Annual Report • Mar 29, 2017
Annual Report
Open in ViewerOpens in native device viewer
29.03.2017
Klaveness Ship Holding AS ("KSH"/the Company) was established 31 May 2005 and is fully owned by Rederiaksjeselskapet Torvald Klaveness. Klaveness Ship Holding AS is located in Oslo, Norway, and is the holding company of the shipowning activities in Rederiaksjeselskapet Torvald Klaveness. The consolidated financial statement of the Company as at year end 31 December 2016 comprises the Company and its subsidiaries.
Health, safety and environment are priority number one in Klaveness and to the Board's satisfaction there were no major incidents in 2016.
The markets where Klaveness Ship Holding AS and subsidiaries (the Group) operates continued to be challenging in 2016. Results for the combination carriers weakened compared to 2015, but were still satisfactory. The container segment was impacted by lower rates and impairments.
The Group achieved an EBITDA of USD 20.4 million from continuing operations in 2016 (2015: USD 35.7 million). Mainly due to impairment of container vessel values, the company made a loss before tax (EBT) from continuing operations of USD 76.0 million (2015: loss of USD 13.8 million). Profit after tax for the year from discontinued operations amounts to USD 24.9 million (2015: USD 10.4 million) and comprise a profit from the sale of five selfunloader vessels of USD 26.3 million in 2016. Cash flow from operations (incl. discontinued operations) was USD 25.0 million (USD 67.5 million). The balance sheet remains solid with a book equity including minority interest of USD 220.0 million at year-end corresponding to an equity ratio of 51 per cent. High solidity and good liquidity was maintained in 2016. The selfunloader and bulk segment is presented as discontinued operations with effect on comparative figures in the consolidated income statement.
The Group took delivery of two combination carriers and one kamsarmax in 2016. EGD Shipholding AS joined as 50 per cent partner in the two combination carriers, one delivered in 2016 and one with delivery in 2017. The kamsarmax was sold later in 2016. The newbuilding program now consists of four combination carriers.
Earnings for the combination carriers weakened in 2016, mainly due to a weaker tanker market, higher spot exposure and lower caustic volumes transported. Results were nevertheless satisfactory and Klaveness was able to expand its fleet by establishing new trades. The container market weakened further in 2016 resulting in an increase in idle days for the Klaveness container vessels, however rates above the general market were still achieved due to the vessels' fuel efficiency.
The three existing bank loans for the eight container vessels were refinanced into a USD 84.9 million revolving credit facility in the fourth quarter of 2016, whereof USD 30 million was drawn at year-end 2016. The existing bond issues KSH02 and KSH01 were repaid in December 2016 and January 2017 respectively. A new bond, KSH03, of NOK 300 million was issued in December 2016. The bond matures in May 2021. Total bond debt was reduced by NOK 290 million, final maturity was extended, and financial covenants aligned with covenants in relevant bank facilities. A bank loan to finance the three newbuildings with delivery in 2018/2019 was entered into in July 2016, while the vessel delivered in 2017 is part of another bank facility.
For the full year 2016 total gross operating revenue from continuing operations was USD 60.1 million (2015: USD 76.6 million) and total operating costs amounted to USD 39.7 million (2015: USD 40.9 million). EBITDA was USD 20.4 million for 2016, weaker than EBITDA of USD 35.7 million for 2015 due to challenging markets.
Loss before tax from continuing operations was negative USD 76.0 million and includes impairment of vessels of USD 60.1 million in 2016 (2015: USD -17.5 million). Negative effects of USD 5.2 million from refinancing the bond loans and de-recognition of hedge accounting hits the finance costs in 2016. The net result from financial items was in total negative by USD 16.2 million in 2016 (2015: USD -12.1 million).
Net profit after tax from continuing operations ended negative USD 74.7 million for 2016. For 2015 the loss was negative USD 9.6 million. USD 8.8 million of the negative result (2015: positive USD 0.7 million) is attributable to non-controlling interests related to external investors in some of the combination carrier and container companies.
Profit from discontinued operations was USD 24.9 million for 2016, up from USD 10.4 million in 2015 due to recognized gain sale of vessels of USD 26.3 million in 2016.
Total assets decreased by USD 166.9 million in 2016 from USD 599.9 million at year end 2015 to USD 433.0 million. Main impacts come from sale of vessels and delivery of newbuildings, depreciation and impairments, and refinancing of the bond loan and container debt. At year-end 2016, the consolidated equity including minority interests was USD 220.0 million (USD 279.8 million), corresponding to a book equity ratio of 51 per cent (2015: 47 per cent). Book equity excluding minority interests was USD 202.7 million. Cash and bank deposits were USD 103.0 million. During 2016, the Group had a positive cash flow from operating activities of USD 25.0 million (2015: USD 67.5 million). Net cash flow from investments amounts to USD 124.1 million (2015: negative USD 34.2 million), consisting of USD 211.0 million from sale of assets and USD 86.9 in payments for vessels under construction. The cash flow from financing activities was negative USD 128.1 million (2015: negative USD 32.0 million) and comprises net of drawdown on new loan facilities, repayment of mortgage/bond debt including interests, distributions to/from the shareholders and group contribution. Due to net sale of vessels and refinancing of container loans into a revolving credit facility in 2016, interest-bearing debt has been reduced from USD 305.2 at year end 2015 to USD 185.0 million at year end 2016.
Total equity decreased by USD 59.9 million in 2016 due to total comprehensive income of USD 46.0 million, payments to non-controlling interests of USD 4.8 million, group contribution/dividend of in total USD 20.5 million and capital increase in non-controlling interests of USD 11.5 million.
The accounts are reported under the assumption of a going concern and the Board considers the financial position of Klaveness Ship Holding including subsidiaries at year-end to be solid. There have been no major transactions or events subsequent to the closing date that would have a negative impact on the evaluation of the financial position of Klaveness Ship Holding AS.
Operating result of the standalone financial statements of the parent company Klaveness Ship Holding AS consists of administrative expenses of USD 0.2 million (2015: USD 0.4 million). The financial result in 2016 consists mainly of impairment of shares in subsidiaries of USD 92.3 million (USD 38.1 million), interest expenses on bond loans of USD 5.8 million (USD 6.0 million) and negative effects of USD 5.2 million from refinancing the bond loans and de-recognition of hedge accounting. The net result from financial items was in total negative by USD 101.1 million in 2016 (2015: negative USD 41.6 million). Impairment in shares is mainly due to weak markets in container and dry bulk with declining vessel values in 2016 which resulted in impairment of the shares in Klaveness Container AS, Klaveness Bulk AS and T. Klaveness Shipping AS.
Net profit for the year is negative USD 100.9 million (2015: USD 36.1 million). Klaveness Ship Holding AS statutory balance sheet has decreased by USD 119.0 million from 2015 to 2016, mainly due to capital changes and impairment in subsidiaries of in total USD 191.4 mill, and an increase in cash of USD 24.0 million while loan to related parties within the Group has increased by USD 50.2 million.
Bond debt has decreased from NOK 590 million (USD 66.1 million) at year end 2015 to NOK 484 million (USD 55.4 million) at year end 2016, of which NOK 184 million (USD 23.1) was classified as short term and repaid in January 2017.
Net operating cash flow from the parent company was positive USD 2.3 million in 2016 (2015: negative USD 14.9 million). Net cash flow from investing activities was USD 99.1 million in 2016 (2015: 0) due to capital changes in subsidiaries. Net cash flow from financing activities amounted to negative USD 77.7 million (2015: negative USD 10.9 million) and consists of payments related to refinanced bond loan, terminated financial instruments, group contribution/dividend, loan to related parties and interest paid.
The dry bulk freight rates weakened to an all-time low in the first quarter of 2016. According to the Baltic Exchange cape-size freight rates averaged less than 1,500 USD/day during the quarter while panamax and supramax freight rates averaged 3,100 USD/day and 3,800 USD/day respectively. Freight rates increased in the subsequent quarters which brought the average rates in 2016 up to 6,300 USD/day for the capes (-600 USD/day year-on-year), 5,600 USD/day for the panamaxes (+100 USD/day year-on-year) and 6,300 USD/day for the supramaxes (-600 USD/day year-on-year). Similarly, the secondhand values of vessels declined sharply in the first quarter to the lowest level since 1991, but have since recovered to the levels seen at the end of 2015.
The cabu vessels are exposed to the clean product tanker market through index linked caustic soda freight contracts and the tanker market was significantly weaker in 2016 compared to 2015. As reported by the Baltic Exchange average earnings for the LR and MR clean product tankers were around 12.500 USD/day in 2016, a drop of around 40 per cent from the previous year. This drop is partly related to the high fleet growth of MR vessels over the last two years combined with very low scrapping of vessels. In addition, refinery throughput growth stalled in 2016 due to high stock levels, weaker margins and less arbitrage opportunities than in 2015. Towards the end of the year about 15 LR product tankers were employed in higher paying crude oil trades, lifting the earnings for product tankers.
The container charter market weakened in 2016 compared to 2015, with rates at historical low levels across most ship sizes. Rates for standard 2,500 TEU vessels ended the year around 5,250 USD/day, barely covering operating expenses. In October 2016 the idle fleet was reported to be record high at 400 vessels and during the year ship owners started to accept very flexible time charter periods in order to keep their vessels employed. The number of idle vessels came down towards the end of the year, due to a combination of increased chartering activity and scrapping. With a record number of vessels being recycled, the net fleet growth in container was only about 1.5 per cent in 2016, compared to a global demand growth of about 4 per cent. This was the first time since 2010 that demand growth outpaced supply growth, and a large improvement from 2015, which had a fleet growth of 8 per cent and a record low demand growth of less than 2 per cent.
According to Reuters, crude oil prices bottomed out in the start of 2016 and strengthened again during the first half of 2016. Crude oil for the year ended at 57 USD/barrel, up 52 per cent compared to the 2015 closing price. Bunker fuel prices largely followed crude oil prices, and bunkers with delivery in Singapore ended the year at 332 USD/mt, up from 160 USD/mt in the previous year.
By the end of 2016 the fleet consisted of eight combination carriers and eight container vessels. In addition, the Group has four combination carriers under construction.
Combination carriers: The cabu vessels are combination carriers transporting both dry cargo and caustic soda in the Far East, the Middle East, Australia, Brazil and North America. At the end of the year the cabu pool consisted of eight cabu vessels after taking delivery of two cabu newbuildings from Zhejiang OuHua Shipbuilding Co. Ltd. during the last four months of 2016. The third and last cabu vessel ordered at Zhejiang OuHua Shipbuilding Co. Ltd. is expected to be delivered in the second quarter of 2017 and will enter the cabu pool when delivered from the shipyard.
External investors hold a 50 per cent share of ownership in three vessels, 19 per cent in one vessel, 5 per cent in another vessel and further 50 per cent in the remaining cabu newbuilding with delivery in 2017.
The pool result weakened in 2016 compared to the last years, mainly as a result of the sharp fall in the tanker market, higher spot exposure and lower transported caustic volumes. The vessels were largely employed on long and medium term contracts of affreightment for transportation of caustic soda with customers in the Australian and Brazilian alumina industry. Total caustic soda shipments accounted for about 49 per cent of the available vessel days in 2016, while dry bulk cargoes, which are mainly north-bound from Australia to the Far East or Middle East and from Brazil to the US Gulf accounted for about 51 per cent of the available vessel days in 2016. The vessels Banastar and Barcarena were dry-docked during 2016.
Klaveness also has three combination carrier newbuildings on order at Jiangsu New Yangzi Shipbuilding Co., Ltd in China with delivery scheduled in 2018 and early 2019.
The cabu pool has during 2016 succeeded to expand its contract portfolio for shipment of both caustic soda and dry bulk commodities. Three new contracts of affreightment for shipment of caustic soda were entered into and one caustic soda contract was renewed in 2016.
Container: During 2016 Klaveness owned and operated a fleet of eight geared container vessels in the feeder segment (1,700 TEU - 3,100 TEU). All vessels were chartered out to liner operators on time charter contracts of up to one year. The six modern "Eco-Flex" vessels of 2,536 TEU continued to obtain fuel efficiency premiums, despite the lower fuel prices, but the general over-supply of tonnage led to an increase in the number of idle days between charter engagements. The weak container market further resulted in an impairment of USD 58.5 million to bring book values in line with estimated recoverable amounts.
Drybulk Investments: The kamsarmax vessel MV Bavang was delivered from the yard in February 2016. It was one out of an eight order deal made in 2013/2014, whereof six have been sold with a profit and one was cancelled in 2015. In line with Klaveness' strategy to focus on building a global combination carrier business, and charter in rather than own standard dry bulk vessels, the vessel was sold in December. Klaveness no longer owns any standard dry bulk vessels.
The Group's business is exposed to risks in many areas. The Board pays high attention to risk analysis and mitigating actions.
Market risks in the shipping markets relate primarily to changes in freight rates, fuel prices, vessel values and counterparty credit risk. These risks are monitored and managed.
The Group's revenue and costs are denominated primarily in US Dollar (USD) which is the functional currency of most entities in the Group. No direct currency hedge has been made towards the small portion of costs incurred in foreign currencies. Fluctuations in USD against NOK may affect the company's tax payable, which will be calculated and paid in NOK. This effect is considered to be limited. To reduce currency and interest rate risk, the company has entered into interest rate swaps converting floating interest payments to fixed rate and the bonds issued in NOK are partly secured with cross currency interest rate swaps, reducing the currency and interest exposure.
The Group is exposed to commercial risks, particularly on customer acceptance of the combination carriers. The Group has made extensive efforts to secure vetting acceptance of existing vessels and works closely with customers to document that new vessel concepts meet all their requirements. There is risk associated with increased competition and dependence on a limited number of key customers, which is mitigated through strong operational performance and continuous development of rendered services.
Operational risks in the shipping activities are managed through quality assurance, control processes and training of seafarers. Quarterly risk reviews ensure that risks are identified, analysed and managed, and that risk-mitigating actions are executed. The organisation is continuously working to learn from incidents and accidents by developing procedures and training accordingly.
Changes in the political, legislative, fiscal and/or regulatory framework governing the activities of the company could have material impact on the business. To lower this exposure, the Group has implemented procedures to comply with all applicable environmental regulations and sanctions legislation and performs due diligence checks of counterparties.
Operational risks are mainly related to the operation of vessels. The Group's vessels are on technical management to Klaveness Ship Management AS (affiliated company) which ensures compliance with IMO, flag and port state regulations. Quality and safety audits are performed regularly and the crew and officers onboard are trained to ensure that regulatory requirements are met. The vessels sail in waters exposed to piracy. All vessels sailing through exposed areas take precautionary steps to mitigate the threat of such attacks. Operational risks are also covered by insurance where relevant to cover loss of assets, revenues and contract commitments. The vessels are insured for loss of hire, protection and indemnity (P&I) and complete loss (hull and machinery). The latter is aligned with vessel values and loan agreement covenants. The financial impact of a total loss of a vessel will not be material for the Group.
At the end of 2016, the company had four newbuildings on order. Klaveness has dedicated on-site personnel who supervise the building processes, and the orders are split between two yards. There is performance risk associated with the newbuildings. Tier one Chinese banks provide refund guarantees.
There were no major unforeseen events of a financial nature during 2016. However, continued low container and dry bulk markets resulted in vessel impairments. The liquidity risk of the Group is considered to be acceptable. Financing is in place for all newbuildings. Current cash, available undrawn credit facilities and projected operating cash flow are considered sufficient to cover the Group's commitments.
Some of the vessels that are owned by the Group and its subsidiaries, participate in a shipping pool for operation and chartering. The pool is taking technical and operational precautions to protect the environment as embodied in ISM and MARPOL. The pool is further seeking to reduce the strain on the environment through efficiency of voyage execution and by reducing ballast voyages.
There are no employees in the Group, hence no actions were planned or implemented to promote equality or prevent discrimination. The board consists of two men and one woman.
The consolidated and parent accounts are prepared under the assumption of going concern. Nothing has occurred after the balance date, which may significantly influence the result or the balance sheet. The Board of Directors finds that the accounts represent a true and fair view of the company's equity and debt, financial position and result.
