contents annual report 2

Newsmagazine for Leif Höegh & Co ASA (LHC) No 1 - 2001

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CONTENTS

Annualreport

Reefer consolidation

Opinions

LNGDevelopment

e-commerce

Photocompetition

HFS Billboard

Marketoutlook

HUALTRITON

Fleetlist

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Newsmagazine for Leif Höegh & Co ASA No 1 - 2001

Improved Financial Results in 2000

During the year 2000 we have implemented many importantchanges in our company. The most important was definitively thepurchase of Ugland's 50% share of HUAL, bringing us to fullownership and to a much larger commercial and asset base. We are very pleased with the outcome of this acquisition and seemany interesting opportunities ahead in the ro/ro segment.

The process to integrate the organisations of Leif Höegh & CoASA and HUAL is well under way, and we look forward towelcoming the HUAL people to Wergelandsveien 7 end February.

The reefer trade has had another difficult year, with a drop in ratesand values that has sent several participants in the reefer marketsinto financial distress. During 2000 we have actively strengthenedCool Carrier as a pool operator, because under exactly suchcircumstances as seen last year, the value of strong operatorsbecame apparent. The market needed a consolidation andthrough our sale of Cool Carriers at a fair price, we havecontributed to the creation of Lauritzen Cool, which we areconfident in turn will lead to a better utilization of vessels andtherefore strengthen the earning potential from our reefer vessels.

In the LNG sector, combined efforts of the LHC gas departmentand HFS led to impressive results last year. The LNG carrierHÖEGH GALLEON (ex MYSTIC LADY) is now being rebuilt for along time charter to Enron, in a project that has covered newground both commercially and technologically.

The net profit in 2000 improved compared with 1999, but we stillhave some way to go to produce results in line with what ourshareholders should reasonably expect. Many changes havebeen implemented creating a healthier basis for improvements in the years to come.

It is not at all an impossible task to improve returns to a desiredlevel, but that task will require the will to embrace necessarychanges and to execute required measures with dedicatedattention.

Many years of experience have shown me that these qualitiesabundantly exist in our organization, and it is therefore with greatconfidence I look forward to the years to come.

I wish you all a happy New Year!

T.J. GuttormsenPresident Leif Höegh & Co ASA

2000 is now history!

The preliminary results for LHC Consolidated show aconsiderable improvement in operating profit compared to1999. Operating profit before sales gain and depreciationincreased from USD 64 million to USD 125 million and theoperating profit (after depreciation) increased by 147% toUSD 57 million. The main reasons for this development areLHC’s additional investments in HUAL and Unicool. Higherbunker prices compared to 1999 led to an additional cost ofabout USD 15 mill.

The Company’s total assets increased by 34 % to USD 1,432million during the year. The increase has to a large extentbeen financed by new debt and interest expenses havedoubled to USD 59 million.

The net profit has turned from minus USD 38 million to USD23 million. The net result in 2000 is influenced by sales gainon Teekay shares (USD 37 million), a write down on ourshares in Gorthon Lines (USD 15 million) and a currency loss(USD 14 million) due to the strengthening of the USD duringthe year.

In the fourth quarter of 2000, LHC entered into an agreementto sell Cool Carriers AB to J. Lauritzen A/S for a totalconsideration of USD 35 mill. In addition LHC received adividend payment of USD 8 mill. from Cool Carriers beforeclosing of the deal. This sale will give a book gain of aboutUSD 20 mill. in the first quarter of 2001. The vessels werenot part of the transaction and will be continue to becommercially operated by Lauritzen Cool in the Leonina pool.

LHC took delivery of two car carrier newbuildings, HualEurope and Hual Trove, late last year. The earnings fromthese vessels did not have a signifi-cant impact on last year’sfinancial results, but will give a positive contribution to theoperating profit in 2001.

At the Annual General meeting in April, the Board of Directorswas authorised to repurchase up to 10 % of outstandingshares in LHC. As the LHC shares trade far below the value-adjusted equity per share, a buy back of own shares wouldbe an attractive investment for the Company. DuringDecember / early January we repurchased 3.6 mill. shares atan average price of about NOK 74. The buy back willimprove the net asset value, earnings and cash flow pershare, if cancelled.

Even if the 2000 results were better than the year before,they still do not meet the shareholders’ reasonableexpectation of financial return. Over the last year, the shareprice has dropped from NOK 95 to the low 70ies, a sign thatour financial performance needs further improvement.

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Published by: Leif Höegh & Co ASAEditorial staff: Charles Jensen, Olav Geir Foss and Mot Vandenberghe. Tel. 22 86 99 56, fax 22 86 99 45,

e-mail: [email protected] Journalist/editing: Stian Aakre, e-mail: [email protected]/graphic design: BRAVE Reklamebyrå asCirculation: 2,800

HöEGH DIALOGUE:


Leif Höegh & Co. ASA has sold its wholly ownedcommercial reefer operator Cool Carriers AB (includingArctic Reefers Ltd.) to J.Lauritzen A/S (Denmark). At thesame time the holding company Unicool Ltd. has beenliquidated and the 15 reefer vessels, which were notincluded in the sale, will continue trading in the LauritzenCool pools. This puts an end to an era with varying owningpositions in Cool Carriers for LHC, but represents animportant consolidation, which we believe shall benefit allpool participants. The commercial operations of CoolCarriers and Lauritzen Reefers combine complementarytrades and operational synergies into the world’s largestreefer operation by far. The combined entity will operateabout 90 reefer vessels commercially, and will continueoperation out of Cool’s Stockholm headquarters. Thecompany is renamed Lauritzen Cool.

