter. LPG is priced relative to
crude and about 75% of the export
volumes are sold on contract price
basis. Monthly export volumes from
Saudi Arabia varied by 0.45 million
tonnes over the course of the year,
subject to LPG blending into the crude
production, maintenance work, efforts to build or clear stocks and cuts
in crude production. The variations
in monthly shipping volumes correspond to ten VLGC cargoes, which
explain the large fluctuations in spot
rates over the year further amplified by
large variation in shipping distances.
Imports to China declined by 0.8
million tonnes, as a result of weaker
demand and higher domestic LPG production mainly from increased crude
refining. Imports to smaller Asian
countries increased substantially.
the summer months. Prices were also
attractive relative to naphtha. Stocks
therefore started to build earlier than
normal and continued to build well
into the winter season exacerbated by
months of exceptionally mild weather.
Importers’ and traders’ margins turned
negative, import volumes were reduced and there was a shift to shorthaul destinations in order to cut
trading losses.
Imports to Europe increased by 1.8
million tonnes of which 1.0 million
tonnes went to Northwest Europe and
the balance to the Mediterranean.
In the Americas, US imports declined
by 0.8 million tonnes while imports to The trade from east to west increased
Latin America remained unchanged to 3.1 million tonnes in 2006, up from
1.6 million tonnes in 2005, while the
at 3.1 million tonnes.
west to east trade remained stable
Escalating LPG prices from mid-2006 at 0.4 million tonnes.
started to soften demand in some
Far Eastern markets. In China the price Period market activity (contracts with
of LPG became too high for the many a duration of one year or longer)
households with limited purchasing decreased from 25 transactions in
power and led to substantial demand 2005 to 19 transactions in 2006.
destruction. In Japan there were signs Idle time for the BW Gas-operated
LPG imports to Asia rose by 0.4 million of fuel switching to natural gas, which fleet increased to 8.2% in 2006, up
tonnes. Japanese and Korean imports was considerably cheaper than LPG from 6.1% in 2005.
each increased by 0.2 million tonnes. for most of the year. The 2006 seasonal stock building started well
The firm LPG market for most of 2006
Indian imports increased in excess
of 0.1 million tonnes to 2.7 million
ahead of the winter season as imand the comparatively weak market
tonnes, with a large share of volume porters took advantage of favorably for tankers trading in clean petroleum
lifted in the second half of the year. priced spot LPG cargoes available in products (CPP) made LPG trade more
attractive. BW Gas’s VLGC pool had two
vessels in CPP in the first quarter and
none for the rest of the year, compared to an average of 4-5 vessels
in 2005.
There were 33 vessels in the pool at
year-end. BW Gas owns or charters
in 26 of these vessels. BW Gas currently has six VLGC newbuildings on
order, of which four are scheduled for
delivery in 2008 and two in 2009.
Four of the VLGCs are owned in a
50/50 joint venture with Maran Gas.
In addition three chartered-in VLGC
newbuildings will be delivered in
2007 and 2009.
The world VLGC fleet consisted of 110
vessels at year-end. Eight newbuildings were delivered in 2006 and two
vessels were sold for scrap. One vessel was sold for conversion to an
LPG FPSO. VLGC contracting activity
was record high, with 27 orders
placed during the year. At the end
of 2006, 61 vessels were on order:
ten for delivery in 2007, 26 in 2008,
21 in 2009 and four in 2010.
LGC
TC income per calendar day/OPEX per day
2006
109.5
-15.5
94.0
0.0
-30.4
63.6
-19.5
11.6
55.7
2005
105.4
-24.9
80.5
0.0
-27.4
53.1
-17.3
0.0
35.8
Key figures
Average number of owned and BB vessels (calendar days)
Average number of owned and BB vessels (voyage days)
Average number of chartered in vessels on TC
TC income per calendar day (USD 1,000) 1)
TC income per voyage day (USD 1,000) 2)
Operating expenses per day (USD 1,000) 3)
Carrying value vessels
2006
10.1
9.9
0.0
25.5
26.0
8.2
396.0
2005
9.5
8.5
0.0
23.2
25.9
7.9
264.4
30
25
(USD 1,000)
LPG - LGC
Operating revenue
Voyage expenses
TC Income
Charter hire expenses
Salaries and other operating expenses
Operating profit before depreciation and disposals
Depreciation
Net gain on sale of tangible fixed assets
Operating profit
20
15
10
5
TC income
Opex
0
2003
2004
2005
2006
BW Gas annual report 2006
33
Market and business report – LPG
LGC
World ammonia exports increased
by 0.5 million tonnes or 3.0% in 2006,
according to Fertecon and BW Gas.
Substantial new ammonia production
capacity came on-stream during
2006. The most significant additions
were the Burrup ammonia plant in
Australia and Safco IV ammonia and
urea plant in Saudi Arabia. In total
1.25 million tonnes of new production
capacity were added, the majority
of which took place in the second
half of the year. The major changes
elsewhere were an increase in exports from Russia and a decline in
Alaskan production.
from Latin America (Atlantic coast)
to the US Gulf and to Latin America
(Pacific coast) were concluded at
premium rates. LPG demand in the
second half of the year was generally
weaker as trade was predominantly
short-haul. This increased idle time.
led to higher idle time, but this situation was short lived.
trade in 2006, which favoured the
MGC segment. The short- and medium-haul LPG trade grew moderately.
Congestion related to the transit of The market for large semi-refrigerated
the Bosporus Strait reduced fleet ef- vessels for the transportation of
ficiency during the winter months.
petrochemical gases was generally
BW Gas used the weaker market con- firm, which limited competition for
ditions in the second quarter to dry- ammonia and LPG cargoes.
Lower US natural gas prices in 2006 dock three vessels. More than 40%
made it profitable for US ammonia of the LGC fleet was employed in
Activity in ammonia trade was high
producers to restart idle capacity.
ammonia in 2006. The LGCs operat- throughout the year, except for a slow
This in turn boosted domestic supply, ing in LPG experienced competition period during the fourth quarter when
which led to lower prices in the US from VLGCs operating west of Suez. Middle East producers had to reduce
and closed the Black Sea to US amoutput and shipments due to mainmonia arbitrage trade. In Europe am- The LGC pool consists of 21 vessels, tenance and technical problems.
monia capacity was shut down due of which 13 are owned by BW Gas. COA activity in ammonia remained
Two modern vessels were added to high. The following trade lanes saw
to high natural gas prices and high
production cost. Europe took over the the fleet in the second half of 2006 high activity: Black Sea-Europe, Black
The LPG exports from the Atlantic
role of swing importer, absorbing
with the acquisition of the Yara fleet. Sea-Mediterranean and Middle EastBasin, the main trading area for LGCs, some of the volumes from the Black All of the vessels in the LGC pool
Asia. Winter sailing patterns in the
increased by 0.7 million tonnes in
are employed.
Bosporus Strait contributed positively
Sea, which previously had been
2006. Most of the expansion came shipped to the US. The shift to shorter
to demand for MGC vessels in the
from West Africa, Nigeria, Angola and haul was negative for ship demand. The world LGC fleet numbered 28
first and fourth quarters.
Equatorial Guinea. However, there was However, the phasing in of new am- vessels at year-end. The order book
competition from VLGCs for many of monia capacity elsewhere provided numbers six vessels, all of which were LPG cargoes out of the North Sea
the spot cargoes.
relief in the second half of the year. ordered in 2005 for delivery in 2008. provided steady employment for
three MGCs throughout 2006. ElseTowards the end of the year there
The LGC market early in the year was was substantial downtime among
where MGCs were employed primaMGC
boosted by cross-Atlantic LPG trade Middle East ammonia producers
There was a strong expansion in the rily in the cross-Mediterranean trade
from the US to Europe. Shipments
which reduced cargo availability and short- and medium-haul ammonia
and in the trade from the Middle East
to India. Indian imports showed seasonal variations with the highest levels recorded in the first and fourth
quarters.
The MGC pool consists of 27 vessels,
of which 10.3 vessels are owned by
BW Gas. Three of these vessels are
commercially operated by BW Gas
and serve on long-term contracts in
the North Sea LPG trade. In addition,
two MGCs and three smaller semirefrigerated vessels are managed
jointly by BW Gas and Yara from an
office in Geneva.
The global MGC fleet consisted of 68
fully- and semi-refrigerated vessels
at year-end. Two newbuildings were
delivered and one scrap sale was
concluded in 2006. 31 MGC vessels
were on order at year-end: nine for
delivery in 2007, six vessels in 2008
and 16 vessels in 2009.
MARKET OUTLOOK
The world economy is expected
to be past the peak of the current
economic cycle. However, growth
MGC
TC income per calendar day/OPEX per day
2006
102.0
-12.9
89.1
-6.2
-29.1
53.8
-21.6
0.0
32.2
2005
58.0
-20.4
37.6
-5.4
-12.5
19.7
-7.7
9.7
21.7
Key figures
Average number of owned and BB vessels (calendar days)
Average number of owned and BB vessels (voyage days)
Average number of chartered in vessels on TC
TC income per calendar day (USD 1,000) 1)
TC income per voyage day (USD 1,000) 2)
Operating expenses per day (USD 1,000) 3)
Carrying value vessels
2006
10.6
10.3
1.1
20.9
21.4
7.5
397.6
2005
4.3
4.1
1.0
19.4
20.2
8.0
73.9
30
25
(USD 1,000)
LPG - MGC
Operating revenue
Voyage expenses
TC Income
Charter hire expenses
Salaries and other operating expenses
Operating profit before depreciation and disposals
Depreciation
Net gain on sale of tangible fixed assets
Operating profit
20
15
10
5
TC income
Opex
0
2003
34
BW Gas annual report 2006
2004
2005
2006
Market and business report – LPG
of the OPEC crude production cuts
and the increase in domestic petrochemical demand from ethylene
crackers. Large investments in new
crude production capacity in Saudi
Arabia could boost the production of
associated LPG by 10 million tonnes
by 2010. Subject to the capacity
utilisation in crude production and
LPG requirements for petrochemical
feedstock and other uses domestically,
more LPG could become available for
exports. Saudi LPG exports are expected to grow from 12.3 million
tonnes in 2007 to 14.3 million tonnes
in 2010 (Poten & Partners). Qatari
exports are expected to grow by 0.7
million tonnes in 2007 and 1.1 million
tonnes in 2008. The major expansion
is expected to take place in 2009 and
2010. Iranian LPG should see a moderate increase this year from the Pars
project and the build-up of LPG exports from phases 4-5. However, the
LPG
LPG shipments are forecast to grow completion of phases 6-8, also scheduled to start up in 2007, is running
by 2.8 million tonnes or 5.3% in
2007, according to Poten & Partners. late and is likely to slip into 2008.
LPG exports from Saudi Arabia are
The projected increase in LPG exports
from Abu Dhabi appears to be on
expected to be lower in the short
and medium term due to the impact course with a moderate expansion
rates are still expected to be strong
this year, but level off in 2008. The
outlook for the US economy in 2007
has improved lately, but a slowdown
is still expected, manifested by a
slower housing market and build-up
in inventories. Japanese growth prospects are mixed, with a strong business sector performance and a disappointing consumer sector. The
outlook for Western Europe reflects
weaker growth in 2007. The fast
economic expansion in China, India
and Russia is expected to continue.
According to Consensus Economics,
world GDP is projected to expand by
around 3.3% in 2007, compared to
3.9% last year. Key risk factors internationally include; a weaker US economy and USD exchange rate, high raw
material prices and a decline in real
estate prices.
Definitions key figures
1)
[TC income]*1,000/[Average number of owned and BB vessels (calendar days) +
Average number of chartered in vessels on TC]/[Number of days in period]
2)
[TC income]*1,000/[Average number of owned and BB vessels (voyage days) +
Average number of chartered in vessels on TC]/[Number of days in period]
Voyage days = Calendar days – Technical Offhire days
3)
[Salaries, social security and pensions + Other operating expenses]*1,000/
[Average number of owned and BB vessels (calendar days) +
Average number of vessels leased out]/[Number of days in period]
SENSITIVITY 2007 LPG
Effect on operating profit (USD million):
Freight rates +/- 1,000 USD/day
OPEX +/- 1,000 USD/day
USD exchange rate +/- 10%
Bunker fuel prices +/- 10%
8.3
15.3
0.7
5-6
Sensitivity of freight rates are measured for open periods and based
on the fleet as of 31.12.06.
BW Gas annual report 2006
35
Market and business report – LPG
in 2007 and 2008 and a major leap
in output to come on-stream in 2009.
African exports should grow by about
one million tonnes in 2007 with new
production mainly from Algeria,
Equatorial Guinea and Angola. A major
expansion, nearly all from Nigeria,
is expected for 2008.
LPG imports to the US and Europe are
expected to absorb the new production capacity brought on-stream this
year in the Atlantic Basin, mainly in
West Africa. The LPG market is predominately supply-driven. LPG trade
will be determined by the price differential between LPG prices at the
port of loading (FOB price) and prices
in the final markets. High oil and
natural gas prices tend to improve
relative LPG values compared to alternative petrochemical feedstock.
Relative prices of LPG tend to be most
favourable over the summer when
seasonal demand in Asia, where a
large share is household demand for
cooking and heating, is at its lowest
level. A recovery in arbitrage-driven
imports to the US and Europe from
the Middle East is expected in the
second and third quarters.
Growth in LPG imports to Asia this
year is expected to come mainly from
petrochemical buyers in Japan, Korea
and Taiwan. Chinese LPG consumption, which stagnated in 2006 due
to high prices and limited household
purchasing power, could recover this
year if LPG prices are lower. A demand
increase would be met partly from
higher domestic LPG production from
crude refining, and partly from LPG
imports.
BW Gas expects the tonnage balance
for the VLGC segment to improve in
the second and third quarters this
year as export volumes recover and
distances increase. However, weaker
market conditions are likely in 2008
with the high number of newbuildings
to be delivered. The recent change
of sentiment among owners could
result in the substantial scrapping of
old VLGCs over the next couple of
years. Scrapping in combination with
strong LPG export growth should
speed up the market recovery.
The VLGC pool features 38% fixed rate
contract cover for 2007, compared
with 58% a year earlier. For the LGCs
the cover for 2007 is 62%, compared
with 60% a year earlier. The MGCs
are 78% covered on timecharters or
fixed COAs for 2007.
CLEAN PETROLEUM PRODUCTS
(CPPs)
The more uncertain market outlook
for VLGCs in 2008 could again make
it attractive to seek employment in
CPP. The number of VLGCs tradable in
CPP has been reduced over the past
couple of years due to more stringent
age limitations and vetting procedures.
Four of the VLGCs in BW Gas can still
trade in CPP.
AMMONIA
Ammonia shipments are expected
to grow by 0.4 million tonnes (2.5%)
in 2007, according to Fertecon and
BW Gas.
The new ammonia export capacity in
2007 will come from Australia and
the Middle East, from the ramp-up to
full production of plants that started
LPG seaborne import
LPG seaborne export
80
CAGR 2006-2011: 7.1%
70
60
10
36
BW Gas annual report 2006
Source: Poten & Partners
2011
2010
2009
2008
2007
2006
0
Other
30
USA
Europe
India
China
Japan
20
10
0
Source: Poten & Partners
2011
20
40
2010
Other
Europe
Africa
Other Middle East
Saudi Arabia
30
50
2009
40
2006
50
(mill. tonnes)
(mill. tonnes)
60
CAGR 2006-2011: 7.1%
2008
70
2007
80
Market and business report – LPG
last year. There will also be exports
from a new large scale ammonia plant
in Iran. Russian export volumes are
expected to remain high supported
by strong international ammonia
prices due to firm demand in the
world market. There is a potential for
Russian exports to increase if the nearly completed TOAZ export terminal
under construction on the Taman
Peninsula on the Russian Black Sea
coastline is commissioned. The cost
of production for the Ukrainian exporters has increased. Ukrainian exports will therefore be more exposed
to international price fluctuations and
be more of a swing producer. Growing
ammonia export capacity in the
Middle East is expected to find outlets
mainly in Asia, replacing a substantial share of volumes previously imported from Russia.
USD 6 MMBTU (Million British Thermal
Units) in 2006, little happened to the
level of US production, as most of the
idling of capacity turned out to be
permanent. It is likely that imports,
mainly from Russia, will take off in
the next couple of months. Higher
natural gas prices could increase demand for imported ammonia if further
domestic production is shut down.
use and some further displacement of
locally produced ammonia by lowercost imported ammonia. Increasing
demand for ammonia for pollution
control measures could be substantial.
The major end-user product for ammonia is urea (for fertiliser and technical use). A preference for urea fertiliser
instead of direct ammonia application
will mean that a greater proportion
of ammonia will be used on-site and
a greater share of exports will be
shipped in the form of urea (dry bulk).
Further closures of ammonia production in Europe and the US are likely
to be accompanied by closure of
downstream capacity and replaceThe short-term outlook for the inter- ment by imported urea. However,
national ammonia market is firm.
there is upside for ammonia demand
High US natural gas prices over the for fertiliser use if bio fuel production
past three years have led to perma- takes off.
nent idling of a large share of the US
ammonia production capacity. When There is expected to be strong growth
for ammonia for non-fertiliser endnatural gas prices declined below
Ammonia seaborne export
20
CAGR 2006-2011: 3.1%
(mill. tonnes)
15
10
Other
Europe
Middle East
5
Asia/Pacific
CIS
Latin America
Source: Fertecon
2011
2010
2009
2008
2007
2006
0
BW Gas annual report 2006
37
Market and business report – LNG
MARKET AND BUSINESS REPORT – LNG
West to East trade of spot LNG
cargoes and extensive use of ships
for floating storage absorbed a
large share of surplus shipping
capacity in 2006.
THE LNG SEGMENT
The LNG segment provides transportation of liquefied natural gas with
vessel size ranging from 138,000 to
150,000 cbm. Since 2000, BW Gas has
considerably expanded its presence in
the LNG sector by making substantial
investments in new LNG vessels.
At the end of 2006 the group’s LNG
business consisted of nine LNG vessels; three 138,000 cbm, four 146,000
cbm and two smaller 30,000 cbm
LNG carriers.
Gas owns or partly owns operate
under long-term time charters. Under
these time charters, the company
hires the vessel to the customer at
an agreed rate for an agreed period
and remains responsible for the
technical management of the vessel.
The small LNG carrier Havfru (1973
built, 30,000 cbm) is currently operating in the spot market; the other
small LNG carrier Century (1974 built,
30,000 cbm) is employed until
October 2007.
The newbuilding LNG Benue was
delivered in March 2006 and began
its 20.5 year time charter with
Nigeria LNG.
The company has two 162,400 cbm
LNG vessels on firm order, both scheduled for delivery in 2009. Both newbuildings will commence long-term
timecharters upon delivery.
Subsidiaries of Bergesen Worldwide
Limited took delivery of two LNG vessels in November 2006 and January
2007, with two more to come in
2008. BW Gas is responsible for the
commercial and technical operation
of these vessels. All vessels are on
20.5 year timecharter contracts to
Nigeria LNG.
Except for the two smaller LNG vessels, all of the LNG vessels that BW
BW Gas is participating in several
new LNG tenders with delivery of
LNG carriers in 2011/2012.
The LNG fleet recorded an operating
profit of USD 86.9 million in 2006,
compared to USD 51.1 million in
2005. The increase resulted from a
higher average number of vessels.
SEGMENT ANALYSIS LNG
(USD million)
Operating revenue
Voyage expenses
TC Income
Financial lease interest income
Total operating income
Charter hire expenses
Salaries and other operating expenses
Operating profit before depreciation and disposals
Depreciation
Net gain on sale of tangible fixed assets
Operating profit
Key figures
Average number of owned and BB vessels (cal. days)
Average number of vessels leased out on financial lease
Average number of chartered in vessels on TC
TC income per calendar day (USD 1,000)
Operating expenses per day (USD 1,000)
2006
142.4
-2.8
139.6
9.6
149.2
0.0
-29.9
119.3
-32.4
0.0
86.9
2005
92.1
-0.2
91.9
0.0
91.9
0.0
-20.4
71.5
-20.4
0.0
51.1
7.3
0.5
0.0
52.4
10.5
5.2
0.0
0.0
48.4
10.7
VARIANCE ANALYSIS LNG
(USD million)
Operating profit 2005
Operating profit 2006
51.1
86.9
Variance operating profit
35.8
Net investment/increase in number of LNG vessels
Financial lease interest income
Depreciation of USD vs NOK, effect on operating expenses
Depreciation of vessels
Net gain on sale of tangible fixed assets
Other
49.8
-1.2
0.0
-12.0
0.0
-0.7
Total variance explained
35.8
‘BW Gas has considerably expanded its presence in the LNG sector’
38
BW Gas annual report 2006
Market and business report – LNG
TC INCOME
The TC income from LNG vessels increased to USD 139.6 million in 2006,
compared to USD 91.9 million in
2005. The increase was attributable
to the delivery of three large LNG
vessels during the year, increasing
the average number of vessels from
5.2 in 2005 to 7.3 in 2006.
In accordance with IFRS, the charter
agreement for the LNG vessel Berge
Arzew was reclassified from operational to financial lease in the fourth
quarter of 2006. Due to the insignificant size of the corrections, the
comparable figures for 2005 have
not been changed, and the accumulated effect for previous periods
has been charged to the consolidated
income statement without affecting
the segment report.
Average TC income for the group’s LNG
fleet increased to USD 52,400/day in
2006, compared to USD 48,400/day
in 2005. Excluding the two small LNG
carriers Havfru and Century, the LNG
fleet generated an average TC income of USD 67,100/day in 2006,
LNG
Operating revenue
Voyage expenses
TC Income
Financial lease interest income
Total operating income
Charter hire expenses
Salaries and other operating expenses
Operating profit before depreciation and disposals
Depreciation
Net gain on sale of tangible fixed assets
Operating profit
2006
142.4
-2.8
139.6
9.6
149.2
0.0
-29.9
119.3
-32.4
0.0
86.9
2005
92.1
-0.2
91.9
0.0
91.9
0.0
-20.4
71.5
-20.4
0.0
51.1
Key figures
2006
Average number of owned and BB vessels (calendar days) 7.3
Average number of owned and BB vessels (voyage days)
7.2
Average number of vessels leased out on financial lease
0.5
Average number of chartered in vessels on TC
0.0
TC income per calendar day (USD 1,000) 1)
52.4
TC income per voyage day (USD 1,000) 2)
53.1
Operating expenses per day (USD 1,000) 3)
10.5
Carrying value vessels
894.9
Financial lease receivable
87.0
2005
5.2
5.2
0.0
0.0
48.4
48.4
10.7
824.6
0.0
compared to USD 65,200/day in 2005.
The smaller LNG carrier Havfru experienced idle time in the first three
quarters of 2006. The LNG carrier
River Orashi experienced 45 days
offhire in the fourth quarter of 2006.
The offhire is due to damage on stern
tube bearings, which BW Gas considers to be a product guarantee issue.
Three sister vessels have experienced
the same problems, and are planned
to be drydocked for repairs during the
first and second quarters of 2007.
The increase is attributable to the
increase in the number of vessels,
and a reduction of USD 2.8 million in
connection with the reclassification
of LNG carrier Berge Arzew to financial lease.
NET GAIN ON SALE OF VESSELS
There was no gain on sale of LNG
vessels during 2006. In 2005, USD
-0.1 million was booked as a correction of a previous sale.
THE LNG MARKET
According to Maritime Strategies InTOTAL OPERATING EXPENSES
ternational (MSI) world LNG trade is
Total operating expenses increased to estimated to have increased by 14.3
USD 29.9 million in 2006, compared million tonnes to 155.7 million tonnes
to USD 20.4 million in 2005. The in- in 2006, up 10.1% from 2005. Nevcrease is due to the increase in the ertheless, the growth in LNG trade
number of vessels and to insurance developed weaker than expected last
deductibles of USD 0.6 million charged year. Fewer new production trains
for damage repairs as described
started in 2006 compared to the year
above. The same amount will also be before. In Egypt, train 2 at ELNG
charged in the first quarter of 2007. started production and there was also
a build-up of capacity at the Segas
DEPRECIATION
facility. In Qatar, RasGas train 4 started
The depreciation of vessels increased production in addition to the ramp-up
to USD 32.4 million in 2006, comat trains 1-2. In Oman the Qalhat LNG
pared to USD 20.4 million in 2005.
train 3 came on-stream. In Nigeria
Definitions key figures
1)
[TC income]*1,000/[Average number of owned and BB vessels (calendar days) +
Average number of chartered in vessels on TC]/[Number of days in period]
2)
[TC income]*1,000/[Average number of owned and BB vessels (voyage days) +
Average number of chartered in vessels on TC]/[Number of days in period]
Voyage days = Calendar days – Technical Offhire days
3)
[Salaries, social security and pensions + Other operating expenses]*1,000/
[Average number of owned and BB vessels (calendar days) +
Average number of vessels leased out]/[Number of days in period]
BW Gas annual report 2006
39
Market and business report – LNG
LNG trains 4-5 started production on
time. Indonesian production and exports came in below expectations
due to declining gas resources and
higher domestic gas requirements.
Algeria saw its export decline due to
technical difficulties and extended
maintenance.
US imports decreased by 1.4 million
tonnes (-10%) to 12.5 million tonnes
in 2006 (MSI). Imports would have
been higher if not for the diversion
of spot cargoes from producers in the
Atlantic Basin to Europe and to the
Far East where natural gas prices were
higher than in the US.
Interest in developing new LNG
projects remained high both on the
production and on the receiving
(re-gasification) side. However, the
development costs and project lead
times have increased substantially
over the last 2-3 years. Many new
projects under planning will require
considerably higher future gas prices
to be profitable. This has led developers to reconsider the economics of
a number of projects and final investment decisions have been postponed.
With the exception of Pluto LNG in
second quarter, and NLNG in fourth
quarter this year and possibly Angola
LNG also this year, few, if any new
FIDs (Final Investment Decision) are
expected until 2008. This could reduce
the growth in new liquefaction capacity beyond 2010.
The Federal Energy Regulatory
Commission (FERC) continued to
approve new re-gasification facilities intended for the US Gulf and the
East Coast. US re-gasification capacity
had a utilization rate below 40% in
2006 and capacity is not regarded
as a constraint for the foreseeable
future.
European imports increased by 7.5
million tonnes (21%) to 43 million
tonnnes in 2006 (Cedigaz).
Japanese imports increased by around
3.5 million (6.0%) to 61.5 million
tonnes in 2006 (Cedigaz).
Imports from the Middle East, Australia and Malaysia increased, while
volumes from Indonesia declined as
a large number of cargoes were
cancelled due to the declining production and high domestic gas requirements.
Most of the fleet surplus over the past
2-3 years disappeared towards the
end of 2005 and the market was fairly
balanced in 2006. Weaker US natural
Interest in developing new re-gasi- gas prices for much of the year made
fication facilities remained high. A
it more profitable to divert spot cargoes from the Atlantic Basin to Asia
number of new countries are considering the construction of re-gasi- where natural gas prices were confication facilities. Concerns about the siderably higher. This added to tonsecurity of supply of Russian pipeline nage demand. Another factor which
gas to Europe and the reliability of
helped to firm the market was the
Middle East suppliers of LNG have not employment of more than ten vesabated over the past year. Re-gasi- sels as floating storage for much of
fication facilities are being considered the second half of the year. The tonin countries like Romania, Bulgaria, nage surplus could grow again in
Cyprus, Croatia, Poland and Germany. 2007, as added LNG production caThere are also plans to construct re- pacity is unlikely to absorb the surge
gasification facilities in Singapore,
in vessel deliveries.
Pakistan and elsewhere in the East.
Some of the projects being developed The global LNG fleet consists of 218
are floating re-gasification solutions vessels, including 27 LNG vessels
which will shorten lead times com- delivered in 2006. There was no
pared to traditional land-based rescrapping during the year. Contracting
gasification facilities. It is now more activity in 2006 continued at a high
of a concern whether sufficient LNG level, with 30 contracts placed. 131
supply rather than re-gasification
vessels are on order: 35 vessels are
capacity will be available; this is in set for delivery in 2007, 54 in 2008,
contrast to two years ago, when
34 in 2009 and eight in 2010.
sufficient re-gasification capacity was
the greatest concern.
LNG
TC income per calendar day/OPEX per day
SENSITIVITY 2007 LNG
60
Effect on operating profit (USD million):
Freight rates +/- 1,000 USD/day
OPEX +/- 1,000 USD/day
USD exchange rate +/- 10%
(USD 1,000)
50
40
30
Sensitivity of freight rates are measured for open periods and based
on the fleet as of 31.12.06.
20
10
TC income
Opex
0
2003
40
BW Gas annual report 2006
0.4
2.0
0.2
2004
2005
2006
Market and business report – LNG
MARKET OUTLOOK
The LNG market is expected to grow
by 23 million tonnes in 2007, up 15%
from 2006. A number of new LNG
production projects are in an advanced planning stage, but only a
couple of these are likely to receive
FID this year. Several projects, which
initially were expected to receive FID
this year, are being postponed due
to rapid cost escalation (equipment
and skilled personnel) and increasing
lead times. LNG projects in Australia,
West Africa and Latin America and
Russian projects in the Baltic and
Barents regions are expected to be
delayed.
Global demand for natural gas is
expected to show strong growth. The
rate of expansion will be impacted
by the relative price of alternative
energy sources, energy conservation,
measures to stimulate greater use
of renewable energy sources and
emission legislation. However, these
effects are unlikely to have a notable
effect on LNG shipping until well after
2010, as trade in the meantime will
be dictated by the development of
new production capacity already
under construction.
LNG vessels employed in the spot
and short term market are expected
to face weaker market conditions
this year due to deterioration in the
supply and demand balance. The LNG
fleet is set to grow in excess of 25%
this year based on scheduled deliveries compared to a growth of about
15% in trade volume. This will, however, not affect the BW Gas LNG
vessels. Except for the vintage LNG
vessel Havfru, which is idle and
seeking new employment, all of
the company’s LNG vessels are
employed on long-term contracts.
