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AVANCE GAS - ANNUAL REPORT 2021
AVANCE GAS
ANNUAL REPORT
2021
Avance Gas, Avance Polaris
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AVANCE GAS - ANNUAL REPORT 2021 AVANCE GAS - ANNUAL REPORT 2021
CONTENTS
4 Key Operational and Financial Highlights
10 History & Fleet
14 Presentation of the Board of Directors
16 Board of Director’s Report
22 Responsibility Statement
23 Consolidated Financial Statements
58 Statement of Corporate Governance
65 Auditor’s Report
Avance Polaris Crew, Amit Acharya
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AVANCE GAS - ANNUAL REPORT 2021
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AVANCE GAS - ANNUAL REPORT 2021
Highlights
KEY OPERATIONAL AND FINANCIAL
Elorde Ruebnico, Thetis Glory
Avance Gas’ results for 2021 reflected the freight market development. The Company’s average time charter
equivalent (TCE) rates followed the market trend, with a full-year average rate for the fleet of $31,302/day,
down from $32,418/day in 2020. The year started high, with TCE rates for the first quarter of $42,552/day,
however, the US cold snap towards the end of the first quarter resulted in a sharp fall in rates towards the end
of the first quarter. The market recovered somewhat during the second quarter with the Company achieving
a TCE rate of $27,730/day which remained relatively stable throughout the rest of the year with a TCE rate of
$27,548/day and $27,631 achieved in the third and fourth quarters, respectively.
Freight Rates 2021
$ pr. ton
180
160
140
120
100
80
60
40
20
0
371 404 437 4610 4913 5216 19 22 25 28 31 34
US$ pr. ton
Week Number
Source: Baltic; Clarkson, Poten & Partners
Baltic LPG1
Houston - Chiba
Houston - Flushing
¹⁾ Refer to Note 10 of the Financial statements for denitions and reconciliation of Alternative Performance Measures (APMs)
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AVANCE GAS - ANNUAL REPORT 2021 AVANCE GAS - ANNUAL REPORT 2021
million in net cash proceeds.. Following the sale-leaseback
transaction, the Company repaid a total of $23.9 million of
debt, in addition to scheduled instalments of $43.9 million.
Total shareholders’ equity amounted to $539.2 million,
corresponding to an equity ratio of 56.4%, compared to $452.6
million and 50.4% as of December 31, 2020. The increase in
equity reflects a net profit of $32.1 million, fair value gain of
interest rate swaps of $12.9 million, a private placement of
$65.0 million oset by dividend payment of $23.1 million.
The private placement was successfully announced and
completed in April 2021 with a total transaction size of NOK
555 million or $65 million through the allocation of 12,899,000
shares in the Company at a price of NOK 43 per share. The
use of net proceeds from the Private Placement was for
general corporate purposes including partly financing of the
Company’s newbuilding program. Shortly aer the Private
Placement, the Company increase it’s newbuilding program
from four to six dual fuel newbuildings.
Cash and cash equivalents were $101.9 million at 31 December
2021, compared with $75.9 million at 31 December 2020,
reflecting capital expenditures and repayment of debt, oset
by positive cash flows from operations, and net cash inflow
from the sale-leaseback transaction.
Cash-break even 2021
Installments OPEX
Interest paid A&G
$1,400
$8,200*
$3,700
$9,200
$22,500/day
KEY FINANCIAL HIGHLIGHTS
TCE/day (in millions)
$31,302
Available liquidity (in millions)
$101.9
Ships
13
OPEX/day
$8,871
A&G/day
$1,363
Calendar
days
Operating
days
4,5684,745
The Company continued to navigate through the pandemic
safely recognising positive profits throughout the year. In
2021, Avance Gas (the "Company") reported a net profit
of $32.1 million compared to a net profit in 2020 adjusted
for the reversal of impairment of $37.2 million. Basic and
diluted earnings per share was $0.44 in 2021, compared
to $0.58 in 2020, adjusted for the reversal of impairment.
Operating expenses in 2021 were $42.1 million down from
$45.0 million in 2020 equalling an average daily operating
expense of $8,871 for 2021, compared to $8,968 in 2020.
Operating expenses during 2021 were negatively impacted
by Covid-19 crew changes expenses and increased freight
cost of approximately $700 per day.
Administrative and general expenses, totalled $6.5 million
in 2021, compared with $3.9 million in 2020. The increase
was largely related to an increase in the number of FTEs
from 2020 to 2021, as well as non-recurring personnel
expenses. Net non-operating expenses, consisting mainly
of financial expenses, were $14.6 million, down from $22.1
million in 2020, a decrease mainly attributable to lower
LIBOR rate for the year, and reduced average debt following
scheduled instalments.
Avance Gas’ total assets amounted to $955.4 million at 31
December 2021, up from $897.2 million at 31 December
2020. In 2021, the Company increased its newbuilding
program from two to six Dual-fuel vessels at the shipyard
Daewoo, in South-Korea. Throughout the year, the Company
capitalised $60.8 million in relation to these six vessels
representing primarily pre-delivery capital expenditure.
Total net interest bearing debt was $389.9 million at year-
end 2021, compared to $416.5 million as of year-end 2020.
In July 2021, the Company completed its first sustainability-
linked term facility of $104 million to finance the two
first dual fuel newbuildings, Avance Polaris and Avance
Capella, which was susbsequently delivered in January and
February 2022. In December 2021, the Company successfully
refinanced and executed a sale leaseback agreement
for the VLGC Iris Glory generating approximately $16.6
Avance Gas TCE
Q1
12,636
Q2
7,711
Q3
15,289
Q4
21,314
50,000
45,000
40,000
35,000
30,000
25,000
20,000
15,000
10,000
5,000
0
$ pr. day
NB Dual-fuel
6
1) Refer to Note 10 of the Financial statements for denitions and reconciliation of Alternative Performance Measures (APMs)
*Normalised Opex excluding Covid crew change
expenses and freight costs of $700 per day.
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KEY OPERATIONAL HIGHLIGHTS
Utilization rates remained high throughout the year
recording a fleet utilization of 97.4% for full year. Waiting
days in 2021 for the Avance Gas fleet totalled 131.0 days
compared to 164.7 days in 2020, representing an average of
0.84 days per ship/month. This compares with average 0.91
day per ship/month and a fleet utilization of 96.6% in 2020.
The Company recorded 4,568 operating days in 2021
(calendar days less o hire days), up from 4,445 operating
days in 2020. This was mainly due to the scheduled
drydocking for eight vessels and the completion of scrubber
installation on five vessels which resulted in lower operating
days in 2020. Scrubber installation on the sixth vessel was
completed in the first quarter of 2021. During 2021, the
Company had one vessel less in the fleet compared to 2020
due to the sale of the VLGC Avance in September 2020.
The Covid-19 pandemic continued to challenge aspects of
our operational business in 2021. For Avance Gas, putting in
place measures to ensure the safety and well-being of our
employees and crew have been our highest priority. Varied
Infection control regulations and procedures between
jurisdictions have made crew changes diicult for the entire
sector, making rotation of crew members on our vessels
challenging, and consequently, impacting the well being
of our seafarers. In 2021, Avance Gas became a signatory of
the Neptune Declaration on Seafarer Wellbeing and Crew
Change, recognising our shared responsibility to improve
the situation for our crew and to ensure that we build a
more resilient maritime supply chain going forward. The
Company had a Lost time Incidence rate of 0 in 2021.
In 2021, Avance Gas continued with the decarbonization
project, which sets a roadmap for meeting the IMO 2030
target. We have fully digitalized our ship performance data
into our digital monitoring platform, allowing us to track
each of our vessel’s emissions and energy consumption
on a live basis. During 2021, the company increased it’s
order to six dual-fuel VLGCs, with delivery end of 2022
and in 2023, further highlighting our commitment towards
decarbonization of the LPG and shipping industry. In
addition, the company entered into a sustainability linked
financing facility during 2021 securing financing for the two
of the dual fuel newbuildings. The financing has an annual
sustainability margin adjustment mechanism linked to our
performance against the carbon intensity targets set out
in the Poseidon Principles.
For more information about GHC emissions and ESG, please
find our separate ESG report published on our website
www.avancegas.com
Avance Gas fleet utilisation
97.4%
On shore employees
9
Number of countries
33
Marine Casualties
0
Waiting days per ship
per month
1.10
Crew members
273*
*Number of employees on board ships at any time are recorded, this does
not reflect the aggregate number of shipboard employees during the year
Total Distance Traveled
By Vessels (Nautical Miles)
1,169,371
Deadweight Tonnes
702,689
The Fleet
VESSEL SIZE CBM YARD BUILT OWNERSHIP
Iris Glory 83,700 Daewoo, South Korea 2008 100%
Venus Glory 83,700 Daewoo, South Korea 2008 100%
Thetis Glory (Sold - Mar 22) 83,700 Daewoo, South Korea 2008 100%
Providence (Sold - May 22) 83,800 Daewoo, South Korea 2008 100%
Promise 83,800 Daewoo, South Korea 2009 100%
Mistral 83,000 Jiangnan, China 2015 100%
Monsoon 83,000 Jiangnan, China 2015 100%
Breeze 83,000 Jiangnan, China 2015 100%
Passat 83,000 Jiangnan, China 2015 100%
Sirocco 83,000 Jiangnan, China 2015 100%
Levant 83,000 Jiangnan, China 2015 100%
Chinook 83,000 Jiangnan, China 2015 100%
Pampero 83,000 Jiangnan, China 2015 100%
Avance Polaris (Jan 22) 91,000 Daewoo, South Korea 2022 100%
Avance Capella (Feb 22) 91,000 Daewoo, South Korea 2022 100%
Avance Rigel 91,000 Daewoo, South Korea 2022 100%
Avance Avinor 91,000 Daewoo, South Korea 2023 100%
Avance Castor 91,000 Daewoo, South Korea 2023 100%
Avance Pollux 91,000 Daewoo, South Korea 2023 100%
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As at December 31, 2021 Avance Gas owned
and operated a modern fleet of thirteen
VLGCs and six dual fuel newbuildings
History
& Fleet
Avance Gas, Avance Polaris
2007-2009
2013-2014
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AVANCE GAS - ANNUAL REPORT 2021 AVANCE GAS - ANNUAL REPORT 2021
History
Avance Gas traces it's roots to 2007 and was
established with the goal “to pursue growth
opportunities in the expanding market for the
transportation of liquefied petroleum gas (LPG)”.
The company entered the market in 2009 with a
three-year timecharter of the VLGC Yuhsho, followed
by the acquisition of the 2003-built VLGC Althea
Gas, later renamed Avance. Avance Gas Holding
Ltd was established.
2018-2020
During 2018, Hemen Holding Limited increased its holdings and became the
largest shareholder in Avance Gas. Avance Gas is integrating closer to the
Seatankers group of companies, benefitting from economy of scale and the
group’s extensive commercial and technical experience. Aer a weak freight
market since 2016, the VLGC market began to strengthen at the end of 2018.
