Latvian Shipping has started a renewal of its aging fleet by placing an order for six new tankers, according to the company's president.
Andris Klavinsh said the firm had signed a letter of intent with Korean shipbuilders to construct tankers worth between $168 million to $210 million and is awaiting a go-ahead from the Latvian privatization agency. He declined to name the Korean shipbuilders involved.
Shipping has had problems with fleet renewal
due to its stalled privatization. It now operates a total of 60 ships, including 36 tankers, two LPG tankers and 19 reefer vessels
. "Latvian Shipping's tanker fleet is older than that of our competitors and if we don't invest in fleet renewal we could lose market share," Klavinsh said.
The average age of the company's tanker fleet is 17.3 years, while the average age of competing fleets is 8.4 years.
Hopes For Speedier Privatization
After the privatization agency approved the firm's selloff terms earlier this month, Klavinsh said he hoped for speedier privatization and noted the new ships would increase the company's value.
The contract with the Korean partners could be signed by Oct. 22 with the first two vessels to be delivered at the end of 2001.
Klavinsh said Latvian Shipping would finance 30 percent of the investment while the rest would be covered by a loan from international banks.
"If we didn't have so many restrictions on taking decisions, we could be more flexible with reserves. We could look not only at building (new vessels) but also at acquiring some other shipping company with a fleet that fits our needs," he said.
Last week the privatization agency board gave the go-ahead to the sale of six loss-making reefers, and Klavinsh said that depending on the reefer fleet operation, the company hopes to show a small profit at the end of the year.
Latvian Shipping showed a $3.99 million unaudited profit in the first half of the year compared to a loss of $56,000 in the same period the year ago.
The firm saw full 1998 profit of $854,000 after a 1997 loss of $9.1 million.