The Board of Directors in Klaveness Ship Holding AS
Oslo, 31 December 2016 Oslo, 29 March 2017
_____________________ Lasse Kristoffersen Chairman of the Board
____________________ Bent Martini Board Member
____________________ Liv Hege Dyrnes Board Member
____________________ Morten Skedsmo Managing Director
| Year ended 31 December | |||
|---|---|---|---|
| USD '000 | Note | 2016 | 2015 |
| Continuing operations | |||
| Operating revenue, vessels | Note 2 | 60 146 | 76 598 |
| Total operating revenue | 60 146 | 76 598 | |
| Operating expenses, vessels | Note 2, 4 | (35 616) | (35 796) |
| Group administrative services | Note 4 | (3 668) | (4 636) |
| Tonnage tax | Note 7 | (138) | (123) |
| Other operating and administrative expenses | Note 5 | (290) | (353) |
| EBITDA | 20 434 | 35 691 | |
| Ordinary depreciation | Note 8 | (20 178) | (19 850) |
| Impairment loss (-) / reversal | Note 8 | (60 050) | (17 511) |
| EBIT | (59 794) | (1 670) | |
| Finance income | Note 6 | 980 | 2 573 |
| Finance costs | Note 6 | (17 147) | (14 687) |
| Profit before tax from continuing operations | (75 961) | (13 785) | |
| Income tax expenses | Note 7 | 1 213 | 4 183 |
| Profit after tax from continuing operations | (74 748) | (9 602) | |
| Discontinued operations | |||
| Profit/(loss) after tax for the year from discontinued operations | Note 3 | 24 852 | 10 352 |
| Profit for the year | (49 896) | 751 | |
| Attributable to: | |||
| Equity holders of the parent company | (41 112) | 99 | |
| Non-controlling interests | (8 783) | 651 | |
| Total | (49 896) | 751 |
| USD '000 | Note | 2016 | 2015 |
|---|---|---|---|
| Net profit/ (loss) | (49 896) | 751 | |
| Other comprehensive income to be reclassified to profit or loss | |||
| Net movement fair value on interest rate swaps | Note 13 | 8 | (113) |
| Net movement fair value on cross-currency interest rate swap | Note 13 | 3 827 | (12 144) |
| Reclassification to profit and loss | Note 13 | 1 412 | 10 468 |
| Income tax effect | Note 7 | (1 320) | 447 |
| Net other comprehensive income to be reclassified to profit or loss | 3 926 | (1 341) | |
| Other comprehensive income not to be reclassified to profit or loss | - | - | |
| Net other comprehensive income not to be reclassified to profit or loss | - | - | |
| Other comprehensive income/(loss) for the period, net of tax | 3 926 | (1 341) | |
| Total comprehensive income/(loss) for the period, net of tax | (45 969) | (591) | |
| Attributable to: | |||
| Equity holders of the parent company | (37 186) | (1 242) | |
| Non-controlling interests | (8 783) | 651 | |
| Total | (45 969) | (591) |
| As at 31 December | ||||
|---|---|---|---|---|
| USD '000 | Note | 2016 | 2015 | |
| ASSETS | ||||
| Non-current assets | ||||
| Deferred tax asset | Note 7 | 7 510 | 7 620 | |
| Vessels | Note 8 | 274 954 | 274 748 | |
| Newbuilding contracts | Note 9 | 31 995 | 45 886 | |
| Financial assets | Note 12 | 1 052 | - | |
| Total non-current assets | 315 510 | 328 253 | ||
| Current assets | ||||
| Inventories | 1 473 | 1 887 | ||
| Accounts receivable | 462 | 782 | ||
| Receivables from related parties | Note 10 | 6 814 | 5 938 | |
| Prepaid expenses | 1 750 | 1 478 | ||
| Other short-term receivables | Note 10 | 4 007 | 15 365 | |
| Cash and cash equivalents | Note 11 | 102 981 | 82 447 | |
| Total current assets | 117 488 | 107 896 | ||
| Assets held for sale | Note 3 | - | 163 730 | |
| TOTAL ASSETS | 432 999 | 599 879 |
| As at 31 December | ||||
|---|---|---|---|---|
| USD '000 | Note | 2016 | 2015 | |
| EQUITY AND LIABILITIES | ||||
| Equity | Note 19 | |||
| Share capital | 1 817 | 1 817 | ||
| Share premium | 6 939 | 16 862 | ||
| Other paid-in capital | - | 5 585 | ||
| Other reserves | 35 | (3 891) | ||
| Retained earnings | 193 863 | 239 975 | ||
| Equity attributable to equity holders of the parent | 202 654 | 260 347 | ||
| Non-controlling interests | 17 344 | 19 491 | ||
| Total equity | 219 998 | 279 838 | ||
| Non-current liabilities | ||||
| Mortgage debt | Note 15 | 109 758 | 132 524 | |
| Bond loans | Note 16 | 34 141 | 66 073 | |
| Financial liabilities | Note 12 | 20 217 | 35 756 | |
| Total non-current liabilities | 164 116 | 234 353 | ||
| Current liabilities | ||||
| Short-term debt | Note 15, 16 | 41 100 | 26 652 | |
| Accounts payable | 874 | 1 810 | ||
| Current debt to related parties | 1 577 | 874 | ||
| Tax payable | Note 7 | - | 1 459 | |
| Tonnage tax payable | Note 7 | 139 | 181 | |
| Other current liabilities | Note 18 | 5 196 | 8 440 | |
| Total current liabilities | 48 886 | 39 416 | ||
| Liabilities directely associated with assets held for | ||||
| sale | Note 3 | - | 46 271 | |
| TOTAL EQUITY AND LIABILITIES | 432 999 | 599 879 |
Oslo, 31 December 2016 Oslo, 29 March 2017
Lasse Kristoffersen Chairman of the Board
Bent Martini Board member
Board member Liv Hege Dyrnes Managing Director Morten Skedsmo
| Attributable to equity holders of the parent | ||||||||
|---|---|---|---|---|---|---|---|---|
| Non | ||||||||
| Share capital |
Share premium |
Other paid in capital |
Hedging reserve |
Retained earnings |
Total | controlling interests |
Total equity | |
| Equity at 1 January 2015 | 1 817 | 16 861 | 5 585 | (2 550) | 243 621 | 265 334 | 21 592 | 286 926 |
| Profit (loss) for the year | 99 | 99 | 651 | 751 | ||||
| Other comprehensive income for the year | (1 341) | (1 341) | (1 341) | |||||
| Total comprehensive income for the year | (1 341) | 99 | (1 242) | 651 | (591) | |||
| Payments to non-controlling interests | (2 752) | (2 752) | ||||||
| Group contribution with tax effect | (2 173) | (2 173) | (2 173) | |||||
| Group contribution without tax effect | (1 572) | (1 572) | (1 572) | |||||
| Equity at 31 December 2015 | 1 817 | 16 861 | 5 585 | (3 891) | 239 976 | 260 347 | 19 491 | 279 838 |
| Profit (loss) for the year | (41 112) | (41 112) | (8 783) | (49 896) | ||||
| Other comprehensive income for the year | 3 926 | 3 926 | 3 926 | |||||
| Total comprehensive income for the year | 3 926 | (41 112) | (37 186) | (8 783) | (45 969) | |||
| Payments to non-controlling interests | - | (4 849) | (4 849) | |||||
| Group contribution | (9 922) | (5 585) | (15 507) | (15 507) | ||||
| Capital increase in non-controlling interests | 11 485 | 11 485 | ||||||
| Dividend payment | (5 000) | (5 000) | (5 000) | |||||
| Equity at 31 December 2016 | 1 817 | 6 939 | - | 35 | 193 863 | 202 653 | 17 344 | 219 998 |
The reserve contains total net changes in the fair value of financial instruments recognized to fair value with changes through OCI.
| USD '000 | Note | 2016 | 2015 |
|---|---|---|---|
| Profit before tax from continuing operations Profit before tax from discontinuing operations |
Note 3 | (75 961) 24 854 |
(13 785) 10 367 |
| Tonnage tax expensed | 151 | 173 | |
| Net gain/loss fixed assets | Note 3 | (26 313) | 2 956 |
| Ordinary depreciation | Note 8 | 20 573 | 30 382 |
| Impairment loss/ reversal | Note 8, 9 | 61 201 | 22 553 |
| Amortization of upfront fees bank loans | 1 421 | 877 | |
| Financial derivatives unrealised loss/gain | 2 855 | 1 226 | |
| Refinancing cost | 1 618 | - | |
| Reversal provision | (500) | - | |
| Gain/loss on foreign exchange | 31 | (1 884) | |
| Interest income | Note 6 | (948) | (313) |
| Interest expenses | Note 6 | 11 501 | 12 302 |
| Taxes paid for the period | (1 459) | (1 295) | |
| Change in receivables | 8 618 | 2 902 | |
| Change in current liabilities | (3 477) | 1 303 | |
| Change in other working capital | (75) | (613) | |
| Interest received | 948 | 313 | |
| A: Net cash flow from operating activities | 25 038 | 67 464 | |
| Acquisition of tangible assets | Note 8 | (2 637) | (5 972) |
| Installments and cost on newbuilding contracts | Note 9 | (84 239) | (28 197) |
| Payment received disposal vessels/newbuildings | 211 021 | - | |
| B: Net cash flow from investing activities | 124 145 | (34 169) | |
| Proceeds from mortgage debt | 94 323 | 69 622 | |
| Proceeds from bond loan | 35 273 | - | |
| Transaction costs on issuance of loans | (1 542) | (1 380) | |
| Repayment of mortgage debt | (169 735) | (80 346) | |
| Repayment of bond loan | (48 299) | - | |
| Terminated financial instruments | (12 708) | - | |
| Interest paid | (11 501) | (12 302) | |
| Cash proceeds from issuing of shares non-controlling interests | 11 485 | - | |
| Group contribution/dividend | (20 507) | (4 794) | |
| Dividends to non-controlling interests | (4 849) | (2 752) | |
| C: Net cash flow from financing activities | (128 062) | (31 952) | |
| Net change in liquidity in the period (A + B + C) | 21 121 | 1 343 | |
| Net foreign exchange difference | (587) | (586) | |
| 20 534 | 757 | ||
| Cash and cash equivalents at beginning of period | 82 447 | 81 690 | |
| Cash and cash equivalents at end of period | Note 11 | 102 981 | 82 447 |
| Net change in cash and cash equivalents in the period | 20 534 | 757 | |
| Undrawn facilities* | Note 15 | 175 900 | 146 277 |
* Includes undrawn part of a Revolving credit facility and committed but undrawn part of loans for the vessels under construction.
Consolidated Income Statements Consolidated Statements of Other Comprehensive Income Consolidated Balance Sheet Statements Consolidated Statement of Changes in Equity Consolidated Statement of Cash Flows Note 1: Accounting principles Note 2: Segment reporting Note 3: Discontinued operations Note 4: Operating expenses Note 5: Other operating and administrative expenses Note 6: Finance income and finance costs Note 7: Taxes Note 8: Vessels Note 9: Newbuildings Note 10: Receivables Note 11: Cash and cash equivalents Note 12: Financial assets and liabilities Note 13: Financial Risk Management Note 14: Fair value measurement Note 15: Interest bearing debt and financial instruments Note 16: Bond loans Note 17: Commitments and guarantees Note 18: Other liabilities Note 19: Share capital, shareholders, dividends and reserves Note 20: List of subsidiaries Note 21: Transactions with related parties
Note 22: Contingent liabilities
Note 23: Events after the balance sheet date
Klaveness Ship Holding AS ( "parent company"/KSH) is a private limited company domiciled and incorporated in Norway. The parent company has headquarter and is registered in Drammensveien 260, 0283 Oslo. The parent company's consolidated accounts for the fiscal year 2016 include the parent company and its subsidiaries (referred to collectively as the Group) and associated companies.
The ultimate parent of the company is Rederiaksjeselskapet Torvald Klaveness. The consolidated financial statements for the ultimate parent is available at www.klaveness.com.
The consolidated financial statements for Klaveness Ship Holding AS for the fiscal year 2016 are approved in the board meeting on 29 March 2017.
The Group activities are described in note 2.
The consolidated financial statements of the Group and the financial statements for the parent company have been prepared in accordance with International Financial Reporting Standards ("IFRS") as endorsed by the European Union.
The consolidated financial statements are based on historical cost, except for derivative financial instruments which are measured at fair value.
The presentation currency for the Group is US Dollar (USD). The Group companies, including the parent company, have USD as their functional currency. Each entity in the Group determines its own functional currency and items included in the financial statements of
each entity are measured using that functional currency.
Transactions in foreign currencies are recorded in the functional currency rate at the date of the transaction. Monetary assets and liabilities in foreign currency are translated at the functional currency rate prevailing at the balance sheet date. Exchange differences arising from translations into functional currency are recorded in the income statement.
Non-monetary assets and liabilities measured at historical cost in foreign currency are translated into the functional currency using the historical exchange rate. Non-monetary assets and liabilities recognized at fair value are translated using the exchange rate on the date of the determination of the fair value.
Income and expenses in NOK are converted at the rate of exchange on the transaction date. The average exchange rate was USD/NOK 8.4044 in 2016 (2015: 8.0640). At year-end 2016 an exchange rate of USD/NOK 8.6456 (2015: 8.7986) was used for the valuation of balance sheet items.
The Group's consolidated financial statements comprise Klaveness Ship Holding AS (KSH) and companies in which KSH has a controlling interest. A controlling interest is normally obtained when the Group owns more than 50 % of the shares in the company or through agreements are capable of exercising control over the company. Non-controlling interests are included in the Group's equity.
Subsidiaries are consolidated from the date of acquisition, being the date on which the Group obtains control, and consolidation is continued until the date when such control ceases. The financial statements of the subsidiaries are prepared for the same accounting period as the parent company,
using consistent accounting principles for similar transactions and events under otherwise similar circumstances.
All intra-group balances, transactions, unrealized gains and losses resulting from intra-group transactions and dividends are eliminated in full.
The Group treats transactions with noncontrolling interests as transactions with equity owners of the Group. For purchases from non-controlling interests, the difference between any consideration paid and relevant share acquired of the carrying value of net assets of the subsidiary is recorded in equity.
Gains or losses on disposals of shares in subsidiaries to non-controlling interests are also recorded in equity.
If the Group loses control of a subsidiary during the reporting period, the assets and liabilities of the former subsidiary is derecognized from the consolidated accounts and recognized as an investment at fair value in accordance with relevant IFRSs. The carrying amounts of any non-controlling interests are also derecognized. Gains or losses associated with the loss of control is recognized in profit and loss.
Preparing financial statements in conformity with IFRS requires the management to make judgments, use of estimates and assumptions which affect the application of the accounting policies and the reported amounts of assets and liabilities, revenues and expenses.
The estimates are based on the actual underlying business, its present and forecast profitability over time, and expectations about external factors such as freight rates, interest rates, foreign exchange rates, oil prices and
more which are outside the Group's and parent company's control. Uncertainty about these assumptions and estimates could result in outcomes that require a material adjustment to the carrying amount of assets or liabilities in future periods. Changes in accounting estimates are recognized in the period the changes occur. When changes to estimates also affect future periods the effect is distributed between the current and future periods.
Management has made estimates and assumptions which have significant effect on the amounts recognized in the financial statements. In general, accounting estimates are considered significant if:
In addition to the purchase price, the carrying amount of vessels is based on management's assumptions of useful life. Useful life may change due to change in technological developments, competition, environmental and legal requirements, freight rates and steel prices.
When value in use calculations are performed, management estimates the expected future cash flows from the assets or cash-generating unit (defined in the section of "judgments") and determine a suitable discount rate in order to calculate the present value of those cash flows. This will be based on management's evaluations, including estimating future performance, revenue generating capacity, and assumptions of
future market conditions and appropriate discount rates. Changes in circumstances and management's evaluation and assumptions may give rise to impairment losses. While management believes that the estimates of future cash flows are reasonable, different assumptions regarding such cash flows could materially affect the evaluations.
On a quarterly basis, management assesses indicators of impairment for non-financial assets and whether the assumptions in the value in use calculations are reasonable. Recoverable amount is set as the highest of fair value less cost to sell and value in use. Average broker values are used to estimate fair value less cost to sell. If carrying value exceeds the estimated recoverable amount, impairment is recognized. Impairments are reversed in a later period if recoverable amount exceeds carrying amount.