Cool Carriers AB was established in 1984 after the Salénbankruptcy. LHC acquired 50% of the company together with Tuftonin 1994, and purchased its first reefer vessel, which was put to Coolfor commercial operation. LHC’s share in the company changedseveral times during the following years (see box) until full controlwas taken early 2000 in order to give LHC the opportunity to fullytake advantage of the strategic options available. During that yearthe company was restructured by splitting the commercial operationand the ship owning functions.

Through this history of varying ownership positions, Cool Carriersestablished itself as a leading and acknowledged commercialoperator through its Leonina pool (established 1986), Eco Shipping(1997) and Arctic Reefers (1999). The Leonina pool (in which LHC’sreefer vessels are employed) operates large high quality vessels, andhas developed a portfolio of year round banana contracts and tradesystems which will be further expanded when combined withLauritzen. The other pools are more spot oriented.

LHC decided to sell its ownership interest in Cool Carriers AB basedon among others the following reasons:- Consolidation was needed in the reefer market

in order to create stronger units to face the structural changesamong customers. Lauritzen Reefers was considered a perfectmatch in this respect.

- LHC maintain its ownership in reefer vessels, thus keeping anupside in trading results from the enlarged and strengthenedpool operation in which LHC’s vessels will continue to beoperated. The future expected market improvements will bepositive for trading results as well as for vessel values.

- Flexibility with regard to future opportunities is maintained.

We would like to thank the management in Cool Carriers for their co-operation through the years of LHC’s owning positions in thecompany, and wish them all the best in a new future in LauritzenCool. We are looking forward to continued co-operation through ourpool membership!

Olav SollieStrategy and Business Development

Reefer consolidation

Cool history

1984 Following the Salén bankruptcy the reefer activity was transferred to a new establishment (SRS Reefer AB) and renamed Cool Carriers AB.

1986 The Leonina pool was established.1987 Bilspedition AB acquired the company.1994 LHC and Tufton acquired 50 % of Cool Carriers AB

from Bilspedition AB. LHC purchased its first reefer which was put to Cool for commecial operation.

1995 LHC acquired Bilspedition AB’s 50 % share(LHC 75%, Tufton 25%).

1997 LHC acquired Tufton’s 25 % share, and sold 50 % toRondeau / Safmarine. A holding company was established and named Unicool Ltd. Unicool took over ownership of LHC’s and Safmarine’s reefer vessels, developing the company into an integrated ship owner.

1997 ECo Shipping established with Eastwind (New York).1998 Unicool launched a strategy process resulting in THE

COOL WAY and established the Arctic Reefer pool (in operation from 1.January 1999).

1999 SAMC (Safmarine) sold its part in the company to Capital Finance (Restis).

2000 LHC acquired Capital Finance’ 50 % share, thus becoming 100 % owner.

2000 Unicool Ltd was restructured by splitting ship owningand commercial operation. The ships were transferred to LHC and Unicool Ltd. was liquidated.

2001 Cool Carriers AB and Arctic Reefers Ltd. were sold toJ.Lauritzen A/S and merged with Lauritzen Reefers.

Thor Jørgen Guttormsen, Mats Jansson, Torben Janholt - CFO,J. Lauritzen and Birgit Aagaard-Svensen - CFO, J. Lauritzen,celebrating the closing of the transaction 3 January 2001.

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In the advent of ISM, the shipping industry combinedwith the seafarers has, after a very long and relentlesseffort, reached a high safety level onboard the ship andthe result is a better ship and safe working environment.Yes, everyone says that this project was not an ordinarytask nor an easy job, but rather a gigantic exploration inorder to make the people fully understand what you wantthem to do and thus to inculcate in everyone’s mind thegreatness of the aims. In the beginning many seafarersreacted negatively and were even radically opposed. Theearly stage of transition was difficult to implement orperhaps no one had yet fully understood that all thesesafety matters are meant for everyone who works on aship and its environment.

HFS as a major and reputable leading shipping company hasdone a tremendous job to comply and to implement the tasks. Attheir helm, they continuously, earnestly adhere to the safety of lifeat sea and a safe ship policy for the entire fleet. In response tothis policy, past and present crews aboard the ships, particularlyon HUAL TRAPPER, have responded positively using all theirresources, reminding the crew that in order to avoid accidentsthey have to follow a simple rule, they have to be "safetyconscious". But the process doesn’t stop here. It will continueuntil all professional and amateur seafarers will be fully aware ofall proceedings and will conscientiously do the right thingsaccordingly.

Henceforth to do this job, I would like to share with all seafarersin this company or even with seafarers in general, that we have tocontinue the good things, which we have already started and wehave to keep developing and pursuing the things that we missedin relation to safety of life at sea in the new millennium.