LNG seaborne import
300
CAGR 2006-2015: 7.6%
(mill. tonnes)
250
200
150
100
Europe
Asia/Oceania
Latin America
North America
50
0
1985
Source: Cedigaz
2005
2010
2015
BW Gas annual report 2006
41
ELECTRICITY
The USA is the world’s largest energy consumer, consuming roughly one-fourth of
all primary energy in the world. Natural
gas constitutes about 24 per cent of the
US energy consumption. Natural gas has
proved to be a reliable and efficient energy source that pollutes less than other
fossil fuels, and is currently responsible
for about 19 per cent of the electricity
generated in the country. The use of LNG
is expected to increase rapidly during the
next 20 years, as domestic gas reserves
are being depleted and new LNG exports
from Africa and the Middle East are coming on stream. In 2006, the USA consumed natural gas equivalent to 460 million tonnes of LNG (570 mtoe), of which
12 million tonnes were imported as LNG.
42
BW Gas annual report 2006
Natural gas is becoming
for generating
CONTENTS
44
45
increasingly important
electricity in the USA
Company management
Shareholder information
BW Gas annual report 2006
43
Company management
COMPANY MANAGEMENT
Jens Ismar
Director chartering and project division
44
BW Gas annual report 2006
Garup Meidell
Director finance division and CFO
Jan Håkon Pettersen
Managing director and CEO
Rebekka Glasser Herlofsen
Director business development
Leif Arthur Andersen
Director technical and marine division
Shareholder information
SHAREHOLDER INFORMATION
THE BW GAS SHARE
The BW Gas share was listed on the
Oslo Stock Exchange in October 2005
and is trading under the ticker code
GAS. BW Gas has one class of shares
with each share carrying one vote.
All shares are freely transferable.
SHAREHOLDER POLICY
All shareholders shall be treated on an
equal basis, and shall not be treated
differently unless in the company’s
and the shareholders common interest. The company has adopted
guidelines for corporate governance
ensuring that members of the board
of directors and management notifies
the board if they have any material
direct or indirect interest in any transaction entered into by the company.
In the event of any material transaction between the company and
any of the shareholders, the board
members, the executive management or close associates of any such
parties, the board will arrange for
evaluation to be obtained from an
independent third party. This also
applies to transactions between the
company and other companies
within the BW group. The rights of
shareholders are set out in the
Norwegian Public Limited Companies
Act and in the company’s articles of
association.
DIVIDEND POLICY
The board of directors has adopted
a dividend policy with a goal to have
an equity capital that appropriately
reflects the company’s goals, strategy
and risk profile. The policy aims to
provide an attractive long-term return
in order to make BW Gas an interesting investment. Shareholders’
return consists of payment of divi-
THE BW GAS SHARE
Ticker symbol: GAS
Listing: Oslo Stock Exchange (OSE)
Number of shares issued: 128,347,885
Number of shares outstanding: 128,097,885
dends and share price appreciation.
The company aims to pay a stable
and preferably rising dividend over
time, depending always on market
conditions, the results of operations
and future capital requirements.
The board is proposing a dividend of
NOK 4.40 per share for 2006 totalling
a payment of NOK 565 million (USD
90.5 million at USD/NOK 6.24). The
dividend approved by the annual
general meeting will be paid on 15
May 2007 to those shareholders included in the company’s register of
shareholders on 3 May 2007.
INFORMATION POLICY
Communication with shareholders,
investors and analysts is a priority
for BW Gas. It is the objective to
ensure that the financial market and
shareholders have sufficient infor-
FINANCIAL CALENDAR 2007
Annual general meeting
Ex. dividend
Payment of dividend
Results 1st quarter
Results 2nd quarter
Results 3rd quarter
3 May
4 May
15 May
15 May
15 August
15 November
BW Gas annual report 2006
45
Shareholder information
mation about the company to be
certain that pricing reflects underlying
values. Pursuant to the Oslo Stock
Exchange regulations the company
promptly discloses inside information.
Care will be taken by the company
to ensure an impartial distribution of
information when dealing with shareholders, analysts and the financial
market. The BW Gas website
(www.bwgas.com) is continuously
updated with press releases, stock
market notices and other relevant
investor relations information. The
website also includes an overview
of the dates for major events such
as annual general meeting, interim
reports, public presentations and
dividend payment date. The company
arranges open investor presentations
in connection with publication of interim reports and arranges roadshows
and other investor meetings on a
regular basis.
AUTHORISATIONS FOR SHARE
BUY-BACKS AND SHARE ISSUES
BW Gas holds 250,000 own shares for
use in the incentive compensation
program for employees. There are
currently no further authorisations
from the general meeting to the
board of directors to purchase own
shares or issue new.
SHARE-RELATED KEY FIGURES,
TURNOVER AND SHAREHOLDERS
During 2006 the BW Gas share price
depreciated by 7.0% (from NOK 88.75
at the beginning to NOK 82.5 at the
end of the year), whereas the Oslo
Stock Exchange Benchmark Index
(OSEBX) climbed 43.4% during the
same period.
A total of 72.3 million shares were
traded during 2006, representing
56.2% of the total outstanding shares.
BW Gas share price vs OSEBX since 1 January 2006
The table below shows the development of the company’s share capital
and the number of outstanding shares in the recent three years
130
120
As of 1 January
Reversed share split
Demerger
Share split
As of 31 December
0
-15,015,630
0
Nominal value
per share (NOK)
2.5
143,363,515
128,347,885
1
1
Total
share capital
143,363,515
143,363,515
128,347,885
128,347,885
128,347,885
Number
of shares
57,345,406
1
1
128,347,885
128,347,885
110
100
90
Oslo Stock Exchange
Benchmark Index (OSEBX),
rebased to BW Gas share price
80
70
BW Gas (GAS),
share price (NOK)
60
01.01.06
20.01.06
13.02.06
27.02.06
13.03.06
27.03.06
10.04.06
24.04.06
08.05.06
22.05.06
19.06.06
10.07.06
31.07.06
14.08.06
28.08.06
11.09.06
25.09.06
09.10.06
23.10.06
06.11.06
20.11.06
04.12.06
18.12.06
10.01.07
29.01.07
12.02.07
26.02.07
12.03.07
26.03.07
Year
2004
2005
2005
2005
2006
Change in
share capital (NOK)
46
BW Gas annual report 2006
02-01-06
03-01-06
04-01-06
05-01-06
06-01-06
09-01-06
10-01-06
11-01-06
12-01-06
13-01-06
16-01-06
17-01-06
18-01-06
19-01-06
20-01-06
23-01-06
24-01-06
25-01-06
26-01-06
27-01-06
30-01-06
31-01-06
01-02-06
02-02-06
03-02-06
06-02-06
07-02-06
08-02-06
09-02-06
10-02-06
13-02-06
14-02-06
15-02-06
16-02-06
17-02-06
20-02-06
21-02-06
22-02-06
23-02-06
24-02-06
27-02-06
28-02-06
01-03-06
02-03-06
03-03-06
06-03-06
07-03-06
08-03-06
09-03-06
10-03-06
13-03-06
14-03-06
15-03-06
16-03-06
17-03-06
20-03-06
21-03-06
22-03-06
23-03-06
24-03-06
27-03-06
28-03-06
29-03-06
30-03-06
31-03-06
03-04-06
04-04-06
05-04-06
06-04-06
07-04-06
10-04-06
11-04-06
12-04-06
13-04-06
14-04-06
17-04-06
18-04-06
19-04-06
20-04-06
21-04-06
24-04-06
25-04-06
26-04-06
27-04-06
28-04-06
01-05-06
02-05-06
03-05-06
04-05-06
05-05-06
08-05-06
09-05-06
10-05-06
11-05-06
12-05-06
15-05-06
16-05-06
17-05-06
18-05-06
19-05-06
22-05-06
23-05-06
24-05-06
25-05-06
26-05-06
29-05-06
30-05-06
31-05-06
01-06-06
02-06-06
05-06-06
06-06-06
07-06-06
08-06-06
09-06-06
12-06-06
13-06-06
14-06-06
15-06-06
16-06-06
19-06-06
20-06-06
21-06-06
22-06-06
23-06-06
26-06-06
27-06-06
28-06-06
29-06-06
30-06-06
03-07-06
04-07-06
05-07-06
06-07-06
07-07-06
10-07-06
11-07-06
12-07-06
13-07-06
14-07-06
17-07-06
18-07-06
19-07-06
20-07-06
21-07-06
24-07-06
25-07-06
26-07-06
27-07-06
28-07-06
31-07-06
01-08-06
02-08-06
03-08-06
04-08-06
07-08-06
08-08-06
09-08-06
10-08-06
11-08-06
14-08-06
15-08-06
16-08-06
17-08-06
18-08-06
21-08-06
22-08-06
23-08-06
24-08-06
25-08-06
28-08-06
29-08-06
30-08-06
31-08-06
01-09-06
04-09-06
05-09-06
06-09-06
07-09-06
08-09-06
11-09-06
12-09-06
13-09-06
14-09-06
15-09-06
18-09-06
19-09-06
20-09-06
21-09-06
22-09-06
25-09-06
26-09-06
27-09-06
28-09-06
29-09-06
02-10-06
03-10-06
04-10-06
05-10-06
06-10-06
09-10-06
10-10-06
11-10-06
12-10-06
13-10-06
16-10-06
17-10-06
18-10-06
19-10-06
20-10-06
23-10-06
24-10-06
25-10-06
26-10-06
27-10-06
30-10-06
31-10-06
01-11-06
02-11-06
03-11-06
06-11-06
07-11-06
08-11-06
09-11-06
10-11-06
13-11-06
14-11-06
15-11-06
16-11-06
17-11-06
20-11-06
21-11-06
22-11-06
23-11-06
24-11-06
27-11-06
28-11-06
29-11-06
30-11-06
01-12-06
04-12-06
05-12-06
06-12-06
07-12-06
08-12-06
11-12-06
12-12-06
13-12-06
14-12-06
15-12-06
18-12-06
19-12-06
20-12-06
21-12-06
22-12-06
25-12-06
26-12-06
27-12-06
28-12-06
29-12-06
01-01-07
02-01-07
03-01-07
04-01-07
05-01-07
08-01-07
09-01-07
10-01-07
11-01-07
12-01-07
15-01-07
16-01-07
17-01-07
18-01-07
19-01-07
22-01-07
23-01-07
24-01-07
25-01-07
26-01-07
29-01-07
30-01-07
31-01-07
01-02-07
02-02-07
05-02-07
06-02-07
07-02-07
08-02-07
09-02-07
12-02-07
13-02-07
14-02-07
15-02-07
16-02-07
19-02-07
20-02-07
21-02-07
22-02-07
23-02-07
26-02-07
27-02-07
28-02-07
01-03-07
02-03-07
05-03-07
06-03-07
07-03-07
08-03-07
09-03-07
12-03-07
13-03-07
14-03-07
15-03-07
16-03-07
19-03-07
20-03-07
21-03-07
22-03-07
23-03-07
26-03-07
Shareholder information
The average daily trading volume
was 280,000 shares.
The market capitalisation of the
company as of 31 December 2006
was NOK 10.59 billion (USD 1.69
billion) making BW Gas the 30th
largest company on the Oslo Stock
Exchange (19th largest at the end
of 2005).
At year end 2006, BW Gas had 1,084
shareholders of which 873 where
domiciled in Norway. The largest
shareholder, World Nordic ApS, which
is a subsidiary of the Bergesen
Worldwide Ltd group, held 59.7% of
the shares and the company’s ten
largest shareholders owned 76.7%
of the shares. Investors outside
Norway owned 94.2% of the company (97.5% at the end of 2005).
ANALYST COVERAGE
The BW Gas share is covered by 13
investment banks, of which eleven
are in Norway and two in the UK.
The investment banks provide market
analysis and financial estimates on
BW Gas on a regular basis. Information on analyst coverage is regularly
updated on our website.
20 LARGEST SHAREHOLDERS AS OF 31.12.06
company’s register of shareholders
at the Norwegian Central Securities
Depositary (VPS) in place of a foreign
shareholder. Nominees may not exercise any rights in the company
beyond receiving dividends and other
distributions, including shares from
new issues. Nominees do not have
the right to attend or vote at general
meetings. Shareholders wishing to
attend or vote at general meetings
must re-register their shares in VPS
in their own names or be able to
document their ownership of the
shares in some other way.
SHARE CAPITAL
The share capital of BW Gas is
NOK 128,347,885, divided into
128,347,885 shares, each share
with a par value of NOK 1.
NOMINEE REGISTRATION
Under Norwegian Law, shares must
normally be registered in the name
of the beneficial owner. However, the
Norwegian authorities may consent
to a nominee being shown in the
RISK
The RISK adjustment for 1 january
2006 is NOK -1.60 per share.
Shareholder
1 WORLD NORDIC APS
2 STATE STREET BANK
3 SIS SEGAINTERSETTLE
4 THIRD AVENUE INTL.
5 VERDIPAPIRFOND ODIN
6 BANK OF NEW YORK, BR
7 BAYERISCHE HYPO
8 COMMERZBANK AG
9 JPMORGAN CHASE BANK
10 COGENT-HUNTER HALL
11 BNP PARIBAS SEC.
12 BNP PARIBAS SECURITIES
13 MELLON BANK AS AGENT
14 THE NORTHERN TRUST
15 BANK OF NEW YORK, BR
16 RBC DEXIA INVESTOR
17 VERDIPAPIRFOND ODIN
18 CLEARSTREAM BANKING
19 BANK OF NEW YORK, BR
20 CREDIT AGRICOLE INVEST
Total
Total number of shares
No of shares
76,630,285
4,088,941
3,703,309
2,606,300
2,340,000
2,066,370
1,820,799
1,820,408
1,818,715
1,582,500
1,370,381
1,333,829
1,216,339
1,150,130
953,500
900,000
828,350
694,744
640,300
622,462
108,187,662
128,347,885
% share
59.71
3.19
2.89
2.03
1.82
1.61
1.42
1.42
1.42
1.23
1.07
1.04
0.95
0.90
0.74
0.70
0.65
0.54
0.50
0.48
84.29
100.00
Shares owned by shareholders
outside Norway
120,934,055
94.22
Country
DNK
USA
CHE
USA
NOR
DEU
DEU
DEU
GBR
AUS
FRA
LUX
USA
GBR
HKG
FRA
NOR
LUX
FRA
FRA
Details
Ordinary
Nominee
Nominee
Ordinary
Ordinary
Ordinary
Nominee
Nominee
Nominee
Ordinary
Nominee
Ordinary
Nominee
Nominee
Ordinary
Ordinary
Ordinary
Nominee
Ordinary
Nominee
Free float ownership by country
(% of total outstanding shares)
Share price at 31 December (NOK)
Earnings per share, cont. operations (USD)
Ordinary dividend per share (NOK)
Payout ratio
Dividend yield
Price/Earnings ratio
2006
82.5
1.7
4.40
30%
5.3%
7.7
2005
88.75
2.1
1.60
11%
1.8%
6.3
2004
-0.1
-
2003
0.3
-
Australia 2.0%
Sweden 1.0%
USA 8.1%
Luxembourg 3.0%
France 3.5%
Norway 5.8%
Others 3.6%
-
Switzerland 3.6%
Germany 5.6%
UK 4.3%
BW Gas annual report 2006
47
HEATING
To decrease the amount of harmful
emission and acid rain, several EU countries
have chosen to use the more environmental
friendly natural gas. Spain was one of the
countries that took a political choice by
phasing out energy production based on
coal and oil in favour of an increased use
of natural gas. Natural gas is also a popular
fuel in households, used mainly for cooking
and heating. Today, Spain is the fastest
growing natural gas importer in EU. The
fuel currently constitutes 20 per cent of
the country’s total energy consumption.
Spain has limited natural gas resources
and thus 65 per cent is imported as LNG,
being the highest import share in
the European Union.
Heating from natural gas
friendly
48
BW Gas annual report 2006
CONTENTS
is an environmentally
alternative
50
50
51
52
53
54
92
93
94
95
96
109
110
112
114
Group accounts
- Consolidated income statement
- Consolidated balance sheet
- Consolidated cash flow statement
- Consolidated statement of changes in equity
- Notes
Parent company accounts
- Income statement
- Balance sheet
- Cash flow statement
- Notes
Auditor’s report
Fleet list
Glossary of shipping terms
Addresses
BW Gas annual report 2006
49
Group accounts
Group
CONSOLIDATED INCOME STATEMENT
USD million (Year ended 31 December)
CONTINUING OPERATIONS
Operating revenue
Voyage expenses
Charter hire expenses
Salaries, social security and pensions
Other operating expenses
Operating profit before depreciation and disposals
Depreciation and amortisation
Impairment charges/reversals
Net gain on sale of tangible fixed assets
Operating profit
Interest income
Interest expenses
Net foreign exchange gain/loss
Share of profit from associates
Other financial items
Net financial items
Profit before tax
Income tax expense
Net profit from continuing operations
Net profit from discontinued operations
Net profit
Minority interests
Majority interests
Note
2006
2005
2004
5
5
729.9
-100.8
-94.9
-87.6
-101.5
345.1
-102.0
0.0
15.6
258.7
23.3
-78.7
5.9
2.2
20.1
-27.2
231.5
-6.8
224.7
-1.0
223.7
12.7
211.0
517.3
-106.2
-50.9
-78.8
-58.9
222.5
-70.9
0.0
34.4
186.0
16.1
-31.0
108.1
2.8
-0.8
95.2
281.2
-1.0
280.2
167.8
448.0
7.5
440.5
432.6
-93.2
-24.2
-82.6
-70.6
162.0
-73.3
0.0
17.6
106.3
8.5
-24.4
-88.0
0.7
-8.4
-111.6
-5.3
-2.2
-7.5
136.1
128.6
9.8
118.8
1.7
-0.1
1.6
2.1
1.3
3.4
-0.1
1.1
0.9
128,097,885
128,306,218
128,347,885
5/11
5
6/7
6
6
10
5
12
23
Basic and diluted 1) earnings per share in USD, continuing operations
Basic and diluted 1) earnings per share in USD, discontinued operations
Basic and diluted 1) earnings per share in USD, all operations
Average number of shares outstanding
1)
15
There are no dilutive potential shares, and therefore the diluted EPS equals the basic EPS.
The accompanying notes are an integral part of these consolidated financial statements.
50
BW Gas annual report 2006
Group accounts
Group
CONSOLIDATED BALANCE SHEET
USD million (As of 31 December)
ASSETS
Tangible fixed assets
Intangible fixed assets
Investments in associates
Other financial long-term assets
Total non-current assets
Inventories
Receivables
Short-term investments
Cash and cash equivalents
Total current assets
Non current assets classified as held for sale
Total assets
EQUITY AND LIABILITIES
Paid-in capital
Valuation reserve
Retained earnings
Total equity before minority interests
Minority interests
Total equity
Long-term interest-bearing debt
Net pension liabilities
Other non-interest-bearing debt and provisions
Deferred tax liability
Total non-current liabilities
Short-term interest-bearing debt
Tax and public duties payable
Other non-interest-bearing liabilities and provisions
Total current liabilities
Total equity and liabilities
Note
6
7
10
14/21/22
14
21
22
13/22
23
16
17/18/22
11
22
12
17/18/22
5
2006
2005
2004
2,290.1
5.2
3.5
225.6
2,524.4
13.1
76.5
7.9
248.9
346.4
n.a.
2,870.8
1,746.8
5.9
20.9
115.4
1,889.0
12.4
107.9
25.1
354.3
499.7
1.8
2,390.5
2,141.4
6.6
5.4
134.5
2,287.9
14.2
85.5
13.1
242.7
355.5
n.a.
2,643.4
16.8
4.7
1,052.6
1,074.1
68.4
1,142.5
16.8
15.6
866.9
899.3
29.6
928.9
284.4
3.1
526.3
813.8
30.2
844.0
1,577.9
10.4
3.2
0.0
1,591.5
27.8
13.6
95.4
136.8
2,870.8
1,297.5
12.1
3.6
7.0
1,320.2
51.7
14.8
74.9
141.4
2,390.5
1,591.4
15.1
79.2
0.0
1,685.7
24.2
15.7
73.8
113.7
2,643.4
The accompanying notes are an integral part of these consolidated financial statements.
Oslo, 20 March 2007
HELMUT SOHMEN
ANDREAS SOHMEN-PAO
KNUT BRUNDTLAND
KATHRYN M. BAKER
CLARE M. J. SPOTTISWOODE CBE
Chairman of the Board
Deputy chairman
Board member
Board member
Board member
JAN HÅKON PETTERSEN
Managing Director
BW Gas annual report 2006
51
Group accounts
Group
CONSOLIDATED CASH FLOW STATEMENT
USD million (Year ended 31 December)
Net profit including discontinued operations 1)
Adjustment for:
Gains/loss on disposal of fixed assets
Depreciation, amortisation and impairment charges
Change in inventories, receivables and payables
Effect of demerger
Foreign exchange gain/loss related to capital transactions
Net cash flow from operations 2)
Investments in operating fixed assets
Sales of operating fixed assets (at sales value)
Net cash in demerged/acquired companies
Change in other investments
Net cash from investing activities 3)
New short- and long-term debt
Repayments of debt
Paid in/distributed equity
Purchase of own shares
Net cash flow from financing activities 4)
Net change in cash during period
Cash at beginning of period
Cash at end of period
1)
Note
13
13
Hereof interests paid
Net operating cash flow from discontinued operations
Net investing cash flow from discontinued operations
4)
Net financing cash flow from discontinued operations
2)
3)
The accompanying notes are an integral part of these consolidated financial statements.
52
BW Gas annual report 2006
2006
223.7
2005
448.0
2004
128.6
-15.6
102.0
33.3
0.0
0.0
343.4
-573.4
29.0
9.4
22.4
-512.6
341.3
-238.1
-39.4
0.0
63.8
-105.4
-192.0
99.7
4.1
-6.2
-108.1
245.5
-600.9
944.1
-15.2
3.1
331.1
1,239.0
-1,481.3
-219.5
-3.2
-465.0
111.6
-78.4
96.4
27.0
0.0
88.0
261.6
-413.2
425.5
0.0
-92.8
-80.5
1,408.1
-826.8
-663.5
0.0
-82.2
98.9
354.3
248.9
242.7
354.3
143.8
242.7
-85.7
-41.5
-35.9
-1.0
0.0
0.0
32.1
479.5
0.0
103.1
104.5
0.0
Group accounts
Group
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
USD million
At 1 January 2004
INCOME AND UNREALISED RESERVES:
Net profit
Net gain/loss on available for sale financial assets
TRANSACTIONS WITH SHAREHOLDERS AND MINORITY:
Dividend
Paid to minority interests
At 31 December 2004
At 1 January 2005
INCOME AND UNREALISED RESERVES:
Net profit
Net gain/loss on available for sale financial assets
TRANSACTIONS WITH SHAREHOLDERS AND MINORITY:
Repayment of capital
Demerger
Purchase own shares
Reverse split of A and B share class
Share based compensation
Other
Paid to minority interests
At 31 December 2005
Issued capital,
A shares
13.7
Issued capital,
B shares
5.1
Share
premium
265.6
Retained
earning
1,047.5
Net unrealised
available for
sale reserve 1)
0.0
Net unrealised
hedging
reserve 2)
0.0
Net forreign
currency
conversion
reserve 3)
0.0
118.8
Minority
interest
39.6
9.8
3.1
-640.0
Total
1,371.5
128.6
3.1
-640.0
-19.2
844.0
13.7
5.1
265.6
526.3
3.1
0.0
0.0
-19.2
30.2
13.7
5.1
265.6
526.3
3.1
0.0
0.0
30.2
844.0
7.5
12.5
448.0
12.5
-210.0
-152.8
-3.2
0.0
0.1
-0.2
-9.5
928.9
440.5
-2.0
0.0
5.1
-210.0
-55.6
-95.2
-3.2
-5.1
0.1
-1.6
16.8
0.0
0.0
866.9
15.6
0.0
0.0
1.4
-9.5
29.6
At 1 January 2006
16.8
INCOME AND UNREALISED RESERVES:
Net profit
Net gain/loss on available for sale financial assets
Net gain/loss on interest hedge derivatives, hedge accounting
Equity adjustment FX-rate changes
TRANSACTIONS WITH SHAREHOLDERS AND MINORITY:
Share based compensation
Paid to minority interests
Paid in from minority interests
Purchase of Edda Gas - transaction with minority
Dividend paid
Other
At 31 December 2006
16.8
0.0
0.0
866.9
15.6
0.0
0.0
29.6
928.9
12.7
223.7
-8.1
1)
2)
211.0
-8.1
-5.2
-5.2
2.4
2.4
0.9
0.0
Relates to financial assets classified as available for sale.
Relates to unrealised gains/losses on derivatives qualifying for hedge accounting
0.0
3)
7.7
-33.7
-0.2
1,052.8
-19.9
14.2
31.7
7.5
-5.2
2.4
68.3
0.9
-19.9
14.2
39.4
-33.7
-0.2
1,142.5
Relates to equity adjustments for the conversion to USD of balance sheet items of subsidiaries with
functional currency other than USD. The accompanying notes are an integral part of these consolidated
financial statements.
BW Gas annual report 2006
53
Group accounts
Group
NOTES
NOTE 1 I CORPORATE INFORMATION
NOTE 2 I SIGNIFICANT ACCOUNTING POLICIES
Bergesen Worldwide Gas ASA
(the company or BW Gas) is
incorporated and domiciled in Norway.
The address of the main office is:
Drammensveien 106
P.O. Box 2800 Solli
0204 Oslo, Norway.
The principle accounting policies applied in the
preparation of these consolidated financial statements are set out below. These policies have been
consistently applied to all years presented, unless
otherwise stated.
BW Gas and its subsidiaries is a
leading global provider of gas marine
transportation services. The group is
the largest owner and operator of LPG
(liquefied petroleum gas) carriers, and
one of the largest independent owners
and operators of LNG (liquefied natural
gas) carriers. The operation is organised into two main business segments:
LNG and LPG, where the latter is subdivided into three sub segments
depending on the size of the vessels
(VLGC, LGC, MGC).
BW Gas ASA is listed on the Oslo
Stock Exchange and is a Public
Limited Liability Company.
The board of directors and the managing director authorized the group
financial statement for issue on 20
March 2007. The shareholders have
the power to amend the financial
statement at the annual general
meeting to be held on 3 May 2007.
BASIS OF PREPARATION
The consolidated financial statements of the group
have been prepared in accordance with International
Financial Reporting Standards (IFRS) as adopted by
the EU in accordance with the Norwegian
Accounting Act.
The consolidated financial statements have been
prepared under the historical cost convention, except
for certain financial instruments that have been
measured at fair value.
An asset is presented as current if it is realised, or
is intended for sale, in the normal operating cycle, is
held primarily for the purpose of being traded, is
expected to be realised within twelve months after
the balance sheet date or is cash or cash equivalents.
A liability is classified as current if it is expected to
be settled in the normal operating cycle, is held
primarily for the purpose of being traded, is due to
be settled within twelve months after the balance
sheet date (even if the original term exceeded
twelve months) or when there is no right at the
balance sheet date to defer settlement for at least
twelve months after the balance sheet date.
The cash flow statement is presented using the
indirect method.
54
BW Gas annual report 2006
All amounts in the consolidated financial statements are rounded and presented in million US
Dollars, except when otherwise indicated.
GROUP ACCOUNTING
The consolidated financial statements comprise the
financial statements of Bergesen Worldwide Gas
ASA and its subsidiaries as of 31 December each
year. Interests in joint ventures are accounted for
by proportionate consolidation, while investments
in associates are accounted for under the equity
method of accounting.
Intra-group income and expenses, shareholdings,
intra-group balances and dividends, and gains and
losses on intra-group transactions are eliminated.
Subsidiaries
Subsidiaries are all entities over which the group
has the power to govern the financial and operating policies. In assessing control, potential voting
rights that presently are exercisable or convertible
are taken into account. Control normally exists when
the group has more than 50% voting power
through ownership or agreements.
Subsidiaries are consolidated from the date on
which control is transferred to the group and cease
to be consolidated from the date on which control
is transferred out of the group. Acquisitions are
accounted for using the purchase method of
accounting. The cost of the acquisition is measured
at the aggregate of the fair values, at the date of
exchange, of assets given, liabilities incurred or
assumed, in exchange for control of the acquiree,
plus any costs directly attributable to the acquisition.
Acquisition prices are assigned to the assets, liabilities and contingent liabilities of the subsidiaries,
using their fair value at the date of exchange
transaction. When a business combination involves
more than one exchange transaction, the identifiable net assets are being stated at their full fair
values at the date the company obtains control in
the business combination. Any excess of purchase
consideration over fair value of assets and liabilities
acquired is recorded as goodwill. Goodwill is not
amortised. Minority interests in the net fair value
of assets (excluding goodwill) of consolidated
subsidiaries are identified separately from the parent
company’s equity in them and consist of the minority
interest at the acquisition date and the share of
changes in equity since the date of the acquisition.
For purchases from minority interests, the difference
between any consideration paid and the relevant
share acquired of the carrying value of net assets
of the subsidiary is deducted from equity. Gains or
losses on disposals to minority interests are also
recorded in equity. For disposals to minority interests, differences between any proceeds received
and the relevant share of minority interests are
also recorded in equity.
Joint ventures
Joint ventures are entities over which the group has
contractual arrangements to jointly share the control
with one or more parties.
The group’s interests in joint ventures are accounted
for by proportionate consolidation, which involves
recognising a proportionate share of each entity’s
assets, liabilities, income and expenses in the corresponding line items in the consolidated financial
Group accounts
statements. Elimination of intra-group transactions
is done proportionally.