In 2019 Avance Gas refinanced all outstanding debt and closed a new $515
million credit facility. End 2019, Avance Gas entered into two Dual-Fuel 91,000
cbm VLGCs at Korean shipbuilder DSME for delivery in 2021 and 2022, and
scrubber installation contracts were signed for six of our vessels.
The global pandemic outbreak (Covid-19) has significant impact on the
global market and economy in 2020, with reduced demand for LPG and lower
fleet eiciency impacting the VLGC market. Avance Gas manages through
a challenging year, and completes the scheduled drydocking programme
for 8 vessels, in addition to scrubber installations on 5 vessels. Avance
Gas completes the sale of its oldest vessel Avance, and proceeds with the
construction of two LPG dual-fuel newbuildings at Daewoo Shipbuilding and
Marine Engineering (DSME) in South Korea.
Frontline 2012 Ltd entered as a new shareholder of Avance Gas
through a cash investment. In addition, Avance Gas agreed
to purchase eight VLGC newbuildings—previously ordered
by Frontline 2012 Ltd from Jiangnan Shipyard in China. The
acquisition was in part financed by a $100 million private
equity placement, through which Avance Gas was listed on
the Norwegian Over-the-Counter (“N-OTC”).
On April 9, 2014, an initial public oering of Avance Gas shares
was completed, raising $100 million from the issuance of
new shares. Avance Gas’ three largest shareholders—Stolt-
Nielsen Gas Ltd, Sungas Holdings Ltd and Frontline 2012 Ltd—
simultaneously sold shares with a total aggregate value of $175
million, including over-allotment options. Trading of Avance
Gas shares commenced on the Oslo Stock Exchange on April
15, 2014. During 2014, Avance Gas also completed the financing
of its newbuilding program by raising a total of $650 million
from a consortium of eight large shipping banks, underscoring
the market’s confidence in the Company’s business strategy.
2010-2012
In exchange for 50% ownership in the Company, Sungas Holding
Ltd sold three 2008 built VLGCs to the Avance Gas fleet: Iris Glory,
Thetis Glory and Venus Glory. Navigator Taurus, a medium sized
gas carrier, was also taken on timecharter in 2010, bringing the
fleet up to a total of six ships.
In 2012 Avance Gas acquired Maran Gas Knossos and Maran Gas
Vergina from Maran Gas Maritime, Inc. in a cash transaction,
now named Promise and Providence. Expiry of the Yuhsho and
Navigator Taurus timecharters.
2021
In January 2021, Avance Gas entered into shipbuilding contracts for two
91,000 CBM, LPG Dual-Fuel VLGCs with Daewoo Shipbuilding and Marine
Engineering (DSME) in South Korea for delivery in Q4 2022 and Q1 2023.
In April, Avance Gas successfully completed a private placement raising
$65 million in new equity. The net proceeds are being used for general
purposes, which includes partly financing of the Company’s newbuilding
program. Following the equity raise, Avance Gas increased its dual fuel
VLGC newbuilding program from four to six vessel, with estimated delivery
of the final two vessels for the second half of 2023. In July the Company
further signed a $104 million sustainability-linked term facility with a bank
syndicate to finance its first two dual-fuel newbuildings, Avance Polaris
and Avance Capella.
In August 2021, the majority shareholder of Avance Gas Holding Ltd., Hemen
Holding Limited (“Hemen”) acquired additionally 127,207 shares in the
Company. Following the acquisition, Hemen, combined with its holdings
through its ownership of Frontline Ltd., held a total of 33.35% of the shares
in the Company. Pursuant to section 6-1 of the Norwegian Securities Trading
Act the transaction triggered an obligation for Hemen to make a mandatory
oer to acquire all shares in the Company at a price of NOK 43 per share.
Following settlement of the mandatory oering in October 2021, Hemen
owned 59,382,696 shares, equating to approximately 76.7% of the Company.
2015-2017
In 2015, Avance Gas took delivery of Mistral,
Monsoon, Breeze, Passat, Sirocco, Levant,
Chinook and Pampero, all 83,000 cbm VLGC
newbuildings from Jiangnan Shipyard in
China. The Avance Gas fleet now consists of
14 modern VLGCs, with a total capacity of 1.17
million cbm.
In 2016, Avance Gas prepares for a weaker
market by entering into an amendment
agreement with its banking group to defer
part if its principal payments. Simultaneously,
the Company raised $58.7 million in a private
placement and subsequent oering, issuing
29.5 million new shares.
Conda, Emmanuel P., Thetis Glory
PRESENTATION OF THE
Board of
Directors
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ØYSTEIN KALLEKLEV
Executive Chairman
Øystein served as Director of Avance Gas since 26 May 2021 and was elected as Chairman of the Board in March 2022. Mr.
Kalleklev has been the CEO in FLEX LNG Management since August 2018, aer serving as CFO of Knutsne NYK Oshore Tankers
since 2013 and Chairman of the General Partner of the MLP KNOT Oshore Partners from 2015-2017. Previous roles include
CFO of industrial investment company Umoe Group, Managing Director of Umoe Invest, Partner of investment bank Clarksons
Platou and Business Consultant at Accenture. Mr. Kalleklev holds a MSC in Business and Administration from Norwegian School
of Economics and a Bachelor in Business and Finance from Heriot-Watt University. Mr. Kalleklev attended all board meetings
during 2021 since his appointment to the board in May.
FRANÇOIS SUNIER
Director
François Sunier has served as a Director of Avance Gas since 1 December 2010. He has been the CEO and Managing Directors
of Suntrust Investment Co. S.A. since January 2002. Prior to Suntrust Investment Co. S.A., Mr Sunier worked as an Executive
Director at Goldman Sachs, London and at UBS Philips & Drew, London. François Sunier serves at the board of Mirabaud SCA
and Groupe Minoteries (listed on the Swiss Stock Exchange Market). François Sunier graduated from the University of Geneva,
with a bachelor in political sciences. Mr Sunier is a Swiss citizen, and resides in Switzerland. Mr. Sunier attended all board
meetings during the year.
JAMES O'SHAUGHNESSY
Director
James O'Shaughnessy has been a Director of the Company since January 2021 and a member of the Audit Committee since
May 2021. James O'Shaughnessy served as an Executive Vice President, Chief Accounting Oicer and Corporate Controller of
Axis Capital Holdings Limited since March 26, 2012. Prior to that Mr. O'Shaughnessy has served as Chief Financial Oicer of
Flagstone Reinsurance Holdings and as Chief Accounting Oicer and Senior Vice President of Scottish Re Group Ltd., and Chief
Financial Officer of XL Re Ltd. at XL Group plc. Mr. O'Shaughnessy received a Bachelor of Commerce degree from
University
College Cork, Ireland and is a Chartered Director, Fellow of the Institute of Chartered Accountants of Ireland a nd
an Associate
Member of the Chartered Insurance Institute of the UK. Mr. O'Shaughnessy attended all board meetings during
2021 since his appointment to the board in January.
JENS MARTIN JENSEN
Director
Jens Martin Jensen has been a Director of Avance Gas since March 2022. Mr. Jensen joined Seatankers Management in March 2022,
and prior to that he was the CEO of Athenian Holdings. He previously served as Head of Shipping at New Fortress Energy (USA) and
prior to that he was a Partner at Pillarstone Europe. From May 2008 to September 2014, he was the CEO of Frontline Management
AS. Mr Jensen has served as a director of various companies, including 2020 Bulkers Ltd, Frontline Ltd and Flex LNG Limited. Prior
to these roles, he was a Partner/Director at Island Shipbrokers between the periods of 1996 – 2004 and held various positions at A.P.
Moller/Maersk Group during 1985-1996 in Copenhagen, Mexico City, Tokyo and Singapore.
KATHRINE FREDRIKSEN
Director
Kathrine Fredriksen served as Director of Avance Gas since 26 May 2021. Ms. Fredriksen serves as President of Seatankers UK,
board member of Norwegian Property since 2016 and as a board member in Ship Finance since February 2020. She has previously
been on the boards of Seadrill, Golar LNG, Frontline and Deep Sea Supply. Through her role as President of Seatankers UK,
she provides advice on all group investments and is intrinsically involved in the administration of the organization. Kathrine is
educated at European Business School in London. She is a passionate collector of modern and contemporary art. Ms. Fredriksen
attended all board meetings during 2021 since her appointment to the board in May.
Avance Gas, Iris Glory
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The year started with a seasonally strong LPG freight market
at the very start of the year. Shortly thereaer, the US cold
snap halted US LPG export activity causing rates to fall
during the first quarter. The market quickly rebounded
in the second quarter as US LPG exports came back on
stream. The second half of 2021 was characterized by a
firming winter market driven by relatively mild winter
temperatures in the US allowing the LPG price arbitrage
to open and more US cargoes to flow and combined with
a continued Panama congestion absorbing capacity to the
global VLGC fleet freight rates.
Looking at our commercial results, the Company recorded
a TCE earnings of $31,302 per day for full year 2021,
compared to $32,418 per day in 2020. Avance Gas reported
a net profit of $32.1 million in 2021, compared to a net profit
of $37.2 million in 2020 adjusted for reversal of previously
recognised impairment.
Out of a total 4,745 calendar days, Avance Gas fleet had
177 ohire days (3.7%) in 2021. Ohire days were impacted
by the Drydocking of one vessel which commenced in
December 2020 and was completed in 2021, and the
scrubber installation on one vessel during 2021. This
compared to 5,022 calendar days, and 577 ohire days
(11%) in 2020 mainly related to drydocking, scrubber
installation and covid-19 delays. Of total operating days,
the fleet had a commercial utilisation rate of 97%, flat from
97% in 2020.
COMPANY AND BUSINESS
Avance Gas Holding Ltd. ("Avance Gas" or the “Company”)
is a Bermuda registered company. Avance Gas is a leading
operator of modern VLGCs and provides LPG transportation
services to destinations in Europe, South America, India
and Asia, mainly loading in the Middle East Gulf and the
US Gulf/US East Coast.
As at December 31, 2021, Avance Gas's fleet consisted of
thirteen owned VLGCs and six LPG dual-fuel newbuildings
to be constructed at Daewoo Shipbuilding and Marine
Engineering (DSME) in South Korea for delivery in 2022
and 2023.
The Company has outsourced technical management of the
fleet with Bernhard Schulte Shipmanagement (Singapore)
and Northern Marine Management Ltd (Glasgow) whose
responsibilities include employment of onboard personnel,
in close collaboration with the Company’s technical
supervisors, Frontline Management Ltd.
During 2021, the Company increased its newbuilding
program with DSME in South Korea from two to six LPG
Dual-Fuel VLGCs. The Company also entered into a $104
million sustainability-linked term facility to finance the
first two of these six dual fuel newbuildings. During the
year, the Company also successfully completed a Private
Placement with a total transaction size of approximately
NOK 555 million (USD $65 million) through the allocation
of 12,899,000 shares in the Company at a price of NOK 43
per share.
The Company continues to focus on enhancing the green
profile of the fleet, by reducing average age and improving
the overall fuel eiciency. The newbuildings will have 91,000
cbm capacity with state of the art technical specification,
resulting in significant improvements in fuel consumption,
lower emissions and improved competitiveness.