Lastly, I would like to personally extend my profound gratitudeand congratulations to the men and women of this company(HFS) and to the whole fleet for a job well done. More specificallyto the officers and crew members of HUAL TRAPPER for all theirefforts to keep ourselves and the vessel Accident Free for awhole year from 1 November 1999 until 1 November 2000. Isn’tthat a major breakthrough?

In this coloumn we intend to let the readers speak freely their opinions.(Opinions may be edited due to shortage of column space.) OP!N!ONS

Capt.. Raymundo M. CaballesMaster, HUAL TRAPPER

A major breakthroughA safe ship - HUAL TRAPPER of HFS fleet - 365 days without injury

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HUAL TROVE

HUAL EUROPE

Leif O. Høegh, Sponsor KarenEugenie Høegh and Carl PrebenHøegh during the naming ceremony.

From left Karl Kr. Hauger, EllenHauger, Karl Terjesen, Ane Terjesen,Thor Jørgen Guttormsen, SponsorÅse Marie Faldalen, Niels RonaldBugge, Marianne Bugge andAmbassador to Korea Torolf Raaduring the naming ceremony.

Hull no. 1160 was named HUALTROVE by Sponsor Karen EugenieHøegh 5 December 2000 at TsuneishiShipbuilding in Japan.

Hull no. 4427 was named HUALEUROPE by Sponsor Åse MarieFaldalen 29 November 2000 atDaewoo Shipbuilding in Korea.

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A floating LNG chain?

Over the last couple of decades, the trend indiscovery of natural gas reserves has moved towardssmaller fields, and the percentage of fields that arelocated offshore far away from the markets has alsoincreased. From these trends new demands are put ontechnical, infrastructure and transportation solutionsto permit these discoveries to be economicallyexploited. One of the most novel and interestingsolutions to this challenge is to utilise a floating LNGproduction, storage and offloading vessel, an LNGFPSO vessel for short. This development calls formerging the traditional offshore operator, the LNGprocess plant operator and LNG shipping expertise -in itself an interesting exercise.

Since the mid-eighties FPSO vessels for oil production havebeen in service, but LNG FPSOs are yet to be tried in thedevelopment of gas fields. Still the concept is widelyrecognised as having great future prospects, and several

major contractors and shipyards have complete designs ofLNG FPSO available. Some of the main conceptual challengesare:

• Barge design with favourable motion characteristics• LNG storage tanks that can resist sloshing loads• Compact process design• Process design that will work in the marine environment• Offloading systems for LNG• Acceptable overall safety level

SafetyA key question when it comes to safety regulations andclassification rules will be to decide which standards to applywhen an onshore technology industry moves offshore. If LNGis to be produced on a ship-shaped floater offshore, shouldthe onshore standards, the offshore standards or the shipstandards apply? The solution lies somewhere in between,where the well proven regulations for LNG shipping form thebasis. The rules for onshore LNG production must be

Side by side offloading of an LNG FPSO by alongside mooring. Illustration: IHI Offshore, Japan


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Relocation of Höegh Fleet Services and HUAL

Based on last years’ organisational changes and inparticular the take-over of Ugland's part of HUAL inMarch 2000, some relocation actions must becarried out in order to achieve the optimalefficiency. HUAL will move from Dronningens gate40 to Wergelandsveien 7, and Höegh Fleet Serviceswill move the opposite way.

The main reason for this process is that HUAL todayrepresents about 70% of LHC's business, and the need toconcentrate the commercial activity was evident. This toboth create a closely connected management team, and toutilise common resources in the best way.

The physical part of the relocation process will becompleted by 26 February, and the whole process will befinished around 5 March. Telephone numbers and e-mailswill not be affected by the interchange of HUAL and HFS.

amended to deal with the compact onboard reality. Theoffshore safety standards will also be part of the newclassification rules for LNG FPSO.

This work to create standards and regulations is already wellin progress. The Classification Societies have alreadydeveloped rules for floating units for oil production, and DetNorske Veritas (DNV) is presently working to developclassification rules for LNG FPSO vessels. In fact DNVdeveloped LNG FPSO rules already around 1980, whenKværner produced an LNG FPSO design for the Kangan fieldin Iran. However, the Iranian revolution stopped the project.

EconomyOne distinct and important benefit with the LNG FPSOapproach is the fact that gas reservoir and field size may notbe as significant a factor as before in order to achievesufficient economy of scale since an LNG FPSO facility maybe relocated to exploit more than one field during its lifetime.

The cost reduction potential for offshore gas exploitation withplanned FPSO technology relies on a number of facts. Anoffshore LNG production facility will eliminate the need for aharbour, the pipeline to shore, a dedicated field productionplatform, site preparation onshore and the duplication of utilityinfrastructure to mention a few of the cost reduction aspects.Preliminary evaluations suggest a cost advantage to an LNGFPSO chain up to 30% compared to a conventional landbased LNG chain.

Later in Höegh Dialogue we will address the other end of afloating LNG chain, the floating receiving terminal.

Source: Extracts from IGU Study Group 3.2 "Small scale LNGprojects andmodular systems."

