Frontline Eyes Up to USD 100 Mn from ATM Equity Offering

tankerImage Courtesy: Pixabay under CC0 Creative Commons license

John Fredriksen-controlled tanker owner and operator Frontline has entered into an equity distribution agreement with Morgan Stanley for the offer and sale of up to USD 100 million of its common shares.

In line with the deal, the company may offer and sell its common shares at any time and from time to time through Morgan Stanley as its sales agent. Frontline added that the sales of the common shares will be made by means of ordinary brokers’ transactions on NYSE or otherwise at market prices prevailing at the time of sale.

The company plans to use the net proceeds to fund growth opportunities and capital expenditures, including the purchase exhaust gas cleaning systems that reduce sulfur emissions to comply with upcoming implementation of new IMO standards.

The move is being announced following Frontline-s memorandum of agreement (MOA) to acquire a 20 percent ownership interest in Feen Marine Scrubbers, a manufacturer of exhaust gas cleaning systems.

Pursuant to the MOA, Frontline will order FMSI exhaust gas cleaning systems for 14 vessels, with options to order an additional 22 systems at fixed prices.

 According to Robert Hvide Macleod, CEO of Frontline Management, the economic case to install scrubbers is very compelling, particularly for larger vessels.

“Scrubbers installed on existing vessels provide the same benefit as those delivered from the yard on newbuildings and our solution comes at a much cheaper cost,” he explained commenting on the deal.

Feen Marine says that its open-loop scrubber system reduces sulphur emissions to 0.1 pct and offers payback period on investment of 6 to 18 months. The company also has a hybrid system in its portfolio which can switch from open loop to closed loop mode of operation.

Ships using exhaust gas cleaning technology will be able to continue to use high sulphur fuel oil (HSFO) as a marine fuel after global sulphur cap becomes mandatory in 2020. The regulation requires that all ships trading outside of the sulphur Emission Control Areas (ECAs) start using fuel with a sulphur content of up to 0.5 pct, a considerable reduction from the currently permitted maximum of 3.5 pct.

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