At each reporting date, management assesses if there are contracts in which the unavoidable costs of meeting the obligations under the contract exceed the economic benefits expected to be received. A provision is recorded by estimating the present obligation under the contract.
Deferred tax assets are only recognized if it is probable that future taxable profit will be available against which the unused tax losses and unused tax credits can be utilized. If the Group has loss carried forward in any subsidiaries, these deferred tax assets are recognized only if there are convincing evidence that adequate taxable profit will be available in the future against which losses can be utilized.
In the process of applying Klaveness Ship Holding's accounting policies, management has made the following judgments which have significant effect on the amounts recognized in the financial statements.
The Group has defined the fleet of combination carriers (Cabu) as one cash generating unit (" CGU"), due to the Group's operational strategy to manage the fleet as a portfolio and thereby optimizing the portfolios' cash flow and the earnings for the entire Group. For container vessels the Group has defined that each vessel is a separate CGU as the cash flows from these vessels can be separated on an individual level.
The Group owns 50 % of Banasol Inc and 50 % of Banastar Inc. The remaining shares are owned by Veronica Co Ltd. The Group owns 50 % of Baffin Shipping AS and 50 % of Ballard Shipping AS. The remaining shares are owned by EGD Shipholding AS. The entities own one vessel each; MV Banasol, MV Banastar, MV Baffin and MV Ballard (to be delivered in 2017) respectively. Management has assessed the investments against control criterias in IFRS 10 whether the Group has rights to direct the relevant activities. The management is of the opinion that power is embedded in one or more contractual arrangements for the main activities; chartering activity and ship-owning activity. The assessment shows that all elements of control are present. The Group is considered to control the entities Banasol Inc, Banastar Inc, Baffin Shipping AS and Ballard Shipping AS which have been consolidated as subsidiaries into the Group's financial statements.
A sale of the five selfunloader vessels was concluded in December 2015, and all vessels were delivered to their new owners in January 2016. The management has considered whether the transaction has one or three different buyers. As the sale was fronted by one nominee, the three buyers are related parties and the fact that prerequisite for a sale was all five vessels or none, the management concluded on one buyer. Based on this, the sale has been treated as sale of group of assets disposed together, ref reversal of prior years impairment (note 3).
The operating segments are reported in a manner consistent with the internal financial reporting provided to the chief operating decision-maker.
The chief operating decision-maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the Group executive management who makes the strategic decisions.
The vessels are structured into segments based on type of freight the vessels transport. The internal financial reports are structured into four reporting segments with similar characteristics i) Combination Carriers ii) Container vessels iii) Dry bulk investments (Kamsarmax) and iv) Other/administration. The shipping market in general offers a global service covering major trade routes. All segments have worldwide activities. Due to this, assets and liabilities are not allocated to geographical segments.
Revenue is recognized when it is probable that transactions will generate future economic benefits that will flow to the Group and the amount can be reliably estimated, regardless of when payment is being made. Revenues are recognized at fair value and presented net of value added tax and discounts.
The Group's revenue in ship owning companies derives from chartering (hiring) out its vessels to operating companies. Vessels owned by the Group are either operated
under time charter contracts or participate in a pool.
Revenues from time charters (TC) are accounted for as operating leases under IAS 17. The Group owns eight container vessels. The charter agreements are on time charter basis, implying chartering a complete vessel including crew. Revenues from predetermined time charters are recognized on a straight-line basis over the duration of the period of each charter and adjusted for off-hire days, as the service is performed.
Net-revenues from the pool participation are recognized in accordance with revenue recognition in the co-sailing pool (charterer). Profit from the co-sailing pool is allocated to each vessel participating in the pool, based on allocation keys (vessel earning points) stipulated in pool participation agreements. Revenues and costs associated with the vessels' voyages are accrued according to the share of voyage days that occur before closing (percentage of completion method). Voyage accounting consists of actual figures for completed voyages and estimates for voyages in progress. Voyages are normally dischargeto-discharge. Except for any period a vessel is declared off-hire due to technical or other owner's matters, a ship is always allocated to a voyage.
Vessel operating expenses include crewing, repairs and maintenance, insurance, stores, lubricant oils and management fees. When vessels are on hire, the majority of vessel operating expenses are reimbursed from the charterer. When the vessel is off hire, vessel operating expenses are mainly for owners account.
All the companies within the Group, with the exception of Klaveness Ship Holding AS (parent company), Klaveness Cement Logistics AB (KCL AB) and Klaveness Bulk AS (KBA), are
organized in compliance with the Norwegian tonnage tax regime ("NTT"). KSH and KCL AB are subject to ordinary taxation. Company tax in Norway is 25 % (24 % from 2017). Subsidiaries outside of Norway are governed by the tax laws and tax rates in the local jurisdiction. Some companies in the Group are subject to taxation in Norway based on controlled foreign company (CFC) rules where tax is charged at the investor level. All of these companies are subject to the Norwegian tonnage tax regime and owned by a company subject for tonnage tax regime.
The NTT entails no tax on operating profits or tax on dividends from companies within the scheme. Net financials, allowed for some special regulations, are taxed on an ongoing basis, currently at a rate of 25 %. A tonnage fee is charged per vessel depending on the size of the vessel owned or leased by companies taxed under the NTT. This tonnage tax is classified as an operating cost.
Tax expenses in the profit and loss account comprise both tax payable for the accounting period and changes in deferred tax. Deferred tax is calculated at 24 % (25 %) on the basis of temporary differences between tax and accounting values of assets and liabilities that exist at the balance sheet date. Deferred taxes are recognized using the liability method in accordance with IAS 12. Deferred tax is only calculated for assets and liabilities for which future realization will lead to tax payable.
Deferred tax liabilities/deferred tax assets within the same tax system are recorded on a net basis. Income tax relating to items recognized directly in equity is included directly in equity and not in the statement of income.
Non-current assets such as vessels, the cost of dry-docking and newbuildings are carried at cost less accumulated depreciation and impairment charges. Cost is defined as directly attributable cost plus borrowing cost during the construction period.
Depreciation is calculated on a straight-line basis over the estimated useful life of a vessel taking its residual value into consideration. Useful life is estimated to be 20-25 years for the Group's fleet. Certain capitalized elements like costs related to periodic maintenance/dry-docking have shorter estimated useful lives and are depreciated until the next planned dry-docking, typically over a three to five years period. When newbuildings are delivered a portion of the cost is classified as dry docking.
Costs of day-to-day servicing, maintenance and repairs are expensed.
The useful life and residual values are reviewed at each balance sheet date.
Vessels under construction are classified as non-current assets and recognized at the cost incurred in relation to the non-current asset when paid. Newbuildings are not depreciated until delivery. Borrowing costs directly attributable to the construction of vessels are added to the cost of the vessels, until such time as the vessels are ready for their intended use.
On a quarterly basis the balances are assessed whether there is an indication that vessels and newbuilding contracts may be impaired. If the recoverable amount is lower than the book value, an impairment charge is recorded. Impairment losses are recognized in the profit and loss statement. An impairment loss recognized in prior periods for an asset is reversed if, and only if, there has been a change in the estimates used to determine the asset's recoverable amount since the last impairment loss was recognized. For further information regarding impairment considerations, refer to critical accounting estimates and judgments.
The Group differentiates between financial leasing and operational leasing based on an evaluation of the lease contract at the time of inception. A lease contract is classified as a financial lease when the terms of the lease transfer substantially all risk and rewards of ownership to the lessee. All other leases are classified as operational leases. When a lease contract is classified as a financial lease where the Group is the lessee, the rights and obligations relating to the leasing contracts are recognized in the balance sheet as assets and liabilities. The interest element in the lease payment is included in the interest costs and the capital amount of the lease payment is recorded as repayment of debt. The lease liability is the remaining part of net present value of future payments. For operational leases, the rental amount is recorded as an ordinary operating cost.
The Group has leasing agreements as lessor related to the container vessels which all are classified as operational leases. Lease payments received are recognized in profit or loss on a straight-line basis over the term of the lease, typically 3-12 months.
Derivatives, are measured at fair value. The fair value of financial instruments traded in active markets is determined by reference to quoted market prices or dealer price quotations, without any deduction for transaction costs. The fair value of financial instruments not traded in active markets is determined using appropriate evaluation techniques.
A fair value measurement of a non-financial asset takes into account a market participant's ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use.
The Group uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximizing the use of relevant observable inputs and minimizing the use of unobservable inputs.
All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorized within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole:
Level 1 – Quoted (unadjusted) market prices in active markets for identical assets and liabilities
Level 2 – Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable
Level 3 – Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable.
The Group and the parent company classify financial assets in the following categories: financial assets at fair value through profit and loss, loans and receivables, held to maturity investments, available for sale financial assets, or as derivatives designated as hedging instruments in an effective hedge. The classification depends on the purpose of the asset. Financial assets are recognized initially at fair value plus, in the case of financial assets not recorded at fair value through profit or loss, transaction costs that are attributable to the acquisition of the financial asset.
The subsequent measurement of financial assets depends on their classification as described below:
Loans and receivables are non-derivative financial assets with fixed or determinable payments which are not quoted in an active market. They are included in current assets, except for maturities greater than 12 months after balance sheet date. These are classified as non-current assets. Loans and receivables are classified as other current assets or other non-current assets in the balance sheet.
Loans and receivables are recognized initially at their fair value plus transaction costs and subsequently measured at amortised cost. The interest element is disregarded if it is insignificant, which is normally the situation for the Group. Should there be objective evidence of a decline in value, the difference between the carrying amount and the estimated recoverable amount is recognized as a loss in the period they arise.
Financial assets are derecognized when the contractual rights to the cash flows from the financial assets expire or are transferred, and the group has transferred by and large all risk and return from the financial asset.
The Group uses derivative financial instruments, such as forward currency contracts and interest rate swaps, to hedge its foreign currency risks and interest rate risks that are within the scope of IAS 39.
Such derivative financial instruments are initially recognized at fair value on the date on which a derivative contract is entered into and are subsequently re-measured at fair value. Derivatives are carried as financial assets when fair value is positive and as financial liabilities when the fair value is negative.
The effective portion of the gain or loss on the hedging instrument is recognized directly as other comprehensive income in the cash flow hedge reserve, while any ineffective portion is recognized immediately in profit and loss.
Amounts recognized as other comprehensive income are transferred to profit and loss when the hedged transaction affects profit and loss,
such as when the hedged financial income or expense is recognized or when a forecast transaction occurs.
Derivative financial instruments that are designated as, and are effective hedging instruments are separated into a current and non-current portion consistent with the classification of the underlying item.
Interest bearing debt and bond loans are recognized at fair value when the proceeds are received, net of transaction costs. In subsequent periods, loans are stated at amortized cost using the effective interest rate method. Any difference between proceeds (net of transaction costs) and the redemption value is recognized in the income statement as finance costs over the term of the loan. Loans are classified as current liabilities unless the Group or the parent company has an unconditional right to defer settlement of the liability for at least 12 months after the balance sheet date.
This category generally applies to interestbearing loans and borrowings. For more information refer note 15 and 16.
Inventories consist mainly of lubricant oil and are recognized at cost in accordance with the first in – first out method (FIFO). Inventories are valued at the lower of cost and net realizable value. Impairment losses are recognized if the net realizable value is lower than the cost price.
Cash includes cash in hand, bank deposits and other highly liquid investments with original maturities of three months or less.
Transaction costs related to an equity transaction are recognized directly in equity, net of tax.
Dividend payments are recognized as a liability in the Group's financial statements from the date when the dividend is approved by the general meeting.
A provision is recognized when the Group has a present obligation (legal and constructive) as a result of a past event, it is probable that the Group will be required to settle the obligation and a reliable estimate can be made of the amount.
Provisions usually relate to legal claims.
Provisions for loss-making contracts are recognized when the Group's estimated revenues from a contract are lower than unavoidable costs which were incurred to meet the obligations pursuant to the contract (ref description of onerous contracts in section "Significant estimates and assumptions").
Parties are related if one party has the ability, directly or indirectly, to control the other party or exercise significant influence over the party in making financial and operating decisions. Parties are also related if they are subject to common control or common significant influence. Related parties transactions are recorded to estimated fair value. Transactions with related parties are disclosed in note 21.
New information on the Group's financial position at the balance sheet date is taken into account in the annual financial statements. Subsequent events that do not affect the Group's position at the balance sheet date, but which will affect the Group's position in the future, are disclosed if significant.
Current assets and short-term liabilities include items due less than one year from the balance sheet date, as well as items due more than one year from the balance sheet date, that are related to the operating cycle.
Liabilities with maturity less than one year from the balance sheet date are classified as current. All other debt is classified as longterm debt. The first year's repayment of longterm debt is classified as current.
The cash flow statements are based on the indirect method.
The financial statements have been prepared based on standards, amendments and interpretations effective for the year ending 31 December 2016. IASB has issued the following standards/amendments to the following standards that are not yet effective which may have an impact on these financial statements:
IFRS 9 Financial Instruments (effective date 1 January 2018)
IFRS 15 Revenue from contract with customers (effective date 1 January 2018)
IFRS 16 Leases (effective date 1 January 2019)
The Group has evaluated if IFRS 9 Financial instruments, IFRS 15 Revenue from contracts with customers and/or IFRS 16 Leases will have significant impact on the financial statements. The evaluation of anticipated effects of the new standards concludes on no material impact on the financial statements of the Group, beyond disclosures. Other issued standards and interpretations, that are not yet effective, are not applicable for the Group, and will not have an impact on the financial statements.
The operating segments are reported in a manner consistent with the internal financial reporting provided to the executive management (chief operating decision-maker).
The financial reporting is divided into the following operating segments:
All segments have worldwide activities. The Group operates in an open international market where the various geographical areas are connected. The fleet has the flexibility to operate in all markets and are employed in a comprehensive pattern inside and between the regions in order to optimize income. Consequently, the Group's operating shipping activities are not attributed to specific geographical markets.
Combination Carriers are spesialized vessels. Cabus are constructed to carry caustic soda and dry bulk. The Group owns eight Cabu vessels which participate in a pool operated by Cabu Chartering AS (affiliated company). The Group has one Cabu newbuilding under construction at Zeijiang OuHua Shipbuilding Co. Ltd. scheduled for delivery in 2017, and three other combination carriers under construction at Jiangsu New Yangzi Shipbuilding Co., Ltd in China, scheduled for delivery in 2018/2019.
The Container vessels are standard vessels which are operated on short term time-charter (TC) agreements.The Group owns eight container vessels (1,700-3,100 TEU).
In December, the Group sold the only owned dry bulk vessel , MV Bavang (see note 3). The vessel was delivered from the yard in February 2016.
The Group's five selfunloader vessels were delivered to their new owners in January 2016 (see note 3).
The remaining of the Group's activities, eliminations and intra group transactions are shown in the "other/administration" column. The Group's administration costs and other shared costs have been allocated to segments. Transfer prices between operating segments are on arm's length basis in a manner similar to transactions with third parties.