Tandem offloading of an LNG FPSO by bow to stern mooring.Illustration: Moss Maritime, Norway

Dronningensgate 40 in Oslo where Höegh Fleet Services now will be located.

LNG is an abbreviation of Liquefied Natural Gas.LNG is Natural Gas (approximately 85% methane) ina liquid state at or below its point of boiling at or nearatmospheric pressure. This state occurs whenNatural Gas is cooled down to minus 161 degreesCelcius in a cryogenic process facility using a heatexchanger in a cooling cycle. In its liquid statenatural gas is suitable for transportation over greatdistances in large insulated cargo tanks onboardpurpose-built LNG ships.

e-commerce is nowadays found everywhere, it isdiscussed in every newspaper and magazine, and thefortune hunters are applying e-commerce solutions onevery trade imaginable. The shipping industry is noexception to the rule, and today you can find more than100 web-portals within the marine procurement. Somesay that maritime procurement has gone dot-com crazy.

It is definitely a challenge for busy shipping executives tostruggle through this jungle and at the same time keep the aimhigh; improve the efficiency and reduce costly errors.Purchasing Manager Kristin Haugen explains: -The main idea forus is to work towards a web-based purchasing portal that caneasily guide us to the best set of deals at any time. A systemthat gives simultaneous access to the market of banking,logistics and suppliers. Another demand that also shapes oursearch for solutions is that we want the portal to totally integratewith our Purchasing system both technically and user interface-wise. The information from the web portal should be visible inthe Purchasing system so we don't add more system co-ordination need to our workday.

-We have now scanned the market for more than 100 web-based purchasing portals and ended up with a short-listing offour solutions that may be useful for us in the future. Of thesefour, the portal ShipServ has been first out to offer an integrationwith our Purchasing system. So with ShipServ as a tool we havelately been testing on a general basis how to work with theseportals, Haugen says. Direct integration between us and thesuppliers will also be evaluated as this is also an option thathave to be considered for contracted items. -This test-phase isa part of our effort to gain experience and then in turn be able todevelop a good e-commerce strategy.

-But one thing is our own considerations and development,there is still a lot to be desired also when it comes to the webdevelopment, Kristin Haugen continues. For us the web portal isstill just a mean of transporting the purchasing orderselectronically and a way for us to more clearly see the landscapeof suppliers, so to speak. We still have to negotiate directly withour business partners. The lack of supplier integration towardsweb is a bottleneck for efficiency in this link as they will notbecome more efficient before they have an integration.

-This is definitely an interesting way of doing efficient business,but still we only see the tip of the iceberg, Kristin Haugen sumsup. -My vision is that our entire purchasing system is web-based, and I also see that the AMOS system can be integratedin a way that the vessels can send their requisitions electronicdirectly to contract suppliers. And I guess by the time we getthere, the development has taken us even further…

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e-commerce

A standard arising?The need for standards in maritime e-commercebusiness is evident, and now 10 e-procurementcompanies have joined two marine supplyassociations in the formation of Maritime E-commerceAssociation. The association defines its aims as:

• Promoting common standards in marine e-commerce.

• Co-operating in marketing and educatingthe industry about the benefits of e-commerce.

• Developing e-business code focusing onlegal and ethical guidelines of e-commerce.

LHC

Web based purchasing portal

AMOS onshore central Accounting

Purchasing

Forwarding/logistics

Suppliers Banks

The illustration shows the principles of web-portal basede-commerce for a shipping company like LHC & Co.

KristinHaugen

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-I see the Knowledge Management System as an important toolin our struggle to remove the paper-consuming files we keep foreach affreightment operation, Kristian Sandem explains. -We have already had good experiences with the first version ofthe system, we have submitted our pilot phase comments to thedevelopers, and we are now looking forward to a new, simplerand even better version.

-What I see as one of the key factors for making the system a success is that all parties involved, e.g. all people engaged inthe same operation, must use the system. Since one of the mainfeatures of the system is that all pertinent information should bereadily accessible for everyone, all information must be put intothe system, Sandem says.

-So far the system has not given us the increased efficiency wecan see will come, but in the Bulk Department we have so to

speak let go of the rope, and we are basically now relying on thenew system. We have done a determined effort in requesting ourbusiness relations to send all documents possible by mail, andwe have hence come a long way in implementing the system andminimising the paper flow. I think the main reasons why theefficiency gain is still out there, are that we have to get used tothe new system and also that the system is still a bit incomplete.For instance, we have been missing some integration towardsAMOS-mail and Shipnet, and we are also looking forward to theprinting possibilities. But in spite of this, I can clearly see that theKnowledge Management System will give us great benefits in thenear future. I also think the new version will be fairly simple foreveryone, Kristian Sandem concludes.

Knowledge management through the pilot phase

Knowledge management progress plan

Ketil Solvik Olsen is the new Project Manager for theKnowledge Management System. His experiences sofar is that there is a strong motivation in theorganisation, and that people are eager to co-operate when they hear about the advantages.People are very willing to improve collaboration bothwithin departments and in between the differentdepartments. And the prospects of easier sharing ofand access to information are highly motivating.