Associated companies
Investments in companies over which the group
exercise significant influence, but does not control,
are accounted for using the equity method of
accounting. Significant influence normally exists
when the group has 20% to 50% voting power
through ownership or agreements. The group
presents its investments within the balance sheet
line ’Investments in associates’ and its share of the
earnings or losses within the income statement line
’Share of profit from associates’. The excess value,
excluding goodwill, of the purchase price and
impairments, if any, are also included within the
balance sheet line ’Investment in associates’. The
excess value is amortized through the income
statement over the useful life of the related asset
or written down to market value if impaired. When
a group entity transacts with an associate of the
group, profits or losses are eliminated to the extent of
the group’s interest in the relevant associate company.
REVENUES AND EXPENSES
Revenues are measured at the fair value of the
consideration received, and are presented net of
commissions.
Voyage revenues are revenues generated from
typically a single round trip, referred to as a spot
voyage or contract of affreightment voyage. Voyage
expenses include all expenses that are incurred as
a direct and incremental consequence of a particular
voyage, such as bunker fuel expenses, port fees,
cargo loading and unloading expenses, canal tolls
and agency fees. Vessel operating expenses include
crew costs, repairs and maintenance, insurance, lube
oils and communication expenses. Voyage expenses
are recognised pro-rata over the duration of the
voyage, and vessel operating expenses are recognised when incurred.
The group uses a discharge to discharge basis in
determining percentage of completion for all spot
voyages and voyages servicing contracts of affreightment (COAs). Under this method, voyage revenue
is recognised on a percentage of completion basis
over the period from the departure of a vessel from
its original discharge port to departure from the next
discharge port. The group does not begin recognising voyage revenue until a charter has been
agreed to by the customer and the group, even if
the vessel is sailing to the anticipated load port of
its next voyage. Voyage related expenses incurred
for vessels without an agreed charter contract in
the idle time are expensed as incurred.
The group recognises revenue from time charters
and bareboat charters on a straight-line basis over
the duration of the charter as service is provided.
The group does not recognise revenue during
days that the vessel is off-hire.
Demurrage revenue is recognised if it is considered
probable that the group will receive payment.
Demurrage revenue is income received from the
charterer when the charterer fails to redeliver the
vessel within the agreed-upon time.
Losses arising from time or voyage charter are
provided for in full when they become probable.
For the group’s vessels operating in chartering pools,
net pool revenues are allocated to the pool participants according to an agreed upon formula. The
formula used to allocate pool revenues may vary
among different pools, but generally allocate revenues to pool participants on the basis of the number
of days a vessel operates in the pool with weighing
adjustments made to reflect vessels’ differing
capacities and performance capabilities. The same
principles as stated above are applied in determining
the pool’s revenues and expenses. The group
accounts for its share of pool revenues, expenses,
assets and liabilities gross in the consolidated
statements.
FOREIGN CURRENCY TRANSLATION
The presentation currency for the group is the US
dollar. The parent company and the majority of
subsidiaries, joint ventures and associates have USD
as their functional currency.
In the translation to the presentation currency for
subsidiaries with a different functional currency
than the USD, income and expenses are translated
at the rate on the dates of the transactions into
USD and balance sheet items are translated at
the exchange rates at the balance sheet date.
Exchange differences arising from the translation
are recognised directly in equity.
Transactions in foreign currencies are translated
using the rate at the date of the transaction.
Monetary assets and liabilities in foreign currencies
are translated at the rate of exchange prevailing at
the balance sheet date. Non monetary items that
are measured in terms of historical cost in foreign
currency are translated using the exchange rate as
at the date of the initial transaction. Non monetary
items measured at fair value in a foreign currency
are translated using the exchange rate at the date
when the fair value was determined.
Foreign exchange gains and losses are included in
the income statement as Net foreign exchange
gain/loss.
PROPERTY, PLANT AND EQUIPMENT
Useful life and depreciation
Vessels, real estate and equipment are stated at cost
less accumulated depreciation and impairment
charges. Cost includes expenditures that are directly
attributable to the acquisition of the items, including
financing costs. The amount of interest to be capitalised during the asset acquisition period is determined by applying an interest rate to the average
amount of accumulated expenditures during the
period. The interest rate used is the average cost
of borrowing for the group.
Assets held under finance leases are treated the
same as other property, plant and equipment.
Depreciation is calculated on a straight line basis
taking residual values into consideration. The estimated useful life of the assets is as follows:
LNG carriers
LPG carriers
Real estate
Other equipment
30 years*
30 years*
25-35 years
3-10 years
BW Gas annual report 2006
55
Group accounts
NOTE 2 cont.
The useful life of the LNG Carriers has been revised
for 2007. Reference is made to the section about
critical accounting estimates.
For the group’s assets, the only identified major
component with a shorter useful life than other
components of the same asset is the major
inspections/classification of the vessels.
flows (cash-generating units). An impairment charge
recognised in prior years is reversed if the current
estimated value in use is greater than at the time
the impairment loss was recognised.
*)
A proportion of the price paid for new vessels is
capitalised as periodic maintenance and depreciated
over the period to the next scheduled dry docking.
The amount equals the estimated cost of the first
scheduled periodic maintenance.
Costs related to subsequent major inspections are
being capitalised when the dry-docking has been
completed and are presented together with the carrying amount of the vessels. The capitalised periodic
maintenance is depreciated over the estimated
time to the next scheduled inspection. Major
inspections/classification of the vessels are typically
depreciated over a period from three to five years.
The assets’ residual values and useful lives are
reviewed, and adjusted if appropriate, at least at
every balance sheet date. Adjustments, where applicable, are made on a prospective basis. An asset’s
carrying amount is written down immediately to
its recoverable amount if the asset’s carrying amount
is greater than its estimated recoverable amount.
The recoverable amount is the greater of net selling
price or discounted cash flows over the remaining
useful life of the asset. For the purpose of assessing
impairment, assets are grouped at the lowest levels
for which there are separately identifiable cash
56
BW Gas annual report 2006
Gains and losses on disposals are determined by
comparing the proceeds with the carrying amount
and are presented net, in the income statement.
Costs of day to day servicing, repairs and maintenance are expensed as incurred.
Vessels under construction
Instalments on newbuilding contracts are capitalised as vessels under construction as they are paid.
The capitalised value is reclassified from vessels
under construction to vessels upon delivery from
the yard, which is when the asset is considered
available for its intended use and depreciation
commences. The acquisition cost reported is the sum
of instalments paid plus costs incurred during the
construction period. The amount of interest to be
capitalised during the asset acquisition period is
determined by applying an interest rate to the
average amount of accumulated expenditures during
the period, limited to the interest expense incurred
during the reporting period. The interest rate used
is the average cost of borrowing for the group.
INTANGIBLES
Intangible assets acquired are capitalised at cost and
mainly consist of specialised computer software.
The useful lives of all these assets are considered
to be finite and are amortised over seven years. The
assets are tested for impairment and their useful
lives are assessed on an annual basis. Adjustments
in useful lives, where applicable, are made on a
prospective basis.
BUNKER OIL AND OTHER INVENTORIES
Inventories comprise mainly bunker oil on board
vessels and are valued at the lower of cost or market. Cost is determined using the first-in, first-out
(FIFO) method.
TRADE AND OTHER RECEIVABLES
Trade receivables are recognised initially at fair
value and are subsequently measured at amortised
cost using the effective interest method, less provision for impairment. A provision for impairment
of trade receivables is recognised when there is
objective evidence that the group will be unable to
collect all amounts due according to the original
terms of the receivables.
CASH AND CASH EQUIVALENTS
Cash and short term deposits on the balance sheet
comprise cash at bank and in hand and short term
deposits with an original maturity of three months
or less.
For the purpose of the consolidated cash flow statement and balance sheet, cash and cash equivalents
includes restricted cash.
Restricted cash consists of bank deposits which may
only be used to settle employee withholding tax
in accordance with Norwegian legislation. The purpose of the restriction is to secure the payment of
these taxes. The amount is settled every second
month, and withholding tax payable is presented
as a current liability in the balance sheet.
LEASES
Leases are classified as finance leases when the
terms of the lease transfer substantially all the risks
and rewards of ownership to the lessee. All other
leases are classified as operating leases. The evaluation is based on the substance of the transaction.
However, situations that individually would normally
lead the group to classify a lease as a finance lease
is if the lease term is more than 75% of the remaining estimated economic life of the leased asset at
the inception of the lease, or the present value of
the minimum lease payments at the inception
exceeds 90% of the fair value of the leased assets.
The group as lessor
For finance leases, which transfer from the group
(lease out) substantially all the risks and benefits
incidental to ownership of the leased asset, the
asset is de-recognised at the inception of the lease,
a gain (loss) on the de-recognised asset is recognised in the income statement and the net present
value of the lease payments is presented as a
receivable. The net present value is calculated using
the implicit interest rate of the lease as the discount
rate. The financial revenue is recognised as a constant rate of return based on the implicit interest
rate of the lease and is presented as operating
revenue in the income statement.
Rental income from operating leases (lease out) is
recognised on a straight-line basis over the term
of the relevant lease.
The group as lessee
Assets held under finance leases (lease in) are
recognised as assets of the group at the fair value
Group accounts
at the inception of the lease or, if lower, at the
present value of the minimum lease payments.
The corresponding liability to the lessor is included
in the balance sheet as a finance lease obligation.
Assets held on finance leases are depreciated over
the estimated useful life of the asset. If there is no
reasonable certainty that the group will obtain
ownership at the end of the lease term, the asset
is depreciated over the lease term if shorter than
its useful life.
Rentals payable under operating leases (lease in)
are charged to the income statement on a straightline basis over the term of the relevant lease.
Reassessed contracts in 2006:
The group has reassessed the accounting for two
lease contracts, reclassifying the contracts from
operational leases to financial leases. One contract
is lease out, while the other is lease in. Due to the
insignificant amount related to previous years, the
full effect has been charged to the net result in 2006.
Tax leases
The group has entered into tax lease agreements,
which all transfer the ownership of the asset to the
group at the end of the lease term. The tax lease
arrangement is therefore presented as debt
financed purchase of assets, and the assets are
mortgaged as security for the tax lease obligation.
INTEREST BEARING DEBT
Borrowings are recognised initially at fair value,
net of transaction costs incurred. Borrowings are
subsequently measured at amortised cost using
the effective interest-rate method.
PROVISIONS
Provisions are recognised when the group has a
present obligation (legal or constructive) as a result
of a past event, it is probable that a payment will
be required to settle the obligation and the amount
can be reliably estimated.
Past-service costs are recognised immediately in
income, unless the changes to the pension plan are
conditional on the employee remaining in service
for a specified period of time (the vesting period).
In this case, the past-service costs are amortised
on a straight-line basis over the vesting period.
PENSIONS
The group has two defined pension schemes, of
which one is unfunded. A defined benefit plan
defines the amount of pension benefit that an
employee will receive on retirement, usually
dependent on one or more factors such as age,
years of service and compensation.
SHARE-BASED COMPENSATION AND BONUS
The group operates an equity-settled, share-based
compensation plan for the directors and assistant
directors, where bonus earned is partly settled in
cash and partly with restricted shares vesting after
a period of time. The fair value determined at the
grant date is expensed over the vesting period.
The part with cash settlement is recognised as a
liability and the part with settlement in shares is
recognised in equity. The vesting period for the
restricted shares is the total period until the contingencies related to those shares are waived. At
each balance sheet date, the group revises the
estimated size of the bonus and the number of
restricted shares that are expected to vest. The group
recognises the impact of the revision to original
estimates, if any, in the income statement, with a
corresponding adjustment to equity and liabilities
accordingly.
The liability recognised on the balance sheet in
respect of defined pension plans is the present
value of the accrued future pension benefits at the
balance sheet date less the fair value of plan assets,
together with adjustments for unrecognised actuarial gains or losses and past service costs. The
defined benefit obligation is calculated annually
by independent actuaries using the projected unit
credit method. The present value of the defined
benefit obligation is determined by discounting the
estimated future cash outflows. The discount rate
has been based on interest rates on Norwegian State
long term bonds, adjusted for differences in maturity.
Actuarial gains and losses arising from experience
adjustments and changes in actuarial assumptions
in excess of the greater of 10% of the value of plan
assets or 10% of the defined benefit obligation are
recognised in the income statement over the
employees’ expected average remaining service
period.
In addition the group operates a bonus compensation plan for all employees at the head office
which is settled in cash. The group recognises a
liability and an expense for the bonuses, based
on an agreed upon formula.
TAXES
Tonnage taxed entities
The group has elected to bring a significant part of
its shipping activities into the Norwegian shipping
taxation system through wholly owned subsidiaries.
Legal entities that are subject to the tonnage tax
system pay tax based on the net tonnage of their
vessels or of proportionally owned vessels through
partnerships. This tax is classified as an operating
expense in the income statement. In addition these
legal entities pay ordinary income tax on their net
financial income.
Operating profits are taxed at the level of the owner
only if profits are distributed to the owners. IFRS
requires that current and deferred tax assets and
liabilities to be measured at the tax rate applicable
to undistributed profits. If an entity exits the tonnage
tax system (voluntarily or by regulation) an exit
gain will be calculated based on fair value and the
amount of untaxed equity and this will become
taxable over a period of time (currently declining
balance of 20% per year). As the group intends to
remain within the tonnage tax system and does not
intend to make distributions of untaxed income, no
accruals are made for deferred taxes originated from
operating activities in the tonnage taxed entities.
These subsidiaries will only to a very limited extent
be able to transfer funds to the parent company
through dividends or loans.
The rates of tonnage tax are
(Tonnage Tax per day per 1,000 tonnes):
First 1,000 NOK 0
1,000 – 10,000 NOK 18
10,000 – 25,000 NOK 12
25,000 or more NOK 6
A reduction is available for certain certified environmental vessels.
BW Gas annual report 2006
57
Group accounts
NOTE 2 cont.
Deferred tax assets and liabilities are measured on
temporary differences related to financial items.
The carrying amount of deferred income tax assets
related to financial items is reviewed at each balance sheet date and reduced to the extent that it
is not probable that sufficient profit will be available
to allow all or part of the deferred income tax asset
to be utilised.
From 1 July , 2005 there is a requirement that a tonnage tax company must maintain or increase its
share of EU flagged vessels. This was measured as
of 1 July 2005 for existing companies such as the
BW Gas group. The share is to be based on own
vessels under tonnage taxation for the companies
within the group. As of 31 December 2006, the
group has maintained the share of EU flagged
vessels compared to the share as of 1 July 2005.
If more than 60% of the existing fleet is operated
with an EU flag, the share can be reduced to 60%.
Ordinary taxed entities – Deferred income tax
The parent company and some of its subsidiaries
are subject to ordinary taxation. The deferred
income tax is calculated using the liability method on temporary differences at the balance sheet
date arising from differences between the tax
bases of assets and liabilities and their carrying
values.
Deferred tax assets and liabilities are measured at
the tax rates that are expected to apply at the time
when the asset is realised or the liability is settled,
based on the tax rates that have been enacted or
substantively enacted at the balance sheet date.
58
BW Gas annual report 2006
Deferred tax and deferred tax assets are recognised
at their nominal value.
The carrying amount of deferred income tax assets
is reviewed at each balance sheet date and reduced
to the extent that it is no longer probable that sufficient profit will be available to allow all or part of
the deferred income tax asset to be utilised.
Deferred income tax is not provided for temporary
differences associated with investments in subsidiaries, associates or joint ventures, where deferred
tax assets are only recognised to the extent that it
is probable that the temporary difference will reverse
in the foreseeable future.
FINANCIAL INSTRUMENTS
The group classifies its financial assets in the following categories: at fair value through profit or loss,
loans and receivables and available for sale. The
classification depends on the purpose for which the
financial assets were acquired. When financial assets
are recognised initially, they are measured at fair
value, plus, in the case of investments not at fair
value through profit and loss, directly attributable
transaction costs. The group determines the classification of its financial assets at initial recognition.
All regular way purchases and sales of financial
assets are recognised on the trade date i.e. the date
that the group commits to purchase the asset.
The group uses derivative financial instruments such
as bunkers contracts, foreign currency contracts and
interest rate swaps to manage its risks associated
with interest rate, bunkers and foreign currency
fluctuations. Such derivative instruments are recognised at fair value in the balance sheet.
Derivatives are carried as assets when the fair value
is positive and as liabilities when the fair value is
negative.
For the derivative financial instruments that do not
qualify for hedge accounting, any gains or losses
arising from changes in fair value are taken directly
to the income statement as a financial item.
The group has some derivative instruments that are
designated as hedging instruments under IAS 39,
hedging the interests and foreign currency risk for a
portfolio of interest bearing debt. For these instruments, the group has documented at the inception of the transaction, the hedging relationship
between the hedging instruments and the hedged
items, as well as its risk management objectives
and strategy for undertaking the hedging transactions. The group also documents its assessment,
both at the hedge inception and on an ongoing
basis, of whether the derivatives designated as
hedging instruments are highly effective in offsetting changes in cash flows of the hedged items.
The effective portion of change in the fair value of
derivatives qualifying for hedge accounting is recognised directly in equity. The gain or loss relating to
the ineffective portion is recognised immediately in
the income statement as a financial item. Amounts
accumulated in equity are transferred to the income
statement in periods when the hedged item affects
profit or loss. The realised gain or loss relating to
the effective portion of interest rate swaps is recognised within interest expenses and within foreign
exchange gain/loss for foreign currency contracts.
When a hedging instrument expires or is disposed,
or when a hedge no longer meets the criteria for
hedge accounting, any cumulative gain or loss
existing in equity at that time remains in equity and
is recognised in the income statement when the
hedged transaction is ultimately recognised. When
a forecast transaction is no longer expected to occur,
the cumulative gain or loss that was reported in
equity is immediately transferred to the income
statement.
Financial assets at fair value through profit or loss
Financial assets at fair value through profit or loss
are financial assets held for trading. Derivatives are
classified as held for trading unless they are designated as hedges. A financial asset is classified in
this category if acquired principally for the purpose
of selling in the short term or derivative used for
hedging purposes without qualifying for hedge
accounting. Changes in fair value are recognised
in the profit or loss as a financial item.
Loans and receivables
Loans and receivables are non derivative financial
assets with fixed or determinable payments that are
not quoted in an active market. They are included
in current assets, except for maturities greater than
12 months after the balance sheet date. These are
classified as non-current assets. Loans and receivables are classified as trade and other receivables
in the balance sheet. Such assets are carried at
amortised cost using the effective interest method.
Gains and losses are recognised in income when the
loans and receivables are derecognised or impaired,
as well as through the amortisation process.
Group accounts
Available for sale financial assets
The group’s holdings in marketable securities are
classified as available for sale and, therefore, are
carried on the balance sheet at fair value with changes in carrying value being recorded directly in equity,
through the statement of changes in equity, except
for impairment losses and foreign exchange gains
and losses, until the financial assets are de-recognised, at which time the cumulative gain or loss
previously recognised in equity is recognised in
profit or loss as a financial item. If an available for
sale financial asset is impaired, an amount comprising the difference between its cost and its current
fair value, less any previous impairment loss recognised, is transferred from equity to income statement
as a financial item. Reversals of impairments are
recognised directly in equity.
De-recognition of financial instruments
The de-recognition of a financial instrument takes
place when the group no longer controls the contractual rights that comprise the financial instrument,
which is normally the case when the instrument is
sold, or all the cash flows attributable to the instrument are passed through to an independent third
party.
Assessing the fair value of financial instruments
The fair values of quoted investments are based on
current bid prices. If the market for a financial asset
is not active (and for unlisted securities), the group
establishes fair value by using valuation techniques.
Other techniques, such as estimated discounted cash
flows, are used to determine fair value for the
remaining financial instruments. The fair value of
interest rate swaps is calculated as the present value
of the estimated future cash flows. The fair value of
forward foreign exchange contracts is determined
using quoted forward exchange rates at the balance
sheet date.
Investments in equity instruments that do not have
a quoted market price in an active market and
whose fair value cannot be reliably measured are
measured at cost.
DIVIDEND DISTRIBUTION
Dividend distribution to the group’s shareholders
is recognised as a liability in the group’s financial
statements in the period in which the dividends
are approved by the group’s shareholders.
DISCONTINUED OPERATIONS
Operations classified as discontinued are presented
on a separate line in the income statement, and
previous periods have been restated. Non-current
assets classified as discontinued have been presented at a separate line in the balance sheet and are
valued at the lower of book value and net realisable
value.
RECENTLY ISSUED ACCOUNTING STANDARDS
AND PRONOUNCEMENTS
Original and amended published standards
and interpretations effective in 2006:
• IAS 19 (Amendment), Employee Benefits, is
mandatory for the group’s accounting periods
beginning on or after 1 January 2006. It introduces the option of an alternative recognition
approach for actuarial gains and losses. It may
impose additional recognition requirements for
multi-employer plans where insufficient infor-
mation is available to apply defined benefit
accounting. It also adds new disclosure requirements. As the group does not intend to change
the accounting policy adopted for recognition of
actuarial gains and losses and does not participate
in any multi-employer plans, adoption of this
amendment only impacts the format and extent
of disclosures presented in the accounts.
• IFRS 6, Exploration for and Evaluation of Mineral
Resources;
• IFRIC 5, Rights to Interests arising from
Decommissioning, Restoration and Environmental
Rehabilitation Funds.
• IFRIC 6, Liabilities arising from Participating in a
Specific Market – Waste Electrical and Electronic
Equipment;
• IFRIC 4, Determining whether an Arrangement
contains a Lease. The interpretation implements
guidelines for the classification of lease contracts
as financial or operational. The interpretation had
no impact on the accounting for the existing lease
contracts for the group.
Interpretations to existing standards that are not
yet effective and have not been early adopted by
the group:
The following interpretations to existing standards
have been published that are mandatory for the
group’s accounting periods beginning on or after
1 May 2006 or later periods but that the group
has not early adopted:
• IAS 1 (Amendment), Presentation of Financial
Statements – Capital Disclosures (effective for
annual periods beginning on or after 1 January
2007). The amendment introduces new disclosures relating to the management of capital. The
group will apply the amendment in IAS 1 from
1 January 2007, but it is not expected to have
any impact on the group’s accounts except for
additional disclosures.
• IFRS 7, Financial Instruments: Disclosures (effective
for annual periods beginning on or after 1 January
2007). IFRS 7 introduces new disclosures relating
to financial instruments. The group will apply IFRS
7 from 1 January 2007, but it is not expected to
have any impact on the group’s accounts except
for additional disclosures.
• IFRS 8 Segment reporting. (effective for annual
periods beginning on or after 1 January 2009).
The standard introduces new requirements for
Standards early adopted by the group:
None
Standards, amendments and interpretations
effective in 2006 but not relevant:
The following standards, amendments and interpretations are mandatory for accounting periods
beginning on or after 1 January 2006 but are not
relevant to the group’s operations:
• IAS 21 (Amendment), Net Investment in a
Foreign Operation;
• IAS 39 (Amendment), Cash Flow Hedge
Accounting of Forecast Intragroup Transactions;
• IAS 39 (Amendment), The Fair Value Option;
• IAS 39 and IFRS 4 (Amendment), Financial
Guarantee Contracts;
• IFRS 1 (Amendment), First-time Adoption of
International Financial Reporting Standards
• IFRS 6 (Amendment), Exploration for and
Evaluation of Mineral Resources;
BW Gas annual report 2006
59
Group accounts
NOTE 2 cont.
segment reporting compared with the existing
standard IAS 14 Segment reporting. The group
will apply IFRS 8 from 1 January 2009, but it is
not expected to have any impact on the group’s
accounts except for additional disclosures.
• IFRIC 8, Scope of IFRS 2 (effective for annual
periods beginning on or after 1 May 2006).
IFRIC 8 requires consideration of transactions
involving the issuance of equity instruments –
where the identifiable consideration received is
less than the fair value of the equity instruments
issued – to establish whether or not they fall
within the scope of IFRS 2. The group will apply
IFRIC 8 from 1 January 2007, but it is not expected
to have any impact on the group’s accounts.
• IFRIC 9, Reassessment of Embedded Derivatives
(effective for annual periods beginning on or after
1 June 2006). IFRIC 9 requires an entity to assess
whether an embedded derivative is required to be
separated from the host contract and accounted
for as a derivative when the entity first becomes
a party to the contract. Subsequent reassessment
is prohibited unless there is a change in the terms
of the contract that significantly modifies the cash
flows that otherwise would be required under the
contract, in which case reassessment is required.
The group will apply IFRIC 9 from 1 January 2007,
but it is not expected to have any impact on the
group’s accounts.
• IFRIC 10, Interim Financial Reporting and
Impairment (effective for annual periods beginning
on or after 1 November 2006). IFRIC 10 prohibits
the impairment losses recognised in an interim
60
BW Gas annual report 2006
period on goodwill, investments in equity
instruments and investments in financial assets
carried at cost to be reversed at a subsequent
balance sheet date. The group will apply IFRIC
10 from 1 January 2007, but it is not expected
to have any impact on the group’s accounts.
of the need to make estimates about the effect of
matters that are inherently uncertain. Management
evaluates such estimates on an on-going basis,
using historical results and experience, consultation
with experts, trends and other methods considered
reasonable in the particular circumstances.
CHANGES IN ACCOUNTING POLICIES
There are no changes in the accounting policies
for the periods presented.
The following is a summary of estimates and
judgements which have a material effect on the
accounts.
CRITICAL ACCOUNTING ESTIMATES AND KEY
SOURCES OF ESTIMATION UNCERTAINTY
The preparation of financial statements in accordance with generally accepted accounting principles
requires management to make estimates and
assumptions that affect the reported amounts of
assets and liabilities, as well as the disclosure of
contingent assets and liabilities at the date of the
financial statements and the reported amounts of
revenue and expenses during the reporting period.
Actual results could differ from these estimates.
Vessels
- Useful life
Depreciation is dependent on the estimated useful
economic life of the vessels. The estimated useful
life is based on previous experience and knowledge
of the vessels owned by the group, and is annually
reassessed. Any change in the estimated useful life
will have an impact on the depreciation for future
periods. From January 2007, the estimated useful
life for the LNG-vessels will be changed from 30 to
35 years. The change is based on an evaluation of
market and technical conditions. Based on the
existing fleet of LNG vessels, this change will result
in an annual reduction in depreciation of approximately USD 3.6 million with effect from 2007.
Certain amounts included in or affecting the financial
statements and related disclosures must be estimated, requiring the group to make assumptions
with respect to values or conditions which cannot
be known with certainty at the time the financial
statements are prepared. A ‘critical accounting
estimate’ is one which is both important to the
portrayal of the group’s financial condition and
results and requires management’s most difficult,
subjective or complex judgments, often as a result
- Residual value at the end of useful life
Depreciation depends on the estimated residual
value at the balance date. Assumptions about residual value are based on management’s knowledge
of scrap values for the vessels. Scrap values are
dependent on steel prices and the voyage related
expenses for the last ballast leg, and is annually
reassessed.
- Impairment
The group has assessed at the balance sheet date
whether there is any indication that a vessel’s value
may be impaired. If any such indication exists, the
group will estimate the recoverable amount of the
asset, and write down the vessel to the recoverable
amount. The assessment of the recoverable amount
is based on broker values received from third party
or contracted cash flows discounted by an estimated
discount rate if the vessel is chartered out on a
long term contract.
Lease contracts
At the date of inception of a lease, a lease contract
is classified as either an operating lease or a finance
lease. The classification is dependent on the following key assumptions:
• The lease term is defined as the ‘non-cancellable
period’ for which the lessee has contracted to
lease the asset together with any further terms
for which the lessee has an option to continue to
lease the asset, when, at the inception of the
lease, it is reasonably certain that the lessee will
exercise the option.
• The lessee’s purchase option is also taken into
consideration in the classification of the lease
contracts. If it is deemed to be ‘reasonably certain’
that the option will be exercised, the lease will
Group accounts
be classified as a financial lease contract. If, at the
inception of the lease, the lessee has been granted
an option to purchase the asset at a price that is
expected to be sufficiently lower than fair value of
the asset at the date the option becomes exercisable, the exercise of the option is deemed to
be ‘reasonably certain’.
• When calculating the net present value of the
minimum lease payments for the purpose of
testing the ratio of net present values of the
minimum lease payments to the fair value of the
leased asset, the group applies the implicit interest
rate in the lease contract. Other interest rates could
result in differing conclusions with respect to the
classification of the leases.
• The evaluation of the term reasonably certain
involves estimation and judgement. The estimated
useful life of the vessels and the residual value
of the assets, described above, are also relevant
in relation to evaluating the lease contracts.
Revenue recognition
All voyage revenues and voyage expenses are
recognised based on the percentage of completion
method. The group uses a discharge to discharge
basis in determining percentage of completion for
all spot voyages and voyages servicing contracts of
affreightment (COAs). Under this method, voyage
revenues and expenses are recognised evenly over
the period from the departure of a vessel from its
original discharge port to departure from the next
discharge port. For all the split voyages at balance
sheet date, an estimate of the expected result of
the voyage is prepared, including the percentage of
completion. Recognition of revenue and expenses
are based on these estimates and are recognised
according to the estimated percentage of completion
on the balance sheet date. These estimates are
based on the most recent information available.
The final result of the voyage may differ from the
estimated result.
Retirement benefit obligations
Accounting for defined benefit plans is complex
because it requires both actuarial and economic
assumptions to be estimated. Moreover, the obligations are measured on a discounted basis because
they may be settled many years after the employees render the related service. The group has applied
the guidelines published in the discussion paper
issued by The Norwegian Accounting Standard
Board, November 2006.
Revenues arising from demurrage are recognised
with the average expected receipt of the invoiced
amount until the payment has been received.
The calculation of pension obligations is mainly
affected by assumptions about the discount rate.