Information regarding the Group's reportable segments is presented below. Interest income and interest expense have not been allocated to segments, as the financing is managed on a group basis.
| (USD'000) | Combination carriers |
Container vessels |
Other/ admin |
Total consolidated |
|---|---|---|---|---|
| Operating revenue, vessels | 41 026 | 19 120 | - | 60 146 |
| Total operating revenue | 41 026 | 19 120 | - | 60 146 |
| Operating expenses, vessels | (17 136) | (18 980) | 500 | (35 616) |
| Ordinary depreciation | (12 812) | (7 366) | - | (20 178) |
| Net impairment | - | (60 050) | - | (60 050) |
| Tonnage tax | (68) | (70) | - | (138) |
| Other operating and adm expenses | (1 368) | (2 318) | (271) | (3 957) |
| Total operating expenses | (31 385) | (88 784) | 229 | (119 939) |
| Operating profit/EBIT | 9 641 | (69 664) | 229 | (59 794) |
| (USD '000) | Combination carriers |
Container vessels |
Other*/ admin |
Total consolidated |
|---|---|---|---|---|
| ASSETS | ||||
| Vessels | 158 852 | 116 102 | - | 274 954 |
| Newbuilding contracts | 31 995 | - | - | 31 995 |
| Financial assets | 1 052 | - | - | 1 052 |
| Other non-current assets | - | - | 7 510 | 7 510 |
| Total non-current assets | 191 898 | 116 102 | 7 510 | 315 510 |
| Cash | 64 908 | 2 865 | 35 208 | 102 981 |
| Current assets | 9 723 | 4 451 | 333 | 14 507 |
| Total current assets | 74 631 | 7 316 | 35 541 | 117 488 |
| TOTAL ASSETS | 266 529 | 123 418 | 43 051 | 432 999 |
| EQUITY AND LIABILITIES | ||||
| Total equity | 160 484 | 91 383 | (31 869) | 219 998 |
| Interest bearing debt | 80 574 | 29 184 | - | 109 758 |
| Bond loans | - | - | 34 141 | 34 141 |
| Financial liabilities | 2 117 | 60 | 18 039 | 20 217 |
| Total non-current liabilities | 82 691 | 29 245 | 52 180 | 164 116 |
| Short-term interest bearing debt | 19 818 | - | 21 283 | 41 100 |
| Other current liabilities | 3 536 | 2 791 | 1 458 | 7 785 |
| Total current liabilities | 23 354 | 2 791 | 22 741 | 48 886 |
| TOTAL EQUITY AND LIABILITIES | 266 529 | 123 418 | 43 051 | 432 999 |
| * Includes assets and liabilities related to assets held for sale/discontinued operations. | ||||
| Capital expenditure Vessels | (2 597) | (40) | - | (2 637) |
| Capital expenditure newbuildings | (64 844) | - | - | (64 844) |
| Cash from operation | 19 856 | (2 288) | 229 | 17 797 |
Cash from operation is reported excluding capital expenditures on newbuildings and acquisition of second hand vessels, as this is considered not part of normal operation, and including minority interests.
| (USD'000) | Combination carriers |
Container vessels |
Other/ admin |
Total consolidated |
|---|---|---|---|---|
| Operating revenue, vessels | 50 989 | 25 609 | - | 76 598 |
| Total operating revenue | 50 989 | 25 609 | - | 76 598 |
| Operating expenses, vessels | (14 905) | (20 889) | - | (35 796) |
| Ordinary depreciation | (10 773) | (9 077) | - | (19 850) |
| Net impairment | - | (17 511) | - | (17 511) |
| Tonnage tax | (62) | (62) | - | (123) |
| Other operating and adm expenses | (2 202) | (2 376) | (411) | (4 989) |
| Total operating expenses | (27 942) | (49 915) | (411) | (78 269) |
| Operating profit/EBIT | 23 047 | (24 306) | (411) | (1 670) |
| Combination | Container | Dry bulk | Other*/ | Total | |
|---|---|---|---|---|---|
| (USD '000) | carriers | vessels | Investment | admin | consolidated |
| ASSETS | |||||
| Vessels | 91 229 | 183 518 | - | - | 274 748 |
| Newbuilding contracts | 45 328 | - | 558 | - | 45 886 |
| Other non-current assets | - | - | - | 7 620 | 7 620 |
| Total non-current assets | 136 558 | 183 518 | 558 | 7 620 | 328 253 |
| Cash | 64 769 | 1 902 | 42 | 15 733 | 82 447 |
| Current assets | 11 748 | 6 202 | 2 307 | 5 192 | 25 448 |
| Total current assets | 76 517 | 8 104 | 2 349 | 20 925 | 107 896 |
| Assets held for sale (note 3) | - | - | 163 730 | 163 730 | |
| TOTAL ASSETS | 213 075 | 191 622 | 2 907 | 192 275 | 599 879 |
| EQUITY AND LIABILITIES | |||||
| Total equity | 143 669 | 89 559 | 2 728 | 43 884 | 279 838 |
| Interest bearing debt | 44 546 | 87 978 | - | 132 524 | |
| Bond loans | - | - | 66 073 | 66 073 | |
| Other non-current financial liabilities | 1 968 | - | 33 788 | 35 756 | |
| Total non-current liabilities | 46 514 | 87 978 | 99 861 | 234 353 | |
| Short-term interest bearing debt | 17 148 | 9 504 | - | 26 652 | |
| Other current liabilities | 5 743 | 4 582 | 179 | 2 260 | 12 765 |
| Total current liabilities | 22 891 | 14 086 | 179 | 2 260 | 39 416 |
| Liabilities directly associated with | |||||
| assets held for sale | - | - | 46 271 | 46 271 | |
| TOTAL EQUITY AND LIABILITIES | 213 075 | 191 622 | 2 907 | 192 275 | 599 879 |
| * Includes assets and liabilities related to assets held for sale/discontinued operations. | |||||
| Capital expenditure vessels | (3 601) | - | - | (3 601) |
|---|---|---|---|---|
| Capital expenditure newbuildings | (23 383) | - | - | (23 383) |
| Cash from operation | 30 219 | 2 282 | (411) | 32 089 |
The five selfunloader vessels were sold in November 2015 and delivered to their new owners in January 2016. A gain of USD 26.2 million was recognized in 2016. Recognized gain of USD 0.2 million relates to finalizing of sale of bulk options from 2013.
The Kamsarmax vessel Bavang was sold in October 2016 and delivered to the new owner in December 2016. A loss of USD 0.1 million was recognized in 2016. After the sale, the Group no longer owns any standard dry bulk vessels.
With selfunloader vessels and the kamsarmax vessel classified as discontinued operations, the selfunloader and dry bulk investments segments are no longer presented in the segment note (note 2). Profit after tax from discontinued operation is presented separately in the consolidated income statement for 2016 and 2015. Booked value of the five selfunloader vessels and liability related to financing of the selfunloader vessels are presented on a seperate line in the financial position as of 31 December 2015. Outstanding amount (USD 46.2 mill) on the revolving credit facility (RCF) with DNB/SEB (USD 75 mill) was repaid in January 2016. Debt related to financing of Bavang (USD 12.4 million) was repaid in December 2016. The total result of discontinued operation for the year are presented below:
| USD '000 | 2016 | 2015 |
|---|---|---|
| Operating revenue, vessels | 2 982 | 47 512 |
| Gain from sale of vessels | 26 443 | (12) |
| Total operating revenue | 29 424 | 47 500 |
| Operating expenses, vessels | (2 223) | (19 061) |
| Loss from of sale fixed assets | (130) | (186) |
| Ordinary depreciation | (394) | (10 533) |
| Impairment | (1 151) | (5 041) |
| Tonnage tax | - | (51) |
| Other operating and adm expenses | (379) | (1 227) |
| Operating profit/EBIT | 25 147 | 11 402 |
| Finance income | - | - |
| Finance costs | (292) | (1 035) |
| Profit/(loss) before tax | 24 854 | 10 367 |
| Income tax expenses | (2) | (15) |
| Profit/(loss) after tax from disc. operations | 24 852 | 10 352 |
Prior to the sale of MV Bavang, the vessel was impaired to fair value less cost to sale. An impairment of USD 1.2 million was recognized in 2016 (2015: USD 8.0 million).
For the selfunloader vessels, sales price of the five vessels (USD 190 million) was higher than booked value (USD 163.7 million). Impairment related to one of the vessels was reversed in the P&L for 2015 (USD 3.0 million).
The major classes of assets and liabilities of assets held for sale as at 31 December are, as follows:
| USD '000 | 2016 | 2015 |
|---|---|---|
| Assets | ||
| Assets held for sale | - | 163 730 |
| Liabilites | ||
| Liabilities directly associated with assets held for sale | - | 46 271 |
Cash flows from discontinued operations are included in cash flows from continuing operations.
Cash flows from discontinued operations are as follows:
| USD '000 | 2016 | 2015 |
|---|---|---|
| Net cash flow from operating activities | 79 | 25 589 |
| Net cash flow from investment activities | 191 428 | (718) |
| Net cash flow from financing activities | (45 471) | 46 067 |
| USD '000 | 2016 | 2015 |
|---|---|---|
| Technical expenses | 11 361 | 12 007 |
| Crew costs | 15 377 | 14 253 |
| Insurance | 2 893 | 2 995 |
| Crewing agency fee to Klaveness Ship Management AS (note 21) | 1 275 | 1 220 |
| Ship management fee to Klaveness Ship Management AS (note 21) | 2 843 | 2 820 |
| IT fee to Klaveness Ship Managment AS (note 21) | 143 | 392 |
| Commission fee | 5 | 793 |
| Cancellation newbuilding (note 9) | - | 2 770 |
| Other operating expenses | 1 717 | (1 454) |
| Total operating expenses | 35 616 | 35 796 |
Costs related to technical management, maintenance and crewing services are recognised as operating expenses. Technical expenses are costs related to spare parts, consumables, cargo handling, power supply, navigation and communication. Crew costs include sea personnel expenses such as wages, social costs, travel expenses and training.
| USD '000 | 2016 | 2015 |
|---|---|---|
| Commercial management fee to Klaveness AS (note 21) | 3 171 | 4 109 |
| Accounting fee and other administrative fees to Klaveness AS (note 21) | 496 | 527 |
| Group administrative services | 3 668 | 4 636 |
The Group has no employees and has thus no wage expenses or pension liabilities. Services including management, technical, commercial and crewing are acquired from other companies within Rederiaksjeselskapet Torvald Klaveness (RASTK), see note 21. The managing director and members of the Board of Directors are employees of other companies within RASTK. No special remuneration has been paid to the various members of the Board of Directors, as such positions of office are a part of their regular employment.
| USD'000 | 2016 | 2015 |
|---|---|---|
| Statutory audit | 118 | 94 |
| Other assurance services | 94 | 79 |
| Total expensed audit fee | 212 | 172 |
Auditor's fees are stated excluding VAT.
| USD'000 | 2016 | 2015 |
|---|---|---|
| Other interest income | 948 | 313 |
| Other financial income | - | 181 |
| Gain / (loss) on foreign exchange | 31 | 2 079 |
| Total finance income | 980 | 2 573 |
| USD'000 | 2016 | 2015 |
|---|---|---|
| Interest expenses mortgage debt | 5 370 | 5 271 |
| Interest expenses bond loan | 5 779 | 5 996 |
| Fair value changes interest rate swaps (note 15) | 2 855 | 1 226 |
| Other financial expenses | 3 144 | 2 194 |
| Total finance costs | 17 147 | 14 687 |
Interest expenses of USD 1.3 million is capitalized as borrowing costs on newbuildings in 2016 (2015: USD 0.6 million). Refer to note 15 and note 16 for further disclosures of the Group's debt.
Companies subject to tonnage tax regimes are exempt from ordinary tax on their shipping income. All the Norwegian companies within the Group, with the exception of the parent company, Klaveness Bulk AS and Klaveness Cement Logistics AB are subject to tonnage taxation. The subsidiary Klaveness Bulk AS exited tonnage taxation in 2016 due to sale of its qualifying asset.The companies within the tonnage tax system have to pay a tonnage fee based on the size of the vessels. The fee is recognized as an operating expense. Financial income is taxed according to the Norwegian tonnage tax regime, however it is only a portion of the interest cost and net currency expenses that gives the right to tax deductions.
The ordinary rate of corporation tax in Norway is 25 % for 2016 (2017: 24 %). Subsidiaries outside of Norway are governed by the tax laws and tax rates in the local jurisdiction (Klaveness Cement Logistics AB subject to tax rate of 22 % in Sweden). Tax expenses outside Norway is not material.
Some companies in the Group are subject to taxation in Norway based on controlled foreign company (CFC) rules where tax is charged at the investor level. All of these companies are subject to the Norwegian tonnage tax regime and owned by a company subject for tonnage tax regime.
| USD '000 | ||
|---|---|---|
| Income taxes for the year | 2016 | 2015 |
| Income taxes payable | - | 1 459 |
| Change in deferred tax | (1 211) | (1 808) |
| Tax adjustments previous years | (2) | (4 781) |
| Adjustment correction of OCI included in tax expense prior years | - | 947 |
| Total tax expense / income (-) reported in the income statement | (1 213) | (4 183) |
| Tax on net (gain)/loss on revaluation of cash flow hedges | 1 320 | (447) |
| Deferred tax charged to OCI | 1 320 | (447) |
| USD '000 | 2016 | 2015 | ||
|---|---|---|---|---|
| Tax payable | Income | Tax effect | Income | Tax effect |
| Profit / loss (-) before taxes, incl OCI | (45 873) | (11 468) | (5 206) | (1 406) |
| Income from shipping activity, tonnage tax system | 32 001 | 8 000 | (3 873) | (1 046) |
| Change in temporary differences | (27 124) | (6 781) | 12 060 | 3 256 |
| Permanent differences | 18 039 | 4 510 | - | - |
| Change in tax losses carried forward | 11 818 | 2 955 | 5 662 | 1 529 |
| Exchange rate differences | 11 137 | 2 784 | (3 240) | (875) |
| Tax payable in the balance sheet | - | - | 5 403 | 1 459 |
| Effective tax rate | 0 % | -28 % | ||
| Tonnage tax (included in operating profit) | 138 | 181 | ||
| Total tax payable in the balance sheet | 138 | 1 640 |
| USD '000 Temporary differences - ordinary taxation |
Temporary difference |
2016 Tax effect |
Temporary difference |
2015 Tax effect |
|---|---|---|---|---|
| Gains and losses accounts | (1 433) | (344) | (331) | (83) |
| Currency gain/loss not realised | 2 023 | 485 | 7 059 | 1 765 |
| Unrealised gain/loss IRS | (18 737) | (4 497) | (2 010) | (503) |
| Unrealised gain/loss CCIRS | (35) | (9) | (33 297) | (8 324) |
| Tax losses carried forward | (20 828) | (4 999) | (9 010) | (2 253) |
| Deferred tax asset not recognised in the balance sheet | 7 718 | 1 852 | 7 114 | 1 778 |
| Net temporary differences - deferred tax liability/asset (-) * | (31 292) | (7 510) | (30 476) | (7 620) |
*At year-end 2016 the company has chosen not to record deferred tax asset of USD 1.9 million which relates to companies subject for tonnage taxation. Temporary differences relates to financial losses carried forward in which possibility to net against future gain is uncertain. At year-end 2016 the Group has recorded a deferred tax asset of USD 7.5 million. At year-end 2015 the company recorded a deferred tax asset of USD 7.6 million. Recognised deferred tax asset is expected to be utilized in the future upon taxable profit in other Group companies with Rederiaksjeselskapet Torvald Klaveness. The probability of future taxable profits has been asessed.
2016
| Combination | |||
|---|---|---|---|
| Vessels | carriers | Container | Total vessels* |
| Cost price 1.1 | 210 267 | 254 279 | 464 546 |
| Delivery of newbuildings | 77 798 | - | 77 798 |
| Additions (mainly upgrading and docking of vessels) | 2 597 | 40 | 2 637 |
| Disposals | (2 164) | - | (2 164) |
| Costprice 31.12 | 288 498 | 254 319 | 542 817 |
| Acc. Depreciation 1.1 | 118 999 | 19 161 | 138 161 |
| Depreciation for the year | 12 812 | 7 368 | 20 178 |
| Reclass/disposal | (2 164) | - | (2 164) |
| Acc. depreciation losses 31.12 | 129 647 | 26 529 | 156 175 |
| Acc. impairment losses 1.1 | - | 51 637 | 51 637 |
| Impairment for the year | - | 60 050 | 60 050 |
| Acc. impairment losses 31.12 | - | 111 688 | 111 688 |
| Carrying amounts 31.12.2016 | 158 851 | 116 102 | 274 954 |
| No. of vessels | 8 | 8 | |
| Useful life | 20 | 25 | |
| Depreciation schedule | Straight-line | Straight-line |
*) carrying value of vessels includes dry-docking
| Combination | |||
|---|---|---|---|
| Vessels | carriers | Container | Total vessels* |
| Cost price 1.1 | 206 666 | 254 279 | 460 945 |
| Additions (mainly upgrading and docking of vessels) | 3 601 | 3 601 | |
| Costprice 31.12 | 210 267 | 254 279 | 464 546 |
| Acc. Depreciation 1.1 | 108 068 | 10 243 | 118 311 |
| Depreciation for the year | 10 931 | 8 918 | 19 850 |
| Reclass/disposal | - | - | - |
| Acc. depreciation 31.12 | 118 999 | 19 161 | 138 161 |
| Acc. impairment losses 1.1 | - | 34 126 | 34 126 |
| Impairment for the year | - | 17 511 | 17 511 |
| Acc. impairment losses 31.12 | - | 51 637 | 51 637 |
| Carrying amounts 31.12.2015 | 91 268 | 183 480 | 274 748 |
| No. of vessels | 6 | 8 | |
| Useful life | 20 | 25 | |
| Depreciation schedule | Straight-line | Straight-line |
*) carrying value of vessels includes dry-docking
All owned vessels are pledged to secure the various loan facilities (refer to note 15 for further information).