-We have developed a project organisation divided in twosegments: project support and effectuation within eachdepartment, Solvik Olsen explains. -Furthermore we haveincorporated the pilot phase findings in a new version ofsoftware due in February.

-Speaking of the plan of progress, 1st quarter in 2001 will bededicated to analysing the existing work processes in eacharea. The start up of the IT-systems for the users will be theprioritised task in 2nd quarter. In this process we will developa training plan based on the tutorial role of selected "super-users" in the organisation.

Project Manager Ketil Solvik Olsen

In the last issue of HöeghDialogue we looked intowhat the KnowledgeManagement System wasaiming at, and we talked toone of the pilot phasetesters Kristian Sandem inthe Bulk Department tohear of his expectations.Now the project is throughthe first pilot stage and anew, improved version isabout to be launched.

Kristian Sandem

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Photo competition 2000

The photo competition 2000 is completed, and the jury hasreached its conclusion. The winner is Elmer De Jesus Naz,Master of HÖEGH MORUS with his picture of icy conditionsonboard 3 February 2000 heading towards Sendai. Otherpictures of the same series have been published in HöeghDialogue no. 2 2000. The jury finds the picture presenting theweather conditions in a very describing way, and thecomposition comprising the sea and the fog underlines themessage.

Two pictures taken by Romulo M. Macadagdag, also Master ofHÖEGH MORUS are given honourable mention by the jury.Both pictures (front page and left) shows HÖEGH MORUS dry-docking at MES-Yura, Japan 21-28 August 2000.


Capt. Elmer De Jesus Naz being awarded for hisvictory in the photo competition 2000 by SebjørnDahl. Capt. Naz received a Canon Ixus II camera.

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N E W S W A T C H


The feeder vessel Carib Sun, built 1977, ended heractive life as car carrier in Mexico on December 15th,2000, where she was delivered for recirculation. Whoknows - she may reappear as a new HUAL car carrier? We thank all our seamen being onboard and IUMShipmanagement for their efforts in keeping heroperative for so long.

From 1 January 2001, LHC Shanghai is appointed asmarketing agent and Owners’ representative in Chinaalso for HUAL. Up to now, the Shanghai office hasdeveloped freight business for the reefers and for PCL.There are great expectations for further businessdevelopment in this huge market, especially after Chinajoining WTO.

Solveig Skrøvset (Solly, SJS) has retired from herposition after nearly 20 years in LHC and HFS. We wishher all the best in her years as a pensioner.

The crewing of 7 of the IUM managed HUAL vesselshave been transferred to HFS Philippines.

Computer based training is now being implemented onall remaining vessels.

Onboard safety training will continue on all vessels in2001.

In early January HUAL's European short sea subsidiaryCETAM had its first shipment under a new 75,000 units-per-year contract with Renault's transport companyCAT, involving two-way shipments of Renault vehiclesbetween Santander, Spain and Le Havre, France. Thistraffic previously went by rail, but CAT has decided thatsea transportation is a better alternative both forlogistical and environmental reasons. CETAM will forthis contract operate in close co-operation with EMC,the Nissan-controlled short sea operator in which LHCowns a 24.5% share, and will in addition to short seavessels also use deep sea PCTCs from HUAL andNissan to perform the contract.

Mr Dahl and Mr Lu unveiling the HFS China Ltd. plaque.

Group work during the conference.

Junior officers’ conference 02-2000

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HFS China Ltd. was officially opened on 7December 2000 with the presence of the ViceMayor of Quanzhou City, representatives of JimeiMaritime University, the top management of ChinaQuanzhou Corperation For International Techno-Economic Co-operation (CQC), other officialguests, the office staff of CQC and HFS (China)and representatives from LHC and HFS.

The company’s first task is to takeover the management of officersand crew of the two bulk carriersSG ENTERPRISE and SGPROSPERITY. Thereafter thelong-term objective is to recruitand train seamen from thePeoples Republic of China as asupplement to the alreadyinternational manning profile ofthe HFS fleet.

The company is a joint venture(51/49%) between HFS and CQC.The office is located in Quanzhou.Capt. Simon Yang leads the fourperson office staff.

HFS HFS China Ltd. officially opened

Conducted in Traders Hotel-Manila, the 2nd JuniorOfficers' conference was held on 22 & 23 Novemberwith 40 participants. This includes not only currentofficers of the fleet but also CDP candidates like ex-cadets. Capt. John Vestby, VP Safety & Quality, and theDesignated Person at HFS introduced ISO 14001 orEnvironmental Management System. With the positivefeedback from these two conferences, it was decidedby HFS to hold this three times next year.

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Based on the evaluation of the previous conferences aswell as feedback both from the personnel onboard and inthe offices, we have decided on the following dates andprogram for the Ship-shape - senior officer conferencesfor 2001:

• Leadership 26-30 March - Philippines• Crisis Management 25-29 June - Norway• Training Motivation 26-30 November - Philippines

Teodoro Carandang and Edwin J. Ebro received theirLoyalty Awards from Sebjørn Dahl and Johannes Tvedte.

