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Finances: Ballasted for stormy weather

Calm seas don’t train skilful sailors. Solvang spent years building a buffer to sail our stakeholders’ assets to port in any weather, according to Solvang’s CFO Egil Fjogstad.

At the turn of 2023, all but two of Solvang’s 22 vessels were fixed on time-charter contracts. Not because markets didn’t perform well, or tonnage laid idle in the course of the year. On the contrary, global states of affairs handsomely awarded Solvang’s strategy of mixing long-term hedging with spot exposure.

By combining a stable control situation with profitable long-term positions, Solvang has strengthened its fundamental position as a  company.

“Solvang espouses long-term thinking. We have sailed our own ships for generations, never intending to let go or shift to short-term profit seeking”, says Egil Fjogstad, CFO at Solvang.

Partnership vlgcs

According to Mr. Fjogstad, Solvang is financially prepared to handle lasting turbulence.

“We enjoy a very stable contract situation in a cyclical business environment, which we consider to be the best asset management strategy in the face of uncertain times”, Mr. Fjogstad states.

Solvang is structured into a fully integrated shipowner. All services, including shipbuilding, are controlled in-house. In 2023, Solvang commissioned seven newbuilds in the Panamax class, five of them in the newly formed joint venture with Gunvor Group. Having a long-standing history of joint ventures, Solvang’s model of shared risk and revenues stands out as a successful setup.

“Our long-term relations with traders and refiners evolve from mutual trust, commitment and an ability to deliver quality shipping over time”, states Mr. Edvin Endresen, CEO of Solvang ASA.

ECO awards

Immediately after delivery, which is planned from 2026, all the newbuild VLGCs will enter into 10-year contracts. During this period, environmental performance is expected to increase its factor in financial operations.

Financial institutions already include emission reductions in loan schemes, awarding a bonus for ECO performance.  olvang’s ECO LPG Carrier programme, including a.o. hull, shaft and propeller, engine optimization and emission cleaning, as well as potential onboard CCS, promises a growing competitive advantage for our partnerships.

“Solvang has started to receive symbolic financial paybacks for emission reductions, which come out as inspiration to our environmental endeavours,” Mr. Fjogstad says.