Neste Oil to Exit the Shipping Business
Ownership of key vessels will remain in Finland
Neste Oil (NTOIF) is planning to exit its shipping business. According to the plan, the company would sell all its own vessels and outsource the ship management functions currently covering them, with around 320 ship management personnel transferring to a new employer. Neste Shipping's chartering functions would be retained and integrated with Neste Oil's organization. Going forward, Neste Oil intends sourcing its marine transportation through contractual arrangements.
"Neste Oil's shipping needs have changed in recent years," explains Neste Oil's President & CEO, Matti Lievonen. "The proportion of the Group's cargoes carried by Neste Shipping ships flying the Finnish flag has steadily declined. Because of its high costs level, Neste Shipping has been unable to compete profitably on the international shipping market. Ensuring the long-term continuity of the business in its present form would also call for significant investments. As a result, we are now planning to exit the shipping business and reinforce our focus on developing our core cleaner traffic solutions."
Service levels will be unaffected and national security of supply guaranteed
As part of the restructuring of its shipping business, Neste Oil intends selling five tankers (Mastera, Futura, Neste, Kiisla, and Suula) and three tugs (Ukko, Ahti, and Esko) to companies owned by Finland's National Emergency Supply Agency and the Ilmarinen Mutual Pension Insurance Company. These will be sold at the current market value. Neste Oil will lease the vessels back under long-term contracts and they will continue to sail under the Finnish flag.
"I am glad that we have been able to find an arrangement that will keep the key vessels needed by Neste Oil in Finnish ownership and in use by us," continues Lievonen. "These vessels, together with vessels chartered from other shipowners, will meet our current shipping needs and ensure that we are able to continue to provide our customers with a high level of service. The arrangement will continue to ensure Finland's security of supply in the area of marine-based oil transportation."
In addition, Neste Oil plans to sell three of its other tankers - Tempera, Purha, and Jurmo - at a later stage, together with its 50% ownership of another three tankers - Stena Poseidon, Palva, and Stena Arctica - which are owned together with the Stena Group of Sweden.
Plan to outsource ship management functions
As part of the restructuring, Neste Shipping plans transferring its ship management functions covering the crewing and maintenance of its vessels to a commercial ship management company that would take over the operations of the vessels that would remain in Neste Oil usage following the restructuring. Neste Shipping's ship management functions currently employ around 300 people at sea and 20 people on shore.
In connection with the planned outsourcing, Neste Shipping will commence statutory employer-employee negotiations covering all the land- and sea-based personnel. The plan is to transfer these personnel to a new employer. The planned sale of the Tempera, Purha, and Jurmo at a later stage could impact personnel in the event that the new employer is unable to offer substitutive positions to those concerned.
If the current plans are implemented as intended, no significant capital gains or losses are expected. However, the arrangement is expected to free up approx. EUR 60 million of capital from Neste Oil's balance sheet and improve the Group's result by approx. EUR 10 million annually during the coming years.