Fair value of derivatives and financial assets
available for sale
All derivatives, including financial assets available
for sale, are included in the accounts at their estimated fair values. The fair values of derivatives are
typically based on expectations about the future
(e.g. interest rate curves and forward foreign
exchange rate curves) and are calculated with
complex valuation models. The estimates are based
on the most recent information available at the
balance sheet date, and will be impacted by
changes in the expected interest rates and foreign
exchange rates and other inputs utilised in the
calculations. Hedge accounting is applied for some
of the derivatives. When applying hedge accounting,
this requires judgment in assessing the expected
effectiveness of the hedge relationship between
the hedge instrument and the hedged objective.
The discount rate is based on a 10-year government
bond rate in Norway, adjusted for the estimated
duration of the pension obligations. A 1% increase/
decrease in the discount rate could imply a
decrease/increase in present value of the obligations of approximately 20-25%. This will not result
in an immediate impact on the pension cost recognised in profit and loss due to the fact that actuarial
gains/losses are recognised over the expected
average remaining service period of the employees,
and are recognised only when such changes and
deviations accumulated exceed 10% of the greater
of the pension benefit obligations and the pension
plan assets at the beginning of the year.
party valuations to estimate the individual value of
each identifiable asset, and allocate the purchase
price accordingly.
Group accounting
All significant investments in shares and partnerships needs to be classified as either a subsidiary,
joint venture or associated company to prepare
proper consolidated accounts. The classification
depends on the control the group has over the
company in question. The degree of control requires
judgement and evaluation of several parameters.
Legal matters, claims and regulatory discussions
The group is subject to legal matters, claims and
regulatory discussions, the outcomes of which are
subject to significant uncertainty. Management
evaluates, amongst other factors, the degree of
probability of an unfavourable outcome and the
ability to make a reasonable estimate of the amount
of loss. Unanticipated events or changes in these
factors may require an increase or decrease of
accruals for any matter or accrued for a matter that
has not been previously accrued because it was not
considered probable or a reasonable estimate
could not be made.
Acquisition of assets
When assets are acquired as a group of assets, their
individual purchase prices need to be established.
The group apply valuation techniques and use third
BW Gas annual report 2006
61
Group accounts
NOTE 3 I SEGMENT INFORMATION
The group had in the period four reportable business
segments: LPG-VLGC, LPG-LGC, LPG-MGC and LNG.
The business segments are organized and managed
according to the nature of services provided (type
of vessel and goods transported). Further, the group
presents the columns ‘unallocated’ and ‘eliminations’, which includes business segments below
reporting thresholds, overheads and eliminations
not directly attributable to the reportable business
segments.
The LNG segment provides transportation of
liquefied natural gas, with vessel size ranging
from 138,000 to 150,000 cbm.
The LPG segment provides transportation of liquefied petroleum gas, clean petroleum products
(CPP) and ammonia. The segment comprises three
main categories of vessels: VLGCs (Very Large Gas
Carriers with capacity above 70,000 cbm), LGCs
(Large Gas Carriers with capacities ranging between
62
BW Gas annual report 2006
50,000 and 70,000 cbm) and MGCs (Medium size
Gas Carriers with capacities less than 50,000 cbm).
The ‘Unallocated’ revenues mainly consist of TC
revenues from three tanker vessels, management
and manning fees for management of companies
and vessels (intrasegment and external parties) and
rent from subletting of office premises. Most of
the restructuring was completed in 2005. However,
the group still operates two tankers presented as
discontinued operations in 2005 and 2004 as a
part of the tanker business segment. These two
vessels are chartered in on BB-contracts with equal
length TC-contracts with the charterer. The intention and plan at the time of the restructuring was
to discontinue all tanker business including these
contracts within the 12 month limit prescribed in
IFRS 5, and therefore the post-tax profit from the
tanker business has been treated as discontinued
operations and presented as a single amount in
the consolidated income statement. The group still
aims to discontinue the remaining contracts, but
as the combined BB/TC-contracts have not been
disposed of according to the original committed disposal plan, these contracts ceased to be presented
as discontinued operations in third quarter 2006.
Adjustments have been made to present these two
vessels as continued operations in 2006 for the full
year, but no adjustments have been made on previous periods (2005 and 2004) due to the insignificant
size of these contracts. In addition the group was
committed to enter into one 33 month contract with
similar features (BB in and TC out at equal length).
This contract started in October 2006, and is also
reported under ‘unallocated’. The effect on operating profit from these contracts in 2006 was USD
1.1 million, while the effect in 2005 and 2004 was
USD -0.1 million and USD 0.5 million respectively.
The presentation of segment information is consistent with the internal reporting of segments to the
management of the group. The identification of the
reportable segments are based on the different
characteristics of each type/size of vessel where
each class have different economic characteristics.
Intra-segment transactions are mostly related to
services from ‘unallocated’ to the other segments.
The revenues are presented as internal revenues,
whereas the expenses are included in the relevant
line items. In the column for eliminations, the size
of these intra segment revenues are presented.
As the vessels neither trades on regular routes nor
in limited geographic areas, geographic segment
revenues are not presented.
The net operating profit in the elimination column
in 2006 consists mainly of the correction of operating profits for previous year due to changes in
accounting for two lease contracts. Reference is
made to note 18 for further information.
Group accounts
2006 (In USD million)
Operating revenue
Finance lease interest income
Intra segment revenue
Total operating revenue
Voyage expenses
Charter hire expenses
Salaries and other operating expenses
Depreciation and amortisation
Net gain/loss on sale of tangible fixed assets
Operating profit
LNG
142.4
9.6
0.0
152.0
-2.8
0.0
-29.9
-32.4
0.0
86.9
VLGC
312.2
0.0
0.0
312.2
-68.8
-73.0
-61.2
-24.2
-0.1
84.9
LGC
109.5
0.0
0.0
109.5
-15.5
0.0
-30.4
-19.5
11.6
55.7
MGC
102.0
0.0
0.0
102.0
-12.9
-6.2
-29.1
-21.6
0.0
32.2
Unallocated
55.9
0.0
81.3
137.2
-0.8
-21.1
-119.8
-4.6
0.1
-9.0
Additional information
Income from associates
Capital expenditures
Proceeds from sale of tangible fixed assets
Material non-cash expenses other than depreciations
-46.7
0.0
n.a
-152.8
0.0
n.a
-168.5
28.9
n.a
-203.3
0.0
n.a
2.1
-2.1
0.1
n.a
Segment assets and liabilities
Vessels
Vessels under construction
Other tangible/intangible fixed assets
Investment in associates
Non current receivables
Inventories and current receivables
Non current liabilities
Current liabilities
894.9
47.6
0.0
0.0
88.5
0.8
0.5
13.3
393.8
116.7
0.0
0.0
11.2
39.6
25.5
34.3
396.0
0.0
0.0
0.0
0.0
12.0
194.0
42.3
397.6
0.0
0.0
0.0
33.6
8.1
112.7
9.0
1.1
0.0
47.6
3.5
92.3
29.1
1,258.8
37.9
Eliminations
-1.7
0.0
-81.3
-83.0
5.4
81.3
0.3
4.0
8.0
Total
720.3
9.6
0.0
729.9
-100.8
-94.9
-189.1
-102.0
15.6
258.7
BW Gas Group
720.3
9.6
0.0
729.9
-100.8
-94.9
-189.1
-102.0
15.6
258.7
0.0
n.a
2.1
-573.4
29.0
n.a
2.1
-573.4
29.0
n.a
2,083.4
164.3
47.6
3.5
225.6
89.6
1,591.5
136.8
2,083.4
164.3
47.6
3.5
225.6
89.6
1,591.5
136.8
BW Gas annual report 2006
63
Group accounts
NOTE 3 cont.
2005 (In USD million)
Operating revenue
Intra segment revenue
Voyage expenses
Charter hire expenses
Salaries and other operating expenses
Depreciation and amortisation
Net gain/loss on sale of tangible fixed assets
Operating profit
LNG
92.1
0.0
-0.2
0.0
-20.4
-20.4
0.0
51.1
VLGC
244.8
0.0
-60.7
-45.6
-59.7
-22.1
24.5
81.2
LGC
105.5
0.0
-24.9
0.0
-27.4
-17.3
0.0
35.9
MGC
58.0
0.0
-20.4
-5.3
-12.5
-7.7
9.7
21.8
Unallocated
16.9
86.9
0.0
0.0
-104.6
-3.4
0.2
-4.0
Additional information
Income from associates
Capital expenditures
Proceeds from sale of tangible fixed assets
Material non-cash expenses other than depreciations
-193.5
0.0
n.a
-74.2
87.9
n.a
-1.8
0.0
n.a
1.1
-120.9
169.0
n.a
1.7
-3.1
0.3
n.a
Segment assets and liabilities
Vessels
Vessels under construction
Other tangible/intangible fixed assets
Investment in associates
Non current receivables
Inventories and current receivables
Non current liabilities
Current liabilities
824.6
185.3
0.0
0.0
0.9
8.6
0.0
7.4
280.2
71.9
0.0
0.0
9.6
41.7
0.0
71.5
264.4
0.0
0.0
0.0
0.9
16.6
58.5
15.5
73.9
5.0
0.0
16.4
0.0
6.5
1.1
4.2
0.0
0.0
47.4
4.5
104.0
46.9
1,260.6
42.8
2004 (In USD million)
Operating revenue
Intra segment revenue
Voyage expenses
Charter hire expenses
Salaries and other operating expenses
Depreciation and amortisation
Net gain/loss on sale of tangible fixed assets
Operating profit
Vessels
LNG
55.8
0.0
0.0
0.0
-16.9
-12.0
3.9
30.8
494.9
VLGC
220.2
0.0
-53.3
-23.6
-72.0
-26.8
0.0
44.5
390.8
LGC
84.7
0.0
-23.4
0.0
-30.0
-17.9
3.4
16.8
279.8
MGC
55.9
0.0
-16.5
-0.6
-17.0
-11.4
5.7
16.1
102.6
Unallocated
16.0
131.8
0.0
0.0
-149.1
-5.2
4.6
-1.9
0.0
*)
64
Offshore, dry bulk and tanker vessels
BW Gas annual report 2006
Eliminations
0.0
Total
517.3
0.0
-106.2
-50.9
-137.7
-70.9
34.4
186.0
BW Gas Group
517.3
0.0
-106.2
-50.9
-137.7
-70.9
34.4
186.0
0.0
n.a
2.8
-393.5
257.2
n.a
2.8
-393.5
257.2
n.a
1,443.1
262.2
47.4
20.9
115.4
120.3
1,320.2
141.4
1,443.1
262.2
47.4
20.9
115.4
120.3
1,320.2
141.4
Total
432.6
0.0
-93.2
-24.2
-153.2
-73.3
17.6
106.3
1,268.1
BW Gas Group
432.6
0.0
-93.2
-24.2
-153.2
-73.3
17.6
106.3
1,586.9*
-86.9
86.9
Eliminations
-131.8
131.8
0.0
Group accounts
NOTE 4 I MAJOR TRANSACTIONS AND INVESTMENTS IN 2006
DISPOSAL OF VESSELS
Helice
Type
LGC
Size
57,206 cbm
Delivery
18.12.2006
Ownership
share
50%
Total recognised gain on disposal of vessels in 2006 was USD 15.5 million. Hereof, USD 4 million was
related to the reclassification of the vessel Berge Arzew to financial lease, while USD 11.5 million was
related to the disposal of Helice.
NEWBUILDINGS AT BALANCE SHEET DATE
Type
Hull no 2258 Daewoo
LNG Carrier
Hull no 2259 Daewoo
LNG Carrier
Hull no 1848 Hyundai
VLGC
Hull no 1849 Hyundai
VLGC
Hull no 2317 Daewoo
VLGC
Hull no 2318 Daewoo
VLGC
Hull no 2319 Daewoo
VLGC
Hull no 2320 Daewoo
VLGC
162,400
162,400
82,000
82,000
83,800
83,800
83,800
83,800
Size
cbm
cbm
cbm
cbm
cbm
cbm
cbm
cbm
Delivery
May 2009
May 2009
2008
2008
2008
2008
2009
2009
Ownership
share
100%
100%
100%
100%
50%
50%
50%
50%
DELIVERY OF PURCHASED SECOND HAND VESSELS
Type
Hedda
MGC
Helga
MGC
Berge Munin
MGC
Berge Hugin
MGC
BW Havlys
MGC
BW Hermes
MGC
BW Helen
MGC
BW Havlur
MGC
BW Havsol
MGC
BW Hesiod
LGC
BW Herdis
LGC
34,754
34,754
27,980
35,229
17,640
24,981
6,060
18,152
18,152
60,239
60,217
Size
cbm
cbm
cbm
cbm
cbm
cbm
cbm
cbm
cbm
cbm
cbm
Delivered
1)
1)
1)
1)
01.07.06
01.07.06
01.07.06
01.07.06
01.07.06
11.09.06
12.09.06
Ownership
share
53%
53%
53%
53%
100%
100%
100%
100%
100%
51% 2)
51% 2)
1)
The vessels are owned by Edda Gas KS, previously owned by 49% and presented as associated company.
From 01.01.2006 this company has been fully consolidated as the ownership share was increased to 53%.
2)
The vessels were 100% owned at delivery from Yara, but simultaneously sold to a new limited
partnership (Hegas KS) in which BW Gas has 51% interest
Total investment for the group for vessels under construction in 2006 was USD 103.1 million.
DELIVERY OF NEWBUILDINGS
LNG Benue
Berge Trader
BW Sombeke
Type
LNG Carrier
VLGC
MGC
Size
145,952 cbm
78,631 cbm
38,436 cbm
Delivered
29.03.06
29.03/05.07.2006
31.10.2006
Ownership
share
100%
100%
50%
Berge Trader was chartered in on TC with purchase option from March 2006. The option was declared in
June, and the ownership of the vessel was transferred in July. The vessel has been treated as financial
lease in the accounts until delivery in third quarter.
In January 2006 the group purchased a 4% share of
Edda Gas KS for USD 2.7 million paid in cash, bringing
the group above 50% ownership share in the
company and reclassifying the company from investment in associates to subsidiary. The company has
been fully consolidated from 1 January 2006. The
purchase has been treated as purchase of assets in
the accounts and increased the carrying value of
vessels by USD 169.8 million.
In 2006 the group acquired the two vessels BW
Herdis and BW Hesiod and the company Yaraship
AS from Yara for USD 347.9 million paid in cash.
The company owns the vessels BW Havlys, BW
Hermes, BW Helen, BW Havlur and BW Havsol and
has three long term TC contracts on chartered in
vessels. The purchase from Yara has been treated as
purchase of assets in the accounts and increased
the carrying value of vessels by USD 315 million,
and the purchased timecharter contracts increased
the long term receivables with USD 32.9 million.
The company Yaraship AS has been fully consolidated from 1 July 2006, and the two vessels BW
Herdis and BW Hesiod have been included in the
financial statement according to delivery date in
the table above.
BW Gas annual report 2006
65
Group accounts
NOTE 5 I SPECIFICATION REVENUES, EXPENSES AND BALANCE SHEET ITEMS
In USD million
Revenue
Charter hire income
Freight income
Rental income
Management services
Total from continuing operations
Discontinued operation
Voyage expenses
Bunker expenses
Port fees
Other voyage expenses
Total from continuing operations
Discontinued operation
Salaries. social security and pensions
Wages, crew
Wages, administrative personnel
Total from continuing operations
Discontinued operation
Note
23
BW Gas annual report 2006
2005
224.7
275.8
0.2
16.6
517.3
141.8
2004
211.3
214.4
0.2
6.7
432.6
219.4
11
23
2006
-73.2
-18.2
-9.5
-100.8
0.0
2005
-69.8
-35.7
-0.7
-106.2
-27.5
2004
-54.2
-36.0
-3.0
-93.2
-48.2
11
23
2006
-58.8
-28.8
-87.6
0.0
2005
-46.5
-32.3
-78.8
-5.6
2004
-55.2
-27.4
-82.6
-26.1
Other operating expenses
Insurance, administration and other manning expenses
-18.3
Maintenance, spare parts and repairments
Total
Discontinued operation
23
66
2006
420.7
284.8
1.7
22.7
729.9
0.0
2006
2005
-26.8
2004
-16.1
-74.8
-101.5
0.0
-42.8
-58.9
-42.5
-52.3
-70.6
-47.1
Other financial items
Dividends
Gain/loss sale of securities
Other financial income
Impairment of share/reversals
Other financial expenses
Total from continuing operations
Discontinued operation
23
2006
0.0
16.2
5.9
0.0
-2.0
20.1
0.0
6
23
2006
4.3
38.0
164.3
35.6
2,047.9
2,290.1
0.0
31 December
2005
4.6
37.0
262.1
24.9
1,418.2
1,746.8
1.8
2004
4.1
38.9
511.5
44.7
1,542.2
2,141.4
n.a.
Other non-interest-bearing liabilities and provisions
Trade and other payables
Accrued interest
Provisions
Total from continuing operations
2006
80.7
14.7
0.0
95.4
31 December
2005
61.5
12.0
1.4
74.9
2004
65.4
5.2
3.2
73.8
Tangible fixed assets
Vehicles, fixtures and fittings
Land, buildings and other property
Vessels under construction
Periodic maintenance
Vessels
Total from continuing operations
Discontinued operation
Note
2005
0.8
6.1
-2.5
-0.9
-4.3
-0.8
3.6
2004
0.1
1.9
0.1
-2.0
-8.5
-8.4
3.3
Group accounts
NOTE 6 I PROPERTY, PLANT AND EQUIPMENT
In USD million
Vessels
Cost at 1 January
Additions
Transferred from newbuildings
Disposals 1)
Cost at 31 December
2006
1,999.3
610.6
200.9
-78.2
2,732.6
2005
2,562.1
200.0
490.2
-1,253.0
1,999.3
2004
3,008.4
32.3
297.4
-776.0
2,562.1
554.5
80.0
17.7
0.0
0.0
0.0
-3.0
649.2
975.2
65.4
20.2
-19.3
9.2
-9.2
-515.5
554.5
1,310.5
74.0
23.7
-28.3
-5.1
5.1
-427.9
975.2
Net carrying amount at 31 December
Hereof reclassified to discontinued operation
2,083.4
0.0
1,444.8
-1.8
1,586.9
n.a.
Gains recognised in the period
Hereof reclassified to discontinued operation
15.5
n.a.
179.9
-145.7
77.2
-59.8
Accumulated depreciation at 1 January
Depreciation charges vessels, long-lived components
Depreciation charges vessels, short-lived components
Hereof reclassified to discontinued operation
Impairment charges/reversals 2)
Hereof reclassified to discontinued operation
Disposals
Accumulated depreciation and impairment at 31 December
1)
2)
Vessels under construction
Cost at 1 January
Instalments/capitalised cost
Delivered/disposed
Net carrying amount at 31 December
2006
262.1
103.1
-200.9
164.3
2005
511.5
400.7
-650.1
262.1
2004
396.4
412.5
-297.4
511.5
The group has capitalised USD 9.6 million of its interest cost related to newbuildings in 2006, USD
17.9 million in 2005 and USD 13.7 million in 2004. The average interest rate used to determine the
capitalisation amount is 5.7% in 2006, 4.2% in 2005 and 4.3% in 2004. Newbuildings are the property of the Yard until delivery. Paid instalments are secured by guarantees.
Real estate, vehicles, equipment etc
Cost at 1 January
Additions
Disposals
Exchange adjustment
Cost at 31 December
2006
67.1
0.9
-0.6
2.4
69.8
2005
71.4
2.2
-6.5
0.0
67.1
2004
70.8
0.6
0.0
0.0
71.4
Accumulated depreciation at 1 January
Depreciation charge
Disposals
Accumulated depreciation at 31 December
25.5
2.3
-0.3
27.5
28.5
2.8
-5.8
25.5
26.1
2.4
0.0
28.5
Net carrying amount at 31 December
42.3
41.6
42.9
0.1
0.3
0.2
Include net disposal of USD - 51.4 million in 2006 related to reclassification of two vessels as leases.
See Note 18 for further information.
Gains recognised in the period
In 2005 the group recorded impairment charges on one vessel in the offshore segment.
Recoverable amount for the vessel was determined as its broker values less cost to sell.
Reference is made to note 17, 20 and 24 for information on pledges and securities.
The reversal of impairment recorded in 2004 was a consequence of the improved market situation in
the tanker segment.
BW Gas annual report 2006
67
Group accounts
NOTE 6 cont.
NOTE 7 I INTANGIBLE ASSETS
Depreciation is calculated on a straight line basis taking residual values into consideration.
The estimated useful life of the assets is as follows:
LNG carriers
30 years
LPG carriers
30 years
Real estate
25-35 years
Other equipment
3-10 years
In USD million
The category of vessels includes vessels leased by the group to third parties under operating leases
with the following carrying amounts:
Cost
Accumulated depreciation at 31 December
Net carrying amount at 31 December
Depreciation charge for the year
2006
1,408.3
144.8
1,263.5
46.8
2005
1,296.4
195.6
1,100.8
38.6
Intangibles
Cost at 1 January
Additions
Disposals
Cost at 31 December
2004
775.2
85.6
689.6
26.8
2006
10.5
1.2
0.0
11.8
2005
9.6
0.9
0.0
10.5
2004
10.6
0.0
-1.0
9.6
Accumulated depreciation at 1 January
Amortisation
Disposals
Accumulated amortisation at 31 December
4.7
2.0
0.0
6.6
3.0
1.7
0.0
4.7
2.7
1.5
-1.2
3.0
Net carrying amount at 31 December
5.2
5.8
6.6
Gains recognised in the period
0.0
0.0
0.0
Intangible assets consist mainly of capitalised software development costs. The useful
lives of these assets are considered to be finite and are amortised over seven years.
68
BW Gas annual report 2006
Group accounts
NOTE 8 I INVESTMENTS IN SUBSIDIARIES
AS Centum
AS Havgas Partners
AS Hektorgas
Berge Arzew Partner AS
Bergehus AS
Bergesen d.y. Skipsfart AS
Bergesen Gas Shipping AS
BW Green Carriers AS
BW Green Gas AS
BW Green Shipping AS 2)
BW Green Transport AS
BW LNG Holding AS
BW LNG I AS
BW LNG II AS
BW LPG Holding AS
BW LPG I AS
BW LPG II AS
Edda Gas AS
Hegas AS
Partgas Shipping AS
SLNG Yemen I AS
SLNG Yemen II AS
SNC Bergesen d.y. France
The Green Tankers AS 1)
Hekabe AS
PR Bergesen d.y. Shipping DA
KS Havgas Partners
PR Century DA
KS AS Hektorgas
Principal activities
Registered
office
Shipowning
Shipowning
Shipowning
Shipowning
Real estate
Shipowning
Shipowning
Chartering
Shipowning
Shipowning
Chartering
Holding
Holding
Holding
Holding
Holding
Holding
Shipowning
Shipowning
Shipowning
Shipowning
Shipowning
Shipowning
Shipowning
Shipowning
Shipowning
Shipowning
Shipowning
Shipowning
Norway
Norway
Norway
Norway
Norway
Norway
Norway
Norway
Norway
Norway
Norway
Norway
Norway
Norway
Norway
Norway
Norway
Norway
Norway
Norway
Norway
Norway
France
Norway
Norway
Norway
Norway
Norway
Norway
Holding and voting rights in %
31.12.06
31.12.05 31.12.04
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
86.17
86.17
77.50
75.13
69.50
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
86.17
86.17
77.50
75.13
69.50
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
86.17
86.17
77.50
75.13
69.50
Principal activities
KS AS Centum
PR Havrim DA
Edda Gas KS
Hegas KS
Lapa Ltd
Bella Store AS 3)
Berge Helene Offshore AS 2)
Berge Sisar Offshore AS 2)
Sendje Berge Offshore AS 3)
Bergesen d.y. Offshore (USA) Inc
PR Gasstransport
Bergesen d.y. Gas Carriers (Oslo) AS
Bergesen d.y. Gas Carriers (UK) Ltd.
Bergesen d.y. India PVT Ltd.
Bergesen d.y. Offshore Nigeria Ltd
Bergesen d.y. Shipping AS
Ceiba Management AS
KS Handygas
KS Hermes
1)
2)
3)
Shipowning
Shipowning
Shipowning
Shipowning
Manning
Shipowning
Shipowning
Shipowning
Shipowning
Chartering
Shipowning
Shipowning
Shipowning
Manning
Chartering
Shipowning
Shipowning
Shipowning
Shipowning
Registered
office
Norway
Norway
Norway
Norway
Latvia
Norway
Norway
Norway
Norway
USA
Norway
Norway
Norway
India
Nigeria
Norway
Norway
Norway
Norway
Holding and voting rights in %
31.12.06
31.12.05 31.12.04
62.50
55.00
53.00
51.00
51.00
(merged)
(merged)
(merged)
(merged)
(liquidated)
(liquidated)
(liquidated)
(liquidated)
(liquidated)
-
62.50
55.00
49.00
51.00
100.00
100.00
100.00
100.00
100.00
57.00
86.17
86.17
100.00
(disposed)
(disposed)
(disposed)
(liquidated)
(liquidated)
62.50
55.00
51.00
100.00
100.00
100.00
100.00
100.00
57.00
86.17
86.17
100.00
100.00
100.00
100.00
70.00
66.63
The company has a branch office in France
The companies have merged with BW Green Shipping AS,
previously named Bergesen d.y. Offshore AS in 2006
The companies have merged with Partgas Shipping AS in 2006
Reference is made to note 15 for information about the limitations in dividends from subsidiaries.
BW Gas’ share of uncalled capital commitments in subsidiaries amounts to USD 39.9 million.
BW Gas annual report 2006
69
Group accounts
NOTE 9 I INVESTMENTS IN JOINT VENTURES
Registered office
PR Berge Spirit DA
Norway
PR BW Gas/Distrigas LNG Transport DA Norway
PR Bergesen GOIC DA
Norway
PR Hekabe DA
Norway
Oil Terminal Belokamenka
Russia
Sonatrach Bergesen Shipmanagement
Corporation
British Virgin Island
Yara Ammonia Chartering AS
Norway
PR BergeMar I DA
Norway
PR BergeMar II DA
Norway
PR BergeMar III DA
Norway
PR BergeMar IV DA
Norway
NOTE 10 I INVESTMENT IN ASSOCIATED COMPANIES
Holding and voting rights in %
31.12.06 31.12.05
31.12.04
0.00
0.00
80.00
51.00
51.00
51.00
0.00
0.00
65.00
43.09
43.09
43.09
0.00
0.00
50.00
50.00
50.00
50.00
50.00
50.00
50.00
50.00
-
50.00
-
The principal activity of the joint ventures in the group is investment in and operation of
gas carriers.
The group has used proportional consolidation for all periods presented. The following
amounts represents the group’s share of assets, liabilities, income and expenses of the
joint ventures proportionally consolidated.
In USD million
Operating revenue
Operating expenses
Net financial items
Profit before tax
Taxes
Profit
Hereof discontinued operations
In USD million
Non-current assets
Current assets
Total assets
Equity
Non-current liabilities
Current liabilities
Total equity and liabilities
70
BW Gas annual report 2006
2006
24.8
-3.6
-0.4
20.8
0.0
20.8
0.0
2005
66.3
-43.8
-3.6
18.9
0.0
18.9
2.7
2004
108.1
-67.6
-2.1
38.4
0.0
38.4
22.1
31.12.06
120.9
16.0
136.9
31.12.05
103.1
2.1
105.2
31.12.04
263.0
26.4
289.4
122.4
0.0
14.5
136.9
94.5
6.4
4.3
105.2
236.6
37.5
15.3
289.4
Company
PR Clipper Victoria DA
KS Havlur (liquidated)
PR Havpil DA
KS AS Heragas
KS Hesperus 2 (liquidated)
Edda Gas KS
Bergesen d.y. Philippines inc
Registered
office
Norway
Norway
Norway
Norway
Norway
Norway
Philippines
In USD million
Carrying value of investments 1 January
Share of profit after amortisation of surplus values
Dividends received
Investments/sale
Reclassification to subsidiaries (note 4)
Elimination of internal profits downstream sale
Carrying value of investments 31 December
Potential
capital call
(usd mill.)
0.3
Holding and voting right in %
31 December
2006
2005
2004
20.00
20.00
20.00
38.59
41.50
41.50
41.50
31.63
31.63
31.63
25.00
49.00
25.00
25.00
25.00
2006
20.9
2.1
-3.2
0.0
-16.4
0.0
3.4
Aggregate financial information of associated companies according to owner share
In USD million
2006
Operating revenue
7.2
Profit
2.0
Total assets
3.9
Equity
3.4
Liabilities
0.5
2005
5.4
2.8
-2.6
24.5
0.0
-9.2
20.9
2004
5.8
0.7
-1.1
0.0
0.0
0.0
5.4
2005
15.8
2.9
82.8
20.9
61.9
2004
4.8
0.0
5.9
5.4
0.5
The accounting for accociates have been according to the equity method for all periods presented.
BW Gas’ share of uncalled capital commitments amounts to USD 0.3 millions.
Group accounts
NOTE 11 I EMPLOYEE BENEFITS AND NUMBER OF EMPLOYEES
In USD million
Staff costs
Wages and salaries
Social security costs
Pension cost, employer’s contribution to benefit plan
Reimbursement arrangement Norwegian seamen
Total
Less discontinued operations
Total according to profit and loss statement
2006
73.7
7.5
6.4
0.0
87.6
0.0
87.6
2005
72.5
8.1
4.1
-0.4
84.3
-5.5
78.8
2004
89.5
11.3
8.7
-0.8
108.7
-26.1
82.6
Key Management’s remuneration is disclosed in Note 20
Persons employed (average for the year)
Head office
Offices abroad
Norwegian and foreign seamen
with permanent employment contracts
Foreign seamen, temporary employment
Total
2006
161
12
2005
173
12
2004
201
14
282
1,371
1,826
338
1,265
1,788
462
1,496
2,173
Employees, full time
Employees, part time
1,822
4
1,786
2
2,170
3
Pension and other post-employment benefit plans
BW Gas operates group pension plans for groups
of employees through independent funds and life
insurance companies. The pension entitlements are
accrued on a linear basis over a service life of 30
years. For office employees, the plans provide for a
retirement pension of 66% of pensionable pay from
the age of 67 as well as benefits for surviving
spouses/dependants and a disability pension.