Selfunloader vessels and the kamsarmax vessel are presented as discontinued operation - see note 3 for further information.
The Group has performed an impairment test where the value in use is calculated using estimated cash flows.
The estimated cash flows are based on management's best estimate and reflect the Group's expectations of the market in the different segments. The net present value of future cash flows is based on a pre-tax weighted average cost of capital (WACC) of 8.5 % in 2016 (2015: 8.5 %). Cash flows are estimated over the remaining life of the vessel, with an estimated residual value at the end of the economic life. From 2021 and onwards, the cash flows are based on a zero-growth scenario, however an escalating factor of an in average 1.0 % inflation rate has been included for all operating expenses for all years until scrapping.
The company has calculated value in use of each vessel by discounting expected future cash flows. Value in use has been calculated by weighing three different scenarios . TC rates differentiates in the three different scenarioes. The management is of the opinion that weighting of three different scenarioes take into account uncertainties in the estimates used in the cash flow model and the fact that shipping is a cyclical industry.
Recoverable amount has been set based on the highest of estimated value in use and average broker values. Recoverable amount has been compared to book values. Calculated value in use for all eight vessels are in line with average broker values; no significant differences. During 2016 all eight container vessels are impaired to recoverable amount, which have resulted in recognised impairments of in total USD 60.1 million in 2016 (2015: USD 17.5 million). Book value of container vessels amounts to USD 116.1 million at 31 December 2016.
A reduction in estimated TC rate from 2017 and onwards of USD 1 000 per day would result in further impairments of approx USD 1.8 million per vessel of the newest class (six out of in total eight vessels). An increase in WACC of 1 % results in an impairment of approx USD 500-800k per vessel of the newest class.
Cash flow projections for the cabu vessels over the remaining economic life of the vessels show a net present value which is higher than the booked value of the fleet (considered as one cash generating unit). Broker values are obtained, however the valuation is based on standard dry bulk vessels, not taking into account the value of specialized cabu features. No impairment has been recognized for the cabu vessels at 31 December 2016 (2015: 0).
A reduction in estimated TC rate from 2017 and onwards of USD 2 200 per day would result in value in use equal to booked values for the fleet of combination carriers. Value in use will be aligned with book value if WACC is set at 13.2%.
The below summarizes the total impairment cost/reversal:
| Impairment loss (-)/ reversal | 2016 | 2015 |
|---|---|---|
| Impairment of vessels | (60 050) | (17 511) |
| Total impairment loss (-) / reversal | (60 050) | (17 511) |
The Group took delivery of two cabu newbuildings from Zeijiang OuHua Shipbuilding Co. Ltd. during the last four months of 2016, the third and last cabu vessel is expected to be delivered in the second quarter of 2017.
The Group also has three combination carrier newbuildings on order at Jiangsu New Yangzi Shipbuilding Co., Ltd in China with delivery scheduled in 2018/2019. The contract includes options for further vessels. The commitments related to newbuildings are presented in note 13.
The Kamsarmax vessel MV Bavang was delivered in February 2016 (see note 3).
| Combination | Dry bulk | ||
|---|---|---|---|
| Investments in newbuildings | carriers | investment | Total |
| Cost 1.1 | 45 328 | 558 | 45 886 |
| Borrowing cost | 1 245 | 171 | 1 415 |
| Yard installments paid | 59 266 | 19 079 | 78 345 |
| Other capitalized cost | 4 333 | 145 | 4 478 |
| Reallocation of supervision fee | - | 194 | 194 |
| Delivery of newbuildings | (78 177) | (28 141) | (106 318) |
| Impairment reclassed to vessels | - | 7 994 | 7 994 |
| Net carrying amount at 31.12.2016 | 31 995 | - | 31 995 |
| Combination | Dry bulk | ||
|---|---|---|---|
| Investments in newbuildings | carriers | investment | Total |
| Cost 1.1 | 21 946 | 5 779 | 27 725 |
| Borrowing cost | 618 | 106 | 724 |
| Yard installments paid | 21 462 | 5 340 | 26 802 |
| Other capitalized cost | 1 302 | 93 | 1 395 |
| Impairment loss (-)/reversal | - | (7 990) | (7 990) |
| Sale of newbuilding contracts | - | (2 770) | (2 770) |
| Transferred to vessels under operation | - | - | - |
| Net carrying amount at 31.12.2015 | 45 328 | 558 | 45 886 |
| USD'000 | ||
|---|---|---|
| Receivables from related parties | 2016 | 2015 |
| Klaveness Ship Management AS | 82 | 57 |
| Cabu Chartering AS | 6 456 | 5 881 |
| Baumarine AS | 275 | - |
| Receivables from related parties | 6 814 | 5 938 |
| USD'000 | ||
|---|---|---|
| Other short-term receivables | 2016 | 2015 |
| Accrued income | - | 3 408 |
| Accrued interest income | 30 | 3 |
| Claims | 1 890 | 4 448 |
| Sale of newbuilding contracts | - | 4 414 |
| Prepaid insurance | - | 1 719 |
| Other short-term receivables | 2 088 | 1 374 |
| Other short-term receivables | 4 007 | 15 365 |
Claims consists of insurance claims for incidents, and yard claims related to the newbuildings delivered in 2013 and 2014. No new claims have occured in 2016. Of the total claim of USD 1.9 million, USD 0.7 million is related to insurance claims, and USD 1.2 million is related to yard claims. The majority of the claims is expected to be settled in 2017.
The Group has bank deposits in the following currencies:
| USD'000 | 2016 | 2015 |
|---|---|---|
| Bank deposits, NOK | 23 487 | 6 308 |
| Bank deposits, USD | 79 084 | 75 677 |
| Bank deposits, SEK (restricted) | 78 | 88 |
| Cash | 332 | 374 |
| Total cash and cash equivalents | 102 981 | 82 447 |
The equivalent of USD 0.4 million is restricted per year end (2015: USD 12.3 million).
To reduce currency and interest rate risk, the Group has entered into interest rate swap (IRS) and cross currency interest rate swap (CCIRS) agreements.
One of the Group's cross currency interest rate swap agreements was terminated in December 2016 related to the repayment of a bond loan. Book value at the termination date was USD 12.1 million. The remaining two CCIRSs, which mature in March 2020, are no longer designated as cash flow hedges. Derecogntion of hedge accounting effects P&L with negative USD 3.1 million in 2016. From December 2016, the two remaining CCIRSs are recognised at fair value with changes through profit and loss. Book value of these are negative by USD 18.0 million as of 31 December 2016 (2015: USD 20.1 million). The change in fair value during 2016 mainly relates to changes in the interest part of the CCIRSs which was transferred from other comprehensive income to income statement upon derecognition of hedge accounting.
After refinancing the bank loans for the eight container vessels, only one out of previous three IRSs qualify for hedge accounting. The interest rate swap agreements in Klaveness Container AS have a duration until 2018. Fair value of interest rate swaps which qualify for hedge accounting is USD 35k (liability) as of year end 2016 (2015: USD 100k/liability). From December 2016, the other two interest swap agreements are recognised at fair value with changes through profit and loss. Book value of these are negative by USD 25k per year end. Derecogntion of hedge accounting effects P&L with negative USD 0.1 million in 2016.
The Group has entered into further interest rate swaps which are recognised at fair value of USD 1.1 million
| 2016 | 2015 | |
|---|---|---|
| Financial instruments at fair value through P&L | ||
| Interest rate swaps | 1 052 | - |
| Financial assets | 1 052 | - |
| Non-current financial liabilities at 31 December | ||
| 2016 | 2015 | |
| Financial instruments at fair value through OCI | ||
| Cross currency interest rate swap | - | 33 688 |
| Interest rate swaps | 35 | 100 |
| Financial instruments at fair value through P&L | ||
| Cross currency interest rate swap | 18 039 | - |
Interest rate swaps 2 142 1 968 Financial liabilities 20 217 35 756
The capital structure of the Group is intended to ensure financial stability for the purpose of limiting its cost of capital to reach its strategic goals. The target for the Group's capital structure states that cash should always be adequate to cover all current business, liquidity fluctuations due to market volatility and investment needs. Targets have been defined for equity ratio and minimum liquidity. The equity ratio as of 31 December 2016 was 51 % (2015: 47 %) and liquidity incl. available capacity on RCF USD 157.9 million. The Group's covenants are described in note 15.
The capital structure composition and dividend payments are considered in view of debt service ability, capital commitments and expectations of future cash flows. Available cash, loan covenants and the balance sheet composition is monitored to make sure that the company has the necessary financial strength to continue as a going concern.
The Group aims to spend free cash flows as follows:
The main priority of maintaining a strong financial position is to secure the ongoing business activity of the Group and the ability to do new business and to ensure access to funding at favourable terms. The Group's capital structure consists of mortgage debt (note 15), bond loans listed at Nordic ABM (note 16), cash and cash equivalents and equity attributable to the shareholders.
The Group is exposed to operational risk, market risk including but not limited to freight rates and vessel values, currency (FX) and interest rate (IR) risks, credit/counterparty risk and liquidity risk. The Group's executive management oversees the management of these risks, and is supported by a risk management department and a treasury department that provide risk advisory and maintain an appropriate financial risk governance framework for the Group. The risk department provides assurance to the executive management that the Group's financial risk activities are governed by appropriate policies and procedures and that financial risks are identified, measured and managed in accordance with the Group's policies and risk objectives. Derivative activities (FX/IR) for financial risk management purposes (incl. hedging) are carried out by the treasury department that has the appropriate skills, experience and supervision. The Board of Directors reviews and agrees policies for managing each of these risks, which are summarised below.
Operational risks are mainly related to the operation of vessels under the management of Klaveness Ship Management AS (affiliated company). The Group's vessels are on technical management to Klaveness Ship Management AS which ensures compliance with IMO, flag and port state regulations. Quality and safety audits are performed regularly and the crew and officers onboard are trained to ensure that regulatory requirements are met.
Operational risk is managed through quality assurance procedures and systematic training of seafarers and land based employees. All vessels sailing through piracy exposed areas take necessary steps to mitigate the threat of such attacks. Operational risk is also covered by insurance where relevant to cover loss of assets, revenues and contract commitments. The vessels are insured for loss of hire, protection and indemnity (P&I) and complete loss (Hull and Machinery). The latter is aligned with vessel values and loan agreements. The financial impact of a total loss of a vessel will not be material for the Group.
Ownership of vessels involves risks related to vessel values, future vessel employment, freight rates and costs. These risks are managed through short-term/long-term time charter contracts and contracts of affreightment covering a large part of the Group's fleet capacity for neareby years.
The Group's revenue and costs are denominated primarily in US Dollar (USD) which is the functional currency of all significant entities in the Group. No direct currency hedge has been made towards the small portion of costs incurred in foreign currencies. Fluctuations in USD against NOK may affect the company's tax payable, which will be calculated and paid in NOK. This effect is considered to be limited. Currency risk and interest rate risk exposure related to the bond issued in NOK is reduced by two cross currency interest rate swaps.
The Group has long term interest bearing debt that is exposed to floating interest rate. In order to hedge the risk, the company has entered into interest rate swaps. At year end 2016, 11 % (2015: 19 %) of the floating interest loans are hedged. Long term mortgage debt bear interest at LIBOR plus a fixed margin. The following table sets out the outstanding swapped amounts as of 31 December 2016. The Group evaluates on an ongoing basis the need to further hedge interest rate exposure. After refinancing of the bond debt in December 2016, the Group's cross currency interest rate swap (CCIRS) no longer qualify for hedge accounting.
| 31/12/2016 | |
|---|---|
| ------------ | -- |
| USD'000 | Outstanding notional | Swapped portion of | Fixed | |
|---|---|---|---|---|
| Loan facilities | amounts of the swap | credit facilities | Maturity | interest |
| Container RCF (SEB) | 15 000 | 50 % | 27/06/2018 | 1,410 % |
| Outstanding notional amounts | 15 000 |
| 31/12/2015 | ||||
|---|---|---|---|---|
| USD'000 | Outstanding notional | Swapped portion of | Fixed | |
| Loan facilities | amounts of the swap | credit facilities | Maturity | interest |
| Balao/Ballenita (SEB) | 15 000 | 62 % | 27/06/2018 | 1,370 % |
| Balsa/Baleares (DNB/Danske Bank) | 7 500 | 54 % | 24/09/2018 | 1,505 % |
| Balsa/Baleares (DNB/Danske Bank) | 7 500 | 54 % | 24/09/2018 | 1,437 % |
| Outstanding notional amounts | 30 000 |
As of 31 December 2016, fair value of the interest rate swaps (IRS) which qualify for hedge accounting was negative by USD 35k (2015: negative by USD 100k). Changes in the fair values of the IRS are recognized as other comprehensive income (OCI). Changes in fair value of the Group's CCIRS's have been transferred from OCI to P&L in 2016 (USD 3.1 million).
Below table sets out the split of other comprehensive income for the years ended 31 December 2016 and 2015, respectively:
| Other comprehensive income / (loss) for the period, net of tax | 2016 | 2015 |
|---|---|---|
| Net movement fair value on interest rate swaps | 8 | (113) |
| Net movement fair value on CCIRS | 3 827 | (12 144) |
| Reclassification to profit and loss | (1 776) | 10 468 |
| Reclassification to profit and loss (derecognition hedge accounting CCIRS) | 3 131 | - |
| Reclassification to profit and loss (derecognition hedge accounting IRS) | 57 | - |
| Income tax effect | (1 320) | 447 |
| Other comprehensive income / (loss) for the period, net of tax | 3 926 | (1 341) |
The table below shows estimated changes in profit before tax for the Group from reasonable possible changes in interest rates in 2016 and 2015, with all other variables held constant. The changes are estimated based on given capital structure as of year end.
| USD '000 | Change in interest rate | 2016 | 2015 |
|---|---|---|---|
| USD LIBOR | +1,00% | 508 | 1 761 |
| 0,50 % | 254 | 880 | |
| - 0,50% | (254) | (880) | |
| - 1,00% | (508) | (1 761) | |
| NIBOR | +1,50% | - | 111 |
| + 0,75% | - | 55 | |
| - 0,75% | - | (55) | |
| - 1,50% | - | (111) |
Counterparty risk is mainly generated by contractual defaults by cargo customers (CoA's) and charterers of the vessels, leading to a financial loss. The Group is exposed to credit risk mainly from its operating activities (primarily trade receivables). The permitted exposure for each contractual partner is defined through a rating process executed by the risk department. The Group recognizes claims to the extent the Group has legal right to insurance coverage or it is virtually certain that the claim will result in cash inflows from the insurance company, a counterparty or a bankruptcy estate. Counterparty risk against insurance institutions exists. There is also counterparty risk associated with yards and vessel delivery and replacement costs thereof. Yard installments are secured with refund guarantees from top-tier Chinese banks. Further, the Group is exposed to credit risk through its deposits. Deposits are currently made with investment grade financial institutions with A rating or higher from public rating agency.
Total unrisked credit risk at year-end 2016 amounts USD 107 million (book value of receivables and bank deposits).
Liquidity risk is the risk that the Group may not be able to fulfill its liabilities when they fall due. The Group has capital commitments relating to borrowings and newbuildings. Liquidity risk is managed by the Group's treasury department. The Group keeps its liquidity reserves mainly in bank deposits. The liquidity risk is considered to be limited as the deposits, committed bank debt and estimated cash flow are considered sufficient for all needs in the forseeable future. The Group's bank financing and bonds are subject to financial and non-financial covenant clauses.The table below illustrates the timing and magnitude of the Group's financial liabilities.
The table below summarises the maturity profile of the Group's financial liabilities based on contractual undiscounted payments. Interest bearing debt and bond loan includes interest payments.
| Maturity profile financial liabilities at 31 Dec 2016 | < 1 year | 1-3 years | 3-5 years | > 5 years | Total |
|---|---|---|---|---|---|
| Mortgage debt (incl interests) 1) | 24 080 | 31 012 | 53 695 | 38 098 | 146 886 |
| Bond loan (incl interests) 2) | 23 704 | 4 561 | 38 436 | - | 66 701 |
| Accounts payable | 874 | - | - | - | 874 |
| Current debt to related parties | 1 577 | - | - | - | 1 577 |
| 50 235 | 35 573 | 92 131 | 38 098 | 216 037 |
1) Including loan facility for Bantry which was refinanced in March 2017.