Ship-Shape 2001Project Alpha Office andResource Center moved


HFS BillboardSenior officers’ conference 03-2000

A few days after the Junior Officers' conference, the 3rdconference for the Senior Officers took place. A total of 23participants attended. This conference was conducted inSarabia Manor Hotel and Convention Center in Iloilo Cityfrom 27 November to 1 December. Like the previous twoconferences, it also focused on crisis management andshipboard economy. Introduced at this conference wasthe ISO 14001, the Environmental Management System,was introduced by Capt. John Vestby, VP Safety andQuality, and the Designated Person at HFS.

On 25 July 2000, Project Alpha Office and ResourceCenter was transferred to the new Dormitory building.The move has brought the office and center closer tothe dormitory making it more accessible to the cadets.Mr. Nils Heien assisted by Capt. Manuel F. Tinio Jr, cutthe ceremonial ribbon to officially open the ProjectAlpha Office and Resource Center.

Both are adjacent to each other and one will serve asthe office of Ms. Josie Rivera, the Project AlphaCoordinator, while the other houses Mr. Levi Revelo,the Research Assistant, as well as CBT computers anda mini library for the cadets.

World Economy And World TradeThe global economy increased by4,7% in 2000, the highest rate formore than ten years. A slowdown toa growth of around 4% is forecast forthis year, with world trade growingby 8%. A harder landing in the USAwould lead to a growth in the globaleconomy of only around 3% in 2001.Both forecasts assume that the oilprice averages USD 25/bbl in 2001.

The Car Carrier MarketNew car sales in the US market turnednegative during the last months of 2000.This also occured in some of the largermarkets in Europe, especially in Germany.Sales in Asia-Pacific and South Americacontinue to enjoy healthy growth rates.Japan’s exports started to fall in the finalmonths of the year, dragged down bylower Europe-bound shipments mainlybecause of a shift of production to thatregion and the strengthening of the Yenagainst the Euro. US-bound exports alsofell, in another sign of the slowing US automarket. New car sales are projected to fallin the USA in 2001 and to remain relativelystable in Europe, whereas sales in otherregions will continue to grow.

35 car carrier newbuildings were deliveredin 2000 and four vessels were scrapped.The market was thus not as tight asexperienced during the preceding coupleof years. Another 15 newbuildings arescheduled for delivery in 2001. There is alarge scrapping potential in the world carcarrier fleet and it is expected that thedemolition activity will pick up in 2001.

The Reefer MarketDuring the last couple of months in 2000market conditions started to improve in thereefer market. Demand for tonnage wasbolstered by increased volumes ofbananas and other reefer commodities,whereas the supply of conventional reefertonnage declined in 2000 for the secondsuccessive year. The year ended withaverage spot rates 50% higher than year-ago levels.

The orderbook for reefer vessels is nowdown to only 1.1% of the existing fleet, i.e.nine ships, and the active conventionalreefer fleet is expected to continue itsdecline. The market fundamentals thuspoint to further improvement in rate levelsthis year, unless climatic factors againconspire against the reefer operators.

The Liner/Open Hatch MarketA slowdown in the US economy is likely tohave a negative impact on this region’sliner imports in 2001. Growing volumes inseveral other trades are expected to resultin a a fairly strong demand for bothcontainerships and multipurpose vessels.However, the container fleet expansionseems plausible to exceed the likelyincrease in tonnage demand in 2001.

There is still some excess capacity in theopen hatch bulk carrier fleet. Theorderbook represents 7.5% of the existingfleet, with the largest part scheduled fordelivery in 2002. Following the generallyfavourable forestry market activities invarious parts of the world over the pastcouple of years, all indicators point to amore subdued market in 2001. However,the potential for increasing imports inChina as well as other expandingeconomies in Asia may bode well forexporters.

The LNG MarketThe rash of new LNG export ventures thathave started in recent years has created alarge expansion of surplus LNG productioncapacity that is looking for outlets. The

development of spot/short-term tradeshave thus proven to be a significantdevelopment in the international LNGbusiness. The USA has played a key rolein this cutting edge trade. Although LNGimports cover only a small part of thesupply of natural gas in the US market,they have doubled between 1997 and1999, with further growth recorded in2000.

The LNG trade, comprising bothspot/short-term and long term, is forecastto grow by anywhere between 6% and 8%annually. The lack of available LNGcarriers to cater for the market growth hasled to an increase in the contractingactivity this year, and the orderbook nowtotals 27 units.

The Dry Bulk MarketFollowing the significant rate improvementduring most of 2000, the dry bulk market isnow showing signs of deterioration. Thesubstantial growth in steel productionwitnessed during most of 2000 have beenreplaced by much lower growth rates.Although both the steam coal and graintrades are projected to increase in 2001,total dry bulk demand growth is projectedto slow to 2.5-3% from last year’s 5%growth.

This lower demand growth will be met by a large increase in the supply of dry bulktonnage this year, particularly in thePanamax segment. The dry bulkorderbook represents 13.5% of theexisting fleet and more than half isscheduled for delivery in 2001

The Tanker MarketStrong market fundamentals are stilldriving the tanker market. High volumes oflong-haul Arabian Gulf oil exports,combined with sporadic lack of suitabletonnage has kept VLCC rates at a highlevel. Increased oil production in short-haul regions have benefitted Suezmaxesand Aframaxes. Despite the tanker marketrally in 2000, scrapping of tankersreached 14 mill. dwt., incl. 25 VLCCs. In addition, three VLCCs were convertedto FPSOs.