MARKET DEVELOPMENT
The VLGC market proved itself as one of the most volatile
shipping markets. From enjoying more than $100,000 per
day in January, rates were down to below $10,000 per day
by the end of February when the US cold snap halted the US
LPG export activity. At the same time, the Middle Eastern
LPG exports had gradually been reduced by the OPEC crude
oil cutbacks before it was slowly reversed later that year.
In the third and well into the fourth quarter, the freight
levels remained stable before the US LPG inventories
reached a high enough level to support the US winter export
program. At the same time, delays in the Panama Canal
and a strong demand from Asia as well as European buyers
of LPG boosted rates which reached close to $60,000 per
day for modern, scrubber fitted vessels before year end.
The LPG commodity market is growing due to a strong
Asian demand and increased US production. US Gulf
and USEC VLGC exports were up 19% totalling 44 million
tons, compared to 37 million tons in 2020. The growth in
US exports volumes is a result of relatively flat domestic
consumption, with seasonal variations, and increased
terminal capacity. On an annual basis, the US VLGC loadings
averaged 78 loadings per month for 2021, up 11% from 70
loadings per month in 2020.
Middle East volumes continued to follow the OPEC+ agreed
crude oil production cuts and further fell back 4% in 2021.
The oil production cuts have impacted the LPG exports
from the region, especially from Saudi Arabia, however
this was slowly reversed the second half of 2021 and the
Avance Gas, Avance Capella
Board of
Directors’
Report
1) Refer to Note 10 of the Financial Statements for denition and reconciliation of performance measures (APMs).
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Middle East Gulf exports are expected to continue in this
direction. On an annual basis, average monthly cargoes
exported were 51 in 2021, down from 53 cargoes in 2020.
On an annual basis, average monthly cargoes exported
were 51 in 2021, down from 53 cargoes in 2020.
FINANCIAL RESULTS
Consolidated results
Despite the volatility in the market, the TCE earnings for
2021 was $143.0 million, similar to last year and slightly
down from $144.1 million in 2020. Operating expenses
decreased to $42.1 million in 2021 from $45.0 million in
2020. The decrease is largely related to 1 vessel less in
the fleet as the Company sold the VLGC Avance (2003) in
September 2020 combined with a reduction in Covid-19
crew change as the vaccine is rolled out to the majority
of the crew towards the end of the year. Administrative
and general (A&G) expenses were $6.5 million in 2021, an
increase from $3.9 million in 2020. The increase in A&G
expenses in 2021 was largely impacted by an increase
in headcount combined with non-recurring personnel
expenses. Non-operating expenses, consisting mainly of
financial expenses, were $14.6 million, compared with $22.1
million in 2020, reflecting a lower LIBOR rate and reduced
average debt following scheduled instalments. Avance Gas
reported a net profit of $32.1 million in 2021, compared
with a net profit adjusted for reversal of impairment of
$37.2 million in 2020.
Financial position and cash ow
As of December 31, 2021, the carrying amount of Avance
Gas’ assets was $955.4 million compared to $897.2 million as
of 31 December 2020. During 2021, the Company capitalised
$60.8 million related to Newbuildings. The additions were
partially oset by depreciations of $47.2 million. Receivables
and other current assets increased from $21.2 million at
the end of 2020 to $31.8 million at the end of 2021, mainly
due to increased freight rates and an increase in prepaid
expenses.
The Company holds derivative financial instruments for
hedge accounting. The net change in fair value of the
derivative financial instruments was positive $12.9 million
as the LIBOR forward rates have been moving upwards
from unusual low levels in 2020.
Total shareholders’ equity as of December 31, 2021 was
$539.2 million, corresponding to an equity ratio of 56.4%,
compared to $452.6 million and 50.4% as of December 31,
2020. During the year, the Company completed the issue
of 12,899,000 common shares at a price of $5.1 (NOK43)
per share, increasing the total number of shares issued to
77,426,972 and the equity with $65 million.
Total free cash and cash equivalents in 2021 amounted to
$101.9 million compared with $75.9 million in 2020. Net
cash flows from operating activities were $72.6 million. Net
cash flows used in investing activities were $60.2 million,
mainly consisting of instalments paid on the Company’s
dual fuel newbuildings. Net cash flows from financing
activities were $13.5 million, consisting of proceeds from
issue of share capital of $64.4 million and drawdown of debt
of $41.65 million. This was partially oset by repayment
of debt of $67.8 million, including $23.9 million following
refinancing of the VLGC Iris Glory by way of a sale-leaseback
agreement generating $16.6 million in net cash proceeds
and lastly the Company processed dividend payments of
$23.1 million during the year 2021
ENVIRONMENT, SOCIAL AND
GOVERNANCE (ESG) REPORT
During 2021, the Company carried out a materiality
assessment to identify our most material impact on the
environment, society and the economy. As part of the
materiality assessment, interviews were conducted with
key stakeholders of the company including employees,
banks, investors and suppliers. Following the assessment,
the areas which are deemed to be most material to the
Company are climate impact, waste, health and safety,
diversity, influence on business partners and corruption,
bribery and money-laundering. The Company has set out
targets in each of these areas, which are outlined in the
Company's 2021 ESG rpeort.
A part of Avance Gas’ strategy is to enhance the green profile
of the fleet to contribute to a more sustainable shipping
industry. The Company is committed to a de-carbonisation
program to achieve the targeted emission reductions set
by IMO 2030 and 2050. In order to provide transparency to
our stakeholders, the Company has increased its focus on
Environmental, Social and Governance (ESG) reporting.
Avance Gas has published an ESG report to provide
investors, banks and other stakeholders with easy access
to extra-financial information. The report has been prepared
in accordance with the Marine Transportation framework
established by the Sustainability Accounting Standards
Board (SASB) and the Poseidon Principles. This allows us
to identify, manage and report on material ESG factors
specific to our industry.
The ESG report is published alongside with this annual
report for the fourth time, and is available on the Company's
website.
HUMAN RESOURCES
AND DIVERSITY
All seagoing crew are under employment contracts with our
technical managers, and are hired in close collaboration
with the Avance Gas’ technical supervisors, Frontline
Management Ltd.
Avance Gas’ technical managers have in place cadet
programs to ensure a healthy growth in the next generations
of qualified seafarers.
Avance Gas is proud to be an equal opportunity employer.
All qualified applicants and employees are treated equally
without regard to gender, nationality, disability, religion,
race or colour. The professional development and personal
growth of the employees is vital to the success of Avance
Gas. Our technical managers take pride in the low turnover
and high retention of Avance Gas’ sea sta, who recognize
that the Company is a safe, reliable and high quality
industrial shipper dedicated to safely and reliably meeting
the needs of its customers worldwide.
Avance Gas had 9 on-shore employees by year-end 2021.
It is the ambition to create a good working environment,
oering challenging and motivating work tasks and equal
development opportunities to all employees. Women
constituted 44% of the onshore workforce. The absence
due to sickness for onshore employees was 0% in 2021.
HEALTH, SAFETY
AND ENVIRONMENT
Avance Gas is committed to ensuring the health and safety
of our people, keeping the oceans clean and reducing
emissions.
Ensuring safe working conditions is always Avance Gas
primary focus, and the health and safety of our personnel
are prioritised in every aspect of our operations. Avance
Gas believes that a strong health and safety focus, both
onshore and oshore, is key to the long-term performance
of our company. All Company employees, shore based
and seafarers are required to comply with the applicable
standards and with the ship’s occupational health and
safety policy and program.
We have a zero-accident ambition, and we operate by the
principle that no serious injury or environmental incident
is acceptable. All onboard personnel are appropriately
trained, and a formal onboard training program includes
both computer-based training and periodic scheduled
and unscheduled drills. All oicers and crew members
are required to report near misses and incidents. The data
from these reports are tracked, tabulated and used to drive
continuous improvement in Avance Gas’ safety culture.
Avance Gas’ technical managers utilize structured safety
campaigns to enhance safety performance and awareness.
Our main HSEQ objectives are inter alia to grow the culture
of on-board awareness on environmental compliance, to
improve the on-board safety culture and to have increased
focus on our safety campaign on learning from industry
incidents relating to launch and recovery failure of life/
rescue boats. As part of these eorts, we hold annual oicer
conferences where we highlight specific topics and hold
drills and training sessions with the technical managers.
Avance Gas’ dedication to safe ships, clean seas and
commercial reliability reflects our unwavering commitment
to operating in a manner that is safe for people and
minimizes our impact on the environment. Our experienced
and highly trained oicers and crew members operate in
strict compliance with local, national, global and industry
requirements, regulations and certifications. All ships in the
Avance Gas fleet operate in accordance with the ISO 14001
standard for Environmental Management.
CORPORATE SOCIAL
RESPONSIBILITY
Avance Gas’ dedication to “safe ships, clean seas
and commercial reliability” reflects our unwavering
commitment to operating in a manner that is safe for
people and minimizes our impact on the environment and
complying with all applicable international and local laws
and regulations. We have established a set of policies and
control procedures to safeguard these environmental and
regulatory risks.
The Board ensures that we have sound internal control
and risks management systems in place, which encompass
our corporate values and ethical guidelines, including the
guidelines for corporate social responsibility.
In accordance with the Oslo Stock Exchange corporate
governance code, an Audit Committee is appointed by
the Board and tasked with monitoring and following up
reports and complaints received by the Company relating
to internal controls and compliance. Furthermore, the Audit
1) Refer to Note 10 of the Financial statements for denitions and reconciliation of Alternative Performance Measures (APMs)
20 21
AVANCE GAS - ANNUAL REPORT 2021 AVANCE GAS - ANNUAL REPORT 2021
Committee ensures that policies with respect to ethics,
risk assessments and risk management are adequate at
all times.
Avance Gas has a zero-tolerance policy towards bribery
as stated in our Code of Conduct, which applies to all
entities controlled by our company and oicers, directors,
employees as well as workers and third-party consultants
acting on behalf of the company, wherever they are located.
Assessing and monitoring business processes, training
and controls are fundamental tools in implementing our
anti-corruption policy.
DIRECTORS AND OFFICERS
LIABILITY INSURANCE
Avance Gas Holding Ltd has liability insurance coverage
for its Directors and Oicers (D&O). The 2021 D&O policy
was placed with Chubb European Group SE and covers all
loss from any claim or securities claim against an insured
person and all legal representation expenses in respect
of an investigation made during the policy period. The
insurance does not cover losses where the Company has
indemnified such loss.
GOING CONCERN
The consolidated financial statements of the Company have
been prepared on a going-concern basis and in accordance
with International Financial Reporting Standards (IFRS).
Based on the Company’s cash position, no material
unfunded capital expenditure commitments and the
strength of the Company’s balance sheet at year-end,
the Board of Directors confirms the assumption of going
concern.
PRINCIPAL RISKS
As a global owner and operator of VLGCs, Avance Gas is
exposed to a variety of risks, including market, operational
and financial risks. The Company maintains an ongoing
assessment process, which is designed to identify, analyse
and minimize risk exposures. The unpredictability of LPG
shipping and financial markets are key factors that this
process considers.