2) Including KSH01 bond repaid in January 2017.
| Maturity profile financial liabilities at 31 Dec 2015 | < 1 year | 1-3 years | 3-5 years | > 5 years | Total |
|---|---|---|---|---|---|
| Mortgage debt (incl interests)* | 79 385 | 35 205 | 8 610 | 15 313 | 138 512 |
| Bond loan (incl interests) | 5 869 | 45 524 | 66 392 | - | 117 785 |
| Accounts payable | 1 810 | - | - | - | 1 810 |
| Current debt to related parties | 874 | - | - | - | 874 |
| 87 937 | 80 729 | 75 002 | 15 313 | 258 981 |
* Includes liabilities directly associated with the assets held for sale (USD 46 million) repaid in 2016 (< 1 year). The Bakkedal facility (USD 12.5 million) was classified as short term as per year end 2015 (<1 year).
The commitments related to newbuildings are set out below. The third and last combination carrier ordered at Zhejiang OuHua Shipbuilding Co. Ltd. is expected to be delivered in the second quarter of 2017. Three combination carrier newbuildings on order at Jiangsu New Yangzi Shipbuilding Co., Ltd in China are scheduled for delivery in 2018 and early 2019.
| Remaining installments at 31 December 2016 | 2017 | 2018 | 2019 | Total |
|---|---|---|---|---|
| Combination carriers | 45 340 | 72 720 | 33 740 | 151 800 |
| Total commitments newbuildings | 45 340 | 72 720 | 33 740 | 151 800 |
Set out below is a comparison by class of the carrying amounts and fair value of the Group's financial assets included in the financial statements.
| Carrying amount | Fair value | |||
|---|---|---|---|---|
| USD'000 | 2016 | 2015 | 2016 | 2015 |
| Loans and receivables at amortised cost | ||||
| Accounts receivable | 462 | 782 | 462 | 782 |
| Receivables from related parties | 6 814 | 5 938 | 6 814 | 5 938 |
| Total loans and receivables | 7 276 | 6 720 | 7 276 | 6 720 |
| Cash and cash equivalents* | 102 981 | 82 447 | 102 981 | 82 447 |
| Total | 110 257 | 89 167 | 110 257 | 89 167 |
| Total current Total non-current |
110 257 - |
89 167 - |
110 257 - |
89 167 - |
* including restricted cash (note 11)
| Carrying amount | Fair value | |||
|---|---|---|---|---|
| USD'000 | 2016 | 2015 | 2016 | 2015 |
| Financial liabilities at fair value through OCI | ||||
| Derivates in effective cash flow hedges | 35 | 33 788 | 35 | 33 788 |
| Financial liabilities at fair value through P&L | ||||
| Other derivatives | 20 181 | 1 968 | 20 181 | 1 968 |
| Total financial liabilities at fair value | 20 217 | 35 756 | 20 217 | 35 756 |
| Other financial liabilities at amortised cost | ||||
| Accounts payable | 874 | 1 810 | 874 | 1 810 |
| Other financial liabilities | 1 577 | 874 | 1 577 | 874 |
| Interest bearing debt | 129 576 | 159 176 | 131 992 | 159 176 |
| Bond loan | 55 423 | 66 073 | 56 621 | 66 345 |
| Liabilities directly associated with assets held for sale | - | 46 271 | - | 46 271 |
| Total financial liabilities at amortised cost | 187 450 | 274 204 | 191 063 | 274 477 |
| Total | 207 666 | 309 960 | 211 280 | 310 233 |
| Total current | 43 551 | 75 607 | 43 551 | 75 607 |
| Total non-current | 164 116 | 234 353 | 167 729 | 234 626 |
The fair value of the financial assets and liabilities is recognised as the value at which they could be exchanged in a transaction between willing parties other than in a forced or liquidation transactions. The following methods and assumptions were used to estimate the fair value of each class of financial instrument:
Cash and restricted cash, trade receivables, trade payables and other current liabilities are recognized at their carrying amounts largely due to the short term maturities of these instruments.
Fair value of loans from banks and other financial liabilities is estimated by discounting future cash flows using rates currently available for debt on similar terms, credit risk and remaining maturities.
Since the bonds are listed on Nordic ABM (ticker KSH01 PRO, KSH03 PRO), fair value of the bonds is disclosed based on traded information. Fair value of KSH01 is based on the call price 9 December 2016. Since there has not been any
transactions on KSH03 since issued 9 December 2016, fair value has been set at par value/100.
The Group uses financial hierarchy under IFRS 13 for determining and disclosing the fair value of financial instruments by valuation techniques. Below table presents fair value measurements to the Group's assets and liabilities at 31 December
| 31/12/2016 | ||||
|---|---|---|---|---|
| Assets | Level 1 | Level 2 | Level 3 | Total |
| Financial assets at fair value through profit or loss | ||||
| Interest rate swaps | 1052 | 1 052 | ||
| Liabilities | Level 1 | Level 2 | Level 3 | Total |
| Financial liabilities at fair value through profit or loss | ||||
| Interest rate swaps | 20 181 | 20 181 | ||
| Financial liabilities not measured at fair value, but for which fair value is disclosed | ||||
| Bond | 56 621 | 56 621 | ||
| Mortgage debt | 131 992 | 131 992 | ||
| Derivatives used for hedging | ||||
| Derivates in effective cash flow hedges | 35 | 35 |
The table below presents fair value measurements to the Group's assets and liabilities at 31 December 2015:
| 31/12/2015 | ||||
|---|---|---|---|---|
| Assets | Level 1 | Level 2 | Level 3 | Total |
| No financial assets measured at fair value | - | |||
| Liabilities | Level 1 | Level 2 | Level 3 | Total |
| Financial liabilities at fair value through profit or loss | ||||
| Interest rate swaps | 1 968 | 1 968 | ||
| Financial liabilities not measured at fair value, but for which fair value is disclosed | ||||
| Bond | 66 345 | 66 345 | ||
| Mortgage debt | 159 176 | 159 176 | ||
| Derivatives used for hedging | ||||
| Derivates in effective cash flow hedges | 33 788 | 33 788 |
The fair value of financial instruments traded in an active market is based on quoted market prices at the balance sheet date and are included in level 1.
The fair value of financial instruments that are not traded in an active market (for example over -the-counter derivatives) is determined by using valuation techniques. These valuation techniques maximise the use of observable market data where it is available and rely as little as possible on entity specific estimates. If all significant inputs required to fair value an instrument are observable, the instruments are included in level 2.
If one or more of the significant inputs are not based on observable market data, the instrument is included in level 3. During the reporting periods of 2016 and 2015, there were no transfers between any of the levels. Refer to Note 12 and 13 for the disclosures of non-current and current portion of the liabilities measured at fair value.
The below table presents the Group's carrying amount of interest bearing debt by non-current and current portions for year ended 31 December 2016 and 2015, respectively. All debt except for the bond loans (NOK) are denominated in USD, ref note 16 for further information on bond loans.
As of 31 December 2016, the Group had a total of USD 185.0 million in interest bearing debt (incl capitalized fees) of which USD 143.9 million was classified as non-current debt and USD 41.1 million was classified as current debt. An overview of the loan facilities in the Group is presented below.
Mortgage debt are subject to an interest rate of LIBOR plus a margin of in range 2.00-3.10.
Loan facilities secured by the Group's eight container vessels with maturity in 2018 and 2019 were refinanced in December 2016. The new facility is a revolving credit facility secured by all eight vessels and a maximum limit of USD 84.9 million. The facility has a tenor of 4.25 years and is guaranteed by Klaveness Ship Holding AS.
50 per cent of the vessel Baffin and the newbuilding Ballard was in 2016 sold to an external company resulting in a carve-out from the USD 140 million term loan for the tranches related to the two vessels. The new USD 56 million term loan facility has a tenor of 5.25 years.
The bond loan were also refinanced in 2016 - see note 16.
Mortgage debt related to the Bantry facility falls due in March 2017, hence the facility is classified as current debt as per 31 December 2016. The loan was refinanced in March 2017.
The Group has secured financing for the three newbuildings with expected delivery in 2018/2019. The owner of the vessels, T. Klaveness Shipping AS, is the borrower and the USD 93 million post delivery term loan has a tenor of five years from drawdown.
| Carrying | ||||
|---|---|---|---|---|
| Mortgage debt | Description | Maturity | amount | Fair value |
| RCF container | SEB/DNB/Danske Bank | February 2021 | 30 000 | 30 816 |
| T. Klaveness Shipping AS | Nordea/Danske Bank | March 2022 | 37 481 | 37 625 |
| Banasol | SEB | April 2018 | 6 500 | 6 539 |
| Banastar | SEB | April 2018 | 6 500 | 6 538 |
| Bantry | Danske Bank | March 2017 | 11 419 | 11 426 |
| Bakkedal | Nordea | Sept 2021 | 11 375 | 11 478 |
| Baffin/Ballard | Nordea/Danske Bank | March 2022 | 27 510 | 27 570 |
| Mortgage debt 31 December 2016 | 130 784 | 131 992 |
| 2016 - Interest bearing debt | Non-current | Current | Total |
|---|---|---|---|
| Mortgage debt | 110 966 | 19 818 | 130 784 |
| Transaction costs mortgage debt | (1 208) | - | (1 208) |
| Bond loan | 34 700 | 21 283 | 55 982 |
| Transaction costs bond loan | (559) | - | (559) |
| Total interest bearing debt | 143 899 | 41 100 | 184 999 |
| 2015 - Interest bearing debt | Non-current | Current | Total |
| Mortgage debt | 133 130 | 26 652 | 159 782 |
| Transaction costs mortgage debt | (606) | - | (606) |
| Liabilities directly associated with the assets held for sale (note 3) | - | 46 271 | 46 271 |
| Bond loan | 67 056 | - | 67 056 |
| Transaction costs bond loan | (983) | - | (983) |
| Cross currency interest rate swap | 33 688 | - | 33 688 |
| Total interest bearing debt | 232 285 | 72 923 | 305 208 |
The Group has undrawn committed bank facilities available at year end 2016.
| USD mill | Credit | Drown up | Available |
|---|---|---|---|
| RCF Container, USD 90 million | 85 | 30 | 55 |
| Baffin/Ballard, USD 56 million* | 56 | 28 | 28 |
| T Klaveness Shipping AS, USD 93 mill* | 93 | - | 93 |
| Total | 234 | 58 | 176 |
* Committed to newbuildings. Available on delivery of vessel.
After the refinancing of bond loans and container facilities in 2016, the Group has only one interest rate swap left that qualify for hedge accounting. The interest rate swap agreement is designated as cash flow hedge to partly hedge interest rate exposure related to parts of the Group's long term mortgage debt. When interest rate swaps qualify for hedge accounting, the fair value movement is recognised in other comprehensive income until realization of the hedged transaction. Fair value of interest rate swaps which qualify for hedge accounting is USD 35k (liability) as per 31.12.2016 (2015: USD 100 k (liability)).
The Group no longer has any cross currency interest rate swap agreements that qualify for hedge acccounting. The interest rate and currency swap agreements that are not effective cash flow hedges, are recognised at fair value with changes through profit & loss (see note 13).
The credit facilities impose restrictions which may limit or prohibit the ability for some of the entities in the Group to incur additional indebtness, sell shares in subsidiaries, commit to new capital expenditure, pay dividends, engage in mergers and de-mergers or purchase and sell vessels without the consent of the lenders (non-financial covenants). In addition, lenders may accelerate the maturity of the indebtness under financing agreements and foreclose upon the collateral securing the indebtness upon the occurence of certain events of defaults.
The credit facilities also contain financial covenants. For Klaveness Ship Holding AS on a consolidated basis has covenants related to equity of USD 125 million, minimum equity ratio of 30 % and minimum cash of USD 15 million. On other levels in the Group the covenants varies. In addition all secured loans contain minimum value clauses related to the value of the vessel compared to outstanding loan. Certain cross-default exists. The Group is in compliance for all of its covenants at 31 December 2016.
All the Group's vessels are mortgaged and in addition the banks have assignment in earnings and insurances of the vessel and pledge over earnings accounts. Some loans have pledge in shares in single purpose entities (Baffin, Ballard, Bantry and Bakkedal).
| Book value of collateral, mortgaged and leased assets | 2016 | 2015 |
|---|---|---|
| Vessels* | 274 954 | 438 478 |
| Total book value of collateral, mortgaged and leased assets | 274 954 | 438 478 |
*Includes vessels held for sale
In December 2016, Klaveness Ship Holding AS (the Issuer) issued a new senior unsecured bond of NOK 300 million with maturity in May 2021 (KSH03). The bond loan has a borrowing limit of NOK 500 million, hence subsequent issues may take place over the tenor of the bond. Tap issues are conditional on the market price and on investor appetite on the date of the tap issue.
In connection with the new bond issue, the Group repaid the existing bond issues KSH02 and KSH01 in December 2016 and January 2017 respectively. Hence, total bond debt was reduced by NOK 290 million, final maturity was extended and financial covenants aligned with covenants in relevant bank facilities.
The bond loan (KSH03) is listed on Nordic ABM and has a bullet structure with no repayment until maturity in 2021. The bond loan is subject to an interest rate of 3M NIBOR plus a margin of 5.25.
Covenants are described in note 15.
| Face value | Year of | Carrying amount (USD'000) | ||
|---|---|---|---|---|
| Bond loan | NOK'000 | maturity | 2016 | 2015 |
| KSH03 | ||||
| Original loan amount | 300 000 | 27.05.2021 | 35 273 | - |
| Exchange rate adjustment | (573) | - | ||
| Capitalized expenses | (559) | - | ||
| Total KSH03 | 300 000 | 34 141 | - | |
| KSH01 | ||||
| Original loan amount | 300 000 | 08.05.2018 | 52 250 | 52 250 |
| Buy back | (100 000) | (17 417) | (17 417) | |
| Buy back (Dec 2016) | (16 000) | (1 875) | - | |
| Exchange rate adjustment | (11 676) | (12 102) | ||
| Capitalized expenses | - | (333) | ||
| Total KSH01 | 184 000 | 21 282 | 22 398 | |
| KSH02 | ||||
| Original loan amount, fixed | 300 000 | 20.03.2020 | 50 500 | 50 500 |
| Original loan amount, unfixed | 100 000 | 20.03.2020 | 16 828 | 16 828 |
| Buy back | (10 000) | (1 355) | (1 355) | |
| Exchange rate adjustment | (20 263) | (21 648) | ||
| Repayment (Dec 2016) | (390 000) | (45 710) | - | |
| Capitalized expenses | - | (650) | ||
| Total KSH02 | - | - | 43 675 | |
| Debt as of reporting period | 484 000 | 55 423 | 66 073 |
The Group has capital commitments relating to borrowings and newbuildings. For information of maturity profile for mortgage debt and bond loan, see note 15 and 16. Commitments related to newbuildings are presented in note 13. Available facilities is presented in note 15.
Below is a list of guarantees given at 31 December 2016.
| Guarantee to | Description | Amount |
|---|---|---|
| SEB/DNB/Danske Bank | Klaveness Ship Holding AS guarantees for RCF in Klaveness Container AS, related to the eight container vessels. |
Drawn amount USD 30 million, max limit 105 million incl interest, expenses and exposures under derivatives |
| Jiangsu New Yangzi Shipbuilding Co. Ltd |
On behalf of T Klaveness Shipping AS, 3rd and 4th Installments, shipbuilding contract YZJ2015-1222, YZJ2015-1223 and YZJ2015- 1224. |
USD 29.0 mill + 5 % interest |
| Danske Bank | T. Klaveness Shipping AS guarantees for a loan facility in Cabu V Investment Inc related to the vessel MV Bantry. |
USD 18.9 mill + interest |
| Danske Bank/ Nordea Bank Norge |
T. Klaveness Shipping AS guarantees for a Senior Secured Term loan Facility Agreement in Baffin Shipping AS and Ballard Shipping AS related to MV Baffin and MV Ballard. |
Max USD 34 mill. 50% of outstanding amount at any time + interest, expenses and exposure under derivatives |
| Other current liabilities | 2016 | 2015 |
|---|---|---|
| Accrued expenses | 1 836 | 3 029 |
| Crew accrued wages | 997 | 2 469 |
| Accrued interest | 983 | 1 081 |
| Other short term liabilities | 1 380 | 1 861 |
| Total other current liabilities | 5 196 | 8 440 |
| Shares | Notional | Share capital (NOK) | |
|---|---|---|---|
| 31.12.2016 | 1 000 | 12 000 | NOK 12 million |
All shares are issued and fully paid.