Seafaring personnel covered by the agreement
between the Norwegian Shipowners’ Association
and the Norwegian seamen’s associations are
entitled to a pension of 60% of pensionable pay
from the age of 60 until the age of 67. Seafaring
personnel in senior positions who are covered by
this agreement and the relevant pension plan are
entitled thereafter to a pension of 50% of pensionable pay. The plan also provides for disability
and survivor benefits. Seafaring personnel in junior
positions covered by the agreement are also entitled
to a pension of 60% of pensionable pay from the
age of 60 until the age of 67. This plan too provides
for a disability pension. However, this group is not
entitled to any benefits after reaching the age of
67 beyond those conferred by the state pension
scheme. The above pension plans are coordinated
with anticipated state pension benefits and had a
total of 405 members at the year-end. In the case
of seafaring personnel not covered by the agree-
ment between the Norwegian Shipowners’
Association and the Norwegian seamen’s organisations, defined contribution plans have been set
up for some groups in line with agreements with
the seamen’s organisations in various countries.
These plans do not involve any pension obligations
beyond the payment of premiums.
The group also has some pension obligations that
are not covered by these group plans. These relate
to early retirement pensions for office employees
from the age of 64 and employees not eligible for
the group pension plans.
The values of plan assets and obligations are based
on estimates, which are adjusted each year in line
with information on the market value of plan assets
and actuarial calculations of obligations. Projected
turnover in each of the plans is taken into account.
The calculation of the obligations is also based on
the assumption that 90% of the workforce will
accept the early retirement option at age 64. The
group applies the most recent actuarial demographic statistics for disability, and will update to
the most recent actuarial demographic statistics
for mortality in 2007. Average expected turnover
is 2.5%.
BW Gas annual report 2006
71
Group accounts
NOTE 11 cont.
Balance sheet obligations for
Pension benefits
2006
10.4
2005
12.1
2004
15.1
Income statement charge for
Pension benefits
6.4
4.1
8.7
Pension benefits
The amounts recognised in the balance sheet
are determined as follows:
Present value of funded obligations
Fair value of plan assets
-112.5
98.3
-14.2
-28.6
33.7
-1.3
-10.4
-108.5
89.6
-18.9
-21.0
29.1
-1.3
-12.1
-105.0
97.3
-7.7
-25.6
20.1
-1.9
-15.1
Experience adjustments on plan obligations
Experience adjustments on plan assets
3.8
-6.2
-2.1
0.0
-1.8
0.0
Fair value of assets consists of
Equity instruments
Debt instruments
Others
Total
11.1
66.3
20.9
98.4
12.9
64.7
12.0
89.6
12.2
68.5
16.6
97.2
Present value of unfunded obligations
Accumulated unrecognised actuarial losses
Social security tax
Net pension liabilities
Fair value of assets in %
Equity instruments
Debt instruments
Others
BW Gas annual report 2006
The amounts recognised in
The income statement are as follows:
Current service cost
Interest cost
Expected return on plan assets
Net actuarial gain/loss
recognised during the period
Past service cost
Correction previous years
Curtailment
Total, included in salaries,
social security and pensions (Note 5)
Reclassified to discontinuing operation
Total continuing operation
Actual return on plan assets
11.3%
67.4%
21.3%
14.4%
72.2%
13.4%
12.6%
70.4%
17.0%
The category ‘other’ consist mainly of pensions covered by life insurance companies, for which the
information about the different categories of assets is not available.
72
The expected return on plan assets is determined by considering the expected returns available on the
assets underlying the current investment policy. Expected yields on fixed interest investments are based
on gross redemption yields as at the balance sheet date. Expected returns on equity and investments
reflect long-term real rates of return experienced in the respective markets.
2006
2005
2004
6.0
5.6
-5.0
6.7
5.9
-5.4
5.6
4.5
-4.9
2.2
0.0
-2.4
0.0
0.8
0.0
0.0
-3.9
0.0
3.5
0.0
0.0
6.4
0.0
6.4
4.1
2.3
6.4
8.7
-2.2
6.5
4.2
5.1
3.1
2005
-15.1
2.3
-4.1
4.8
-12.1
2004
-8.2
-1.6
-8.7
3.4
-15.1
The movement in the liability recognised in the balance sheet is as follows:
At beginning of the period
Exchange differences
Total expense charged in the income statement
Contributions paid
At end of the period
2006
-12.1
-0.8
-6.4
8.9
-10.4
Group accounts
NOTE 12 I INCOME TAX
The principal actuarial assumptions used for the balances as at 31 December were as follows
and are equal for both plans:
2006
2005
2004
Discount rate
4.30%
4.25%
5.00%
Expected return on plan assets
5.40%
5.25%
6.00%
Future salary increases
4.50%
3.50%
3.50%
Future pension increases
2.00%
2.50%
2.50%
Future public regulations of pension
4.25%
2.50%
2.50%
In USD million
TAX EXPENSES
Taxes payable in Norway
Taxes payable to other countries *)
Reclassified to discontinued operations
Total income tax from continuing operations
*)
The principal actuarial assumptions used for the amount charged to the income statement
are as follows:
2006
2005
2004
Discount rate
4.25%
5.00%
4.75%
Expected return on plan assets
5.25%
6.00%
5.75%
Future salary increases
3.50%
3.50%
2.00%
Future pension increases
2.50%
2.50%
1.00%
Future public regulations of pension
2.50%
2.50%
1.00%
2006
-0.2
-6.6
0.0
-6.8
2005
-2.7
-3.4
5.1
-1.0
2004
-0.4
-1.8
0.0
-2.2
2006 amount relates mainly to non-recurring disposals.
The group’s current tax rate is below the standard Norwegian statutory 28% rate because of the shipping taxation system. A reconciliation between actual tax expense and tax expense based on applying the standard income tax rate in Norway on profits before tax is as follows:
Profit before tax
2006
230.5
2005
454.1
2004
130.8
Tax calculated at rate of 28%
Effect of different tax rates in other countries
Tax effect on expenses/income not deductable/taxable for tax purposes
Tax effect on income not subject to tax
Deferred tax assets/liability not recognised
Other *)
Tax charge
-64.5
-6.7
4.1
48.2
44.5
-32.4
-6.8
-127.1
-3.4
-2.2
96.6
-10.9
40.9
-6.1
-36.6
-1.8
0.1
41.8
-4.5
-1.2
-2.2
*)
Includes tax effect of differences arising from exchange differences to Norwegian Krone, which is
the basis for taxation for the group.
BW Gas annual report 2006
73
Group accounts
NOTE 12 cont.
TEMPORARY DIFFERENCES
Outside the shipping tax system
Long-term items *)
Tax losses to be carried forward
Income basis for tax credit to be carried forward
Net temporary differences
28% deferred tax (-)/deferred tax asset
Hereof deferred tax (-) related to shipowning companies
Deferred tax assets not recognised **)
Deferred tax (-)/deferred tax asset in balance sheet
31.12.06
314.0
-227.2
0.0
86.8
-24.3
-28.1
3.8
0.0
Tax adjusted directly in equity, deferred tax on fair value reserve
*)
**)
0.0
31.12.05
167.6
-223.6
-15.1
-71.1
19.9
-2.2
29.1
-7.0
31.12.04
264.1
-295.4
-18.8
-50.1
14.0
-51.4
65.4
0.0
7.0
0.0
Mainly relates to temporary differences on fixed assets and unrealised foreign exchange rate gains/
losses on long term receivables and debt.
Deferred tax asset are not recognised due to uncertainity with respect to utilisation.
There is currently no time limitation on losses carried forward.
Inside the shipping tax system
Current year’s untaxed income
Negative balance on account for retained taxed earnings *)
Unrealised currency gain (contingent taxable income)
Tax losses to be carried forward
*)
31.12.06
106.6
1,172.4
6.6
19.0
31.12.05
151.6
1,115.8
-15.9
51.1
31.12.04
140.0
1,466.2
47.6
58.2
Accumulated net untaxed income at the balance sheet date.
Positive temporary differences related to undistributed profits in subsidiaries taxed under the shipping
taxation system will not be subject to tax until they are distributed in the form of dividends or the company
exits the scheme. This also applies to untaxed revenue relating to net positive temporary timing differences at the time of joining the scheme in 1996/97.
Net financial income is taxed. When calculating net financial income, only part of the company’s interest
expenses and net foreign exchange gain/loss are deductible, equal to the financial capital’s share of total
assets. If equity exceeds 70% of the total assets, a taxable interest income is deemed based on an
interest norm fixed by the Ministry of Finance, and included in the company’s taxable financial income.
As at 31 December 2006, the unrecognized deferred tax assets related to tax loss carried forward (on
financial items) within the Norwegian tonnage tax system amounted to USD 19.0 million and are currently
to be carried forward for unlimited time.
Distribution of untaxed capital through dividends from subsidiaries under the Norwegian tonnage tax
regime will result in a taxable income with a payable tax of 28% of the distributed amount.
Withdrawal from the Norwegian tonnage tax regime will result in a taxable profit of approximately
USD 2,772.1 million with a corresponding tax liability of approximately USD 776.2 million. The group
has no plans to withdraw from the regime.
74
BW Gas annual report 2006
Group accounts
NOTE 13 I CASH AND SHORT-TERM DEPOSITS
NOTE 14 I TRADE, RECEIVABLES AND INVENTORIES
In USD million
In USD million
The group’s cash and short-term deposits are denominated in the following currencies as of 31 December
Trade and other receivables - non-current
US Dollar
Norwegian Krone
Other currencies
Total cash at bank and on hand
2006
241.4
7.1
0.4
248.9
2005
332.6
19.8
1.9
354.3
2004
215.8
19.9
7.0
242.7
Short-term bank deposit have an average maturity of eleven days from the end of the financial period
with the following weighted average effective interest rates:
2006
2005
2004
US Dollar
4.7%
3.1%
1.2%
Norwegian Krone
2.2%
1.7%
1.6%
Restricted bank deposits as of 31 December:
Deposits related to taxes withheld from employees
2006
2.2
2005
2.1
2004
3.0
Reference is made to Note 15 for information on limitations on cash distributions for companies within
tonnage tax system.
TRADE AND OTHER RECEIVABLES - NON CURRENT:
- loan receivables
- staff loans
- others
Total trade and other receivables - non current
2006
31 December
2005
217.4
4.1
4.2
225.6
110.3
4.2
0.9
115.4
2004
120.7
6.0
7.8
134.5
Reference is made to Note 21 for further details regarding receivables.
The non-current trade and other receivables have the following maturity
31 December
2006
2005
TRADE AND OTHER RECEIVABLES - NON CURRENT:
Later than one year and not later than five years
45.5
39.2
Later than five years
180.1
76.2
Total trade and other receivables - non current
225.6
115.4
2004
45.5
89.0
134.5
The fair values of non-current trade and other receivables are as follows as of
31 December 2006:
Carrying amounts
Fair values
TRADE AND OTHER RECEIVABLES - NON CURRENT:
- loan receivables
217.4
230.5
- staff loans
4.1
4.1
- others
4.2
4.2
Total trade and other receivables - non current
225.6
238.7
BW Gas annual report 2006
75
Group accounts
NOTE 14 cont.
NOTE 15 I SHARES, SHAREHOLDERS, DIVIDENDS AND EARNINGS PER SHARE
Trade and other receivables (current and non-current) are denominated in the following
currencies as of 31 December:
At 31 December 2006 Bergesen Worldwide Gas ASA had 1,084 shareholders.
Trade and other receivables:
US Dollar
Norwegian Krone
Others
Trade and other receivables
2006
2005
2004
287.3
9.8
4.9
302.1
211.3
9.1
2.9
223.3
207.4
10.3
2.3
220.0
The weighted average effective interest rates for non-current trade and other receivables
are as follows as of 31 December:
2006
2005
2004
Loan receivables
8.7%
6.5%
6.0%
Staff loans
3.0%
2.5%
3.0%
The exposure of non-current trade and other receivables to interest rate risks is disclosed
in Note 22.
Shareholding of the board of directors and Management (and related parties) in Bergesen
Worldwide Gas ASA as of 31 December 2006
The board of directors
Helmut Sohmen, Chairman
Andreas Sohmen-Pao, Deputy Chairman
Knut Brundtland
Clare M. J. Spottiswoode CBE
Kathryn M. Baker
Number of shares
Management 2)
Jan Håkon Pettersen (Managing Director)
Leif Arthur Andersen
Rebekka Glasser Herlofsen
Jens Ismar
Garup Meidell
1)
1)
25,000
0
2,000
900
500
1,200
1,400
800
The Chairman and the Deputy Chairman of the board of directors indirectly have significant
influence over World Nordic Aps.
1)
Inventories
At cost
Bunkers
Ship stores
Inventories
2006
31 December
2005
2004
11.5
1.6
13.1
10.6
1.8
12.4
13.7
0.5
14.2
The management has in addition restricted shares as follows:
Jan Håkon Pettersen
Leif Arthur Andersen
Rebekka Glasser Herlofsen
Jens Ismar
Garup Meidell
2)
Reference is made to note 20 for further information on restricted shares bonus program.
The company’s auditor PricewaterhouseCoopers AS does not hold shares in the company.
76
BW Gas annual report 2006
28,455
5,278
9,146
15,729
21,007
Group accounts
Largest shareholders
Shareholder
WORLD NORDIC APS
STATE STREET BANK & TRUST CO. *)
SIS SEGAINTERSETTLE AG *)
THIRD AVENUE INTL. V
ODIN VERDIPAPIRFOND
BANK OF NEW YORK. BRUSSEL BRANCH
BAYERISCHE HYPO UND VEREINSBANK AG
COMMERZBANK AG *)
JPMORGAN CHASE BANK *)
COGENT-HUNTER HALL VALUE GROWTH
BNP PARIBAS SEC. SERVICES *)
BNP PARIBAS SECURITIES
*)
*)
Declared and paid during the year:
Equity dividends
Dividend per share in USD
Total number of shares per 31 December
Shares owned by the company
Weighted average number of shares *)
Earnings per share
Basic earnings per share are calculated by dividing the profit attributable to equity holders of the
company by the weighted average number of shares in issue during the year. There are no dilutive
potential shares, and therefore the diluted EPS equals the basic EPS.
Basic earnings per share, continuing operations
Profit attributable to equity holders (USD million)
Weighted average number of shares
Earning per share (USD)
Includes nominee accounts
Proposed at year end:
Equity dividends (NOK 563.6 million)
Dividend per share in USD (NOK 4.40)
*)
% share
59.7%
3.2%
2.9%
2.0%
1.8%
1.6%
1.4%
1.4%
1.4%
1.2%
1.1%
1.0%
Dividend restrictions
The part of the equity that is distributable is depending on the dividend capacity of the parent company
Bergesen Worldwide Gas ASA, and as of 31 December 2006, the distributable reserves equal NOK 10,500
million. Covenants on debt financing require that the group’s equity is minimum 35% of total assets at all
times, and place a limitation on distributions, as well as the need to have prudent reserves as required by
the Joint Stock Public Companies Act (Allmennaksjeloven). Further, the dividend capacity depends on the
availability of cash for distribution. Cash owned by tonnage taxed entities, can only to a limited extent be
distributed without taxation, and hence impose restrictions on dividends or increase the expenses
related to dividends.
2006
212.0
128,097,885
1.7
2005
2004
272.7
-17.3
128,306,218 128,347,885
2.1
-0.1
Basic and diluted earnings per share, discontinuing operations
2006
Profit attributable to equity holders (USD million)
-1.0
Weighted average number of shares
128,097,885
Earning per share (USD)
-0.1
2005
2004
167.8
136.1
128,306,218 128,347,885
1.3
1.1
Basic and diluted earnings per share, all operations
Profit attributable to equity holders (USD million)
Weighted average number of shares
Earning per share (USD)
2005
2004
440.5
118.8
128,306,218 128,347,885
3.4
0.9
90.2
0.70
*)
2006
33.7
0.26
128,347,885
250,000
128,097,885
2005
0.0
0.0
128,347,885
250,000
128,306,218
2004
60.0
0.47
128,347,885
0
128,347,885
The number of shares and the weighted average number of shares has been adjusted retrospectively
to reflect the change in number of shares due to split and demerge. This is also reflected in the calculation of earning per share at the face of the consolidated income statement.
2006
211.0
128,097,885
1.6
The calculation of dividend per share and earnings per share excludes the shares owned by the company.
BW Gas annual report 2006
77
Group accounts
NOTE 16 I ISSUED AND OUTSTANDING SHARE CAPITAL
NOTE 17 I INTEREST-BEARING LOANS
As of 31 December 2006 a total of 128,347,885 shares were issued and outstanding, each with a par
value of NOK 1.00, which all have equal rights. Bergesen Worldwide Gas ASA had as of 31 December
2006 in total 250,000 treasury shares.
In USD million
On 21 September 2005, the extraordinary general meeting approved that the board be authorised for
a period of 18 months to acquire up to 250,000 shares in the company with an aggregate nominal
value of up to NOK 250,000 with a minimum purchase price per share of NOK 25 and a maximum
purchase price per share of NOK 200. This right was executed by the board in 2005, when the group
purchased 250,000 shares at NOK 82 per share (USD 3.2 million in total). The board plans to make
use of the treasury shares in connection with the management compensation program.
The table below shows the development of the company’s share capital and the number of
outstanding shares in the recent three years:
Year
2004
2005
2005
2005
2006
Change in
share capital (NOK)
As of 1 January
Reversed share split
Demerger
Share split
As of 31 December
0
-15,015,630
0
Nominal value
per share (NOK)
2.5
143,363,515
128,347,885
1
1
Total
share capital
143,363,515
143,363,515
128,347,885
128,347,885
128,347,885
Number
of shares
57,345,406
1
1
128,347,885
128,347,885
NON-CURRENT
Loan from Bergesen Worldwide Limited
Bank borrowings
Bond loan
Tax lease liabilities
Finance lease liabilities (Note 18)
Total non-current
CURRENT
Bank borrowings
Tax lease liabilities
Finance lease liabilities (Note 18)
Total current
Total borrowings
31.12.06
31.12.05
31.12.04
0.0
1,352.2
152.2
48.0
25.5
1,577.9
0.0
1,239.0
0.0
58.5
0.0
1,297.5
1,451.8
28.9
0.0
110.7
0.0
1,591.4
14.7
9.4
3.7
27.8
26.4
25.3
0.0
51.7
6.3
17.9
0.0
24.2
1,605.7
1,349.2
1,615.6
(a) Credit facility from bank syndicate
In connection with the listing of the company in 2005, the debt to Bergesen Worldwide Limited was
repaid and USD 1,239 million (net of establishment expenses of USD 6.0 million) of a new unsecured
revolving credit facility of USD 1,500 million with a term of seven years was drawn. As of 31 December
2006 the drawn amount was USD 1,100 million.
(b) Security
Total borrowings include secured liablities of USD 358.6 million for the group which are secured by mortgages
over the group’s vessels with a book value USD 501.1 million including tax leases and financial leases.
Substantially all of the remainder of the group’s borrowings are unsecured. However, the group is required
to comply with financial covenants, which all have been met for the financial periods reported. The main
requirements of the existing covenants are: The equity over total asset ratio should at least equal 35%
and the unencumbered assets over the total unsecured borrowings should at least equal 1.5.
78
BW Gas annual report 2006
Group accounts
NOTE 18 I LEASES
(c) Maturity of borrowings
The current borrowings have an average maturity of 6 months from the end of the financial period.
The non-current borrowings have the following maturity:
Later than one year and not later than five years
Later than five years
Total non-current borrowings
31.12.06
273.5
1,304.4
1,577.9
31.12.05
58.5
1,239.0
1,297.5
31.12.04
115.0
1,476.4
1,591.4
(d) Currency risk
As of 31.12.2006, most of the group’s borrowings are denominated in US Dollar.
(e) Interest rate risks
The weighted average effective interest rates of total borrowings at the balance sheet date are as follows:
Borrowings in NOK
Bank borrowings in USD
Tax lease liabilities
Finance lease liabilities
31.12.06
n.a
5.97%
6.21%
6.73%
31.12.05
n.a
5.03%
4.66%
n.a
31.12.04
2.67%
2.90%
3.18%
n.a
The exposure of current and non-current borrowings to interest rate risks is disclosed in Note 22.
(f) Carrying amounts and fair values
The carrying amounts of current and non-current borrowings approximate their fair values.
(g) Presentation of tax leases
The group has tax lease arrangements (French tax lease) on four vessels as of 31.12.2006, whereof two
are vessels under construction. As the group is committed to purchase the vessels at the end of the tax
lease period at a fixed price, the tax lease is presented as a debt financed purchase of vessels, and
includes the full amount to be paid including the settlement at the end of the tax lease. The tax leases
are structured through lessor companies set up and owned by the bank/syndicate/investors in the tax
lease, where the group has funded the lessor companies with subordinated loans amounting to approximately USD 115.3 million as of 31.12.2006. These receivables are presented net with the tax lease liability
in the balance sheet, and the net amount equals USD 57.4 million.
FINANCE LEASE LIABILITIES
Total financial lease commitment as of 31 December 2006 is USD 29.2 million. The lease
commitment is included as a liability in the balance sheet. The financial lease is related to
the vessel Berge Summit which is hired in on a timecharter from May 2005 until May 2015
with a purchase option at the end of the timecharter period. The purchase price is included
in the minimum lease payments.
For vessels on tax lease arrangements, reference is made to note 17.
In USD million
MINIMUM LEASE PAYMENTS DUE:
Less than one year
More than one year and less than five years
More than five years
Total minimum lease payments
Less: Future finance charges
Present value of finance lease liabilities
31.12.06
31.12.05 31.12.04
3.8
15.1
21.2
40.1
-10.9
29.2
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
The present value of finance lease liabilities may be analysed as follows:
In USD million
31.12.06 31.12.05 31.12.04
Not later than one year (Note 17)
3.7
0.0
0.0
- more than one year and less than five years (Note 17)
7.3
0.0
0.0
- more than five years (Note 17)
18.1
0.0
0.0
Total
29.2
0.0
0.0
The carrying value of the leased vessels as of the balance sheet date was as follows:
In USD million
Berge Summit
31.12.06 31.12.05 31.12.04
27.7
0.0
0.0
The lease arrangement does not impose any restrictions.
BW Gas annual report 2006
79
Group accounts
NOTE 18 cont.
Financial lease receivables
Total financial lease receivables as of 31 December 2006 are USD 87 million and are included as a financial
long term receivable in the balance sheet.The financial lease is related to the vessel Berge Arzew.
The vessel Berge Arzew is hired out on a timecharter from July 2004 until July 2024. The lessee has options
to extend with 5 plus 5 years at a discounted rate.
The lease arrangement does not impose any restrictions.
As of the balance sheet date, the present value of future minimum lease payment receivables was as follows:
In USD million
31.12.06
Gross investment in financial lease contracts
231.0
Less unearned financial revenues
-144.0
Net investment in financial lease contracts
87.0
Less: Unguaranteed residual values of leased vessel
for the benefit of the lessor, present value
-0.8
Present value of future minimum lease payment receivables
86.2
31.12.05
0.0
0.0
0.0
0.0
0.0
31.12.04
0.0
0.0
0.0
0.0
0.0
As of 31 December 2006, the gross investment and present value of receivables relating to future
minimum lease payments under non-cancellable financial leases were as follows:
Maturity
2007
2008
2009
2010
2011
Later years
80
BW Gas annual report 2006
Gross investment
10.8
10.8
10.8
10.8
10.8
177.0
231.0
Present value of future
minimum lease payments
10
9
8.1
7.2
6.5
45.4
86.2
Reclassification of lease contracts in 2006
The two lease contracts on Berge Summit (lease in) and Berge Arzew (lease out) were reconsidered in
2006, and reclassified from operational to financial lease. Accordingly a net amount of USD 51.4 million
was de-recognised from fixed assets, and a financial lease receivable of USD 87.0 million and a debt of
USD 29.2 million was recognised as at 31 December 2006. Due to the insignificant amount that impacts
previous periods, the full effect of the reclassification has been charged to the income statement in 2006.
The correction for previous periods amounts to USD 8.3 million in operating profit and USD 5.3 million
in net result, whereof USD 4.0 million is a gain related to the reclassification of Berge Arzew.
OPERATING LEASE COMMITMENTS
(a) Operating lease commitments - where the group is a lessee
The future aggregate minimum lease payments under non-cancellable operating leases contracted for
at the reporting date, but not recognised, are as follows:
In USD million
Less than one year
More than one year and less than five years
More than five years
Total
31.12.06
105.8
193.2
242.8
541.8
31.12.05
122.7
220.1
134.3
477.1
31.12.04
78.4
167.7
181.5
427.6
Commitments under operational leases are not included as liabilities in the balance sheet. The group has
purchase options on eight VLGC vessels currently chartered in on long-term charters. The purchase options
on Formosagas Bright and Formosagas Apollo have been declared and the vessels will be delivered in
first quarter 2007. The purchase options for Yuyo Berge expires in March 2010, the purchase options for
Berge Ningbo and Berge Nantong expire in February and October 2018 and purchase options for three
newbuildings, delivered in June 2007, 2009 and 2010, expire in 2017, 2224 and 2225 respectively. Regarding
the two newbuildings delivered in 2009 and 2010 the group participate with a 33% share in each.
All operating leases are presented as the expense line item Charter Hire expenses in the consolidated
income statement.
Group accounts
NOTE 19 I COMMITMENTS AND CONTINGENCIES
(b) Operating lease commitments - where the group is a lessor
The future minimum lease payments receivable under non-cancellable operating leases
contracted for at the reporting date, but not recognised as receivables, are as follows:
In USD million
Less than one year
More than one year and less than five years
More than five years
Total
31.12.06
264.0
926.1
2,803.5
3,993.6
31.12.05
259.2
720.5
2,994.4
3,974.1
31.12.04
204.3
1,091.5
2,526.4
3,822.2
The majority of the leases in which the group is a lessor, is related to four LNG vessels
chartered out to Nigeria LNG Limited and two LNG vessels chartered out to Suez LNG NA
LLC. All six vessels have 20-year charters from date of delivery, determining the lease term
for the minimum lease payments. Nigeria LNG Limited has purchase options for the four
vessels that can be exercised after five years, ten years and then every second year
thereafter for the life of the contracts.
The group has two LNG-vessels under construction which are chartered out to Suez LNG
Trading S.A on 20 year timecharters determining the lease term for the minimum lease
payments. The newbuildings are financed through a French tax lease. The group will hire
the vessels on bareboat contracts from a French taxlease company (lessor) and become
owner of the vessels when the contracts expires in 2029. Suez LNG Trading S.A. has
options to participate with 49% in the later shipowning companies (subsidiaries).
(a) Capital commitments
Capital expenditures contracted for at the balance sheet date, but not recognised in the financial statements
(excluding those relating to investments in associated companies (Note 10) and investments in joint
ventures (Note 9) are as follows as at 31 December:
In USD million
Newbuilding instalments
Declared purchase options
2006
645.6
85.0
2005
539.4
0.0
2004
228.8
0.0
(b) Guarantees
The group has as of 31 December 2006 no guarantees issued to third parties, except for a guarantee
related to a tax lease for the previously owned company PR Bergesen GOIC DA. This guarantee has been
agreed to be transferred out of the group in connection with the restructuring in 2005, but the final
documents have not yet been signed.
(c) Provisions
In USD million
Carrying amount 1 January
Increases to existing provisions
Amounts utilised
Carrying amount 31 December
2006
1.4
0.0
1.4
0.0
2005
5.4
0.0
4.0
1.4
2004
11.2
3.9
-9.7
5.4
Current share 31 December
Non current share 31 December
Carrying amount 31 December
0.0
0.0
0.0
1.4
0.0
1.4
2.2
3.2
5.4
(d) Legal claims
General Ore International Corporation Ltd (GOIC) has filed a complaint about the level of disbursements
and expenses charged to two of the group’s joint ventures (the JVs have been demerged out of the group
as of 1 July 2005) by the parent company and have reserved the right to review and contest the same.
In a letter dated 27 July 2005 GOIC has stated that they now intend to claim reimbursements for
overcharging in an amount between USD 8 to 10 million. In a letter of 6 September 2005, GOIC has
formally called for the appointment of a single arbitrator in respect of the claim. The company has rejected
the claim and the call for a single arbitrator, and each party has appointed its arbitrator, while the third
member of the arbitration panel has not been appointed yet. No further substantiation of the claim has
been made. The claimant has not substantiated the claim nor provided any evidence, and the company’s
preliminary view is that the claim has no merit.
BW Gas annual report 2006
81
Group accounts
NOTE 19 cont.
Hess Equatorial Guinea has claimed compensations in connection with the sale and purchase of the
FPSO Sendje Ceiba in 2004 from Ceiba Offshore AS, later merged into BW Green Shipping AS after an
intermediate merger with Berge Helene Offshore AS. The claim is raised, but is not specified, through
correspondence between Hess Equatorial Guinea and BW Offshore who has handled the matter so far.
The matter is not brought before any arbitration panel. The claim is reviewed by Nordisk Skibsrederforening and will in their opinion not lead to any compensation, with the possible exception of costs
to repair cracks/corrosion in one cargo tank. Such repairs are estimated to be within a range of USD
0.5 to 1.0 million.