Avance Gas conducted a full Compliance Risk Assessement
if all aspects of our business performed by a third party
during the year. The overall purpose was to adequately
mitigate the compliance risks Avance Gas is exposed with
emphasis to governance (sanctions, corruption, bribery,
facilitation payments, money laundering, fraud, anti-
competitive practices, handling of sensitive information
and blackmailing) and social (employment conditions,
health and safety, hum rights, discrimination, labour,
community relations, local participation issues and freedom
of association and collective bargaining). The results
showed that Avance Gas has already implemented the
key risk mitigating actions representing relevant policies
and procedures being in place, implementation of soware
tools necessary for the compliance work, screening and
monitoring of business partners, audits of third parties
as well as mandatory compliance training for employees.
The cyclical characteristics of the LPG shipping segment
is the most significant risks to the Company in terms of
impact on the Company’s financial results. A reduction in
export volumes combined with increased supply of new
tonnage normally impacts LPG freight rates and asset values
negatively. Similarly, reduced demand for LPG would reduce
export volumes and, consequently, impact demand for
LPG shipping. Further, changing economic, political, and
governmental conditions in the countries and regions where
the Company’s ships are employed and key terminals are
located, could adversely impact the drivers of the VLGC
freight market. To partly mitigate the cyclical VLGC freight
market, the Company has entered five 2-year Time charter
consisting of three VLGC’s on a fixed rate at $30,000 per day
and two with a floating Baltic linked structure.
Following the above, the global economy has been
impacted by the recent outbreak of war between Russia
and the Ukraine, causing disruption to supply chains and
instability. The Company has limited exposure to these
regions and currently, the situation has not impacted the
Company's contracts or operations. While, uncertainty is
still present as a result of the conflict, it is possible that the
situation could have an impact on the Company's business.
Given the uncertain geopolitical situation in Ukraine it is
diicult to quantify the magnitude of the short terms'
eects to the VLGC freight market even though we see the
tendency of energy securing, especially in Europe, driving
energy commodity pricing upwards.
Avance Gas is exposed to changes in financial markets,
including credit and interest rate and capital markets,
which may aect the Company’s financial performance. The
availability of financing alternatives for future investment
opportunities may be unavailable at suiciently attractive
terms. The Company is also exposed to general movements
on the Oslo Stock Exchange, which may limit the possibility
of raising new equity at attractive prices. The Company
has exposed to fluctuations in LIBOR through its credit
facilities. To partly mitigate this the Company has hedged
half of its current exposure through interest rate swaps of
which the majority expire in 2025.
OUTLOOK
The outlook for 2022 remains positive but subject to
constant change with the volatile freight markets.
Fundamentally it remains a positive outlook with the
expectation that US exports will continue to grow with
high energy prices creating a demand pull to keep cargoes
moving. The demand from Chinese Petrochemical plants
(PDH) is also expected to significantly grow during 2022
with a number of new PDH plants expected to come online
in 2022. These new PDH plants will be largely dependent
on seaborne supply, therefore having a positive impact
on freight rates.
Exports from the Middle East are also expected to gradually
increase in 2022. However, it is likely that these exports will
remain close by in regional centres such as India where the
product is used mainly for residential purposes.
The orderbook currently stands at 20% of the existing
fleet of 328 vessels, with 13 ships due for delivery during
the remainder of 2022, 47 in 2023 and 5 in 2024. Positive
fundamentals in the VLGC freight market suggest that the
orderbook will be partly accommodated by increased
US production and Asian LPG demand combined
with continued congestion in the Panama Canal. The
inefficiencies in Panama will likely remain for the
foreseeable future, albeit with expected seasonal variations
in waiting times. The subsequent uncertainty in transiting
will likely mean more secure routings via Cape of Good Hope
are utilized which could stretch the fleet. Additionally, we
believe another layer could stretch the fleet when the new
EEXI and XII emission regulations are introduced in 2023.
With strong fundamentals and a fully utilized fleet, the
Board will continue to focus on fleet renewal, further
balance sheet strengthening and shareholder value. Since
January 2022, the Company has sold two older VLGCs in
a strong second/hand market generating approximately
$46.8 million in total net cash proceed while at the same
time we have taken delivery of our two first dual fuel VLGC
newbuildings. Our remaining four dual fuel newbuildings,
capable of burning LPG as fuel and prepared for ammonia
as fuel, we are positioning ourselves for a zero-carbon fuel
solution as soon as the technology is ready and feasible.
SUBSEQUENT EVENTS
In January, 2022 the Company took delivery of Avance
Polaris, the first of six 91,000 cbm VLGC newbuildings
from Daewoo shipyard in South Korea. The vessel was
shortly aer delivered to Total Energies on a Time Charter
Agreement for 2 years.
In January, 2022 the Company entered into a Time Charter
Agreement with Petredec for a period of two years for the
second dual fuel VLGC, Avance Capella. The company took
delivery of the vessel in February 2022.
In January, 2022 the Company entered into a contract to sell
the 2008-built VLGC Thetis Glory. The sale was completed
in February 2022 and following repayment of debt, the sale
generated cash proceeds of approximately $22.5 million
and a book profit of approximately $6.0 million.
In February, 2022 the Board of Directors declared a dividend
of $0.05 per share for the fourth quarter 2021.
In March, 2022 Kristian Sorensen resigned as Chief Executive
Oicer and Erik O. Jacobsen resigned as Chairman of the
board. Øystein Kalleklev was appointed Executive Chairman
and Jens Martin Jensen was appointed as a Director of
the Company.
In March, 2022 the Company entered into a contract
to sell the 2008-built VLGC Providence with expected
delivery in May. The sale is expected to generate a gain of
approximately USD $4.8 million to be recognised in the
second quarter 2022.
The Board of Directors of Avance Gas Holding Ltd
April 7, 2022
........................................
Jens Martin Jensen
Director
........................................
James O'Shaughnessy
Director
........................................
Øystein Kalleklev
Executive Chairman
........................................
Francois Sunier
Director
........................................
Kathrine Fredriksen
Director
23
AVANCE GAS - ANNUAL REPORT 2021
22
AVANCE GAS - ANNUAL REPORT 2021
On behalf of the Board of Directors and Management, we confirm that, to the best of our knowledge,
the financial statements for 2021 have been prepared in accordance with the current applicable
accounting standards, and give a true and fair view of the assets, liabilities, financial position and
profit or loss for Avance Gas Holding Ltd and its subsidiaries (the “Group”) as a whole.
We also confirm that the Board of Director’s Report includes a true and fair review of the development
and performance of the business and the position of the Group, together with a description of the
financial risks and uncertainties facing the Group.
Responsibility
Statement
Avance Gas, Avance Capella
..................................................
Jens Martin Jensen
Director
..................................................
James O'Shaughnessy
Director
..................................................
Øystein Kalleklev
Executive Chairman
..................................................
Francois Sunier
Director
..................................................
Kathrine Fredriksen
Director
The Board of Directors of Avance Gas Holding Ltd
April 7, 2022
Consolidated
Financial
Statements
24 25
AVANCE GAS - ANNUAL REPORT 2021 AVANCE GAS - ANNUAL REPORT 2021
DECEMBER 31,
2021
DECEMBER 31,
2020
Note
Operating revenue 10 210,677 205,716
Voyage expenses 11 (67,689 ) (61,618 )
Operating expenses 12 (42,093 ) (45,040 )
Administrative and general expenses 13 (6,466 ) (3,870 )
Gross operating profit 94,429 95,188
Depreciation and amortisation expense 5 (47,209 ) (41,705 )
Reversal of impairment losses 5 - 33,733
Gain on disposal of asset 5 - 5,829
Operating profit 47,220 93,045
Finance expense 14 (16,608 ) (22,303 )
Finance income 1,859 26
Foreign currency exchange gains 136 223
Income before tax 32,607 70,991
Income tax expense 15 (498 ) (85 )
Net profit 32,109 70,906
Earnings per share 9
Basic 0.44 1.11
Diluted 0.44 1.11
(in USD thousands)
FOR THE YEAR ENDED
See accompanying notes that are an integral part of these consolidated financial statements.
CONSOLIDATED INCOME STATEMENT
DECEMBER 31,
2021
DECEMBER 31,
2020
Note
Net profit 32,109 70,906
Other comprehensive (loss) income:
Items that may be reclassied subsequently to prot
and loss:
Net fair value adjustment of interest rate swaps designated
for hedge accounting 7, 20 12,875 (10,181 )
Exchange dierences arising on translation of foreign
operations (12 ) 7
Other comprehensive (loss) income 12,863 (10,174 )
Total comprehensive income 44,972 60,732
(in USD thousands)
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
See accompanying notes that are an integral part of these consolidated financial statements.
FOR THE YEAR ENDED
26 27
AVANCE GAS - ANNUAL REPORT 2021 AVANCE GAS - ANNUAL REPORT 2021
See accompanying notes that are an integral part of these consolidated financial statements.
DECEMBER 31,
2021
DECEMBER 31,
2020
ASSETS
Note
Cash and cash equivalents 3 101,910 75,882
Receivables
4 21,098 16,293
Related party receivable balances
16 134 163
Inventories 7,933 4,358
Mobilisation cost 2,322 2,793
Prepaid expenses 6,940 45
Other current assets
4 3,620 4,720
Total current assets 143,957 104,254
Property, plant and equipment
5 716,577 761,159
Newbuildings
5 92,609 31,825
Derivative financial instruments
7 2,240 -
Total non-current assets 811,426 792,984
Total assets 955,383 897,238
(in USD thousands)
AS OF
CONSOLIDATED BALANCE SHEET
See accompanying notes that are an integral part of these consolidated financial statements.
DECEMBER 31,
2021
DECEMBER 31,
2020
LIABILITIES AND SHAREHOLDERS’ EQUITY
Note
Current portion of long-term debt 6, 7 44,574 43,001
Accounts payable 7,477 2,853
Related party payable balances
16 532 124
Accrued voyage expenses 4,161 3,150
Accrued expenses 2,795 493
Derivative financial instruments
7 5,691 6,223
Other current liabilities 457 56
Total current liabilities 65,687 55,900
Long-term debt
6, 7 263,423 285,434
Long-term revolving credit facilities
6, 7 81,984 88,110
Derivative financial instruments
7 5,121 15,224
Total non-current liabilities 350,528 388,768
Shareholders’ equity
Share capital
8 77,427 64,528
Paid-in capital 431,366 379,851
Contributed capital 95,070 94,780
Accumulated deficit (44,825 ) (53,856 )
Treasury shares (11,351 ) (11,351 )
Accumulated other comprehensive loss
20 (8,519 ) (21,382 )
Total shareholders’ equity 539,168 452,570
Total liabilities and shareholders’ equity 955,383 897,238
(in USD thousands)
CONSOLIDATED BALANCE SHEET
AS OF
..................................................
Francois Sunier
Director
..................................................
Øystein Kalleklev
Executive Chairman
..................................................