Global oil inventories are slowlyrecovering, however, and oil prices havefallen somewhat during the past weeks.OPEC might need to cut back productionin order to avoid a continued fall in prices,which will exacerbate the usual springtimedownturn in the tanker market.

14

Newsmagazine for Leif Höegh & Co ASA No 1- 2001

By Mona Boug Kristiansen

Market outlook

15


HUAL TRITON calling Drammen

A rare visit by HUAL vessel at Drammen when HUAL TRITON dischargedToyota cars under its charter to NYK on 4 January 2001. The vesselshowed up as a dark shadow in the foggy and narrow sound of Svelvikand one hour later later moored at the car terminal with the Ownersrepresentatives proudly waiting to get onboard the ship. The followinggreeting was exchanged with a crew member while rigging the gangway:‘Welcome to Norway - sorry about the weather!’ ‘It’s okay, my owner isfrom this country!’

During the short stay, only 4 hours, we made our way through the vesselfrom bottom to top and found the 14 year old ship to be very tidy andrepresentative. We also had the opportunity to have a chat with CaptainBaldomar and his officers and felt that the ship was not only tidy, but alsoa happy one.

Master Avelino Baldomar, Chief Engineer EdgarPlantinos, 2nd Officer Nov Cabangon and 3rd OfficerCyrus Pagdato with Fleet Manager Stein Eriksenonboard HUAL TRITON in Drammen.

Newsmagazine for Leif Höegh & Co ASA No 1- 2001

HFSVESSEL MASTER CHIEF ENGINEER CHIEF OFFICERSG ENTERPRISE HSING, NAN YEN QIN, JING LU MAK, CHU POONSG ENTERPRISE T UNG, ON POSG PROSPERITY LIN, YU CHUAN CHAU, WAN HING NG, WAI KAPHÖEGH GALLEON BENTZRØD, KNUT HANSEN, ROY KEISER, RUNEHÖEGH GANDRIA PEDERSEN, PER SIGURD PAULSEN, TARJEI HØYDALSVIK, HALLVARD ANDRENORMAN LADY VISTNÆS, JENSEN KJELL HAVEN, JAN MØRK, HELGE ROGERMATTHEW HANSEN, RUNE HANSEN, PER HANS IVANISEVIC, DALIBORHÖEGH MORUS GALVE, ISMAEL SELAUSO OCBINA, ISAGANI JALLORINA LACANLALI, ROBERTO ROWANHÖEGH MARLIN AGUILA, ALBERTO BRIONES RABARIA, PERICLES JR MALBAS ESTABAYA, GILBERT JOHNSHÖEGH MERCHANT CHIONG, HENRY ALVAREZ MASOCOL, EDWIN DENUM FERNANDEZ, FERDINAND MANALOHÖEGH MERIT SORIANO, FRANCO LAPIDARIO CRISTINO, MANUELO BERDOS FLORESCA, LUCINO TIUHÖEGH MINERVA SABADO, ALFREDO RIMANDO ARAGOZA, CRISOSTOMO ASPER ASTILLO, FELIX LUENGOHÖEGH MIRANDA ALCORIZA, DIODORO ESO SUAREZ, ROBERTO SODUSTA SOLATORIO, FRANCISCO JR JUANERHÖEGH MUSKETEER SIBYA, RAFAEL DIANSEN TERAZONA, FRANK PENAFIEL TAGHAP, HERMENEGILDO JR. BETHØEGH MISTRAL GARFIN, AGUSTIN RODOLFO GONZ VENTULA, REYNALDO GANIRON BERTUMEN, ROGELIO ROSTROLLOMASCOT DAROY, ADOLFO SUEZO PABULAYAN, DELFIN SAQUIBAL ZENAROSA, DANTE BALANDRASAGA CHALLENGER MACADAGDAG, ROMULO MIEDES CASAMA, FIDEL HERNANDEZ ENGCOY, ETCHEL PEREZCRYSTAL PRIDE TIMTIMAN, ROBERTO LAPUS SANTOS, LAMBERTO ISTOMEN CORTES, KIM PADORCRYSTAL PRIMADONNA ORACION, OSCAR MARQUEZ RABAYA, NORMANDO C KIERULF, MANUEL LUIS MENCIASCRYSTAL PRINCE PALCES , NEFTALI JR CORRO IGNACIO, ALDEN GALANG BAGUIO, ULYSSES UYCRYSTAL PRIVILEGE BALAN, JOSE JR TABUDLONG PASADILLA, DIONE PELEGRINO DEMEGILLO, BENHUR ABERDEIVORY DAWN RAMBOANGA, DAVID CORPUZ ALON, ROY YAP PUNAY, FERNANDO MONTERDESUMMER MEADOW DEQUITO, GENEROSO PALOMO ABARINTOS JR, ALIPIO DOLOR BATOON, ELMER MARTILLANOSUMMER WIND PARAGUYA, MIGUEL SILVA BELTRAN, ALBERTO GOCOTANO DAYMIEL JR, BIENVENIDO MUITSPRING BRIDE OYALES, GEORGE GESULGA ROBIN, ALEXANDER SANCHEZ BATAYOLA, JESSIE NECESARIOSUMMER BAY VIOLANGO, ADRIAN DALIT JIMENEZ, ALEX PEREZ ARCAY, VERONICO FUDOTANSUMMER FLOWER MASNAYON, WILLARD PUNO LIBRERO, ANTONIO P. PASAPORTE, HARLEY ZAYCOSUMMER FLOWER HARE, JESSEL CALDEACARIB STAR PILAPIL, ALBERTO SANORIA YORO, RAMONITO JABASA RIEGO, ANACLETO ROLLEHUAL ASIA MANALAYSAY, CESAR DUQUE LAPE, JESUS ALQUEZA NIEDO, JULIUS VINCAHUAL TRICORN MAPA, ODNESOR CRUZ LEDESMA, REDEMTOR PUNZALAN CRUZ, APOLINARIO SAN PEDROHUAL TRACER MANGOHIG, QUINTIN ABANGAN ALOJADO, VICTORIANO AMILANGAN TALAMAN, DANILO CRUZHUAL TRAPPER SANCHEZ, GIL BARRIOS OZARAGA, MARIO GOMEZ ESTOLAS, BENJAMIN MABUTASHUAL TRAVELLER LICUDAN, EUSEBIO JULATON PAJATIN, JOVENCIO JR CALPO ENRIQUEZ, ELIGIO E.HUAL TRIBUTE MACABABBAD, GIL G. CIRERA, LEOPOLDO AGPAWA CONCEPCION, ROLANDO VALEROSOHUAL TRIDENT JONOS, DIONISIO COMPANERO CARAPATAN, ROLANDO SR. BATIN CASIANO, DANILO NAVARROHUAL TRIDENT BALIDOY, JOSE BALANEHUAL TROOPER SOMOSOT, JEREMIAS CORBITA MAHINAY, VICTORINO JR GENTAPA GOMEZ, JOEY BARRIOSHUAL TROTTER SATIADA, ROBERTO CRUZ CONCEPCION, LEO QUIJANO JOSE, EDGARDO ABRIGOHUAL TRANSIT GULLIAB, BENEDICTO CASIGURAN. LUMOCSO, ELEUTERIO BENDANILLO ATIAN, SALVADOR NOHUAL TRADER LACSON, PACIFICO JR. DAGUIA YANGCO, TEODULFO JR LIM AGONIAS, ANTONIO MARANTANHUAL TRANSPORTER DELIARTE, BENITO ARROJADO PAJARILLO, JESUS SALES SULIBET, MANUEL NOEL SOLLORAN