(e) Uncertainty regarding the Norwegian tonnage tax system
The Norwegian tonnage tax system is currently being evaluated. An official committee of inquiry has
presented a draft proposal (Norges offentlige utredninger) for general comments. The committee members
are divided in their views. The majority suggests that the tonnage tax system cease to exist in its entirety
and that Norwegian CFC rules should be extended. The minority suggest that Norway adapts rules similar
to those typically introduced in EU. Based on the proposal it is presently uncertain whether there will
be changes in the Norwegian tonnage tax system, and – if so- in which direction such changes will go
as the suggestions of the two factions in the committee will lead to quite opposite results.
(f) Tax lease risks
The group is participant in French tax lease regimes. As a part of these tax lease arrangements, the group
as lessee is liable for changes in the tax regulations that may impact these arrangements. This includes
changes in tax depreciations, tax rates and possible terminations of tax lease systems from the tax
authorities.
(g) Insurance
The group insures the legal liability risks for its shipping activities with London Steam-Ship Owners,
Assuranceforeningen Gard Gjensidig and Britannia Steam Ship Insurance Association Limited, all mutual
protection and indemnity associations. As a member of these mutual associations, the group is subject
to calls payable to the associations based on the group’s claims record in addition to the claims records of
all other members of the associations. A contingent liability exists to the extent that the claims records
of the members of the associations in the aggregate show significant deterioration, which result in
additional calls on the members. The group accrues for the liability once the amount for additional
calls is known.
82
BW Gas annual report 2006
(h) Unlimited liability as general partner in limited partnerships
The Group participate in several limited partnerships (‘KS‘). For all limited partnerships
classified as subsidiaries, the Group act as the general partner with unlimited liability for
the partnership. The Group will be responsible for liabilities that can not be covered
through uncalled capital from the limited partners.
(i) Joint and several liability arising from demerger
The group has a joint and several liability for any contingent liability of companies demerged
from the group.
(j) Notice of possible changes to tax assessments
In February 2007, Bergesen d.y. Shipping AS received a notice from the Central Tax Office of
Large Enterprises stating that the tax authorities were considering increasing the taxable
income for the fiscal years 2000 and 2004 with NOK 455.5 million and NOK 30.5 million
respectively, corresponding to a total potential tax liability of approximately NOK 136 million
(28%). The notice concerns the tax treatment of capital reductions made in Bergesen d.y.
Shipping AS in favour of the parent company Bergesen d.y. ASA (now Bergesen Worldwide Gas
ASA). Bergesen d.y. Shipping AS is in the process of answering the notice, clarifying both factual
circumstances as well as the legal issues. The company’s view is that its previous years tax
assessments are correct, but the company cannot be certain of the final outcome. No provisions
have been made in the accounts.
In 2005, Bergesen d.y. Shipping AS, a wholly owned subsidiary of Bergesen d.y. ASA (now
Bergesen Worldwide Gas ASA), was demerged into the companies Bergesen d.y. Shipping AS
and Bergesen Gas Shipping AS. Bergesen d.y. Shipping is owned 100% by Bergesen Dry Bulk
Holding AS, a company which is not part of the BW Gas Group. Bergesen Gas Shipping AS is
indirectly owned 100% by BW Gas ASA. Under the demerger plan the fair values and the share
capital were split between the two companies in the ratio 14.5% to Bergesen d.y. Shipping AS
and 85.5% to Bergesen Gas Shipping AS, and a potential tax liability will in the company’s
opinion inter partes be split the same way.
Group accounts
NOTE 20 I RELATED PARTY DISCLOSURES, REMUNERATION AND AUDIT FEES
REMUNERATION AND CONTRACTUAL AGREEMENTS
Bergesen Worldwide Gas ASA is a public company. The company is owned 59.7% by World Nordic ApS,
Denmark, which is a subsidiary of Bergesen Worldwide Limited.
The ultimate holding corporation is Bergesen Worldwide Limited, incorporated in Bermuda and is
approximately 93% owned by companies controlled by Sohmen family interests.
The group has carried out various transactions with companies within Bergesen Worldwide Limited.
All transactions have been carried out at fair value. The most important transactions carried out in
2006 are as follows:
BW Gas executes supervision services for other companies within Bergesen Worldwide Limited regarding
certain LNG contracts.
BW Gas executes management for several companies within Bergesen Worldwide Limited.
The transactions carried out with Bergesen Worldwide Limited amounts to
USD million
2006
Sales of services
18.4
Sales of vessels, companies and movables (at sales value)
0.0
Purchase of services
21.4
Purchase of shares
0.0
Interest and financial items
0.0
2005
16.0
776.8
13.7
3.2
34.9
Year end balances with Bergesen Worldwide Limited amounts to
USD million
Receivable
Payable
2005
15.0
0.0
REMUNERATION TO THE BOARD OF DIRECTORS
USD 1,000
Morten Sig. Bergesen,
board member 01.01-26.05.2004
Svein Erik Amundsen,
board member 01.01-24.10.2005
Clare M.J. Spottiswoode CBE 01.09.05-31.12.2006
Kathryn M. Baker
25.10.05-31.12.2006
Knut Brundtland
25.10.05-31.12.2006
2006
5.2
1.5
2006
n.a.
n.a.
40
40
40
2005
n.a.
32
13
7
7
2004
2.9
0.0
0.0
0.0
3.8
2004
2.9
1,455.0
2004
15
37
n.a.
n.a.
n.a.
REMUNERATION TO THE AUDITOR
USD 1,000
Audit services
Other attestation services
Tax advisory services
Other fees
Total
2006
432
4
17
67
520
2005
425
4
27
56
512
2004
442
6
74
26
548
KEY MANAGEMENT REMUNERATION
It is BW Gas policy to at all time offer its executive management competitive remuneration
based on current market standards, group and individual performance. The remuneration
program shall promote value creation and ensure that the executive management and
shareholders share common interest.
Following from the above, the remuneration consists of a basic salary element combined
with a performance based bonus program. The bonus program shall be linked to the group’s
performance over time and shareholder value creation in order to ensure that the management’s performance secures the long-term interests of the shareholders and other key
stakeholders.
The bonus program consists of a short-term as well as a long-term scheme. In the short-term
scheme, the remuneration is linked to group performance as measured by the return on
capital employed and individual performance relative to set targets. No bonus will be paid
unless a minimum return is achieved as agreed by the management and board of directors.
Remuneration in the long-term scheme is linked to development of the share price. No
bonus will be paid unless a pre-specified share price increase is achieved.
For both schemes, the bonus award is a combination of cash and restricted shares, payable
after a pre-defined period and provided the person is still employed with the group.
Furthermore, there is an absolute limit to the bonus awards, defined by the executive
management’s monthly basic pay.
Helmut Sohmen and Andreas Sohmen-Pao have waived remuneration.
BW Gas annual report 2006
83
Group accounts
NOTE 20 cont.
USD 1,000
2006
Wages and other taxable benefits
Pension expense
One-off bonus 1)
Bonus scheme settled in cash (estimate) 2)
Share based incentive scheme (estimate) 3)
Total
Number of granted restricted shares (estimate) 4)
Loans 5)
Period of employment
Jan Håkon
Pettersen
711
320
0
95
216
1,343
7,189
737
Jan.-Dec.
Leif Arthur
Andersen
328
219
0
35
49
631
2,640
116
Jan.-Dec.
Jens
Ismar
348
147
65
43
94
696
2,640
0
Jan.-Dec.
Garup
Meidell
333
163
65
43
116
719
2,640
0
Jan.-Dec.
Rebekka Glasser
Herlofsen
269
90
0
37
56
451
2,288
0
Jan.-Dec.
Hans Ditlef
Martens
325
70
57
0
42
494
4,619
0
Jan.-June
Total
2,314
1,009
187
252
572
4,335
22,016
853
For 2005 and 2004 the total remuneration was (in USD 1,000) 4,181 and 3,340 respectively.
84
1)
The one-off bonus relates to a historic agreement due to
renegotiations of employment contracts in 2003. The bonus is
earned over the period 2004-2006. The final amount was paid
in January 2007 and recognised as bonus for 2006.
2)
Bonus scheme with settlement in cash. The major part of the
amount is payable in 2007 and is based on the estimated bonus
achieved for 2006. For Jens Ismar, Garup Meidell and Rebekka
Glasser Herlofsen a part of the amount relates to the long term
bonus scheme which is partly settled in cash. The amount will
be payable in 2009 and is based on an estimated bonus
contingent on an increase in the share price. The estimate is
uncertain as it is depending on the future development of the
share price as well as the fact that the manager will have to
be employed with the company at the time of payment.
BW Gas annual report 2006
3)
Share based incentive scheme is the manager’s share of the
expense in the reported period for restricted shares granted
and to be granted for 2006 including any dividends received
for restricted shares in the period. For Jens Ismar, Garup Meidell
and Rebekka Glasser Herlofsen the amount also includes an
amount related to restricted shares to be granted under the long
term share based bonus scheme. The shares will be granted
in 2009, and the number of shares is based on an estimated
bonus contingent on an increase in share price. The estimate
is uncertain as it is depending on the future development of
the share price as well as the fact that the manager will have
to be employed with the company at the time of the vesting.
4)
The number of restricted shares granted in the period is based
on the estimated bonus payable in restricted shares for 2006.
Reference is made to note 15 for information about total number
of shares and restricted shares owned by the management.
5)
Outstanding under loans to key management per 31.12.06
consists of:
Jan Håkon Pettersen, Managing Director NOK 4,600,000.
The loan will mature in July 2013 and be payable in full.
Leif Arthur Andersen, Director Technical and Maritime Division
NOK 725,000. The loan will be waived upon retirement, which
is expected to take place in December 2007. The interest rate
is currently 3.5% for both.
Group accounts
NOTE 21 I RECEIVABLES
Other employment contract details
Jan Håkon Pettersen was appointed Managing Director from 1 January 2004. His employment contract
is fixed until 31 December 2007. Thereafter it can be terminated by both parties at six months notice.
At the time of retirement, he will be entitled to a pension of 2/3 of his salary. The pension entitlements
for previous board member Svein Erik Amundsen and Managing Director Jan Håkon Pettersen are secured
through mortgages of real estate. For both the pension will be calculated proportionately based on the
number of years the manager has been employed with the company compared with the required 30
years of employment for fully earned pension rights.
Under the employment agreements, employment can typically be terminated upon six months notice.
In such event, senior management shall receive a severance payment equal to two years annual salary.
Two members of the group’s senior management are entitled to retire at the age of 63 with a pension
constituting 2/3 of their salary upon retirement. One member of the group’s senior management is
entitled to retire at the age of 60 with a pension constituting 2/3 of his salary upon retirement. The
pension will be calculated proportionately based on the number of years the manager has been employed
with the company compared with the required 30 years of employment for fully earned pension rights.
RECEIVABLES - CURRENT ASSETS
The total amount of current receivables is USD 76.5 million in 2006, USD 107.9 million in
2005 and USD 85.5 million in 2004. This item consists primarily of accrued freight and interest
income and amounts receivable from charterers and agents in respect of the operation of
the fleet. It also includes insurance claims relating to the fleet. All these receivables fall
due within one year of the balance sheet date.
RECEIVABLES - OTHER FINANCIAL LONG-TERM ASSETS
This item includes
In USD million
31.12.06
RECEIVABLES
Financial leases
87.0
121.0
Loans to external parties *)
Receivables, chartering pools
9.1
Loans to joint ventures
0.0
Loans to employees
4.1
Total receivables
221.2
OTHER ITEMS
Fair value interest instruments
2.1
Investments in other companies
0.2
Other
2.0
Total other items
4.3
Total
225.6
*)
31.12.05
31.12.04
0.0
90.1
10.5
9.4
4.2
114.2
0.0
91.2
14.8
14.1
6.0
126.1
0.0
0.2
1.0
1.2
115.4
7.3
0.9
0.2
8.4
134.5
The amounts consist mainly of a mortgage loan to Sonatrach Berge Arzew Corporation and
receivable linked with the purchased TC in/out with Yara International/Yara Switzerland.
BW Gas annual report 2006
85
Group accounts
NOTE 22 I FINANCIAL INSTRUMENTS AND RISK MANAGEMENT
The group’s activities expose it to a variety of financial risks: market risk (including currency risk, fair value interest rate
risk and price risk), credit risk, liquidity risk and cash flow interest rate risk. The group’s overall risk management
programme focuses on the unpredictability of financial markets and seeks to reduce potential adverse effects on the
group’s financial performance by entering into hedging instruments designed to partly mitigate interest rate, bunkers
price and currency risk.
The management identifies, evaluates and hedges financial risks in close co-operation with the group’s operating
units. The Board provides written policies covering specific areas, such as foreign exchange risk, interest rate risk,
and bunker price risk.
MARKET RISK FOR FINANCIAL INSTRUMENTS
(i) Foreign exchange risk
Practically all operating revenue and contractual obligations for vessels under construction are denominated in USD.
The group’s vessels are also mainly valued in USD when trading in the second-hand market. Around 35% of the
company’s operating expenses (excluding depreciation) are incurred in Norwegian Kroner. This exposes the group
to foreign exchange risk. At balance sheet date the group has bank deposits, short term receivables and payables
in other currencies than USD, mainly NOK and Euro. In addition the group’s pension obligation is valued in NOK.
The group has a hedging policy to manage the foreign exchange risk by using forward contracts, options and swaps
in order to reduce negative impact caused by exchange rate volatility between USD and NOK.
For accounting purposes, expenses incurred in NOK and other foreign currencies are converted into USD at the exchange
rate prevailing on the date of each transaction. Because a significant portion of the group’s operating expenses is
incurred in currencies other than USD, the expenses may from time to time increase relative to the revenues as a
result of fluctuations in exchange rates, particularly between the USD and NOK, which could affect the amount of
net income that the group reports in future periods.
A change of +/- 0.1 in the NOK/USD exchange rate impact the operating expenses (excluding non-cash items) with
USD 1.0 to 1.2 million at the expense base as of balance sheet date.
The existing FX-contracts are listed in the table below:
Amounts in USD million
FX contracts at balance sheet date, nominal
Fair value at balance sheet date
Realised gain/loss in the period
Maturity
BW Gas annual report 2006
The group has limited interest-bearing assets, except for bank deposits and long term receivables as follows:
- Sonatrach Berge Arzew Corporation – fixed interest until repayment.
- Financial lease receivable, Berge Arzew – fixed interest based on the TC contractual payments.
- Receivable linked with the TC in/out with Yara International/Yara Switzerland ltd – fixed interest
based on the TC contractual payments.
The group has established an interest rate hedging policy. The policy is primarily designed to hedge the
interest exposure for the financing of LNG vessels fixed on long-term time charters. The group hedges
the lower of 50% of the LNG exposure and 50% of net interest-bearing debt. The interest swaps have
a maximum average length of 10 years. The existing hedging policy was established in November 2005,
and fully implemented in 2006.
When the swaps are taken into account, a change in the interest rates of +/- 100 basis points will impact
the interests payable with +/- USD 6.8 million given the net interest-bearing debt/bank deposits as
at balance sheet date.
Overview of interest swap agreements:
Amounts in USD million
Nominal value of swaps at balance sheet date
Coverage of net interest-bearing debt
Coverage of LNG exposure *)
2006
544
48.1%
51.0%
2005
290
33.0%
31.9%
2004
485
39.2%
83.5%
213
757
0
290
300
785
1.6
0.8
-2.5
-4.0
-69.7
-13.0
Range of fixed interest rates
4.36%-5.16%
Floating rate basis
LIBOR
Weighted average fixed rate, excl. forward start contracts
4.89%
Weighted average length, excl. forward start contracts
7.46 year
2.66%-5.85%
LIBOR
4.57%
6.78 year
1.25%-6.80%
LIBOR
5.69%
6.77 year
Nominal value of swaps, forward start
Total swaps
Fair value at balance sheet date
Realised gain/loss in the period
2006
26.7
0.8
2.2
1-9 mnts
2005
32.5
0.5
107.6
1-9 mnts
2004
7.5
1.4
45.6
1-6 mnts
The group has also entered into an FX-swap to convert a NOK bond loan into USD. See details under the hedge
accounting section below.
86
(ii) Interest rate risk and cash flow interest rate risk
The group is exposed to market and cash flow risks relating to changes in the interest rates, as the
borrowings are at floating rate. Interests on loans drawn as of 31 December 2006 are paid based on
LIBOR with an average margin of 61 basis points.
*)
The LNG exposure is calculated by summarizing the carrying values for assets related to long term
LNG contracts.
Group accounts
(iii) Price risk
The group has very limited exposure to price risk in the equity marked, as the investment in shares
available for sale is insignificant.
The group has established a hedging policy to offset the price risk related to fluctuations on bunker fuel
prices. The policy is to hedge to a maximum 24 months fuel consumption for all new COA-contracts, if the
contract is without clauses for price adjustments on bunker.
A change in +/- 10% on the bunker fuel prices, impacts the bunker expenses with +/- USD 5.0 to 6.0
million based on the existing fleet and contract base as at balance sheet date.
Overview of bunker hedge contracts:
Amounts in USD million
Contracts at balance sheet date
Fair value at balance sheet date
Realised gain/loss in the period
Length of contracts as at balance sheet date
2006
2005
1)
2)
2004
3)
0.0
0.4
0.0
-0.5
0.5
1-12 mnts
0.0
0.0
1-12 mnts
1)
The group had no contracts as at balance sheet date 2006.
2)
At the end of 2005, the group had entered into contracts hedging a part of the bunker fuel consumption
for 2006 for VLGC vessels trading world wide. The contracts hedged approximately 20% of estimated
consumption. The group had also entered into contracts hedging the bunker fuel prices for the MGC
vessels operating in the North Sea. These contracts hedged approximately 100% of the estimated
consumption in first quarter 2006 and 50% in the remaining quarters in 2006 for MGC vessels on
COA-contracts without price adjustment clauses for bunker.
3)
At the end of 2004, the group had one contract covering the first three months of 2005 and another
covering the remaining part of 2005 related to the MGC vessels operating in the North Sea. These
contracts hedged approximately 100% of the estimated consumption in 2005 for MGC vessels on
COA-contracts without price adjustment clauses for bunker.
CREDIT RISK ASSOCIATED WITH FINANCIAL INSTRUMENTS (RECEIVABLES)
(i) Main policy:
The group has established a policy to secure that all cash and deposits are located in banks and other
financial institutions with international good reputation and high credit ratings. The vessels are contracted
to charterers with high credit ratings or with additional guarantees.
(ii) Non current receivables:
The loan to Sonatrach Berge Arzew Corporation, amounting to USD 89.2 million at 31 December 2006 is
secured by a first priority Bahamas mortgage on the borrower’s 32/64 interest in the Berge Arzew vessel and a deed of covenant collateral to that mortgage including an assignment of the borrowers interest in the vessels earnings, insurances and requisition compensation. The loan was granted in connection with the sale of a 32/64 interest in the Berge Arzew vessel in 2004. The Borrower shall repay the
loan by 40 semi-annual and fixed instalments. The repayments commenced on January 31, 2005. The
interest rate on the loan is fixed at 7.5% for the first 10 years and 9% for the next 10 years.
The long term receivable from Yara, amounting to USD 32.8 million at 31 December 2006, was established in connection with the Yara transaction that was entered into during 2006, see note 4. The
receivable represents the net present value of certain unsecured net settlement arrangements entered
into with the Yara group. The net settlement arrangements have fixed monthly settlements and are
organized as time charter contract over periods of 13 - 15 years commencing in 2006 and 2007. The
receivable yields an interest of 8.2% p.a.
Non current receivables related to financial lease (note 18) are based on on-going business relationships with equal risks as short term charterer receivables.
(iii) Current receivables
Current receivables are mainly freight receivables. Based on credit ratings and the short term due
dates on the receivables, the group regard the credit risk to be limited for these receivables.
BW Gas annual report 2006
87
Group accounts
NOTE 22 cont.
(iv) Overview of receivables due
The table below lists the receivables according to due dates as at balance sheet date:
Amounts in USD million
Assets
Non Current receivables
Current receivables
Total
Not due
Overdue
< 3 mnts
Overdue
> 3 mnts
225.6
64.8
290.4
0.0
2.4
2.4
0.0
9.3
9.3
The table below shows the liquidity risk related to maturity of loans. Included in the table are liabilities
at carrying amounts, categorised by the maturity dates.
Total
225.6
76.5
302.1
There are no accruals for impaired receivables.
LIQUIDITY RISK ASSOCIATED WITH FINANCIAL INSTRUMENTS (LOAN AND DEBT)
Prudent liquidity risk management implies maintaining sufficient cash and marketable securities, the
availability of funding through an adequate amount of committed credit facilities and the ability to close
out market positions. Due to the dynamic nature of the underlying business, the group maintains sufficient
cash for its daily operations via short term cash deposit at banks and unutilised portion of revolving credit
facilities offered by financial institutions. At the end of the period, the group holds cash and short term
deposits amounting to USD 248.9 million (Note 13), compared to USD 354.3 million in 2005 and USD
242.7 million in 2004. Committed credit facilities available approximate USD 400 million of the USD 1,500
million Bank Credit Facility.
NonLess than 6 to 12
1 to
Over interest
Amounts in USD million
6 months months 5 years 5 years bearing
Total
Credit facility, mortgage loan and bond loan
7.3
7.3 218.0 1,286.3
0.0 1,518.9
Tax lease
4.7
4.7
48.0
0.0
0.0
57.4
Financial lease (Note 18)
1.9
1.9
7.3
18.1
0.0
29.2
Other non interest-bearing debt and provisions
0.0
0.0
0.0
0.0
112.2 112.2
Total
13.9
13.9 273.3 1,304.4
112.2 1,717.9
OVERVIEW OF DERIVATIVES AND FINANCIAL ASSETS AVAILABLE FOR SALE
The financial instruments are carried at fair value in the balance sheet, and are classified as follows:
Amounts in USD million
Forward foreign exchange contracts
Bunker swaps
Available for sale financial assets
Total current investments
Bond loan - hedge instruments
Interest rate swaps *)
Total non current investments
*)
88
BW Gas annual report 2006
Includes contracts under hedge accounting.
2006
Asset Debt
0.8
0.0
0.0
0.0
7.9
0.0
8.7
0.0
0.0
0.7
2.1
0.5
2.1
1.2
2005
Asset Debt
0.0
0.2
0.0
0.5
25.1
0.0
25.1
0.7
0.0
0.0
0.0
2.3
0.0
2.3
2004
Asset Debt
1.4
0.0
0.0
0.0
11.7
0.0
13.1
0.0
0.0
0.0
7.3 77.0
7.3 77.0
Group accounts
SPECIFICATION OF MOVEMENT ON FINANCIAL ASSETS AVAILABLE FOR SALE
Movements on financial assets available for sale, directly to/from equity and through income
statement in the period:
Amounts in USD million
Net unrealised gain/loss in equity as at 01.01
Amount of gain or loss recognised directly in equity
Unrealised net increase/decrease in equity as of 31.12
Gain/loss realised and charged to income statement
Impairments charged to income statement
2006
15.6
-8.1
7.5
17.0
0.8
2005
3.1
12.5
15.6
6.0
0.0
Exchange rate hedge NOK bond loan
The group has entered into a cross currency swap from NOK to USD related to the NOK bond loan in
the parent company. The swap changes the cash flow of interests and repayments from NOK to USD
in the full length of the loan and is tailored to match the cash flows in NOK.
2004
0.0
3.1
3.1
0.0
2.0
HEDGE ACCOUNTING
The group has entered into contracts (financial derivatives) which qualify for hedge accounting. These
contracts are included in the figures above, and are further specified below:
Interest rate hedges:
Equity adjustment hedge accounting 01.01.
Fair value change on hedge instrument charged to equity
Cash flow effect of hedge charged to income statement
Equity adjustment hedge accounting 31.12.
Inefficiency charged to income statement:
2006
0.0
-2.7
0.1
-2.6
0.0
Exchange rate hedge:
Cash flow hedges:
Interest hedge related to tax lease
The group has entered into two interest swap agreements from floating to fixed interests covering a
period of 12 years from delivery of the two Daewoo LNG newbuildings (Hull no. 2258 and 2259). The
swap contracts are with forward start, and are tailored to match 50% of the interests in the tax lease
agreements on these two vessels. The two swap agreements hedge 50% of the remaining principal
amount at all times throughout the 12 year period, one with a fixed interest of 5.1575%, while the
other agreement has an interest of 5.35% with a floor/roof adjustment for number of days where
the 6 month LIBOR falls below 1.00%/above 7.15%. The two principal amounts for the agreements are
approximately the same size.
Equity adjustment hedge accounting 01.01.
Fair value change on hedge instrument charged to equity
Fair value change on hedge object (unrealised agio/disagio) charged to equity
Equity adjustment hedge accounting 31.12.
Inefficiency charged to income statement:
2006
0.0
-0.7
-1.9
-2.6
0.0
Interest hedge mortgage loan (Hegas KS)
The group has entered into a 5 year interest swap agreement from floating interest rate to fixed interest
rate related to a mortgage loan in the subsidiary Hegas KS. The swap has been tailored to match the
interest cash flows in the loan agreement. Hegas KS pays fixed interests of 5.0475% + 0.5% margin
in 5 years from 11.09.06 on 50% of the remaining principal amount at all times.
BW Gas annual report 2006
89
Group accounts
NOTE 23 I DISCONTINUED OPERATIONS
Prior to the IPO on 25 October 2005, BW Gas ASA was through World Nordic ApS a 100%owned subsidiary of Bergesen Worldwide Ltd., Bermuda. In June 2005, Bergesen Worldwide
Ltd. announced its intention to restructure Bergesen into a pure gas shipping company with
the aim of listing its shares on the Oslo Stock Exchange. In this connection, the majority of
the gas, offshore, tanker and dry bulk businesses were planned separated into stand-alone
entities within the Bergesen Worldwide Ltd. group through a combination of sales and
demerger transactions, with BW Gas holding substantially all of the gas business. Except
for the planned disposal of some combined tanker contracts (BB-hire in and TC-hire out)
the restructuring was completed in 2005. In accordance with IFRS 5, the segments Offshore,
Dry Bulk and Tankers are presented as discontinued operations in the consolidated income
statement for all presented periods, and in the consolidated balance sheet as of 31 December
2005. As of 31 December 2006, there are no balance sheet items to reclassify to discontinued operations. Reference is made to note 3 for details regarding the two tankers that
ceased to be presented as discontinued operation in 2006. Reference is made to the annual
accounts for 2005 for details on the restructuring.
90
BW Gas annual report 2006
Specification of revenue and expenses reclassified to discontinued operations
INCOME STATEMENT
In USD million
DISCONTINUED OPERATIONS
Operating revenue
Voyage expenses
Charter hire expenses
Salaries, social security and pensions
Other operating expenses
Operating profit before depreciation and disposals
Depreciation
Impairment charges/reversals
Net gain on sale of tangible fixed assets
Operating profit
Interest income
Interest expenses
Net foreign exchange gain/loss
Share of profit from associates
Other financial items
Net financial items
Profit before tax
Income tax expense
Net profit from discontinued operations
2006
0.0
-0.1
0.0
-0.1
-0.8
-1.0
0.0
0.0
0.0
-1.0
0.0
0.0
0.0
0.0
0.0
0.0
-1.0
0.0
-1.0
Year ended 31 December
2005
2004
141.8
-27.4
-13.7
-5.5
-42.5
52.7
-19.3
-9.2
145.7
169.9
0.0
-0.6
0.0
0.0
3.6
3.0
172.9
-5.1
167.8
219.4
-48.2
-0.7
-26.1
-47.1
97.3
-28.3
5.2
59.8
134.0
0.0
-1.2
0.0
0.0
3.3
2.1
136.1
0.0
136.1
Group accounts
NOTE 24 I ASSETS PLEDGED AS SECURITY
NOTE 25 I SUBSEQUENT EVENTS
Mortgages and leases
Total borrowings include secured liabilities of USD 358.6 million for the group which are secured by mortgages over the group’s vessels with a book value USD 501.1 million including tax leases and financial leases.
In January 2007, the group increased the 5 year bond loan with NOK 100 million with a coupon
rate of 3 months NIBOR +0.50% p.a. The proceeds and interest have been swapped into USD.
Finance lease and tax lease liabilities of the group are secured by the rights to the leased vessels which
would revert to the lessor in the event of default by the company. The book value of vessels under
financial lease and tax lease is USD 140.6 million.
Reference is made to note 17 and 18 for further information regarding loans and finance lease liabilities.
Pensions:
The group’s real estate with book value of USD 38 million is pledged as security for a pension obligation.
Reference is made to note 20 for further information regarding this security.
VLGC BW Sisu (75,989 cbm, 1978 built) was sold in February 2007 with delivery in the same
month. The vessel will be used for captive trade/storage in the Middle East. The sales price
is USD 8.9 million, which will generate a booked sales gain of about USD 6.4 million in the
first quarter 2007.
In February 2007, Bergesen d.y. Shipping AS received a notice from the Central Tax Office
of Large Enterprises stating that the tax authorities were considering increasing the taxable
income for the fiscal years 2000 and 2004. Reference is made to note 19 for further information.