Kathrine Fredriksen
Director
The Board of Directors of Av ance Gas Holding Lt d
April 7, 2022
..................................................
James O'Shaughnessy
Director
..................................................
Jens Martin Jensen
Director
28 29
AVANCE GAS - ANNUAL REPORT 2021 AVANCE GAS - ANNUAL REPORT 2021
SHARE
CAPITAL
PAID-IN
CAPITAL
CONTRIB-
UTED
CAPITAL
RETAINED
(LOSS)
INCOME
ACCUMULATED
OTHER
COMPREHENSIVE
LOSS
TREASURY
SHARES TOTAL
Balance December
31, 2019 64,528 379,851 94,945 (105,654 ) (11,208 ) (11,351 ) 411,111
Comprehensive
income (loss):
Net profit - - - 70,906 - - 70,906
Other comprehensive
income (loss):
Net fair value
adjustment of
interest rate swaps
designated for hedge
accounting less
portion reclassified
to income statement
(note 7, 20) - - - - (10,181 ) -
(10,181 )
Exchange dierences
arising on translation
of foreign operations - - - -
Total other
comprehensive
income (loss) - - - - (10,174 ) - (10,174 )
Total
comprehensive
income (loss) - - - 70,906 (10,174 ) - 60,732
Transactions with
shareholders:
Dividend - - - (19,108 ) - - (19,108 )
Compensation
expense for share
options (note 18) - - (165 )
Total transactions
with shareholders - - (165 )
(19,108 ) - - (19,273 )
Balance, December
31, 2020 64,528 379,851 94,780 (53,856 ) (21,382 ) (11,351 ) 452,570
(in USD thousands)
CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY
See accompanying notes that are an integral part of these consolidated financial statements.
SHARE
CAPITAL
PAID-IN
CAPITAL
CONTRIB-
UTED
CAPITAL
RETAINED
(LOSS)
INCOME
ACCUMULATED
OTHER
COMPREHENSIVE
LOSS
TREASURY
SHARES TOTAL
Balance, December
31, 2020 64,528 379,851 94,780 (53,856 ) (21,382 ) (11,351 ) 452,570
Comprehensive
income (loss):
Net profit - - - 32,109 - - 32,109
Other comprehensive
income (loss):
Net fair value
adjustment of
interest rate swaps
designated for hedge
accounting less
portion reclassified
to income statement
(note 7, 20) - - - - 12,875 - 12,875
Exchange dierences
arising on translation
of foreign operations - - - - (12 ) - (12 )
Total other
comprehensive
income - - - - 12,863 - 12,863
Total
comprehensive
income - - - 32,109 12,863 - 44,972
Transactions with
shareholders:
Share Capital
increase (note 8) 12,899
Dividend - - - (23,078 ) - - (23,078 )
Compensation
expense for share
options (note 18) - - 290 - - - 290
Total transactions
with shareholders
Balance, December
31, 2021 77,427 431,366 95,070 (44,825 ) (8,519 ) (11,351 ) 539,168
(in USD thousands)
See accompanying notes that are an integral part of these consolidated financial statements.
CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY
30 31
AVANCE GAS - ANNUAL REPORT 2021 AVANCE GAS - ANNUAL REPORT 2021
DECEMBER 31,
2021
DECEMBER 31,
2020
Note
Cash flows from operating activities
Cash generated from operations
21 91,158 99,880
Interest paid (17,603 ) (20,926 )
Settlement of share options (959 ) -
Net cash flows from operating activities 72,596 78,954
Cash flows used in investing activities:
Net cash proceeds from sale of asset
5 - 34,257
Capital expenditures
5 (60,179 ) (66,222 )
Net cash flows used in investing activities (60,179 ) (31,965 )
Cash flows from financing activities:
Dividend (23,078 ) (19,108 )
Proceeds from issue of share capital 64,414 -
Repayment of long-term debt
6 (61,652 ) (85,451 )
Drawdown of long-term debt
6 41,650 59,473
Repayment of revolving credit facility
6 (6,126 ) (11,890 )
Transaction cost related to loans and borrowings (1,707 ) -
Net cash flows from (used in) financing activities 13,501 (56,976 )
Net increase (decrease) in cash and cash equivalents 25,918 (9,987 )
Cash and cash equivalents at beginning of period 75,882 85,909
Eect of exchange rate changes on cash 110 (40 )
Cash and cash equivalents at end of period 101,910 75,882
(in USD thousands)
FOR THE YEAR ENDED
CONSOLIDATED STATEMENT OF CASH FLOWS
See accompanying notes that are an integral part of these consolidated financial statements.
1. GENERAL
INFORMATION
Corporate information
is an exemp ted comp any limited by shar es incorporated
under the laws of Bermuda on January 20, 2010. The
Company and its subsidiaries (collectively “the Group”)
and operated a fleet of thirteen ships and six Dual Fuel LPG
newbuildings due for delivery in 2022 and 2023.
Basis for preparation
These consolidated financial statements comprise the
consolidated income statement, consolidated statement
of comprehensive income, consolidated balance sheet,
consolidated statement of changes in shareholders’ equity,
consolidated statement of cash flow, and the basis of
preparation, accounting policies and related notes of the
Company, and its subsidiaries (collectively, the “Group”).
The consolidated financial statements have been prepared
in accordance with the International Financial Reporting
Standards (“IFRS”), as adopted by the European Union.
Details of the Group’s accounting policies, including changes
thereto, are outlined in Note 2 Signicant Accounting
policies.
The consolidated financial statements are prepared on the
historical cost basis except for certain assets, liabilities,
and financial instruments, including derivatives, which
are measured at fair value.
The functional currency of the Group is US dollars. The
consolidated financial statements are presented in US
dollars, and all amounts have been rounded to the nearest
thousand, unless otherwise indicated.
2. SIGNIFICANT
ACCOUNTING POLICIES
ESTIMATION UNCERTAINTY,
JUDGEMENTS, AND
ASSUMPTIONS
Key accounting estimates and
judgements
In connection with the preparation of the consolidated
financial statements, management has made assumptions
and estimates about future events, and applied judgements
that aect the reported amounts of assets, liabilities,
revenue, expenses, and the related disclosures. The
assumptions, estimates and judgements are based on
historical experience, current trends, and other factors
that management believes to be relevant at the time the
consolidated financial statements are prepared. Actual
results may dier from these estimates. Critical accounting
estimates and judgements are those that have a significant
risk of causing material adjustment in the next year’s
reporting period.
Management believes the following area involves significant
judgements and estimates in the preparation of the
consolidated financial statements:
IMPAIRMENT OF NON-CURRENT ASSETS
The Group has significant carrying amounts related to
ships. For the purposes of preparing the Group's financial
statements, management is required to assess the ships
for indicators of impairment or reversal of previously
recognised impairment, whenever events or changes
in circumstances indicate the carrying amount of the
ships may not be recoverable, or that assumptions for
previously recognised impairment are no longer present.
The Group tests its fleet of ships for impairment and reversal
of impairment on a vessel-by-vessel basis. We consider
each vessel to be a cash generating unit (CGU). A CGU is
the lowest level at which cash flows are independent from
cash flows generated by other assets.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
32 33
AVANCE GAS - ANNUAL REPORT 2021 AVANCE GAS - ANNUAL REPORT 2021
FINANCIAL INSTRUMENTS MEASURED AT FAIR VALUE
The Group holds financial derivative instruments for
hedging purposes, which are measured at fair value. When
measuring fair value, the Group uses observable market
data to the extent possible. Where there is no active market,
fair value is determined using valuation techniques which
includes discounted cash flows method based on forward
curves aer the balance sheet date.
REVENUE RECOGNITION
Voyage revenues from spot voyages are recognised as the
Company satisfies its performance obligations in accordance
with IFRS 15. The performance obligation is satisfied over
time from the point of loading to the point of discharge.
Management uses judgement to estimate the total duration
of each voyage at year end and allocates revenue to
the voyage based on the percentage of completion. In
estimating the total duration of the voyage, management
considers historical trends, the operating capacity of each
vessel and the distance of the planned route.
ACCOUNTING POLICIES
Basis of consolidation
Subsidiaries are all entities (including structured entities)
over which the Group has control. The Group controls
an entity when the Group is exposed to, or has rights to,
variable returns from its involvement with the entity and
has the ability to aect those returns through its power
over the entity. Subsidiaries are fully consolidated from the
date on which control is transferred to the Group. They are
deconsolidated from the date of no control.
All intra group transactions and balances between group
companies are eliminated upon consolidation, including
any gains and losses on transactions. When necessary,
amounts reported by subsidiaries have been adjusted to
conform with the Group’s accounting policies.
Foreign currency
The functional currency of Avance Gas and the majority of
its subsidiaries is U.S. dollars.
Transactions in foreign currencies are translated at
the foreign exchange rate prevailing at the date of the
transaction. Monetary assets and liabilities denominated in
foreign currencies at the balance sheet date are translated
at the foreign exchange rate prevailing at that date. Non-
monetary assets and liabilities that are measured in terms
of historical cost in a foreign currency are not translated
while non-monetary assets and liabilities denominated in
foreign currencies that are stated at fair value are translated
at foreign exchange rates prevailing at the dates the fair
value was determined.
Operating segments
As of December 31, 2021 the Group operated thirteen
VLGCs and six Newbuildings under construction in the
LPG segment. The performance of the vessels is reviewed
regularly by the chief operating decision maker, which is
the Group’s management, and thereby constitutes the
Group’s only reportable segment.
Financial assets
ACCOUNTS RECEIVABLE
Accounts receivable are initially recognised at the
transaction price in the contract with the customer and
are subsequently measured at amortised cost. Accounts
receivable are assessed for impairment on an ongoing basis
using the expected credit loss method and presented net
of expected losses if expected losses are not insignificant.
Individual receivables are credit impaired and subsequently
written o if enforcement activities indicate that a full
recovery is not possible.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents include current bank deposits
and monetary items with a maturity of three months or less.
Inventory
Inventories are valued at the lower of cost and net realisable
value. Inventories, being predominantly bunkers and lube
oils, are accounted for based on first-in, first-out principle.
Property, plant and equipment
Items of property, plant and equipment mainly consist
of the Group’s ships, in addition to furniture and fixtures,
which are measured at cost, less accumulated depreciation
and any recognised impairment losses. Cost includes
expenditures that are directly attributable to the acquisition
of the asset, with addition of directly attributable borrowing
costs for assets that take a substantial period of time to get
ready for their intended use.
Subsequent expenditures are only capitalised if it is
probable that the future economic benefits associated with
the item will flow to the Group. Such expenditures include
major refits and cost of replacement assets. Subsequent
expenditures are included in the carrying amount of the
asset or recognised as a separate asset as appropriate.
Repairs and maintenance which are considered as a regular
part of the daily operation of the ships are charged to the
income statement as they occur and are included in Other
operating expenses.
