SFL - Newbuild order of five LNG dual-fuel 16,800 TEU container vessels in combination with long term charters
SFL (NYSE: SFL) has announced the construction of five 16,800 TEU container vessels with LNG dual-fuel propulsion, set to be delivered in 2028. The project will cost approximately $1 billion. The vessels will feature advanced fuel efficiency and cargo intake optimization. Concurrently, SFL has secured 10-year minimum time charters for these vessels with a leading liner company, expected to add $1.2 billion to SFL's charter backlog. The charters include options for two-year extensions and purchase options at the end of years 10 and 12, with a profit-sharing feature. CEO Ole B. Hjertaker highlighted this investment as a milestone, adding that the acquisitions and charter extensions announced this year have increased SFL's fixed-rate charter backlog by approximately $1.75 billion.
- Secured $1 billion for construction of five 16,800 TEU container vessels.
- Added $1.2 billion to charter backlog through 10-year time charters.
- Option for two-year charter extensions and purchase options at the end of years 10 and 12.
- High construction cost of $1 billion for new vessels.
Insights
The announcement by SFL Corporation Ltd. to build five LNG dual-fuel container vessels represents a significant capital expenditure of
From a financial perspective, the long-term charters with an investment-grade counterparty are a positive sign, offering reassurance about the future revenue streams and reducing the risk associated with the investment. The inclusion of purchase options and profit-sharing features could provide additional upside potential, aligning incentives between SFL and its chartering partner.
Short-term, investors might see an impact on SFL's cash reserves, but long-term, the potential for steady revenue growth and adherence to environmental standards could improve the company's market positioning.
From a market perspective, the order for new LNG dual-fuel vessels positions SFL as a forward-thinking player in the shipping industry, which is increasingly prioritizing sustainability and fuel efficiency. The use of LNG dual-fuel technology aligns with global trends towards reducing carbon emissions in maritime transport, potentially giving SFL a competitive edge in securing future charters with environmentally conscious clients.
The timing of the delivery in 2028 also aligns with expected regulatory changes in shipping emissions, suggesting the company is strategically planning to meet future standards. Furthermore, the 10-year charters indicate a strong demand and commitment from a leading liner company, which reflects positively on SFL's market reputation and operational reliability.
In the long run, this initiative may reinforce SFL's market position and could result in higher charter rates and better utilization rates for their fleet. However, the success of this strategy will depend on effective execution and maintaining technological advancements in their vessels.
Investing in LNG dual-fuel technology demonstrates SFL's commitment to reducing its carbon footprint, aligning with global environmental goals and regulations. LNG, or liquefied natural gas, is seen as a cleaner alternative to traditional marine fuels, with lower sulfur oxides (SOx) and nitrogen oxides (NOx) emissions. This move not only appeals to regulatory bodies but also to customers who are increasingly prioritizing sustainability in their supply chains.
The environmental impact of this initiative should not be understated. By incorporating the latest fuel efficiency and cargo intake optimization features, SFL is likely aiming to reduce operational costs and enhance the eco-friendliness of its fleet. The environmental benefits are manifold, contributing to a reduction in greenhouse gas emissions and potentially improving air quality in port cities.
However, it is essential to note that the effectiveness of LNG as a transitional fuel is still under debate. Methane slip, the release of unburned methane, could undermine the climate benefits of LNG. Therefore, while this investment is a step in the right direction, ongoing improvements and innovations will be necessary to ensure maximum environmental benefits.
SFL Corporation Ltd. (NYSE: SFL) (“SFL” or the “Company”) today announced that it has agreed to build five 16,800 TEU container vessels with scheduled delivery in 2028 at an aggregate construction cost of approximately
Concurrently, SFL has agreed minimum 10-year time charters to a leading liner company from delivery, adding approximately
Ole B. Hjertaker, CEO of SFL Management AS, said in a comment: «This marks another accretive milestone investment for SFL and will add five large container vessels to our fleet. With these vessels delivered, we will have 11 LNG dual-fuel vessels, and it demonstrates our commitment to continue expanding our investment focus to assets with a lower carbon footprint whilst ensuring significant visibility through 10-year firm charters to an investment grade counterparty.
With the acquisitions and charter extensions announced so far this year, we have added approximately
July 3, 2024
The Board of Directors
SFL Corporation Ltd.
Hamilton, Bermuda
Investor and Analyst Contacts:
Aksel Olesen, Chief Financial Officer, SFL Management AS
+47 23 11 40 36
André Reppen, Chief Treasurer & Senior Vice President, SFL Management AS
+47 23 11 40 55
Sander Borgli, Vice President - IR, SFL Management AS
+47 23 11 40 73
Media Contact:
Ole B. Hjertaker, Chief Executive Officer, SFL Management AS
+47 23 11 40 11
About SFL
SFL has a unique track record in the maritime industry and has paid dividends every quarter since its initial listing on the New York Stock Exchange in 2004. The Company’s fleet of vessels is comprised of tanker vessels, bulkers, container vessels, car carriers and offshore drilling rigs. SFL’s long term distribution capacity is supported by a portfolio of long term charters and significant growth in the asset base over time. More information can be found on the Company's website: www.sflcorp.com
Cautionary Statement Regarding Forward Looking Statements
This press release may contain forward looking statements. These statements are based upon various assumptions, many of which are based, in turn, upon further assumptions, including SFL management’s examination of historical operating trends, data contained in the Company’s records and other data available from third parties. Although SFL believes that these assumptions were reasonable when made, because assumptions are inherently subject to significant uncertainties and contingencies which are difficult or impossible to predict and are beyond its control, SFL cannot give assurance that it will achieve or accomplish these expectations, beliefs or intentions.
Important factors that, in the Company’s view, could cause actual results to differ materially from those discussed in the forward looking statements include the strength of world economies, fluctuations in currencies and interest rates, general market conditions in the seaborne transportation industry, which is cyclical and volatile, including fluctuations in charter hire rates and vessel values, changes in demand in the markets in which the Company operates, including shifts in consumer demand from oil towards other energy sources or changes to trade patterns for refined oil products, changes in market demand in countries which import commodities and finished goods and changes in the amount and location of the production of those commodities and finished goods, technological innovation in the sectors in which we operate and quality and efficiency requirements from customers, increased inspection procedures and more restrictive import and export controls, changes in the Company’s operating expenses, including bunker prices, dry-docking and insurance costs, performance of the Company’s charterers and other counterparties with whom the Company deals, the impact of any restructuring of the counterparties with whom the Company deals, and timely delivery of vessels under construction within the contracted price, governmental laws and regulations, including environmental regulations, that add to our costs or the costs of our customers, potential liability from pending or future litigation, potential disruption of shipping routes due to accidents, political instability, terrorist attacks, piracy or international hostilities, the length and severity of the ongoing coronavirus outbreak and governmental responses thereto and the impact on the demand for commercial seaborne transportation and the condition of the financial markets, and other important factors described from time to time in the reports filed by the Company with the United States Securities and Exchange Commission. SFL disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.
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