All shares are owned by Rederiaksjeselskapet Torvald Klaveness.
A dividend of USD 5 million was paid to the shareholder in 2016 and group contribution of USD 15.5 million was paid to Klaveness Finans AS. Klaveness Ship Holding AS will provide USD 3.9 million in group contribution without tax effect to Klaveness Finans AS (not recognised as liability as of 31 December 2016 as not yet approved by the general meeting).
Klaveness Ship Holding AS comprises several subsidiaries. Presented below is a list of all subsidiaries. Unless otherwise stated, the companies are located in Oslo, Norway.
| Ownership interest | Ownership interest | |
|---|---|---|
| Company name | per 31 Dec 2016 | per 31 Dec 2015 |
| T Klaveness Shipping AS | 100 % | 100 % |
| Klaveness Cement Logistics AB (Sweden) | 100 % | 100 % |
| Klaveness Container AS | 82,70 % | 86,20 % |
| Klaveness Bulk AS | 100 % | 100 % |
| Banasol Inc (Liberia) | 50 % | 50 % |
| Cabu Bangor Inc. (Liberia) | 100 % | 100 % |
| Banastar Inc. (Liberia) | 50 % | 50 % |
| Cabu V Investment Inc. (Liberia) | 95 % | 95 % |
| Cabu VI Investment Inc. (Liberia) | 81 % | 81 % |
| Baffin Shipping AS | 50 % | 0 % |
| Ballard Shipping AS | 50 % | 0 % |
The Group has a 50 % share in Banasol Inc, Banastar Inc, Baffin Shipping AS and Ballard Shipping AS, however the Group has power to direct the relevant activities based on contractual agreements for the main activities; chartering activity and ship-owning activity.
The ultimate owner of the Group is Rederiaksjeselskapet Torvald Klaveness (RASTK), which owns 100 % of the shares in Klaveness Ship Holding AS.
The Group has undertaken several agreements and transactions with related parties in the RASTK Group. The level of fees are based on market terms and are in accordance with the arm's length principle.
Klaveness AS delivers services to the Group performed by corporate functions like management, legal, accounting & controlling, risk management and commercial management.
Klaveness Ship Management AS delivers ship management services for all of the vessels in the Group. Ship Management fees cover services like technical management, crewing management, IT and energy management. For the newbuildings in the Group, Klaveness Ship Management performs supervision and project management services.
| USD'000 | |||
|---|---|---|---|
| Supplier | Type of agreement | 2016 | 2015 |
| Klaveness AS (affiliated company) | Business administration fee | (496) | (527) |
| Klaveness AS (affiliated company) | Commercial management fee | (3 171) | (4 492) |
| Klaveness Ship Management AS (affiliated company) | IT fee | (151) | (392) |
| Klaveness Ship Management AS (affiliated company) | Ship Mangement fee | (4 568) | (4 069) |
Regular claims are made against the Group as a result of its ordinary operations. Provisions are made in the financial statements whenever the probable outcome of these disputes are expected to be in disfavour of the Group. No new provisions are recognised in 2016.
In connection with the new bond issue, the Group repaid the existing bond issue KSH01 of NOK 184 million in January 2017 (note 16).
USD 15.0 million of the revolving credit facility for the container vessels was repaid in February 2017. After the repayment the drawn amount is USD 15.0 million and unutilised capacity is USD 69.9 million.
The loan facility for MV Bantry was refinanced in March 2017 (note 15).
There are no other events after the balance sheet date that have material effect on the financial statement as of 31 December 2016.
| Year ended 31 December | |||
|---|---|---|---|
| USD '000 | Note | 2016 | 2015 |
| Total operating revenue | - | - | |
| Management fee | Note 2, 13 | (199) | (299) |
| Other administrative services | Note 2, 13 | (49) | (76) |
| Total operating expenses | (248) | (375) | |
| Operating profit | (248) | (375) | |
| Finance income | Note 3 | 3 257 | 3 150 |
| Finance costs | Note 3 | (104 324) | (44 755) |
| Profit/ (loss) before tax | (101 315) | (41 980) | |
| Income tax expenses | Note 4 | 420 | 5 899 |
| Profit/ (loss) after tax | (100 895) | (36 081) |
| USD '000 | Note | 2016 | 2015 |
|---|---|---|---|
| Profit of the year | (100 895) | (36 081) | |
| Other comprehensive income to be reclassified to profit or loss | |||
| Net movement fair value on cross-currency interest rate swaps | Note 9 | 3 827 | (12 144) |
| Reclassification to profit and loss of cash flow hedges | 1 355 | 10 468 | |
| Income tax effect | Note 4 | (1 366) | 419 |
| Net other comprehensive income to be reclassified to profit or loss | 3 816 | (1 257) | |
| Other comprehensive income not to be reclassified to profit or loss | - | - | |
| Net other comprehensive income not to be reclassified to profit or loss | - | - | |
| Other comprehensive income/(loss) for the period, net of tax | 3 816 | (1 257) | |
| Total comprehensive income/(loss) for the period, net of tax | (97 079) | (37 338) |
| As at 31 December | |||
|---|---|---|---|
| USD '000 | Note | 2016 | 2015 |
| ASSETS | |||
| Non current assets | |||
| Deferred tax asset | Note 4 | 7 135 | 8 081 |
| Investments in subsidiaries | Note 5 | 223 463 | 414 876 |
| Loan to related parties | Note 6 | 74 381 | - |
| Total non current assets | 304 979 | 422 957 | |
| Current assets | |||
| Loan to related parties | Note 6 | - | 24 227 |
| Receivables from related parties | Note 6 | 176 | 914 |
| Other short-term receivables | 11 | 65 | |
| Cash and cash equivalents | Note 7 | 32 430 | 8 417 |
| Total current assets | 32 617 | 33 624 | |
| TOTAL ASSETS | 337 596 | 456 580 |
| As at 31 December USD '000 Note 2016 EQUITY AND LIABILITIES Equity Share capital Note 8 1 817 |
2015 1 817 16 862 5 585 |
|---|---|
| Share premium 7 068 |
|
| Other paid-in capital - |
|
| Other reserves 346 177 |
342 361 |
| Retained earnings (116 233) |
(10 338) |
| Total equity 238 828 |
356 287 |
| Non-current liabilities | |
| Bond loans Note 16 Group, Note 10, 11 34 141 |
66 073 |
| Financial liabilities Note 9, 11 18 039 |
33 688 |
| Debt to related parties Note 6 24 000 |
- |
| Total non-current liabilities 76 180 |
99 761 |
| Current liabilities Note 16 Group |
|
| Short-term bond loan 21 283 |
- |
| Current debt to related parties Note 6 24 |
107 |
| Tax payable Note 4 - |
- |
| Other current liabilities 1 282 |
425 |
| Total current liabilities 22 589 |
532 |
| TOTAL EQUITY AND LIABILITIES 337 596 |
456 580 |
Oslo, 31 December 2016 Oslo, 29 March 2017
Chairman of the Board Lasse Kristoffersen Bent Martini
Board member
Liv Hege Dyrnes Board member
Morten Skedsmo Managing Director
| USD'000 | Share capital |
Share premium |
Other paid in capital |
Hedging reserves |
Other reserves |
Retained earnings |
Total equity |
|---|---|---|---|---|---|---|---|
| Equity at 1 January 2015 | 1 817 | 16 862 | 5 585 | (2 560) | 346 177 | 29 606 | 397 486 |
| Profit (loss) for the year | (36 081) | (36 081) | |||||
| Other comprehensive income for the year | (1 257) | (1 257) | |||||
| Total comprehensive income for the year | (1 257) | (36 081) | (37 338) | ||||
| Net group contribution receieved/(paid) without tax effect | (1 572) | (1 572) | |||||
| Net group contribution receieved/(paid) with tax effect | (2 184) | (2 184) | |||||
| Currency effect group contribution | (107) | (107) | |||||
| Equity at 31 December 2015 | 1 817 | 16 862 | 5 585 | (3 817) | 346 177 | (10 338) | 356 287 |
| Profit (loss) for the year | (100 895) | (100 895) | |||||
| Other comprehensive income for the year | 3 816 | 3 816 | |||||
| Total comprehensive income for the year | 3 816 | (100 895) | (97 079) | ||||
| Group contribution Dividend payment |
(9 794) | (5 585) | (5 000) | (15 379) (5 000) |
|||
| Equity at 31 December 2016 | 1 817 | 7 068 | 0 | (0) | 346 177 | (116 233) | - 238 828 |
The reserve contains total net changes in the fair value of financial instruments recognized to fair value with changes through OCI.
The revaluation reserves are used to record shares in T Klaveness Shipping AS which was paid as contribution in kind measured at fair value.
| USD '000 | Note | 2016 | 2015 |
|---|---|---|---|
| Profit before tax | (101 315) | (41 980) | |
| Amortization of upfront fees and bank loans | 1 027 | 331 | |
| Gain/loss on foreign exchange | (1 036) | (1 884) | |
| Unrealised result financial instruments | 3 550 | - | |
| Refinancing costs | 1 443 | - | |
| Finance income | Note 3 | (2 221) | (1 222) |
| Interest expenses | Note 3 | 5 779 | 6 095 |
| Impairment shares in subsidiaries | Note 5 | 92 275 | 38 054 |
| Tax paid for the period | - | - | |
| Change in receivables | 792 | (15 122) | |
| Change in current liabilities | 774 | (148) | |
| Change in other working capital | 399 | (211) | |
| Interest received | Note 3 | 861 | 1 222 |
| A: Net cash flow from operating activities | 2 327 | (14 865) | |
| Capital decrease in subsidiaries | 131 636 | ||
| Capital increase in subsidiaries | (32 497) | - | |
| B: Net cash flow from investment activities | 99 139 | - | |
| Proceeds from bond loans | Note 17 Group | 35 273 | - |
| Repayment of bond loan | (48 299) | - | |
| Terminated financial instruments | (12 708) | - | |
| Transaction costs on issuance of bond loans | Note 17 Group | (559) | - |
| Interest paid | Note 3 | (5 779) | (6 095) |
| Loan to related parties | (25 100) | - | |
| Payments of group contribution/dividends | (20 503) | (4 794) | |
| C: Net cash flow from financing activities | (77 674) | (10 889) | |
| Net change in liquidity in the period (A + B + C) | 23 791 | (25 754) | |
| Net foreign exchange difference | 221 | (86) | |
| Net change in liquidity in the period | 24 013 | (25 841) | |
| Cash and cash equivalents at beginning of period | 8 417 | 34 258 | |
| Cash and cash equivalents at close of period | Note 7 | 32 430 | 8 417 |
| Net change in cash and cash equivalents in the period | 24 013 | (25 841) |
The financial statements of Klaveness Ship Holding AS (referred to as the Company/the parent company) have been prepared in accordance with International Financial Reporting Standards (IFRS) as endorsed by the European Union.
Accounting principles for the consolidated statement of Klaveness Ship Holding AS also apply to the parent company – see accounting policies presented as part of the consolidated Group accounts.
The main activity of the company is to be a holding company of shipowning subsidiaries.
Dividend income is recognized when the right to receive payment is established, which is when the dividend is approved by the general meeting of the subsidiary.
Dividend distribution to the company's shareholders is recognized as a liability in the financial statements in the period in which the dividends are approved by the company's shareholders.
Shares in subsidiaries in the parent accounts are recorded at acquired cost. These investments are reviewed for impairment when there are indicators that carrying amount may not be recoverable.
When shares are transferred as contribution in kind the capital increase is measured at fair value. Fair value is estimated based on the fair value of underlying assets and liabilities.
The preparation of financial statements in conformity with IFRS requires management to exercise its judgment in the process of applying the Company's accounting policies. It also requires the use of accounting estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the financial year. Although these estimates are based on management's best knowledge of current events and actions, actual results may ultimately differ from those estimates.
Shares in subsidiaries and intercompany receivables are subject to impairment testing at the end of each reporting period. Valuation is subject to assessment of the recoverability in the underlying investment or receivable. Management's assessment can affect the level of impairment loss, or reversal of such, that is recognized in profit or loss.
The Company has no employees and has thus no wage expenses or pension liabilities. Management services are acquired from other companies within the Group of Rederiaksjeselskapet Torvald Klaveness (RASTK), see note 13. The managing director and members of the Board of Directors are employees of other companies within RASTK. The cost of management is included in the management fee. No special remuneration has been paid to the members of the Board of Directors, because such positions are part of their regular employment.
| USD '000 | 2016 | 2015 |
|---|---|---|
| Accounting fee and other administrative fees related company (note 13) | 199 | 299 |
| Management fee | 199 | 299 |
| USD '000 | 2016 | 2015 |
| Statutory audit | 39 | 23 |
| Other assurance services from auditor | 6 | 58 |
| Other administrative costs | 4 | (5) |
| Other administrative services | 49 | 76 |
Auditor's fees are stated excluding VAT.
| USD'000 | 2016 | 2015 |
|---|---|---|
| Interest received from related parties | 1 473 | 578 |
| Other interest income | 255 | 63 |
| Guarantee fee from related parties | 493 | 581 |
| Other financial income | - | 1 |
| Gain / (loss) on foreign exchange | 1 036 | 1 927 |
| Total finance income | 3 257 | 3 150 |
| USD'000 | 2016 | 2015 |
|---|---|---|
| Interest paid to related parties | 93 | 99 |
| Interest expenses bond loan | 5 779 | 5 996 |
| Impairment shares in subsidiaries (note 5) | 92 275 | 38 054 |
| Unrealised results financial instruments | 3 550 | - |
| Other financial expenses | 2 627 | 607 |
| Total finance costs | 104 324 | 44 755 |
Refer to note 16 in the Group accounts for further disclosures of the company's bond debt.
| 2016 | 2015 |
|---|---|
| - | |
| (2 015) | |
| 947 | |
| (4 831) | |
| (420) | (5 899) |
| 1 366 | (419) |
| (419) | |
| - (420) - - 1 366 |
| Calculation of tax payable | 2016 | 2015 |
|---|---|---|
| Profit/ (loss) before tax, incl OCI | (96 133) | (43 656) |
| Permanent differences | 110 314 | 38 589 |
| Change in temporary differences | (34 333) | 9 471 |
| Currency effects | (11 587) | (6 342) |
| Tax basis before group contribution | (31 740) | (1 938) |
| Income taxes payable | - | - |
| Reconciliation of actual tax expense against expected tax cost in accordance | ||
|---|---|---|
| with the ordinary Norwegian income tax rate of 25 % (27 %) | 2016 | 2015 |
| Profit /(loss) before tax, incl OCI | (96 133) | (43 656) |
| Estimated tax at 25% (27%) statutory rate | (24 033) | (11 787) |
| 25 % (27 %) tax on permanent differences | 27 578 | 10 419 |
| Exchange rate differences | (2 897) | (1 712) |
| Change in tax rate from 25 % to 24 % | 297 | 646 |
| Adjustment correction of OCI included in tax expense prior years | - | 947 |
| Adjustment correction of last year's tax expense** | - | (4 831) |
| Income tax expenses | 946 | (6 318) |
| *Profit and loss effect | (420) | (5 899) |
| *OCI effect | 1 366 | (419) |
| Effective tax rate | -1,0 % | 14,5 % |
| Temporary | 2016 | Temporary | 2015 | |
|---|---|---|---|---|
| Temporary differences - ordinary taxation | difference | Tax effect | difference | Tax effect |
| Gains and losses account | (269) | (65) | (331) | (83) |
| Currency gain/loss not realised | 1 985 | 476 | 3 243 | 811 |
| Unrealised gain/loss interest rate swaps | 294 | 71 | 391 | 98 |
| Unrealised gain/loss CCIRS (hedge) | - | - | (33 688) | (8 422) |
| Unrealised gain/loss CCIRS | (18 039) | (4 329) | - | - |
| Loss carried forward | (13 701) | (3 288) | (1 938) | (485) |
| Deferred tax liability/ asset (-) recognised in balance sheet* | (29 730) | (7 135) | (32 323) | (8 081) |
*Recognised deferred tax asset is expected to be utilized in the future upon realisation of the financial asset/liability (CCIRS).