BW Gas annual report 2006
91
Parent company accounts
92
BW Gas annual report 2006
Parent company accounts
BW Gas ASA
INCOME STATEMENT
NOK million
OPERATING REVENUE/EXPENSES
Operating revenue
Salaries, social security taxes and pensions
Provision for severance payments
Other operating expenses
Net gain on sale of tangible fixed assets
Depreciation
Operating profit
FINANCIAL INCOME/EXPENSES
Interest income
Gain/loss on sale of securities
Interest expense
Net foreign exchange gain/loss
Impairment charge of shares/reversal
Impairment charge of financial long-term assets
Dividends and other financial items
Net financial items
Profit before tax
Income tax expense
Net profit
Equity transfers and allocations:
Dividends
Transferred to/from other equity
Total equity transfers and allocations
Note
2006
2005
2004
2
4/5
632
- 542
0
- 145
0
- 20
- 75
709
- 605
0
- 120
1
- 23
- 38
944
- 857
- 27
- 128
2
- 19
- 85
745
10,131
-480
564
4
119
-2
11,081
521
29
-303
510
-4
-16
49
786
251
14
- 186
- 608
-2
-2
-4
- 537
11,006
- 54
10,952
748
0
748
- 622
0
- 622
-564
-10,388
-10,952
-205
-543
-748
0
622
622
8
7
3
6
BW Gas annual report 2006
93
Parent company accounts
BW Gas ASA
BALANCE SHEET
Note
NOK million
ASSETS
Intangible fixed assets
Tangible fixed assets
Financial long-term assets
Total non-current assets
7
7
8/10/15
Receivables
Work in progress
Short term investments
Bank deposits
Total current assets
10
8
11/15
TOTAL ASSETS
EQUITY AND LIABILITIES
EQUITY
Share capital
Share premium reserve
Total paid in equity
Other equity
Total equity
12/13
12
LIABILITIES
Net pension liabilities
Long-term interest bearing debt
Current liabilities
Total liabilities
5
14/15
8
TOTAL EQUITY AND LIABILITIES
31.12.06
31.12.05
31.12.04
38
40
20,368
20,446
45
42
9,839
9,926
52
41
10,873
10,966
285
10
3
91
389
342
11
17
239
609
172
4
69
206
451
20,835
10,535
11,417
128
0
128
11,898
12,026
128
0
128
1,456
1,584
143
1,795
1,938
502
2,440
65
7,819
925
8,809
130
8,403
418
8,951
125
8,775
77
8,977
20,835
10,535
11,417
Oslo, 20 March 2007
HELMUT SOHMEN
ANDREAS SOHMEN-PAO
KNUT BRUNDTLAND
KATHRYN M. BAKER
CLARE M. J. SPOTTISWOODE CBE
Chairman
Deputy chairman
Board member
Board member
Board member
JAN HÅKON PETTERSEN
Managing Director
94
BW Gas annual report 2006
Parent company accounts
BW Gas ASA
STATEMENT OF CASH FLOW
2006
11,006
20
-17
-3
0
19
-119
-4
-10,131
771
2005
748
23
-5
-386
-1
-40
16
4
-29
330
2004
-622
19
-12
249
-2
51
2
93
-14
-236
-11,596
-200
1,707
36
587
-484
3
11,067
-726
4
76
1,823
3
74
180
Proceeds from new loans
Loan repayments
Purchase of own shares
Dividends paid
Net cash from financing activities
950
-938
0
-205
-193
8,017
-8,775
-20
-1,342
-2,120
9,050
-4,952
0
-3,951
147
Net change in cash during period
-148
33
91
239
91
206
239
115
206
NOK million
Net profit before tax
Depreciation
Pension costs
Unrealised foreign exchange gains/loss
Gains/loss on sale of fixed assets
Changes in short-term items
Impairment charges financial fixed assets
Impairment charges shares/reversal
Gains/loss on sale of securities
Net cash from operating activities
Payment for purchase of
Shares and equity to subsidiaries
Other fixed assets
Proceeds from sale of
Other fixed assets
Shares
Net cash from investing activities
Cash at beginning of period
Cash at end of period
Note
7
5
BW Gas annual report 2006
95
Parent company accounts
BW Gas ASA
NOTES
NOTE 1 I ACCOUNTING PRINCIPLES
The accounts have been prepared in accordance with
the Accounting Act (Norway) and generally accepted
accounting principles in Norway. The accounting
principles which are described below are applicable
and accepted principles for Bergesen Worldwide
Gas ASA (BW Gas ASA).
A) REVENUE RECOGNITION
Sales revenues are recognised at the time of delivery.
Revenue from services are recognised at execution.
The share of sales revenue associated with future
services are recorded in the balance sheet as
deferred sales revenue, and are recognised at
the time the services are rendered.
B) CLASSIFICATION AND VALUATION
OF BALANCE SHEET ITEMS
Assets intended for long term ownership or use
have been classified as fixed assets.
Receivables are classified as current assets if they
are to be repaid within one year after the transaction date. Similar criteria apply to liabilities.
Current assets are valued at the lower of purchase
cost and net realisable value. Short term liabilities
are reflected in the balance sheet at nominal value
on the establishment date.
Long term liabilities in NOK, except other accruals,
are reflected in the balance sheet at nominal value
on the establishment date. Accruals are included at
present value if the interest element is material.
96
BW Gas annual report 2006
C) INTANGIBLES
Intangible assets acquired are capitalised at cost and
mainly consist of specialised computer software.
The assets are depreciated on a straight-line basis
over the estimated remaining useful life of each
asset. On an annual basis, the assets are tested for
impairment and their useful lives are assessed.
Adjustments in useful lives, where applicable,
are made on a prospective basis.
D) FIXED ASSETS
Fixed assets are reported in the balance sheet at
cost less depreciation and impairment charges.
Depreciation is charged on a straight-line basis over
the estimated remaining useful economic life of
each asset.
When there are indicators of impairments of fixed
assets, an assessment is made as to whether the
value in use or net sales value is less than their book
value. The value in use is estimated using the present
value of projected future cash flows. Fixed assets
are impaired to the higher of net market value and
value in use when both are less than their book
value. These impairment charges are reversed if
there is no longer any basis for them.
E) SUBSIDIARIES, ASSOCIATED COMPANIES
AND JOINT VENTURES
Subsidiaries and investments in associates are valued
by the cost method in the company accounts. The
investment is valued as cost of acquiring shares in
the subsidiary, providing that write down is not
required. Write down to fair value will be carried
out if the reduction in value is caused by circumstances which may not be regarded as incidental,
and deemed necessary by generally accepted
accounting principles. Write downs are reversed
when the cause of the initial write down are no
longer present.
H) INVENTORIES
Inventories are carried at the lower of cost and
net realisable value.
Dividends and other distributions are recognised in
the same year as appropriated in the subsidiary
accounts. If dividends exceed withheld profits after
acquisition, the exceeding amount represents reimbursement of invested capital, and the distribution
will be subtracted from the value of the acquisition
in the balance sheet.
J) TAX
The tax charge reported includes both the tax payable for the period and the change in deferred tax.
Deferred tax is included in the balance sheet as a
long-term liability. The company is subject to
ordinary taxation.
F) SHARES, BONDS AND CERTIFICATES
Financial investments in shares are classified as
current assets, whereas long-term investments are
classified as fixed assets. Bonds, certificates and
shares held as current assets are valued on an
individual basis and carried at the lower of cost and
net realisable value. Long-term investments are
included in the accounts using the cost method.
Shares presented as fixed assets are written down
to net realisable value in the event of a permanent
and material diminution in value. When shares are
sold, the capital gain/loss is calculated on the basis
of the average price paid.
G) RECEIVABLES
Receivables are reported at the amount outstanding
less a provision for bad debts.
I) HOLDING OF TREASURY SHARES
The company’s holdings of treasury shares are
recorded against equity.
Deferred income tax is provided, using the liability
method, on all temporary differences at the balance
sheet date between the tax bases of assets and
liabilities and their carrying value for financial
reporting purposes, except for deductible temporary
differences associated with investments in subsidiaries, associates or joint ventures, where deferred
tax assets are only recognised to the extent that it
is probable that the temporary difference will reverse
in the foreseeable future and tax on gain or loss on
the investment is not excepted under the Norwegian
tax system.
The carrying amount of deferred income tax assets
is reviewed at each balance sheet date and reduced
to the extent that there is no longer probable that
sufficient profit will be available to allow all or part
of the deferred income tax asset to be utilised.
Parent company accounts
NOTE 2 I OPERATING REVENUE
Deferred income tax assets and liabilities are
measured at the tax rates that are expected to apply
at the time when the asset is realised or the liability
is settled, based on the tax rates that have been
enacted or substantively enacted at the balance
sheet date. Deferred tax and deferred tax assets
are recognised at their nominal value.
K) PENSIONS
The company has two defined pension schemes,
of which one is unfunded. A defined benefit plan
defines the amount of pension benefit that an
employee will receive on retirement, usually
dependent on one or more factors such as age,
years of service and compensation.
The liability recognised on the balance sheet in
respect of defined pension plans is the present value
of the defined benefit obligation at the balance
sheet date less the fair value of plan assets, together
with adjustments for unrecognised actuarial gains
or losses and past service costs. The defined benefit
obligation is calculated annually by independent
actuaries using the projected unit credit method.
The present value of the defined benefit obligation
is determined by discounting the estimated future
cash outflows. The discount rate has been based
on interests on Norwegian State long term bonds,
adjusted for differences in maturity.
Actuarial gains and losses arising from experience
adjustments and changes in actuarial assumptions
in excess of the greater of 10% of the value of plan
assets or 10% of the defined benefit obligation are
charged or credited to income over the employees’
expected average remaining service period.
Past-service costs are recognised immediately in
income, unless the changes to the pension plan are
conditional on the employee remaining in service
for a specified period of time (the vesting period).
In this case, the past-service costs are amortised
on a straight-line basis over the vesting period.
L) SHARE-BASED COMPENSATION AND BONUS
The company operates an equity-settled, sharebased compensation plan for the directors and
assistant directors, where bonus earned is partly
settled in cash and partly with restricted shares
vesting after a period of time. The full bonus amount
for the employees is recognised as an expense,
whereof the part with cash settlement is recognised
as a liability and the part with settlement in shares
is recognised as equity. At each balance sheet date,
the company revises the estimated size of the bonus
and the number of restricted shares that are expected to vest. The company recognises the impact
of the revision to original estimates, if any, in the
income statement, with a corresponding adjustment
to equity and liabilities accordingly.
M) FOREIGN CURRENCY TRANSLATION
The presentation currency for the company is
NOK. The functional currency is USD. Transactions in
foreign currencies are recorded in both USD and NOK
at the currency rate at the date of the transaction.
The operating revenues of the company
mainly consist of management fee from
other companies within the group,
related to technical and commercial
management of vessels and administration of the same companies.
Monetary assets and liabilities denominated in foreign currencies are translated at the rate of exchange
prevailing at the balance sheet date. Non-monetary
items that are measured in terms of historical cost
in foreign currency are translated using the exchange
rate as at the date of the initial transaction.
N) FINANCIAL INSTRUMENTS
Financial instruments (bunkers contracts, foreign
currency contracts and interest rate swaps) are
valued at lower of cost and market value.
O) CASH FLOW STATEMENT
The company applies the indirect method. Cash and
cash equivalents include cash, restricted cash, bank
deposits, and other short-term investments which
immediately and with minimal exchange risk can
be converted into known cash amounts.
In addition the company operates a bonus compensation plan for all employees at the head office
which is settled in cash. The company recognises a
liability and an expense for the bonuses, based on
an agreed upon formula.
BW Gas annual report 2006
97
Parent company accounts
NOTE 3 I MAJOR TRANSACTIONS
NOTE 4 I SALARIES, PERSONS EMPLOYED AND REMUNERATION
Restructuring and sale of subsidiaries
In 2006 the company has restructured
its activity. The subsidiaries have been
placed in different sub-holding companies according to segment (LPG or LNG)
and taxation scheme. The restructuring
has been implemented through sale of
shares in subsidiaries to sub-holding
companies. The sales of shares amounted
to NOK 11,046 million with a net gain
of NOK 10,128.
SALARIES
NOK million
Salaries
Social security taxes
Pension cost
Total
Payment of debt
The syndicate loan was repaid with USD
145 million in 2006. Undrawn amount
is USD 400 million as of 31.12.2006.
Ref. note 14.
New loans raised
In July 2006, bond loans of in total NOK
950 millions were raised. Se note 14.
Subsequent events
In January 2007, the bond loan was
raised with NOK 100 million. In February
2007, the syndicate loan was repaid
with USD 20 million.
Note
5
BW Gas annual report 2006
2005
513
56
36
605
2004
736
77
44
857
PERSONS EMPLOYED (AVERAGE FOR THE YEAR)
Head office
Offices abroad
Norwegian and foreign seamen
with permanent employment contracts
Foreign seamen, temporary employment
Total
2006
161
12
2005
173
12
2004
201
14
282
1,371
1,826
338
1,265
1,788
462
1,496
2,173
Employees, full time
Employees, part time
1,822
4
1,786
2
2,170
3
REMUNERATION TO THE AUDITOR
NOK 1,000
Audit fee
Attestation fee
Tax related fee
Non audit fee
Total (ex VAT)
2006
947
27
113
447
1,534
2005
890
27
132
358
1,406
2004
780
25
329
173
1,307
REMUNERATION TO THE BOARD OF DIRECTORS
NOK 1,000
Morten Sig. Bergesen
Board member 01.01-26.05.2004
Svein Erik Amundsen
Board member 01.01-24.10.2005
Clare M. J. Spottiswoode CBE 01.09.05-31.12.2006
Kathryn M. Baker
25.10.05-31.12.2006
Knut Brundtland
25.10.05-31.12.2006
98
2006
454
40
48
542
2006
n.a.
n.a.
250
250
250
2005
n.a.
204
83
46
46
2004
101
250
n.a.
n.a.
n.a.
KEY MANAGEMENT REMUNERATION
It is company policy to at all time offer its executive management
competitive remuneration based on current market standards,
group and individual performance. The remuneration program
shall promote value creation and ensure that the executive
management and shareholders share common interest.
Following from the above, the remuneration consists of a basic
salary element combined with a performance based bonus program. The bonus program shall be linked to the group’s performance over time and shareholder value creation in order to
ensure that the management’s performance secures the longterm interests of the shareholders and other key stakeholders.
The bonus program consists of a short-term as well as a longterm scheme. In the short-term scheme, the remuneration is
linked to group performance as measured by the return on capital
employed and individual performance relative to set targets.
No bonus will be paid unless a minimum return is achieved as
agreed by the management and board of directors.
Remuneration in the long-term scheme is linked to development
of the share price. No bonus will be paid unless a pre-specified
share price increase is achieved.
For both schemes, the bonus award is a combination of cash and
restricted shares, payable after a pre-defined period and provided the person is still employed with the company.
Furthermore, there is an absolute limit to the bonus awards,
defined by the executive management’s monthly basic pay.
Parent company accounts
NOK 1.000
Total remuneration key management
2006
Wages and other taxable benefits
Pension expense
One-off bonus 1)
Bonus scheme settled in cash (estimate) 2)
Share based incentive scheme (estimate) 3)
Total
Number of granted restricted shares (estimate) 4)
Loans 5)
Period of employment
2006
27,793
2005
26,927
Jan Håkon
Pettersen
4,560
2,053
0
610
1,387
8,610
7,189
4,600
Jan.-Dec.
1)
The one-off bonus relates to a historic agreement due to
renegotiations of employment contracts in 2003. The bonus
is earned over the period 2004-2006. The final amount was
paid in January 2007 and recognised as bonus for 2006.
2)
Bonus scheme with settlement in cash. The major part of the
amount is payable in 2007 and is based on the estimated
bonus achieved for 2006. For Jens Ismar, Garup Meidell and
Rebekka Glasser Herlofsen a part of the amount relates to the
long term bonus scheme which is partly settled in cash. The
amount will be payable in 2009 and is based on an estimated
bonus contingent on an increase in the share price. The estimate
is uncertain as it is depending on the future development of
the share price as well as the fact that the manager will have
to be employed with the company at the time of payment.
3)
Share based incentive scheme is the manager’s share of the
expense in the reported period for restricted shares granted
and to be granted for 2006 including any dividends received
for restricted shares in the period. For Jens Ismar, Garup Meidell
and Rebekka Glasser Herlofsen the amount also includes an
amount related to restricted shares to be granted under the
long term share based bonus scheme. The shares will be
granted in 2009, and the number of shares is based on an
2004
22,516
Leif Arthur
Andersen
2,105
1,406
0
224
313
4,414
2,640
725
Jan.-Dec.
Jens
Ismar
2,233
940
418
274
601
4,465
2,640
0
Jan.-Dec.
Garup
Meidell
2,133
1,045
418
274
743
4,613
2,640
0
Jan.-Dec.
estimated bonus contingent on an increase in share price.
The estimate is uncertain as it is depending on the future
development of the share price as well as the fact that the
manager will have to be employed with the company at the
time of the vesting.
4)
The number of restricted shares granted in the period is based
on the estimated bonus payable in restricted shares for 2006.
Reference is made to note 15 for information about total number
of shares and restricted shares owned by the management.
5)
Outstanding under loans to key management per 31.12.06
consists of:
Jan Håkon Pettersen, Managing Director NOK 4.600.000 The
loan will mature in July 2013 and be payable in full.
Leif Arthur Andersen, Director Technical and Maritime Division
NOK 725.000. The loan will be waived upon retirement, which
is expected to take place in December 2007. The interest rate
is currently 3.5% for both.
Other employment contract details
Jan Håkon Pettersen was appointed Managing Director from 1
January 2004. His employment contract is fixed until 31 December
Rebekka Glasser
Herlofsen
1,722
576
0
237
357
2,893
2,288
0
Jan.-Dec.
Hans Ditlef
Martens
2,081
450
366
0
267
2,799
4,619
0
Jan.-Jun.
Total
14,835
6,470
1,202
1,618
3,668
27,793
22,016
5,325
2007. Thereafter it can be terminated by both parties at six
months notice. At the time of retirement, he will be entitled
to a pension of 2/3 of his salary. The pension entitlements for
previous board member Svein Erik Amundsen and Managing
Director Jan Håkon Pettersen are secured through mortgages of
real estate. For both the pension will be calculated proportionately
based on the number of years the manager has been employed
with the company compared with the required 30 years of
employment for fully earned pension rights.
Under the employment agreements, employment can typically
be terminated upon six months notice. In such event, senior
management shall receive a severance payment equal to two
years annual salary.
Two members of the company’s senior management are entitled
to retire at the age of 63 with a pension constituting 2/3 of their
salary upon retirement. One member of the company’s senior
management is entitled to retire at the age of 60 with a pension
constituting 2/3 of his salary upon retirement. The pension will be
calculated proportionately based on the number of years the manager has been employed with the company compared with the
required 30 years of employment for fully earned pension rights.
BW Gas annual report 2006
99
Parent company accounts
NOTE 5 I PENSION PLANS
BW Gas ASA operates group pension plans for
groups of employees through independent funds
and life insurance companies. The pension entitlements are accrued on a linear basis over a
service life of 30 years. For office employees, the
plans provide for a retirement pension of 66% of
pensionable pay from the age of 67 as well as
benefits for surviving spouses/dependants and a
disability pension. Seafaring personnel covered by
the agreement between the Norwegian
Shipowners’ Association and the Norwegian seamen’s associations are entitled to a pension of
60% of pensionable pay from the age of 60 until
the age of 67. Seafaring personnel in senior positions who are covered by this agreement and the
relevant pension plan are entitled thereafter to a
pension of 50% of pensionable pay. The plan also
provides for disability and survivor benefits.
Seafaring personnel in junior positions covered by
the agreement are also entitled to a pension of
60% of pensionable pay from the age of 60 until
the age of 67. This plan too provides for a disability pension. However, this group is not entitled to
any benefits after reaching the age of 67 beyond
those conferred by the state pension scheme.
The above pension plans are coordinated with
anticipated state pension benefits and had a total
of 405 members at the year-end.
In the case of seafaring personnel not covered by
the agreement between the Norwegian Shipowners’ Association and the Norwegian seamen’s
100
BW Gas annual report 2006
organisations, defined contribution plans have
been set up for some groups in line with agreements with the seamen’s organisations in various
countries. These plans do not involve any pension
obligations beyond the payment of premiums.
The company also has some pension obligations
that are not covered by these group plans. These
relate to early retirement pensions for office
employees from the age of 64 and employees
not eligible for the group pension plans.
The values of plan assets and obligations are
based on estimates, which are adjusted each
year in line with information on the market value
of plan assets and actuarial calculations of obligations. Projected turnover in each of the plans is
taken into account. The calculation of the obligations is also based on the assumption that 90%
of the work force will accept the early retirement
option at age 64. The calculation applies the most
recent actuarial demographic statistics for disability, and will update to the most recent actuarial
demographic statistics for mortality in 2007.
NOK million
THE NET PENSION COST INCLUDES THE FOLLOWING ELEMENTS
2006
Service cost, at net present value
38
Interest in plan obligation
36
Estimated return on plan assets
-32
Amortised effect of changes in estimates and pension plans, and
differences between actual and estimated return on pension plan assets
14
Correction of earlier years
-8
Ordinary pension costs
48
2005
37
39
-38
2004
37
42
-41
-2
0
36
6
0
44
PENSION PLAN ASSETS AND OBLIGATIONS
31.12.06
Estimated value of plan assets
614
Estimated value of pension obligations
-880
Unamortised effect of changes in assumptions and pension plans, and
differences between actual and estimated return on pension plan assets 210
Estimated net plan assets (-obligations)
-56
Social security taxes
-9
Net plan assets (-obligations) in balance sheet
-65
31.12.05
631
-764
31.12.04
620
-734
18
-115
-15
-130
7
-107
-18
-125
35
21
2005
-125
-36
31
0
-130
2004
-113
-44
32
0
-125
Actual return on plan assets
27
The movement in the liability recognised in the balance sheet is as follows
The company has with effect from the accounts
for 2006 implemented IAS 19 as basis for calculation of pension expenses and obligations, and the
effect of the implementation from NGAAP to IFRS
is charged to equity account.
At beginning of the period
Total expense charged in the income statement
Contributions paid
Implementation of IFRS
At end of the period
2006
-130
-48
65
48
-65
Parent company accounts
NOTE 6 I TAX
The principal actuarial assumptions used for the balances as at 31 December were as follows and are
equal for both plans:
NOK million
Calculation of deferred tax asset/ deferred tax
Discount rate
Expected return on plan assets
Future salary increases
Future pension increases
Future public regulations of pension
2006
4.30%
5.40%
4.50%
2.00%
4.25%
2005
4.25%
5.25%
3.50%
2.50%
2.50%
2004
5.00%
6.00%
3.50%
2.50%
2.50%
The principal actuarial assumptions used for the amount charged to the income statement are as follows:
Discount rate
Expected return on plan assets
Future salary increases
Future pension increases
Future public regulations of pension
2006
4.25%
5.25%
3.50%
2.50%
2.50%
2005
5.00%
6.00%
3.50%
2.50%
2.50%
2004
4.75%
5.75%
2.00%
1.00%
1.00%
2006
Temporary differences
Fixed assets
-5
Financial long term assets
-36
Gain and loss account
10
Pension liabilities
-65
Net temporary differences
-96
Income basis for corporation tax credit to be carried forward
0
Tax losses to be carried forward
0
Basis for calculation of deferred tax asset
-96
28 % deferre tax asset
Deferred tax not recognised
Deferred tax asset in balance sheet
-27
27
0
2005
2004
-6
-164
12
-130
-288
-102
-450
-839
-7
-142
15
-125
-258
-125
-1,288
-1,672
-235
235
0
-468
468
0
Deferred tax assets are not recognised due to uncertainty with respect to utilisation.
There is currently no time limitation on losses carried forward.
BW Gas annual report 2006
101
Parent company accounts
NOTE 7 I INTANGIBLE AND TANGIBLE FIXED ASSETS
NOTE 6 cont.
Basis for income tax, change in deferred tax and tax payable
Profit before tax
Permanent differences
Basis for tax charges in the year
Change in temporary differences
Use of losses carried forward
Basis for tax payable in the income statement
Group contributions
Taxable income (basis for tax payable)
2006
11,006
-10,077
929
-182
-453
294
-192
102
2005
748
-63
685
23
-708
0
0
0
2004
-622
-2
-624
17
0
-607
0
-607
Allocation of tax charge
Tax payable (28% of the basis of tax)
Corporation tax credit to be carried forward
Total tax payable
Total tax on profit
82
-28
54
54
0
0
0
0
0
0
0
0
Tax payable in the balance sheet
Tax payable (28% of the basis of tax)
Tax effect of group contribution with effect on payable taxes
Tax payable in the balance sheet
54
-54
0
0
0
0
0
0
0
2006
2005
2004
82
8
-52
38
-15
76
6
-37
45
-13
74
2
-24
52
-11
4
0
0
-1
3
1
5
0
-1
-2
2
-1
6
0
-1
-2
3
-1
Fixtures and fittings, vehicles etc.
Cost as of 01.01
Additions
Disposal
Accumulated depreciation 31.12
Book value 31.12
Current year’s depreciation
87
6
-4
-52
37
-6
77
13
-3
-48
40
-9
114
6
-2
-80
38
-7
TOTAL TANGIBLE FIXED ASSETS
Cost as of 01.01
Additions
Disposal
Accumulated depreciation 31.12
Book value 31.12
Current year’s depreciation
91
6
-4
-53
40
-5
82
13
-4
-49
42
-10
128
6
-3
-90
41
-8
Total depreciation intangible - and
tangible fixed assets
-20
-23
-19
NOK million
INTANGIBLE FIXED ASSETS
Software
Cost as of 01.01
Additions
Accumulated depreciation 31.12
Book value 31.12
Current year’s depreciation
TANGIBLE FIXED ASSETS
Real estate
Cost as of 01.01
Additions
Disposal
Accumulated depreciation 31.12
Book value 31.12
Current year’s depreciation
Economical lifetime applied: Cars 3 years, office machines 5 years, IT hardware 6 years,
IT software respectively 5 years for standard programs and 7 years for tailored programs.
Office furniture is depreciated over 10 years.
102
BW Gas annual report 2006
Parent company accounts
NOTE 8 I SPECIFICATIONS
NOK million
OPERATING COSTS
Premises - rent
Premises - other expenses
IT expenses
Fees
Other operating expenses
Total operating costs
FINANCIAL LONG-TERM ASSETS
Shares and investments in subsidiaries
Investments in associated and other companies
Loans to subsidiaries
Other long-term receivables *)
Total financial long-term assets
*)
OTHER LONG-TERM RECEIVABLES
Loans to external parties
Tax leases receivables 1)
Capitalised arrangement fee on loans
Loans to employees
Other
Total other long-term receivables
1)
NOTE 9 I SHARES AND INVESTMENTS IN SUBSIDIARIES
note
9
10
2006
2005
2004
20
20
46
9
50
145
20
13
32
7
48
120
21
14
46
6
42
128
5,560
1
13,787
1,021
20,368
1,103
1
7,841
894
9,839
1,094
5
8,843
931
10,873
543
416
32
26
4
1,021
601
221
40
28
4
894
550
341
0
36
4
931
3
3
17
17
69
69
38
564
192
131
925
39
205
0
174
418
33
0
0
44
77
NOK million
Bergehus AS
BW LPG Holding AS
BW LNG Holding AS
Bella Store AS
Berge Arzew Partner AS
Bergehus AS
Bergesen d.y. Gas Carriers (Oslo) AS
Bergesen d.y. India PVT Ltd.
Bergesen d.y. Offshore AS
Bergesen Gas Shipping AS 2)
Bergesen d.y. Skipsfart AS
Bergesen d.y. Offshore (USA) Inc
Bergesen Kabushiki Kaisha
The Green Tankers AS
Partgas Shipping AS
Sendje Berge Offshore AS
Edda Gas AS
SLNG Yemen I
SLNG Yemen II
Lapa Ltd.
Total
Holding/Voting rights in %
2006
2005
2004
100.00 100.00 100.00
100.00
100.00
- 100.00 100.00
- 100.00 100.00
- 100.00 100.00
86.17
86.17
- 100.00 100.00
- 100.00 100.00
- 100.00 100.00
- 100.00 100.00
- 100.00 100.00
- 100.00 100.00
- 100.00 100.00
- 100.00 100.00
- 100.00 100.00
- 100.00
- 100.00
- 100.00
51.00
51.00
51.00
2006
185
4,289
1,086
5,560
Book value
2005
2004
55
46
185
63
223
311
118
101
1,103
55
185
63
262
311
118
100
1,094
Subordinated loan related to tax lease arrangements in subsidiaries.
SHORT-TERM INVESTMENTS
Shares
Total short-term investments
CURRENT LIABILITIES
Social security taxes
Accrued dividends
Accrued group contribution
Other non-interest bearing liabilities
Total current liabilities
BW Gas annual report 2006
103
Parent company accounts
NOTE 10 I INTERCOMPANY LOAN TO SUBSIDIARIES
NOTE 11 I RESTRICTED BANK DEPOSITS
NOK million
Restricted deposits relates to taxes withheld.
The company has intercompany balances with subsidiaries, directly or indirectly owned.
NOK million
Restricted bank deposits
LONG-TERM
Non-current receivables (in USD) 1)
Non-current receivables (in NOK) 1)
Long-term liabilities (in NOK) 1)
Net non-current receivables
Interest income from subsidiaries
Interest expense to subsidiaries
1)
2005
7,916
0
-52
7,864
2004
5,266
3,613
-36
8,843
661
12
441
2
201
1
The amount fall due later than five years. The interest conditions agreed upon:
LIBOR/NIBOR + margin 1.5% - 2%
SHORT-TERM
Current receivables
Net current receivables
104
2006
7,297
6,558
-68
13,787
BW Gas annual report 2006
2006
153
153
2005
40
40
2004
71
71
2006
13
2005
14
2004
18
Parent company accounts
NOTE 12 I EQUITY
NOK million
EQUITY 01.01.04
Extraordinary dividend
Profit after tax
Equity 31.12.04
EQUITY 01.01.05
Distibution from share premium
Transferred to other equity
Demerger
Purchase of treasury shares
Incentives share based payment
Dividend
Profit after tax
Equity 31.12.05
EQUITY 01.01.06
Incentives share based payment
Pension liabilities to IFRS
Dividend
Profit after tax
Equity 31.12.06
NOTE 13 I SHARES AND SHAREHOLDERS
Share capital
143
Share premium
reserve
1,795
143
1,795
143
1,795
-1,342
-453
-15
128
0
128
0
128
0
Other
equity
4,674
-3,550
-622
502
502
At 31 December 2006 Bergesen Worldwide Gas ASA had 1,084 shareholders.
