Stena FINANCE

HIGH LIQUIDITY AND STRONG AMORTISATION PROFILE

Stena Finance’s primary task is to manage the short-term and long-term funding requirements of the Stena AB Group. Stena Finance also manages the operational business units’ financial risks on the interest, foreign exchange and oil markets as well as the Group’s liquidity and financial investments. Another important role is to act as a resource for the operational units in identifying, analysing and implementing new business deals.

The global economy continued to strengthen in 2013, albeit cautiously. This was particularly true of the USA, where the Federal Reserve’s fiscal measures acted as a stimulus, leading to a rise in stock prices. Other indicators, such as unemployment, household debt and rising wealth, also suggest that the US is entering a phase where growth is being driven by domestic factors.

On the other hand, the economy in Europe has remained sluggish. Europe is recovering slowly from the deep-seated euro crisis. Across southern Europe, the economies were marked by high unemployment and low household expectations.

Thanks to a relatively sound fiscal position, the Nordic countries have weathered the strain of the euro crisis well. In general, the Nordic stock exchanges have remained strong.

Economic development in Asia showed considerable disparity. China, for example, was not greatly affected by the global financial unrest in 2013 but Indonesia and India were less ­fortunate. There is rising growth across the region.

Liquidity and financing

The role of Stena Finance is to support other companies in the Stena Group, including managing the Group’s cash flow. Its task is to optimise the Group’s loan and bond profile and to manage liquidity in such a way that there are sufficient resources available when the loans and bonds mature. To achieve this, Stena Finance maintains a high level of liquidity, which ensures that the company’s cash flow requirements would be safeguarded if access to international capital were to be cut off.

In January 2014, Stena issued a 10-year MUSD 600 million note in the US is to extend its amortisation profile and reduce debt under a revolving credit facility. In February 2014, Stena issued a 10-year MUSD 350 note and MUSD 650 within a 7-year term loan with a low capital repayment rate. The bond and loans are secured by the vessels Stena DrillMAX and Stena Carron. This transaction was also designed to extend Stena’s maturity profile and free up liquidity.

Liquidity also opens up good, long-term investment opportunities in equities and bonds.

The Stena AB Group is funded largely through the banking system and the European and US bond markets. Together with credit facilities and vessel loans, this generates good financial strength and flexibility. Total available liquidity as of 31 December was SEK 12.2 billion.

During the year, Stena Drilling contracted two drilling rigs for MUSD 800 each.

Portfolio management

Good growth on the international markets in which Stena Finance has invested capital could lead to significant appreciation in value. The year saw substantial increases in equity prices. The value of Stena Finance’s investments grew during the year, with an average yield of 19%. At year-end 2013, Stena Finance’s equity portfolio consisted of around 50 companies, the vast majority of which are listed Nordic, European, US and Asian enterprises. The positive trend applies not only to equity investments but also to investments in corporate bonds. The total value of Stena Finance’s equity and bond portfolio was SEK 6.0 billion as at 31 December 2013, compared with SEK 6.2 billion on 31 December 2012.

 

CEO Comment

Stena has invested substantially in the vessel fleet in recent years. With good business acumen and high liquidity, Stena is able to seize business opportunities as they arise. As in 2013, however, the rate of investment in 2014 is likely to be lower than in recent years.

Thanks to successful, long-term funding solutions, the Group’s financial position remains strong. The majority of credit facilities and ­outstanding bonds do not mature until 2017.

Peter Claesson

CEO Stena Finans