** Adjustment correction of last year's tax expense in 2015 (USD 4.8 million) relates to a deviation between tax payable in the financial statement in 2014 and tax payable according to the tax filing. Tax payable is offset by group contribution. The reversal does not have any cash flow impact.
| Business office, country |
Voting share/ ownership |
Book value 31/12/2016 |
Book value 31/12/2015 |
|
|---|---|---|---|---|
| T Klaveness Shipping AS* | Oslo, Norway | 100 % | 197 621 | 360 427 |
| Klaveness Cement Logistics AB | Stockholm, Sweden | 100 % | 356 | 425 |
| Klaveness Container AS | Oslo, Norway | 82,7 % | 14 049 | 53 556 |
| Klaveness Bulk AS | Oslo, Norway | 100 % | 11 437 | 467 |
| Investments in subsidiaries | 223 463 | 414 876 |
* Shares in T Klaveness Shipping AS were paid as contribution in kind at fair value with effect as of 01.01.2013 (see note 1).
Investments in subsidiaries are recorded at cost. Impairments have been recognised for the shares in T. Klaveness Shipping AS (USD 31.2 million), Klaveness Cement Logistics AB (USD 0.1 million), Klaveness Container AS (USD 59.5 million) and Klaveness Bulk AS (USD 1.6 million) of in total USD 92.3 million (2015: USD 38 million) as estimated fair value of equity is lower than book value of the shares. Impairments are a result of weak markets in container and dry bulk which resulted in impairments of vessels in these subsidiaries with negative effect on equity.
At the end of the year, the Company had the following intragroup balances with related parties:
| USD'000 | Relationship | 2016 | 2015 |
|---|---|---|---|
| Klaveness Container AS | Subsidiary | 74 381 | 22 027 |
| Klaveness Bulk AS | Subsidiary | - | 2 200 |
| Loan to related parties | 74 381 | 24 227 |
Loan to Klaveness Container AS was extended in 2016. The loan has a maximum limit of USD 80 million and falls due in November 2018. Interests are calculated based on 3M LIBOR + margin and are to be paid at maturity.
| USD'000 | Relationship | 2016 | 2015 |
|---|---|---|---|
| Klaveness Container AS | Subsidiary | 176 | - |
| T Klaveness Shipping AS | Subsidiary | - | 914 |
| Receivables from related parties | 176 | 914 |
| USD'000 | Relationship | 2016 | 2015 |
|---|---|---|---|
| Klaveness Ship Management AS | Related company | - | 15 |
| Klaveness AS | Related company | 24 | 92 |
| Current debt to related parties | 24 | 107 |
| USD'000 | Relationship | 2016 | 2015 |
|---|---|---|---|
| T Klaveness Shipping AS | Subsidiary | 15 000 | - |
| Klaveness Bulk AS | Subsidiary | 9 000 | - |
| Current debt to related parties | 24 000 | - |
Loan from related parties fall due in November 2018. Interests are calculated based on 3M LIBOR + margin and are to be paid at maturity. The loan from T Klaveness Shipping AS has a maximum limit of USD 30 million and the loan from Klaveness Bulk AS has a maximum limit of USD 10 million.
The company has bank deposits in the following currencies:
| 2015 | |
|---|---|
| 6 212 | |
| 2 205 | |
| 32 430 | 8 417 |
| 2016 23 416 9 014 |
The company has no restricted bank deposits.
| Shares | Notional | Share capital (NOK) | |
|---|---|---|---|
| 31.12.2016 | 1 000 | 12 000 | NOK 12 million |
All shares are issued and fully paid.
All shares are owned by Rederiaksjeselskapet Torvald Klaveness.
A dividend of USD 5 million was paid to shareholder in 2016 and group contribution of USD 15.5 million was paid to Klaveness Finans AS. Klaveness Ship Holding AS will provide USD 3.9 million in group contribution without tax effect to Klaveness Finans AS (not recognised as liability as of 31 December 2016 as not yet approved by the general meeting in 2017).
To reduce currency and interest rate risk, the company has entered into interest rate swap (IRS) and cross currency interest rate swap (CCIRS) agreements.
One of the company's cross currency interest rate swap agreements was terminated in December 2016 related to the repayment of a bond loan. Book value at the termination date was USD 12.1 million. The remaining two CCIRS's, which mature in March 2020, are no longer designated as cash flow hedges. Derecogntion of hedge accounting effects P&L with negative USD 3.1 million in 2016. From December 2016, the two remaining CCIRS's are recognised at fair value with changes through profit and loss. Book value of these are negative by USD 18.0 million as of 31 December 2016.
| Financial liabilities at 31 December | 2016 | 2015 |
|---|---|---|
| Financial instruments at fair value through OCI | ||
| Cross currency interest rate swap | - | 33 688 |
| Financial instruments at fair value through P&L | ||
| Cross currency interest rate swap | 18 039 | - |
| Financial liabilities | 18 039 | 33 688 |
For further information on interest rate swaps and cross-currency interest rate swaps see note 10.
Capital management of the Company is overseen on Group level, see note 13 in the consolidated accounts of Klaveness Ship Holding AS. The Company is in compliance with all covenants as of 31 December 2016 - see note 16 in the consolidated accounts of Klaveness Ship Holding AS.
The company's activity is to be a holding company of subsidiaries and its main risk is related to the financial situation of the subsidiary companies. If the subsidiary experiences losses over time, the investment may be impaired. Impairment evaluations are carried out at each closing date. As the ultimate holding company of all shipowning companies, the company is also subject to development costs related to research and development within the Torvald Klaveness Group.
As of 31 December 2016, fair value of cross currency interest rate swap (CCIRS) is negative by USD 18.0 million (2015: negative by USD 33.7 million). The company no longer has any cross currency interest rate swap agreements that qualify for hedge acccounting. The interest rate and currency swap agreements that are not effective cash flow hedges, are recognised at fair value with changes through profit & loss (see note 9). Changes in fair value of the Group's CCIRS's are transferred from OCI to P&L. Below table sets out the split of other comprehensive income for the years ended 31 December 2016 and 2015.
The Company's functional currency is US Dollar (USD). The company has some costs incurred in other currencies (mainly NOK). No direct currency hedge has been made towards the small portion of costs incurred in foreign currencies. Fluctuations in USD against NOK may affect the company's tax payable, which will be calculated and paid in NOK. This effect is considered to be limited.
| Other comprehensive income | 2016 | 2015 |
|---|---|---|
| Net movement fair value on CCIRS | 3 827 | (12 144) |
| Net movement reclassification to profit and loss | (1 776) | 10 468 |
| Reclassification to profit and loss (derecognition hedge accounting CCIRS) | 3 131 | - |
| Income tax effect | (1 366) | 419 |
| Other comprehensive income / (loss) for the period, net of tax | 3 816 | (1 257) |
The table below shows estimated changes in profit before tax for the company from reasonable possible changes in interest rates in 2016 and 2015, with all other variables held constant. The changes are estimated based on given capital structure as of year end.
| USD '000 | Change in interest rate - unsecured bond loan | 2016 | 2015 |
|---|---|---|---|
| NIBOR | +1,0% | - | 102 |
| +0,5% | - | 51 | |
| - 0,5% | - | (51) | |
| - 1,0% | - | (102) | |
| USD '000 | Change in interest rate - loan to related parties | 2016 | 2015 |
| LIBOR | +1,00% | 240 | 744 |
| +0,5% | 120 | 372 | |
| - 0,5% | (120) | (372) | |
| - 1,00% | (240) | (744) |
Counterparty risk is related to intercompany balances and risk related to guarantees provided to banks on behalf of loan facilities in subsidiaries (Klaveness Container AS, see note 12). There is a risk that subsidiaries do not generate cash flow to be able to meet financial obligations when they fall due. Loan facilities in which guarantee has been provided fall due in 2021. Liquidity buffers in the benefactors are expected to be sufficiently large to cater for such events.
The company is exposed to credit risk through its deposits. Deposits are currently made with financial institutions that have A/AA rating.
Liquidity risk is the risk that the company may not be able to meet its obligations when they fall due. Liquidity risk is managed by the Group's treasury department. The Group keeps its liquidity reserves mainly in cash and bank deposits. The liquidity risk is considered to be limited as the deposits are considered sufficient for all needs in the forseeable future. The Company's bond loans are subject to financial and non-financial covenant clauses given on Group level (Consolidated Klaveness Ship Holding AS, see Group note 15 regarding information about covenants). The bond loan (KSH03) fall due in 2021. Due to the financial situation , debt maturity profile and liquidity reserve in the Group at year-end, liquidity risk is considered to be low. The Group as such furthermore benefits from being well diversified on funding sources.
Maturity profile presented below includes interest payments and CCIRS.
| Maturity profile to financial liabilities at 31 Dec 2016 | < 1 year | 1-3 years | 3-5 years | > 5 years | Total |
|---|---|---|---|---|---|
| Bond loan | 23 704 | 4 561 | 56 475 | - | 84 740 |
| Long term debt related parties | 994 | 24 994 | - | - | 25 987 |
| Current debt to related parties | 24 | - | - | - | 24 |
| Other current liabilities | 1 282 | - | - | - | 1 282 |
| 26 004 | 29 554 | 56 475 | - | 112 034 |
Set out below is a comparison by class of the carrying amounts and fair value of the Company's financial instruments included in the financial statements.
| Carrying amount | Fair value | |||
|---|---|---|---|---|
| 2016 | 2015 | 2016 | 2015 | |
| Loans and receivables at amortised cost | ||||
| Loan to related parties | 74 381 | 24 227 | 74 381 | 24 227 |
| Receivables from related parties | 176 | 914 | 176 | 914 |
| Total loans and receivables | 74 557 | 25 141 | 74 557 | 25 141 |
| Cash and cash equivalents | 32 430 | 8 417 | 32 430 | 8 417 |
| Total assets | 106 987 | 33 558 | 106 987 | 33 558 |
| Total current | 32 606 | 33 558 | 32 606 | 33 558 |
| Total non-current | 74 381 | - | 74 381 | - |
| Carrying amount | Fair value | |||
|---|---|---|---|---|
| 2016 | 2015 | 2016 | 2015 | |
| Financial liabilities at fair value | ||||
| Derivates in effective cash flow hedges | - | 33 688 | - | 33 688 |
| Other derivatives | 18 039 | - | 18 039 | - |
| Total financial liabilities at fair value | 18 039 | 33 688 | 18 039 | 33 688 |
| Other financial liabilities at amortised cost | ||||
| Current debt to related parties | 24 | 107 | 24 | 107 |
| Non-current debt related parties | 24 000 | - | 24 000 | - |
| Bond loan | 55 423 | 66 073 | 56 621 | 66 345 |
| Total other financial liabilities at amortised cost | 79 448 | 66 180 | 80 645 | 66 452 |
| Total liabilities | 97 486 | 99 868 | 98 684 | 100 140 |
| Total current | 21 307 | 107 | 21 945 | 107 |
| Total non-current | 76 180 | 99 761 | 76 739 | 100 033 |
The fair value of the financial assets and liabilities is recognised as the value at which they could be exchanged in a transaction between willing parties other than in a forced or liquidation transaction. The following methods and assumptions were used to estimate the fair value of each class of financial instruments:
Cash and restricted cash, trade receivables, trade payables and other current liabilities are deemed to have equal fair value and book value due to the short term maturities of these instruments.
Since the bonds are listed on Nordic ABM (ticker KSH01 PRO, KSH03 PRO), fair value of the bonds is disclosed based on traded information. Fair value of KSH01 is based on the call price 9 December 2016. Since there has not been any transactions in KSH03 since issued 9 December 2016, fair value has been set at par value/100. - The Company enters into derivative financial instruments with various counterparties, principally financial institutions with investment grade credit ratings. Derivatives valued using valuation techniques with market observable inputs are mainly interest rate swaps and foreign exchange forward contracts. The most frequently applied valuation techniques include forward pricing and swap models, using present calculations. The models incorporate various inputs including the credit quality of counterparties, foreign exchange spot and forward rates and interest rate curves. Valuation is performed by the banks, and assessed by the company. - Fair value of loans to/from related parties is estimated by discounting future cash flows using rates currently
available for debt on similar terms, credit risk and remaining maturities. The fair value of current borrowings equals their carrying amount as the impact of discounting and differences in margin is not significant.
The company uses hierarchy for determining and disclosing the fair value of financial instruments by valuation techniques. Below table presents fair value measurements to the company's assets and liabilities at 31 December. The company had no assets measured at fair value at year end.
| 31/12/2016 | ||||
|---|---|---|---|---|
| Liabilities | Level 1 | Level 2 | Level 3 | Total |
| Financial liabilities not measured at fair value, but for which fair value is disclosed | ||||
| Bond | 56 621 | 56 621 | ||
| Derivatives | 18 039 | 18 039 | ||
| 31/12/2015 | ||||
|---|---|---|---|---|
| Liabilities | Level 1 | Level 2 | Level 3 | Total |
| Financial liabilities not measured at fair value, but for which fair value is disclosed | ||||
| Bond | 66 345 | 66 345 | ||
| Derivatives used for hedging | ||||
| Derivatives in effective cash flow hedges | 33 688 | 33 688 | ||
The fair value of financial instruments traded in active market is based on quoted market prices at the balance sheet date and are included in level 1.
The fair value of financial instruments that are not traded in an active market (for example over -the-counter derivatives) is determined by using valuation techniques. These valuation techniques maximise the use of observable market data where it is available and rely as little as possible on entity specific estimates. If all significant inputs required to fair value an instrument are observable, the instruments are included in level 2.
If one or more of the significant inputs are not based on observable market data, the instrument is included in level 3. Refer to Note 9 for the disclosures of non-current and current portion of the liabilities measured at fair value.
The company has capital commitments related to borrowings. For information of maturity profile for bond loans, see note 10.
Below is a list of guarantees provided by the company at 31 December 2016.
| Description | Amount |
|---|---|
| Bank guarantee for RCF in Klaveness Container AS, related to the eight container vessels. |
Drawn amount USD 30 million, max limit 105 million incl interest, expenses and exposures under derivatives |
Jiangsu New Yangzi Shipbuilding Co. Ltd On behalf of T Klaveness Shipping AS, 3rd and 4th Installments, shipbuilding contracts YZJ2015-1222/1223/1224. USD 29.0 mill + 5 % interest
The ultimate owner of Klaveness Ship Holding AS is Rederiaksjeselskapet Torvald Klaveness (RASTK), which owns 100 % of the shares in Klaveness Ship Holding AS.
The company has undertaken several agreements and transactions with related parties in the RASTK Group. The level of fees are based on market terms and are in accordance with the arm's length principle. Loan to related parties - see note 6.
Klaveness AS delivers services to the company performed by corporate functions like management, legal, accounting & controlling and risk management department.
| Supplier | Type of agreement | 2016 | 2015 |
|---|---|---|---|
| Klaveness AS | Business administration fee | 199 | 299 |
In connection with the new bond issue, the company repaid the existing bond issue KSH01 of NOK 184 million in January 2017.
There are no events after the balance sheet date that have material effect on the financial statement as of 31 December 2016.
We confirm, to the best of our knowledge, that the consolidated financial statements for the period 1 January to 31 December 2016 have been prepared in accordance with International Financial Reporting Standards (IFRS) as endorsed by the European Union and give a true and fair view of the company's assets, liabilities, financial position and profit. We also confirm, to the best of our knowledge, that the board of director's report includes a fair review of important events that have occurred during the financial year and their impact on the consolidated financial statements of Klaveness Ship Holding AS, and a description of the principal risks and uncertainties for 2017.
Vækerø, 29 March 2017
Lasse Kristoffersen Liv Hege Dyrnes
Chairman of the Board Board member
Morten Skedsmo Bent Martini Managing Director Board member
Building tools?
Free accounts include 100 API calls/year for testing.
Have a question? We'll get back to you promptly.