IUM VESSEL MASTER CHIEF ENGINEER CHIEF OFFICERCARIB SEA MUSIALIK, BOLESLAW MACZYNSKI, ANDRZEJ RYBACZEWSKI, GABRIEL JAKUBHUAL TREASURE KULIK, MAREK OBST, ARKADIUSZ TROCHA, KRZYSZTOFHUAL TRAILER ALCARAZ, REYNALDO BOGO TRASPORTE, ARNULFO CHIONG, BERNARD BOGOHUAL TRAMPER RYSZCZAK, ZDZISLAW AUGUSTYN, JANUSZ PEPEL, MIROSLAWHUAL TRAPEZE CANDAVA, ROGELIO ILAGAN LEGASPI, DANI FAVILA ALISEN, NESTOR ALBAYHUAL TREKKER SZYMKIEWICZ, ROBERT PIOTR MIRSKI, RYSZARD NIEWINSKI, JERZYHUAL TRITON BALDOMAR, AVELINO GUBAN CAWICAAN, LUIS DINOZO PLANTINOS, EDGAR MACAHILOHUAL TROVE KSIAZKIEWICZ, WOJCIECH KANIA, ANDRZEJ KIERONSKI, GRZEGORZHUAL EUROPE WENCEL, WLODZIMIERZ MORDARSKI, RYSZARD FRANCZAK, KRZYSZTOFHUAL TRUBADOUR WILGOWSKI, MAREK ZURAWSKI, MIECZYSLAW JUSZKIEWICZ, MAREKHUAL TROPHY LANORIAS, EDUARDO COYOCA VILLARIN, EUTIQUIANO ELNACIN YANEZ, HENRY CAPAHUAL TRIUMPH IBRAHIM, ZAIDE DELA CRUZ ALTURA, RUBEN MORALES MAQUIRAN, NOE GREGORIO RAMOSHUAL TRINITY BENIGNO, JOSE JR PONCHINLAN LOZANO, CAMILO JR ORBES REFUERZO, GODOFREDO RABARAHUAL TROPICANA ACUNA, PONCIANO JR PARAGAS ARCE, RAFAEL JR MOLINA RODRIGUEZ, EDUARDO PEREZ

HFS and IUM fleet personnel onboard 10 January 2001

contents annual report 2

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