Generally, ships drydock every five years. Aer a ship is
fieen years old, an intermediate survey is performed
by a shipping classification society between the second
and third year of the five-year drydocking period. The
Group capitalises a substantial portion of the costs
incurred during drydocking, including the survey costs
and depreciates those costs on a straight-line basis from
the time of completion of a drydocking or intermediate
survey based upon the estimated life of each component
of the drydocking. Costs related to routine repairs and
maintenance incurred during drydocking that do not
improve or extend the useful lives of the ships are expensed.
Depreciation is recognised on a straight-line basis over the
remaining useful life of the asset. Depreciation commences
when the asset is available for use, being in the location
and condition necessary to operate as intended by
management.
Estimated useful life is 25 years for each VLGC and from
3 to 5 years for drydock assets and furniture and fixtures.
Residual value for the ships is based on steel price times
lightweight tonnage and is reassessed annually. If the
drydock results in an extension of the useful life of a
ship, then the estimated useful life of the ship is changed
accordingly.
An asset is derecognised upon disposal or when the asset
is no longer expected to generate any future benefits to
the Group. Gain or loss due to disposal of the asset is
calculated as the dierence between the net proceeds
from the disposal and the carrying value of the asset and
is recognised in the income statement.
IMPAIRMENT AND REVERSAL OF IMPAIRMENT
Property, plant and equipment is reviewed for impairment
whenever events or significant changes in circumstances
indicate that the carrying amount might not be recoverable.
If any such indication exists, the asset’s recoverable amount
is estimated in order to determine the extent of any
impairment loss. Where the asset does not generate cash
flows that are independent from other assets, the Group
estimates the recoverable amount of the cash-generating
unit to which the asset belongs.
The recoverable amount is the higher of fair value less costs
of disposal and value in use. In assessing value in use, the
estimated future cash flows are discounted to their present
value using a pre-tax discount rate that reflects current
market assessments of the time value of money and the
risks specific to the asset.
An impairment loss is recognised whenever the carrying
amount of an asset or its cash-generating unit exceeds its
recoverable amount.
An impairment loss is assessed for reversal if there is an
indication of a subsequent increase of the recoverable
amount. If such indications exist, a previously recognised
impairment is reversed partially or in full if there has been
a change in the estimates used to determine the asset’s
recoverable amount.
Borrowing cost
Borrowing costs that are directly attributable to the
acquisition, construction or production of assets that take
a substantial period of time to get ready for their intended
use or sale (‘qualifying asset’) are added to the cost of such
assets. Borrowing costs added to the carrying amount of
Property, plant and equipment are depreciated over the
useful life of the respective asset.
34 35
AVANCE GAS - ANNUAL REPORT 2021 AVANCE GAS - ANNUAL REPORT 2021
Financial liabilities
INTEREST-BEARING DEBT
The Group currently holds bank loans and a lease financing
agreement which are initially recognised at fair value less
directly attributable transaction costs, and subsequently
measured at amortised cost using the eective interest rate
method. The portion of bank loans which is due within 12
months aer the balance sheet date is presented as current.
OTHER FINANCIAL LIABILITIES
Financial liabilities as accounts payable and other current
liabilities are presented as current if the liability is due
within 12 months aer the balance sheet date. If the
contractual obligations related to any financial liabilities
expire, the liability is derecognised.
Derivative nancial instruments
INTEREST RATE SWAPS
The Group holds interest rate swaps for the purpose of
hedging its exposure to fluctuations in the market interest
rates. All the interest rate swaps are designated for hedge
accounting. These derivative financial instruments are
initially recognised at fair value on the date the derivative
contract was entered into and are subsequently remeasured
at fair value, with the effective portion of the hedge
recognised through other comprehensive income at the
end of each reporting period.
The Group documents at the inception of the hedging
transaction the relationship between hedging instruments
and hedged items, as well as its risk management objective
and strategy for undertaking various hedge transactions.
The Group also documents its assessment, both at
hedge inception and on an ongoing basis, of whether the
derivatives that are used in hedging transactions have
been, and will continue to be, highly eective in osetting
changes in fair values or cash flows of hedged items.
The fair values of the derivative financial instruments used
for hedging purposes are disclosed in note 7. Movements in
the fair value of hedging derivatives in shareholders’ equity
are shown in note 20. The derivative financial instruments
are presented gross in the consolidated balance sheet
unless contract terms include the option to settle the
instruments on a net basis and the Group has the intention
and ability to do so. Derivative financial instruments with
maturity equal to or less than 12 months aer the balance
sheet date are classified as a current asset or liability, and
as non-current asset or liability if the maturity exceeds 12
months.
Operating revenue
Avance renders transportation services of LPG by sea and
has categorised its revenue streams the two following
categories:
FREIGHT REVENUE
The Group recognises revenues as it satisfies its
performance obligation to deliver freight services to the
customer. Revenue is recognised on a load-to-discharge
basis in accordance with IFRS 15, with cost related to
fulfil the contract incurred prior to loading capitalised as
mobilisation costs and amortised over the related period
for which revenue is recognised. Voyage expenses incurred
as repositioning for non-committed freight contracts are
expensed as incurred. Other revenue from services, such
as demurrage, is recognised when earned and is included
in freight revenue.
TIME CHARTER REVENUE
Time charter revenue is accounted for as an operating lease
under IFRS 16 and is recognised on a straight-line basis over
the term of the time charter arrangement.
Expenses
VOYAGE EXPENSES AND OPERATING EXPENSES
Voyage expenses include all expenses that are incurred
as a direct and incremental consequence of a particular
voyage, such as bunker fuel expenses, port fees, cargo
loading and unloading expenses, time charter expenses,
canal tolls and agency fees. Ship operating expenses include
crew costs, repairs and maintenance, insurance, lube
oils and communication expenses. Voyage expenses are
recognised pro-rata over the duration of the voyage, while
ship operating expenses are recognised when incurred.
Share-based compensation
The fair value at the grant date of options granted to
employees is recognised as an employee expense, with a
corresponding increase in equity, over the vesting period.
The fair value of the options is measured using the Black-
Scholes option valuation model, taking into account the
terms and conditions upon which the options were granted.
The total amount to be expensed is determined by reference
to the fair value of the options granted, including any
market performance conditions (e.g. the entity’s share
price), excluding the impact of any service and non-market
performance vesting conditions and including the impact
of any non-vesting conditions (e.g. the requirement for
employees to save or hold shares for a specific period of
time).
Income taxes
Under current Bermuda law, the Company is not required
to pay taxes in Bermuda on either income or capital gains.
Through the Group’s shipping activities, some subsidiaries
operate in foreign jurisdictions and are subject to local tax
schemes, including the local tax system in Norway and in
United Kingdom. Income tax expense includes the current
tax payable based on taxable profit for the year, adjusted for
tax adjustments from previous periods, and any changes
in deferred taxes.
Leases
IFRS 16 was eective from periods beginning on or aer
January 1, 2019. At implementation, management made
an accounting policy choice that short-term leases (being
12 months or less) and leases of low value will be expensed
as incurred, following the exemption in the standard. This
mainly applies to short-term leases of oice equipment
and low value leases of oice premises, which are charged
to the income statement as incurred and included in
Administrative and general expenses. Avance assesses
at contract inception whether a contract is, or contains, a
lease. As of the reporting date Avance has not entered into
any lease contracts that are not meeting the short-term or
low value exemptions in the standard.
NEW OR AMENDMENTS
TO STANDARDS
The following new or amendments to standards and
interpretations have been issued and become eective
for annual reporting periods beginning on or aer January
1, 2022, and earlier adoption is permitted. The Group
has not early adopted the new or amended standards
in preparing these accounts, and they are not expected
to have a significant impact on the Group’s consolidated
financial statements:
• Provisions, contingent liabilities and contingent
assets; costs of fulfilling a contract (Amendments to
IAS 37).
• Property, plant and equipment: Proceeds before
intended Use (Amendments to IAS 16).
The company has adopted all other new standards and
amendments that are applicable as of January 1, 2021,
which had no material impact on the Group’s consolidated
financial statements. These include Classification of
liabilities as Current or Non-current (Amendments to IAS
1), Covid 19-related Rent concessions (Amendments to
IFRS 16) and Interest Rate Benchmark Reform – Phase 2
(Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16).
36 37
AVANCE GAS - ANNUAL REPORT 2021 AVANCE GAS - ANNUAL REPORT 2021
3. CASH AND CASH EQUIVALENTS
Cash and cash equivalents comprise of cash and short-term time deposits held by the Group, which are subject to an
insignificant risk of changes in value. The Group has no restricted cash.
DECEMBER 31,
2021
DECEMBER 31,
2020
Cash at bank 101,910 75,882
Cash and cash equivalents 101,910 75,882
(in USD thousands)
AS OF
4. RECEIVABLES AND OTHER CURRENT ASSETS
DECEMBER 31,
2021
DECEMBER 31,
2020
Receivables
Customer trade receivables 18,984 12,499
Demurrage 2,466 3,924
Other 1 1
Total 21,451 16,425
Allowance for credit losses (353) (131)
Receivables 21,098 16,293
AS OF
(in USD thousands)
Refer to note 7 for an analysis of credit risk of receivables.
DECEMBER 31,
2021
DECEMBER 31,
2020
Other current assets
Advance canal toll and port disbursement 3,138 3,036
Other assets 481 1,684
Other current assets 3,620 4,720
AS OF
(in USD thousands)
5.PROPERTY, PLANT AND EQUIPMENT
& NEWBUILDINGS
SHIPS
FURNITURE
AND
FIXTURES DRYDOCKING
TOTAL
PROPERTY,
PLANT AND
EQUIPMENT
Cost:
December 31, 2019 1,050,962 480 23,112 1,074,554
Additions 15,685 6 18,973 34,664
Disposals (46,903) - (3,372) (50,274)
December 31, 2020 1,019,744 486 38,713 1,058,944
Additions 2
139 2,485 2,626
Disposals - - - -
December 31, 2021 1,019,746 625 41,198 1,061,570
(in USD thousands)
Accumulated depreciation, amortisation, impairment and reversals:
December 31, 2019 299,467 278 11,913 311,658
Depreciation expense for the year 37,757 17 3,930 41,705
Disposals (18,714) - (3,133) (21,847)
Reversal of Impairment (33,733) - - (33,733)
Foreign currency translation eect - 2 - 2
December 31, 2020 284,777 297 12,710 297,784
Depreciation expense for the year 38,289 19 8,901 47,209
Disposals - - - -
December 31, 2021 323,066 316 21,611 344,993
Carrying value:
December 31, 2020 734,968 189 26,003 761,159
December 31, 2021 696,680 309 19,588 716,577
38 39
AVANCE GAS - ANNUAL REPORT 2021 AVANCE GAS - ANNUAL REPORT 2021
Newbuildings
On December 16, 2019 the Company entered into
shipbuilding contracts for two LPG Dual-Fuel VLGCs with
Daewoo Shipbuilding and Marine Engineering (DSME) in
South Korea, for delivery in Q1 2022.
On January 18, 2021 the Company entered into shipbuilding
contracts for a further two LPG Dual-Fuel VLGCs with DSME
in South Korea, for delivery in Q4 2022 and Q1 2023.