Total
6,612
-3,550
-622
2,440
453
-23
-20
1
-205
748
1,456
2,440
-1,342
0
-38
-20
1
-205
748
1,584
1,456
5
48
-564
10,952
11,898
1,584
5
48
-564
10,952
12,026
As of 31 December 2006 a total of 128,347,885 shares were issued and outstanding, each
with a par value of NOK 1.00, which all have equal rights. Bergesen Worldwide Gas ASA had
as of 31 December 2006 in total 250,000 treasury shares.
Shareholding of the board of directors and Management (and related parties) in Bergesen
Worldwide Gas ASA as of 31 December 2006
The board of directors
Helmut Sohmen, Chairman
Andreas Sohmen-Pao, Deputy Chairman
Knut Brundtland
Clare M. J. Spottiswoode CBE
Kathryn M. Baker
Number of shares
1)
1)
25,000
0
2,000
Management 2)
Jan Håkon Pettersen (Managing Director)
Leif Arthur Andersen
Rebekka Glasser Herlofsen
Jens Ismar
Garup Meidell
1)
900
500
1,200
1,400
800
The Chairman and the Deputy Chairman of the board of directors indirectly have
significant influence over World Nordic Aps.
The management has in addition restricted shares as follows:
Jan Håkon Pettersen
Leif Arthur Andersen
Rebekka Glasser Herlofsen
Jens Ismar
Garup Meidell
2)
28,455
5,278
9,146
15,729
21,007
Reference is made to note 4 for further information on restricted shares bonus program.
The company’s auditor PricewaterhouseCoopers AS does not hold shares in the company.
BW Gas annual report 2006
105
Parent company accounts
NOTE 14 I INTEREST-BEARING LOANS
NOTE 13 cont.
Largest shareholders
Shareholder
WORLD NORDIC APS
STATE STREET BANK & TRUST CO. *)
SIS SEGAINTERSETTLE AG *)
THIRD AVENUE INTL. V
ODIN VERDIPAPIRFOND
BANK OF NEW YORK. BRUSSEL BRANCH
BAYERISCHE HYPO UND VEREINSBANK AG
COMMERZBANK AG *)
JPMORGAN CHASE BANK *)
COGENT-HUNTER HALL VALUE GROWTH
BNP PARIBAS SEC. SERVICES *)
BNP PARIBAS SECURITIES
*)
*)
Includes nominee accounts
Dividends paid and proposed
(NOK million)
2006
Proposed at year end:
Equity dividends
563.6
Dividend per share in NOK
4.40
Declared and paid during the year:
Equity dividends
205.0
Dividend per share in NOK
1.60
Total number of shares
per 31 December *)
128,347,885
Shares owned by the company
250,000
*)
% share
59.7%
3.2%
2.9%
2.0%
1.8%
1.6%
1.4%
1.4%
1.4%
1.2%
1.1%
1.0%
2005
2004
205.0
1.60
0.0
0.0
0.0
0.0
400.9
3.12
128,347,885 128,347,885
250,000
0
The number of shares has been adjusted retrospectively to reflect the
change in number of shares due to split and demerge.
The calculation of dividend per share excludes the shares owned by the
company.
106
BW Gas annual report 2006
Dividend restrictions
The part of the equity that is distributable
is depending on the dividend capacity of
the parent company Bergesen Worldwide
Gas ASA, and as of 31 December 2006,
the distributable reserves equal NOK
10,500 million before provisions for
dividend of NOK 564 million. Covenants
on debt financing require that the group’s
equity is minimum 35% of total assets
at all times, and place a limitation on
distributions, as well as the need to have
prudent reserves as required by the
Joint Stock Public Companies Act
(Allmennaksjeloven). Further, the dividend
capacity depends on the availability of
cash for distribution. Cash owned by
tonnage taxed entities, can only to a
limited extent be distributed without
taxation, and hence impose restrictions
on dividends or increase the expenses
related to dividends.
Treasury shares
On 21 September 2005, the extraordinary
general meeting approved that the board
be authorised for a period of 18 months
to acquire up to 250,000 shares in the
company with an aggregate nominal
value of up to NOK 250,000 with a
minimum purchase price per share of
NOK 25 and a maximum purchase price
per share of NOK 200. This right was
executed by the board in 2005, when the
company purchased 250,000 shares at
NOK 82 per share (USD 3.2 million in
total). The board plans to make use of
the treasury shares in connection with
the management compensation program.
NOK million
31.12.06
NON-CURRENT
Loan from Bergesen Worldwide Limited
0
Bank borrowings
6,869
Bond loan
950
Total non-current
7,819
31.12.05
31.12.04
0
8,403
0
8,403
8,775
0
0
8,775
CURRENT
Bank borrowings
Total current
0
0
0
0
0
0
Total borrowings
7,819
8,403
8,775
(a) Credit facility from bank syndicate
In connection with the listing of the company in 2005, the debt to Bergesen
Worldwide Limited was repaid and USD 1,239 million (net of establishment
expenses of USD 6.0 million) of a new unsecured revolving credit facility of
USD 1,500 million with a term of seven years was drawn. As of 31 December
2006 the drawn amount was USD 1,100 million.
(b) Bond loan
In July 2006, two bond loans were raised; NOK 700 million with a term of
three years and NOK 250 million with a term of five years.
(c) Security
The company’s borrowings are unsecured. However, the company is required
to comply with financial covenants, which all have been met for the financial
periods reported. The main requirements of the existing covenants are: The equity
over total asset ratio (group level) should at least equal 35% and the unencumbered assets over the total unsecured borrowings should at least equal 1.5.
Parent company accounts
NOTE 15 I FOREIGN EXCHANGE EXPOSURE
(d) Maturity of borrowings
The non-current borrowings have the following maturity:
31.12.06
Later than one year
and not later than five years
Later than five years
Total non-current borrowings
950
6,869
7,819
31.12.05
0
8,403
8,403
At year-end BW Gas ASA carried the following balances denominated in foreign currencies, in addition to operating
receivables and liabilities.
31.12.04
0
8,775
8,775
(e) Currency risk
As of 31.12.2006, the company’s borrowings are denominated in USD. The bond
loans and its interest rates have been swapped into USD at exchange rates
6.23 for NOK 700 million and at exchange rate 6.242 for NOK 250 million.
Million
Bank deposits
Loan to subsidiaries
Other interest bearing debt
Obligations
Receivables - fixed assets
Net
USD
10
1,169
-1,100
-152
158
84
2006
(in NOK)
63
7,297
-6,869
-950
987
528
USD
25
1,170
-1,245
122
72
2005
(in NOK)
169
7,895
-8,403
823
484
USD
27
945
91
1,063
2004
(in NOK)
163
5,712
550
6,425
The company seeks to balance net foreign exchange exposure.
(f) Interest rate risks
The syndicate loan has an interest rate of LIBOR + 0.60% until October 2010 and
LIBOR + 0.65% from November 2010. The three year bond loan has an interest
rate of LIBOR + 0.394%. The five year bond loan has an interest rate of LIBOR
+ 0.56%.
The weighted average effective interest rates of total borrowings at the balance
sheet date are as follows:
31.12.06
31.12.05
31.12.04
Borrowings in NOK
n.a
n.a
2.67%
Borrowings in USD
5.96%
5.03%
2.90%
BW Gas annual report 2006
107
Parent company accounts
NOTE 16 I COMMITMENTS AND CONTINGENCIES
NOTE 17 I RELATED PARTY TRANSACTONS
(a) GUARANTEES
Guarantees on behalf of subsidiaries (directly or indirectly owned)
The company has issued guarantees related to contracting of vessels by the subsidiaries
Partgas Shipping AS, SLNG Yemen I AS and SLNG Yemen II AS.
REMUNERATION AND CONTRACTUAL AGREEMENTS
Bergesen Worldwide Gas ASA is a public company. The company is owned 59.7% by World Nordic ApS,
Denmark, which is a subsidiary of Bergesen Worldwide Limited.
The company has issued guarantees related to tax lease on behalf of the companies SNC
Bergesen dy France, SLNG Yemen I AS and SLNG Yemen II AS.
The company has issued guarantees to charterers related to long-term time charter
agreements with subsidiaries.
Guarantees on behalf of other companies
The company has issued a guarantee related to a tax lease for the previously owned company
PR Bergesen GOIC DA. This guarantee has been agreed to be transferred out of the group in
connection with the restructuring in 2005, but the final documents have not yet been signed.
108
The ultimate holding corporation is Bergesen Worldwide Limited, incorporated in Bermuda and is
approximately 93% owned by companies controlled by Sohmen family interests.
The company has carried out various transactions with companies within Bergesen Worldwide
Limited.
All transactions have been carried out at fair value. The most important transactions carried out in 2006
are as follows:
BW Gas ASA executes supervision services for other companies within Bergesen Worldwide Limited
regarding certain LNG contracts.
The company has a guarantee issued (counter-guarantee) to Maran Gas in connection with
the contracting of four vessels. The vessels are 50% owned by a group company and the
guarantee is proportional with the company’s owner share.
BW Gas ASA executes management for several companies within Bergesen Worldwide Limited.
(b) LEGAL CLAIMS
General Ore International Corporation Ltd (GOIC) has filed a complaint about the level of
disbursements and expenses charged to joint ventures (the JVs have been demerged out
of the group as of 1 July 2005) by the company and have reserved the right to review and
contest the same. In a letter dated 27 July 2005 GOIC has stated that they now intend to
claim reimbursements for overcharging in an amount between USD 8 to 10 million. In a letter
of 6 September 2005, GOIC has formally called for the appointment of a single arbitrator in
respect of the claim. The company has rejected the claim and the call for a single arbitrator,
and each party has appointed its arbitrator, while the third member of the arbitration panel
has not been appointed yet. No further substantiation of the claim has been made. The
claimant has not substantiated the claim nor provided any evidence, and the company’s
preliminary view is that the claim has no merit.
NOK million
Sales of services
Purchase of services
Purchase of shares
Interest and financial items
BW Gas annual report 2006
The transactions carried out with Bergesen Worldwide Limited amounts to
2006
119
0
0
0
2005
105
0
-21
-221
2004
18
0
0
-19
2006
33
0
2005
33
0
2004
18
-8,794
Year end balances with Bergesen Worldwide Limited amounts to
NOK million
Receivable
Payable
Auditor’s report
BW Gas annual report 2006
109
Fleet list
FLEET LIST AS OF MARCH 2007
Name
Year built/
To be delivered
Capacity
(cbm)
Ownership (%)/
TC/BB rate
Timecharter/Pool TC/BB expiry (USD/day)
VLGCS (>70,000 CBM)
2001
2001
1985
1986
1984
2001
2000
1992
1992
1991
1990
2006
1979
1982
1981
1978
1978
84,333
84,301
81,698
81,640
81,599
78,637
78,552
78,549
78,539
78,530
78,488
78,000
75,853
75,849
75,823
75,649
75,609
Bareboat
Bareboat
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
Bareboat
100.00
100.00
100.00
100.00
100.00
100.00
Mar 2006
Jul 2006
2001
2001
2005
2003
1995
1987
1991
82,000
82,000
78,921
78,912
78,908
78,908
78,462
77,749
75,352
TC/Purchase option
TC/Purchase option
Short-term TC to BW Gas and Exmar (75/25)
Short-term TC to BW Gas and Exmar (75/25)
TC/Purchase option
Short-term TC to BW Gas, Exmar and Maran
Short-term TC to BW Gas and Exmar (75/25)
Timecharter
Timecharter
2008
2008
2009
2009
2009
2009
2008
2008
2007
84,000
84,000
84,000
84,000
83,000
83,000
82,000
82,000
80,000
2,798,861
50.00
50.00
50.00
50.00
TC/Purchase option (33%)
TC/Purchase option (33%)
100.00
100.00
BB/Purchase option
1992
1996
2002
1983
1991
1980
1979
85,826
84,269
78,929
85,662
78,543
75,917
75,689
564,835
Pool
Pool
Short-term TC to pool
Pool
Pool
Pool
Pool
Mar 2007
Mar 2007
14,340
14,340
May 2015
10,197
Feb 2018
Jul 2018
Apr 2008
Mar 2008
Mar 2010
Dec 2008
Jun 2007
Feb 2010
Mar 2010
21,546
21,546
29,934
29,934
23,520
27,942
31,743
22,521
24,000
2Q 2024
2H 2025
29,600
29,800
Jun 2017
23,014
Newbuildings
NB Daewoo 2317
May
NB Daewoo 2318
NB Daewoo 2319
NB Daewoo 2320
May
NB Mitsubishi I
2Q
NB Mitsubishi II
2H
NB Hyundai 1848
Jan
NB Hyundai 1849
Mar
NB Kawasaki 1583 (BW Broker) Jun
Total (35 VLGCs)
Operated
BW Gas annual report 2006
BW Hesiod
BW Herdis
BW Nantes
BW Nice
BW Havfrost
Helios
Havis
Hekabe
Havdrott
Havkong
Hemina
Havglimt
Total (12 LGCs)
2005
2004
2003
2003
1991
1992
1993
1977
1978
1978
1979
1978
60,239
60,217
59,399
59,375
57,180
57,160
57,139
54,226
54,226
54,226
54,226
52,408
680,021
51.00
51.00
100.00
100.00
86.17
100.00
77.50
43.08
86.17
43.08
86.17
62.50
2003
2004
1991
1980
1980
1983
1979
1978
59,460
59,342
57,206
57,001
56,952
56,854
53,354
53,317
453,486
Pool
Pool
Pool
Pool
Pool
Pool
Pool
Pool
Operated
Chartered-in
110
Capacity Ownership (%)/
(cbm) Timecharter/Pool
Owned
Formosagas Apollo
Formosagas Bright
Berge Racine
Berge Ragnhild
Berge Rachel
BW Denise
Berge Danuta
Berge Clipper
Berge Challenger
BW Captain
Berge Summit
Berge Trader
BW Saga
BW Strand
BW Sund
Berge Eagle
Berge Arrow
Flanders Harmony
Flanders Tenacity
Yuhsan
Berge Frost
Berge Commander
Berge Spirit
Berge Sword
Total (7 VLGCs)
Year built/
To be delivered
LGCS (70-50,000 CBM)
Owned/bareboat
Berge Ningbo
Berge Nantong
Gas Taurus
Linden Pride
Yuyo Berge
Leto Providence
Gas Scorpio
Chelsea Bridge
Tower Bridge
Name
Clipper Moon
Clipper Sky
Maharshi Vamadema (ex. Helice)
Harriette N
Hugo N
Clipper Posh
Steven N
Clippper Lady
Total (8 LGCs)
Fleet list
Name
Year built/
To be delivered
Capacity
(cbm)
Ownership (%)/
Timecharter/Poo TC/BB expiry
TC/BB rate
(USD/day)
Year built/
To be delivered
Capacity
(cbm)
Ownership (%)
Charterer
1973
1974
2003
2003
2004
2004
2005
2005
Mar 2006
29,589
29,388
138,059
138,028
138,089
145,914
145,000
145,000
145,000
75.13
75.13
51.00
100.00
50.00
100.00
100.00
100.00
100.00
Spot
Depa
Suez Energy
Suez Energy
Sonatrach
Nigeria LNG
Nigeria LNG
Nigeria LNG
Nigeria LNG
Oct
Jan
Jun
Jul
May
Apr
Jun
Sep
May 2009
May 2009
162,400
162,400
1,378,867
100.00
100.00
Suez Energy
Suez Energy
May 2029
May 2029
Nigeria
Nigeria
Nigeria
Nigeria
May
Jul
Sep
Dec
CP expiry
LNG vessels
MGCs (<50,000 CBM)
Owned
Owned
BW Sombeke
Berge Odin
Havrim
Berge Hugin
Hedda
Helga
Herakles
Berge Munin
Hebris
BW Hermes
BW Havsol
BW Havlur
BW Havlys
BW Helen
Name
Nov 2006
2005
1980
2002
1993
1994
1982
1989
1983
1983
1997
1997
1983
2000
38,000
38,000
37,829
35,229
34,754
34,754
30,455
27,980
24,012
24,981
18,152
18,152
17,640
6,060
Havfru
Century
Berge Boston
Berge Everett
Berge Arzew
LNG River Orashi
LNG Enugu
LNG Oyo
LNG Benue
50.00
100.00
55.00
53.00
53.00
53.00
100.00
53.00
69.50
100.00
100.00
100.00
100.00
100.00
2007
2023
2023
2024
2025
2026
2026
2026
Newbuildings
NB Daewoo 2258
NB Daewoo 2259
Total (11 LNG vessels)
Operated
Chartered-in long term
Marola
2003
37,314
Timecharter
Mar 2016
19,397
Sep 2007
Dec 2007
38,000
38,000
499,998
Timecharter
Timecharter
Sep 2022
Dec 2022
19,068
19,068
1982
24,047
24,047
Short-term TC
Nov 2007
17,000
Newbuildings
NB Kawasaki I
NB Kawasaki II
Total (17 MGCs)
LNG Lokoja
LNG Kano
NB Daewoo 2231
NB Daewoo 2232
Total (4 LNG vessels)
Nov
Jan
Mar
Jun
2006
2007
2008
2008
148,300
148,300
148,300
148,300
593,200
LNG
LNG
LNG
LNG
2027
2027
2028
2028
Operated
Maharshi Labhatreya
Total (1 MGC)
Note: Fleet list does not include three part-owned semi-refrigerated vessels.
LPG
LPG
LNG
BW Gas annual report 2006
111
Glossary
Following are definitions of shipping terms used in the annual report
GLOSSARY OF SHIPPING TERMS
TERM DEFINITION
Ammonia Raw material used in fertiliser production.
Bcm
Billion cubic metres.
Btu
British thermal unit.
CPP
Bunker fuel
Capesize vessel
Cbm
BW Gas annual report 2006
Any hydrocarbon mineral oil used or intended to
be used for the operation or propulsion of a ship.
Refers to a rather ill defined standard that has the
common characteristic of being incapable of using
the Panama or Suez canals, not necessarily because
of their tonnage, but because of their size. These
ships serve deepwater terminals handling raw materials, such as iron ore and coal. As a result, Capesize
vessels transit via Cape Horn (South America) or
the Cape of Good Hope (South Africa). Their size
ranges between 80,000 and 175,000 dwt.
Cubic meter. A unit for gas vessel’s capacity for
carrying gas.
The international association for natural gas.
CFC-refrigerants
Gases used as cooling agents in gas carriers.
Charter
Classification Society
The hiring of a vessel, or use of its carrying capacity,
for either (i) a specified period of time or (ii) a
specific voyage or set of voyages.
An independent organisation, which certifies that a
vessel has been built and maintained in accordance
with the rules and regulations of such organisation.
The organisation also may agree with agencies of
countries in which a vessel is registered or trades to
perform services to assist such agencies, including
assuring that the vessel complies with conventions
of which that country is a member.
Under a COA, the ship owner provides capacity to
transport a certain amount of cargo within a specified period from one place to a destination designated by the customer. All of the ship’s operating,
voyage and capital costs are borne by the shipowner.
The freight rate normally is agreed on a per cargo
ton basis. The freight rate can be fixed or floating,
or a combination of both.
Clean petroleum products.
Drydocking
The removal of a vessel from the water for
inspection and/or repair of submerged parts.
Dwt
Dead weight tonne. A vessel’s cargo carrying
capacity measured in tonnes.
Fertecon
FID
Freight rate
Free on board (FOB)
Fully refrigerated vessel
Cedigaz
COA - Contract of
Affreightment
112
TERM DEFINITION
Commercial By managing a vessel commercially we mean that
management we are responsible for the chartering negotiations
and operation of the vessel in accordance with the
terms of the charterparties.
Fertilizer Economic Market Analysis & Consultancy
Final investment Decision
A rate paid on spot voyage, COA or time charter.
Monthly average product price excluding freight cost.
A gas carrier designed to carry cargoes fully
refrigerated at atmospheric pressure.
Hull
The shell or body of a vessel.
IEA
International Energy Agency.
IFRS
LGC - large gas carrier
LIBOR
LNG
Long term time charter
LPG
LTI
MGC - medium gas carrier
International Financial Reporting Standards
Gas carrier of 50,000-70,000 cbm.
London Inter Bank Offered Rate.
Liquefied natural gas.
Time charter to an entity for a term greater than
five years.
Liquefied petroleum gas.
Lost Time Incident
Gas carrier of 20,000-50,000 cbm.
Glossary
TERM
MSI
MMBTU
Newbuilding
NGAAP
NIS
Off hire
Petrochemical gases
Pool
Pool points
DEFINITION
Maritime Strategies
TERM DEFINITION
Short to medium term An LPG time charter for a term less than five years.
time charter
Million British Thermal Units
Spot market
The market for chartering a vessel for single voyages
on the basis of current market levels.
Spot rate
The rate for chartering a vessel on the spot market.
Spot voyage
A spot voyage is typically a single round trip that
is priced on a current or spot market value. The
owner of the vessel receives one payment derived
by multiplying the tons of cargo loaded on board
by the agreed upon freight rate expressed on a per
cargo ton basis. The owner is responsible for the
payment of all expenses including voyage expenses
(including bunker fuel, agency and port costs),
operating expenses and capital costs of the vessel.
A new vessel under construction.
Norwegian General Accepted Accounting Principles.
Norwegian International Ship Register.
The time during which a vessel is not available
for service.
Industrial processed gases like ethylene, propylene,
butadiene and VCM.
Arrangement pursuant to which vessels owned by
different owners are chartered into a pool and the
manager of the pool markets the vessels as a single,
cohesive fleet, operating them under spot contracts,
COAs and time charters. The income from the vessels
included in the pool is distributed to individual owners according to an agreed upon pool point system
whereby each vessel receives its share of the pool’s
earnings according to the vessel’s earning potential.
Earnings from the pool are distributed between the
owners according to pool points. The pool points
are negotiated between the owners of the vessels
participating in the relevant pool and are revised
from time to time based on each vessel’s speed,
fuel consumption and other technical and operational parameters. The pool manager is responsible
for all the voyage expenses for pool activities, such
as bunker fuel costs, port charges and canal dues.
Such costs are deducted from pool revenues prior
to the calculation of pool points and distribution to
pool members. All other operating costs, such as
manning, insurance, loan repayments and maintenance are paid for by the owner.
Scrapping
The disposal of an old or damaged vessel by way
of sale as scrap metal.
Semi refrigerated vessel
A gas carrier designed to carry cargoes both fully
refrigerated and under higher pressure than
atmospheric pressure.
Refined petroleum
products
Products derived from crude oil: petrol, heating
oil, jet fuel, etc.
Technical management
By managing a vessel technically we mean that we
are responsible for the daily operation of a vessel,
including maintenance, supplies and manning.
Time charter (TC)
Under time charters, vessels are chartered to customers for fixed periods of time at rates that are generally fixed. The charterer pays all voyage costs.
The owner of the vessel receives monthly charter
payments on a per day basis and is responsible for
the payment of all vessel operating expenses (including manning, maintenance, repair and docking) and
capital costs of the vessel.
TC income
Tonne mile
VLGC - very large gas carrier
Urea
Gross freight less voyage related costs.
Unit cargo x distance; i.e. 10 tonnes carried 25
miles = 250 tonne miles.
Gas carrier above 70,000 cbm.
An organic compound of carbon, nitrogen, oxygen
and hydrogen. Used among others as a component of fertiliser.
BW Gas annual report 2006
113
Addresses
ADDRESSES
BW Gas ASA
Visiting address:
Drammensveien 106
0273 Oslo, Norway
The Green Tankers AS
2, rue Joseph Monier
92500 Rueil Malmaison
Paris, France
Mail address:
P.O.Box 2800 Solli
0204 Oslo, Norway
Tel: +331 5547 0040
Fax: +331 5547 0050
[email protected]
Tel: +47 2212 0505
Fax: +47 2212 0500
[email protected]
www.bwgas.com
BW Shipping Managers Pte. Ltd.
- India Liaison Office
841, Solitaire Corporate Park,
167, Guru Hargovindji Marg,
Andheri-Ghatkopar Link Road,
Chakala, Andheri (E),
Mumbai – 400 093, India
Tel: +91 22 2837 0101, 5675 1011
Fax: +91 22 5695 9564
[email protected]
BW Shipping Philippines Inc
5th Floor, Urban Building
405 Sen. Gil Puyat Avenue
1209 Makati City, Philippines
Tel: +632 895 2469
Fax: +632 895 9870
[email protected]
114
BW Gas annual report 2006
LAPA Ltd.
33-3a Kr. Valdemara Str.
Riga, LV-1010, Latvia
Tel: +371 733 2887
Fax: +371 783 0133
[email protected]
www.lapa.lv
BW Gas Representative
5th Floor, World-Wide Center,
1-13 Sanbancho, Chiyoda-ku
Tokyo 102-0075, Japan
Tel: +81 3 3222 3327
Fax: +81 3 3222 3387
[email protected]
HISTORY
1935 Bergesen d.y. is founded by Stavangerbased shipowner Sigval Bergesen d.y. The
first vessel is an oil tanker of 14,290 dwt,
Président de Vogüé
1942 Bergesen takes control over Rosenberg
Shipyard in Stavanger to be able to build
larger vessels for the fleet
1966 Bergesen enters into the drybulk business
1969 After 27 years and 43 vessels built, the
company sells Rosenberg Shipyard. It has
become increasingly clear that the shipyard is unable to serve the future needs
of the company
1974 First entry into gas shipping as Bergesen
takes over four newbuilding contracts
from the Norwegian shipping company,
Fearnley & Eger
1980 The founder, Sigval Bergesen d.y., passes
away, leaving a fleet of seven million dwt
and NOK 1 billion in the bank
1986 Bergesen is listed on the Oslo Stock Exchange, being the fifth largest company
quoted
1996 Bergesen acquires the Norwegian gas
carrier company Havtor, increasing the
total fleet to more than 90 vessels
2002 Breaks through in the LNG market by
ordering seven LNG newbuildings at
Daewoo, all with 20-year contracts
2003 Sohmen family interests, with long tanker
shipping traditions in Asia, buy all the
shares in Bergesen, combining two of the
world’s leading shipowners. Bergesen is
delisted in June
2005 Bergesen is restructured into a pure gas
shipping company by separating out offshore and dry-bulk into stand alone
entities within Bergesen Worldwide Ltd.
The gas segment, with the world’s largest
fleet, is renamed Bergesen Worldwide
Gas ASA (BW Gas) and is listed on the
Oslo Stock Exchange in October
2006 BW Gas enters into an agreement with
fertiliser company Yara to take over its
ammonia fleet consisting of ten vessels.
A partnership agreement states that BW
Gas will provide shipping services to Yara
BW GAS
CORPORATE STRUCTURE
is a leading global provider of gas marine
transportation services. The company is the
largest owner and operator of LPG (liquefied
petroleum gas) carriers and one of the largest
independent owners and operators of LNG
(liquefied natural gas) carriers. BW Gas owns,
part-owns and/or operates a fleet of 98
vessels (including newbuildings), of which
83 are LPG vessels (transporting mainly
LPG and ammonia) and 15 are LNG vessels. Currently the company employs approximately 1,750 seagoing personnel and
160 onshore employees.
BW Gas operates the business of gas marine transportation in
two main segments: LPG and LNG.
Following the listing of BW Gas on the Oslo Stock Exchange in
October 2005, and the acquisition of Yara’s shipping business in
April 2006, the corporate structure was reviewed in order to
establish a more efficient structure.
As a result, the group was divided into separate holding companies
for each of the two business areas, reflecting the commercial
and operational differences and the related risks of the LPG and
LNG segments, as well as enhancing the financial flexibility.
The holding companies are 100% owned by BW Gas and have
separate boards and commercial managements. The restructuring
was implemented during 2006.
MISSION
VISION
We carry clean energy
BW GAS
LPG/AMMONIA
LNG
MARINE TRANSPORTATION
MARINE TRANSPORTATION
83 LPG CARRIERS
15 LNG CARRIERS
42 VLGCs
15 LNGs
20 LGCs
21 MGCs
To be the world’s leading
clean energy carrier by 2012
Berge Sisu, built 1978, was the first newbuilt gas vessel to enter the company
Connecting
consulting • consept • design: cox.no
photo: ole walter jakobsen
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Annual Report
2006
BW GAS
BW Gas ASA
Visiting address:
Drammensveien 106
0273 Oslo
Norway
Mail address:
P.O. Box 2800 Solli
0204 Oslo
Norway
Annual Report 2006
Tel: +47 2212 0505
Fax: +47 2212 0500
[email protected]
www.bwgas.com
KEY FIGURES
KEY OPERATIONAL AND FINANCIAL DATA
2006
2005
2004
2003
Operating revenue
729.9
517.3
432.6
360.5
Timecharter (TC) income
629.1
411.1
339.4
283.9
Operating profit before depreciation and disposals
345.1
222.5
162.0
96.5
Operating profit
258.7
186.0
106.3
25.8
Net profit from continuing operations
224.7
280.2
-7.5
34.7
Net profit incl. discontinued operations
223.7
448.0
128.6
86.1
1.7
2.1
-0.1
0.3
248.9
354.3
242.7
143.8
1,605.7 1,349.2
1,615.6
896.6
Earnings per share, continuing operations
Cash and cash equivalents
Interest bearing debt
ROE (%)
21.7
31.6
-0.7
2.5
ROACE 1 (%)
11.2
10.3
5.6
1.4
1
Return on adjusted capital employed = operating profit/(average total assets
- intangibles - newbuildings - non-interest bearing debt)
TC income 2006
EBITDA 1
MGC
15%
MGC
16%
LNG
26%
LNG
34%
LGC
16%
BW Gas – the leading clean energy carrier
LGC
18%
VLGC
43%
VLGC
32%
LPG segment 66%
LPG segment 74%
1
Operating profit before depreciation and disposals