On April 21, 2021 the Company increased its VLGC
newbuilding program with DSME in South Korea from
four to six LPG Dual-Fuel VLGCs. The two additional VLGCs
are due for delivery in the second half of 2023.
BORROWING COST
The capitalisation rate used to determine the amount of
borrowing costs to be capitalised is the weighted average
interest rate applicable to the Company’s general borrowing
during the year. The average interest rate for the borrowing
cost in 2021 was 2.6%.
Contractual obligations
Refer to note 7 for information on contractual obligations
related to LPG Dual-Fuel VLGCs shipbuilding contracts.
Assets pledged as security
The carrying amount of each vessel is pledged for a relative
portion of the Group’s bank loans. Refer to Note 6 Interest-
bearing liabilities.
Impairment and reversal of impairment
Tangible assets with a defined economic life are tested
for impairment if indicators are identified that would
suggest that the carrying amount of the assets exceed the
recoverable amount. The Company performs a quarterly
assessment to determine any indicators of impairment or
reversal of previous recognised impairment for its vessels.
An impairment loss is recognised if the carrying amount
exceeds recoverable amount. The recoverable amount
is the higher of an asset’s fair value less cost of disposal
(FVLCOD) and value in use (VIU), and each ship is considered
a separate cash generating unit (CGU) for the purpose of
impairment testing.
VALUE IN USE
VIU is based on the present value of discounted cash flows
for each separate CGU for its remaining life. Management
considers the current competitive situation, developments
in market rates, and macroeconomic trends when
estimating the future cash flows.
FAIR VALUE LESS COST OF DISPOSAL
FVLCOD (level 3) (see note 7) is determined as the amount
that would be obtained from sale of the asset in a regular
market, less cost of sales, based on an average of third-
party valuation reports from two independent ship
brokers. The Company understands that shipbrokers
apply newbuilding price parity as part of their basis for their
appraisals. Newbuilding prices are adjusted for building
supervision costs and other additional costs, which results
in an estimated delivered cost of a newbuilding with prompt
delivery adjusted for age of each vessel.
IMPAIRMENT TESTS PERFORMED IN 2021
As of December 31, 2021, indicators of impairment were
assessed. The assessment was performed on a quarterly
basis. Based on this assessment it was concluded that no
significant indicators of impairment were present for the
year ended December 31, 2021.
IMPAIRMENT TESTS PERFORMED IN 2020
As of December 31, 2020, indicators of reversal of previously
recognised impairment were assessed. Based on this
assessment previously recognised impairment losses
on the VLGC fleet were assessed for reversal mainly due
to recovered freight rates and appraisals obtained from
external brokers. As a result of the impairment reversal
test, management recognised a reversal of impairment of
$33.7 million. Following this reversal of impairment, there
was no residual impairment on any vessels.
Vessel Valuation method
Impairment
reversal amount
Carrying value
aer reversal
Iris Glory VIU 689 42,728
Thetis Glory VIU 676 43,064
Venus Glory VIU 732 43,432
Providence VIU 4,123 46,533
Promise VIU 3,286 48,262
Mistral VIU 2,238 66,950
Monsoon VIU 2,530 66,925
Breeze VIU 2,559 66,039
Passat VIU 2,043 67,772
Sirocco VIU 2,694 68,472
Levant VIU 3,898 69,701
Chinook VIU 4,227 66,096
Pampero VIU 4,036 65,064
Total 33,733 761,039
The table shows the valuation method used, the impairment amount reversed, and the carrying amount aer
reversal, per vessel for the Impairment reversal as of December 31, 2020:
Management’s assumptions for the
reversal of impairment in 2020
FUTURE EXPECTED CASH FLOWS
Management applies the expected cash flow approach
based on a weighted average of three dierent freight rate
scenarios given the current market views for the future
periods.
Operational expenses that are directly attributable to the
CGU are based on budgets and forecasts. Drydocking costs
are included as scheduled.
DISCOUNT RATE
The estimate of VIU was determined using a discount rate
of 7.3 %, which is derived from the weighted average cost
of capital (WACC) for the Company. The cost of equity is
derived from the 20-year treasury yield rate, the Group’s
market risk premium and the Group’s beta. The debt
element of the WACC is based on 20-year three-month
forward LIBOR curve plus the Group’s average margin for
secured debt.
Sensitivities
The VIU calculation is mainly aected and sensitive to
changes in WACC and freight rate assumptions.
NEWBUILDINGS
Cost:
Newbuildings as at December
31, 2019 -
Instalments paid during 2020 31,432
Capitalised borrowing costs
during 2020 393
Newbuildings balance at
December 31, 2020 31,825
Instalments paid during 2021 58,068
Capitalised borrowing cost
during 2021 2,716
December 31, 2021 92,609
40 41
AVANCE GAS - ANNUAL REPORT 2021 AVANCE GAS - ANNUAL REPORT 2021
DECEMBER 31,
2021
DECEMBER 31,
2020
Non-current liabilities:
Long-term debt 187,763 243,318
Revolving credit facilities 81,984 88,110
Lease financing agreement 75,660 42,116
345,407 373,544
Current liabilities:
Current portion of long-term debt 37,818 40,751
Current portion of lease financing agreement 6,756 2,250
44,574 43,001
TOTAL NET DEBT 389,981 416,545
(in USD thousands)
6. FINANCIAL LIABILITIES
AS OF
The Company’s Long-term debt is comprised of the $515
million credit facility signed in June 2019. The facility
consists of three tranches, $380 million term loan tranche,
a $100 million revolving tranche, and a $35 million top-up
tranche. The top-up tranche was fully repaid in November
2019 ahead of its maturity date June 25, 2021.
In November 2020, the Company entered into a sale-
leaseback agreement with a Chinese leasing house for
the vessel Pampero. The financing has a 10 year tenor,
with a termination option for the leasing house at year 5,
and repurchase options in favour of the Company from
year 2. The Company recognised a financial liability of
$45 million related to the lease financing agreement equal
to the consideration received. Following the transaction
debt of $34.7 million on the original facility was repaid.
Management determined that the transaction did not
qualify as a sale of the asset under IFRS 15 and continue
to recognise the vessel.
In July, 2021, the Company signed a $104 million
sustainability-linked term facility with a bank syndicate.
The transaction secured financing of the two first dual fuel
newbuildings. The facility date has a maturity at the earlier
of five years from delivery of the second newbuilding and
June 2027.
In December 2021, the Company entered into a sale
leaseback agreement of $41.65 million for the VLGC Iris
Glory. The financing principal for the vessel has a 9-year
tenor and a repurchase option in favour of Avance from
end year 2. The financing bears an implied 22-year age
adjusted repayment profile with a tenor of 9 years and
no repurchase obligation. Following repayment of debt,
the transaction generated approximately $16.6 million
in net cash proceeds. Management determined that the
transaction did not qualify as a sale of the asset under
IFRS 15 and continues to recognise the vessel at cost less
accumulated depreciation.
For the year ended December 31, 2021 long-term debt
repayments were $61.7 million, and repayments of credit
facilities were $6.1 million. Of total repayments $23.9
million were fully repaid ahead of maturity in relation to
the refinancing of the VLGC Iris Glory as specified below.
AS OF
(in USD thousands)
Currency
Year of
maturity Face value
Carrying
amount Face value
Carrying
amount
Long-term debt USD 2024 228,590 225,581 287,549 284,069
Revolving credit facility USD 2024 81,984 81,984 88,110 88,110
Lease financing agreement USD 2030 83,957 82,416 45,000 44,366
Total interest-bearing liabilities 394,531 389,981 420,659 416,545
DECEMBER 31, 2021
Terms and repayment schedule
DECEMBER 31, 2020
Loan covenants
The Group’s secured bank loan contains a loan covenant, which under the terms of the loan agreement, the Group must
comply with the following covenants at all times:
Financial covenants
• Total equity > $250 million
• Equity ratio > 30%
• Working capital > 0
•
Minimum free liquidity: Cash and cash equivalents shall be at least the higher of (i) $35 million and (ii) 5% of the
consolidated gross interest-bearing debt of the Group.
Other covenants
•
A change of control provision which will be triggered if a person or company other than Hemen Holding Ltd, Frontline
Ltd. or Sungas Holdings Ltd gains control, directly or indirectly, of one-third or more of the voting and/or shares of
Avance Gas.
• Fair market value of VLGCs shall be minimum 130% of the aggregate of total loans outstanding.
The Group has complied with the covenants of its borrowing facilities during and as at December 31, 2021 and 2020.
42 43
AVANCE GAS - ANNUAL REPORT 2021 AVANCE GAS - ANNUAL REPORT 2021
7. FINANCIAL RISK MANAGEMENT
& FINANCIAL INSTRUMENTS
Financial risks
The Group’s activities create exposure to a variety of financial risks: credit risk, liquidity risk, market risk (including
interest rate risk, currency risk and price risk). The board of directors has the overall responsibility for the establishment
and oversight of the Group’s risk management policies, which focuses on the unpredictability of financial markets and
seeks to minimise potential adverse eects on the Group’s financial performance. The Company continuously monitors
financial risk and implements financial risk policies for foreign exchange risk, interest rate risk, credit risk, and investment
of excess liquidity, as applicable.
CREDIT RISK
Credit risk is the risk of financial loss to the Group if a customer fails to meet its contractual obligations, and the exposure
is limited to the carrying amount of the Group’s receivables from customers.
Cash and cash equivalents
The group holds cash and cash equivalents with financial institutions. The group considers that the risk of impairment
to cash and cash equivalents is low given the credit ratings of the counterparties and the short term maturities of the
exposures.
Trade receivables
The Group performs credit checks upon entering into an initial sales contract with a customer and regularly reviews the
days past due accounts. The company assesses the credit quality of its counterparties as good since customers are on
the whole large well known energy firms. The majority of trade receivables are in U.S. dollars.
For the year ended December 31, 2021, the Group had three customers who each generated revenue greater than 10% of
total revenue. The amounts were $28.2 million, $23.8 million and $21.2 million. For the year ended December 31, 2020,
the Group had two customers who each generated revenue greater than 10% of total revenue. The amounts were $36.0
million and $21.6 million.
GROSS
AMOUNT
IMPAIRMENT
OF TRADE
RECEIVABLES
AS OF DECEMBER 31, 2021
Up to 30 days past due 7,004 -
31 to 60 days past due 337 -
61 to 90 days past due - -
More than 91 days past due 396 353
7,737 353
(in USD thousands)
GROSS
AMOUNT
IMPAIRMENT
OF TRADE
RECEIVABLES
AS OF DECEMBER 31, 2020
Up to 30 days past due 1,059 131
31 to 60 days past due 474 -
61 to 90 days past due 813 -
More than 91 days past due 606 -
2,952 131
(in USD thousands)
The following table provides information about the exposure to credit risk and expected credit losses (ECLs)
for overdue trade receivables from individual customers:
DECEMBER 31,
2021
DECEMBER 31,
2020
Beginning of the period 131 255
Net remeasurement of loss allowance 222 (124)
End of period 353 131
(in USD thousands)
LIQUIDITY RISK
Liquidity risk is the risk that the Group will encounter diiculty in meeting the obligations associated with its financial
liabilities when they become due. The Group’s objective when managing liquidity is to ensure that it will have suicient
liquidity to meet its liabilities when they are due, under both normal and stressed conditions, without incurring
unacceptable losses or risking damage to the Group.
Maturity of nancial liabilities and contractual obligations
The following are the remaining contractual maturities of financial liabilities at the reporting date. The amounts are
gross and undiscounted, and include contractual interest payments:
Movements in the allowance for impairment in respect of trade receivables
The movement in the allowance for impairment in respect of trade receivables during the year was as follows:
44 45
AVANCE GAS - ANNUAL REPORT 2021 AVANCE GAS - ANNUAL REPORT 2021
As of December 31, 2021
Contractual cash flows
Carrying
Amount
Total
contractual
cash flow
Less than
1 year
1 to
2 years
2 to
5 years
More than
5 years
Trade and other payables 14,965 14,965 14,965 - - -
Long-term debt 225,581 246,037 45,881 49,283 150,873 -
Revolving credit facilities 81,984 89,952 2,666 3,500 83,786 -
Lease financing agreement 82,416 108,719 10,428 10,740 30,320 57,231
Total non-derivative financial liabilities 404,946 459,673 73,940 63,523 264,979 57,231
Interest rate swaps used for hedging 10,812 10,821 5,098 2,864 2,859 -
Total financial liabilities 415,758 470,494 79,038 66,387 267,838 57,231
(in USD thousands)
As of December 31, 2020
Contractual cash flows
Carrying
Amount
Total
contractual
cash flow
Less than
1 year
1 to
2 years
2 to
5 years
More than
5 years
Trade and other payables 6,620 6,620 6,620 - - -
Long-term debt 284,069 309,025 49,144 48,118 211,763 -
Revolving credit facilities 88,110 96,832 2,354 2,393 92,085 -
Lease financing arrangement 44,366 58,995 3,770 3,712 11,261 40,252
Total non-derivative financial liabilities 423,165 471,472 61,888 54,223 315,109 40,252
Interest rate swaps used for hedging 21,447 21,441 6,172 5,576 10,493 (800)
Total financial liabilities 444,612 492,913 68,060 59,799 325,602 39,452
(in USD thousands)
Contractual obligations related to LPG Dual-Fuel VLGCs shipbuilding contracts
As at December 31, 2021, the Company has entered into shipbuilding contracts for six new vessels, providing future
payments of:
2022 2023 TOTAL
As of December 31, 2021
204,273 181,135 385,408
(in USD thousands)
2021 2022 TOTAL
As of December 31, 2020
70,614 54,922 125,536
(in USD thousands)
INTEREST RATE RISK
The Group has floating interest on its interest-bearing loans and is exposed to changes in the interest market. Based
on its outstanding loan portfolio as of December 31, 2021, a 1 % change in the LIBOR rate would increase/decrease the
Group’s interest expense by $3.9 million. To mitigate this interest rate exposure, the Group holds interest rate swaps for
risk management purposes which are designated in cash flow hedging relationships. Refer to Hedge Accounting section
below.
Interest expense on outstanding debt is based on 3 months LIBOR forward curve at year end December 31, 2021 and
2020 plus applicable margin.
Financial instruments and fair value
The following table shows the carrying amounts and fair values of financial assets and financial liabilities which have
been determined by the Group, using appropriate market information and valuation methodologies. Considerable
judgement is required to develop these estimates of fair value, thus the estimates provided herein are not necessarily
indicative of the amounts that could be realised in a current market exchange.
The carrying amount of cash and cash equivalents, receivables, and accounts payable are a reasonable estimate of their
fair value, due to their short maturity. The estimated value of the Group’s long-term debt equals its carrying value as of
December 31, 2021 and December 31, 2020 as it is variable-rated. Derivative financial instruments are interest rate swaps
designated in hedge relationships and are measured at Fair Value through OCI. The Company values the interest rate
swaps according to level 2 in the fair value hierarchy, based on discounted future cash flows.
FAIR VALUE HIERARCHY
The below analyses financial instruments carried at fair value, by valuation method. The dierent levels have been
defined as follows:
• Quoted prices (unadjusted) in active markets for identical assets or liabilities (Level 1).
•
Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly
(that is, as prices) or indirectly (that is, derived from prices) (Level 2).
•
Inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs) (Level 3).
The fair value (level 2) of the Company’s interest rate swap agreements is the estimated amount that the Company would
receive or pay to terminate the agreements at the reporting date, considering, as applicable, fixed interest rate curves and
the current credit worthiness of both the Company and the derivative counterparty. The estimated amount is the present
value of future cash flows. Fair value adjustment of the interest swaps as of December 31, 2021 and December 31, 2020
was recognised in the statement of other comprehensive income, refer to Note 20 Accumulated Other Comprehensive
Income.
DECEMBER 31, 2021 DECEMBER 31, 2020
Note
Carrying
Amount
Fair
Value
Carrying
Amount
Fair
Value
Financial liabilities
Long-term debt 6 225,581 225,581 284,068 284,068
Revolving credit facilities 6 81,984 81,984 88,110 88,110
Lease financing agreement 6 82,416 82,416 44,366 44,366
Derivative financial instruments
Interest rate swap assets 2,240 2,240 - -
Interest rate swap liabilities 10,812 10,812 21,447 21,447
(in USD thousands)
AS OF
46 47
AVANCE GAS - ANNUAL REPORT 2021 AVANCE GAS - ANNUAL REPORT 2021
Hedge accounting
FAIR VALUE OF DERIVATIVE FINANCIAL INSTRUMENTS
The Company uses financial instruments to hedge its interest rate exposure. The Company has designated a hedge
relationship between the interest on its long-term debt and interest rate swaps, where the changes in the fair value of
the hedging instrument is oset partly or in full by changes in cash flows of the underlying hedging object. The cash
flows on these instruments will vary depending on LIBOR during the relevant period. The fair value of the interest rate
swaps will depend on expectations of future interest rates, the forward yield curve.
The Group determines the existence of an economic relationship between the hedging instrument and hedged item
based on the reference interest rates, tenors, repricing dates and maturities and the notional or par amounts. The Group
assesses whether the derivative designated in each hedging relationship is expected to be eective in osetting changes
in cash flows of the hedged item using the hypothetical derivative method.
The interest rate swaps have a maturity in 2025 and 2030. The swaps due in 2025 are amortising in line with the underlying
debt, while the swaps maturing in 2030 have a fixed notional amount through to maturity. The portion of the interest
rate swaps with maturity less than 12 months are classified as current. The designated hedge accounting relationship
with the underlying loans assumes refinancing of outstanding loans at maturity of each loan agreement at substantially
the same terms.
8. SHARE CAPITAL, PAID IN SURPLUS
AND CONTRIBUTED CAPITAL
Shares outstanding
ORDINARY SHARES
OUTSTANDING
TREASURY
SHARES
NUMBER OF
SHARES
OUTSTANDING
December 31, 2019 64,527,972 (833,889) 63,694,083
December 31, 2020 64,527,972 (833,889) 63,694,083
Share Capital Increase 12,899,000 - 12,899,000
December 31, 2020 77,426,972 (833,889) 76,593,083
SHARE CAPITAL
The share capital of Avance Gas Holding Ltd. as of December 31, 2021 was $77.4 million, consisting of 77,426,972 shares
at par value of $1 per share. In April 2021, the company issued 12.9 million shares at a price of $5.1 (NOK 43) per share.
All ordinary shares were issued at par value of $1.0. The share capital of Avance Gas Holding Ltd. as of December 31, 2020
was $64.5 million, consisting of 64,527,972 shares at par value of $1 per share. All shares are fully paid. All shares have
equal voting rights and the rights to receive dividends. The Company’s authorised share capital consists of 200,000,000
common shares at par value of $1 per share as of December 31, 2021 and December 31, 2020.
In August 2021, the majority shareholder of Avance Gas Holding Ltd., Hemen Holding Limited (“Hemen”) acquired
additionally 127,207 shares in the Company. Following the acquisition, Hemen, combined with its holdings through its
ownership of Frontline Ltd., held a total of 33.35% of the shares in the Company. Pursuant to section 6-1 of the Norwegian
Restriction on payment of dividend
Under the Bermuda Companies Act, dividends cannot be paid if there are reasonable grounds for believing that (a) The
company is, or would aer the payment be, unable to pay its liabilities as they become due; or (b) The realisable value
of the company’s assets would thereby be less than its liabilities.
The Company has acted within the rules in the Bermuda Companies Act when declaring dividends.
NAME NUMBER OF SHARES HOLDING %
Hemen Holding Limited 59,382,696 76.7%
Nordnet Bank AB 1,437,430 1.9%
Danske Bank A/S 1,192,499 1.5%
UBS Switzerland AG 931,194 1.2%
Total shareholders holding 1 % or more 62,943,819 81.3%
Other shareholders 14,483,153 18.7%
TOTAL SHAREHOLDERS 77,426,972 100.0%
List of largest shareholders as of December 31, 2021
Shareholders holding 1 % or more:
Avance Gas Holding Ltd holds 833,889 treasury shares representing 1.29% of total issued shares as of December 31, 2021.
Securities Trading Act the transaction triggered an obligation for Hemen to make a mandatory oer to acquire all shares
in the Company at a price of NOK 43 per share. Following settlement of the mandatory oering in October 2021, Hemen
owned 59,382,696 shares, equating to approximately 76.7% of the Company.
TREASURY SHARES
Repurchased shares are classified as treasury shares and presented as a deduction from total equity. The treasury shares
are available for use in connection with settlement in share-based incentive schemes.
48 49
AVANCE GAS - ANNUAL REPORT 2021 AVANCE GAS - ANNUAL REPORT 2021
9. EARNINGS PER SHARE
DECEMBER 31,
2021
DECEMBER 31,
2020
Net profit attributable to common shareholders 32,109 70,906
Basic weighted average shares outstanding 73,130 63,694
Dilutive eect of share options 88 135
Diluted weighted average shares outstanding 73,218 63,829
Basic earnings per share 0.44 1.11
Diluted earnings per share 0.44 1.11
(in thousands, except per share data)
FOR THE YEAR ENDED
10. OPERATING REVENUE AND TIME CHARTER
EQUIVALENT (TCE RATE)
DECEMBER 31,
2021
DECEMBER 31,
2020
External revenue disaggregated by nature:
Freight revenue 159,711 148,980
Time charter revenue 50,966 56,746
Operating revenue 210,677 205,716
Timing of revenue recognition:
Products and services transferred at a point in time 7,267 2,390
Products and services transferred over time 152,444 146,590
Revenue from contracts with customers 159,711 148,980
Time charter revenue 50,966 56,736
Operating revenue 210,677 205,716
(in USD thousands)
FOR THE YEAR ENDED
The Group’s freight revenue was mainly generated in the Middle East and US Gulf for the years ended December 31, 2021
and 2020, when based on the region in which the cargo is loaded. For time charter revenue, the Group is aware that the
chartered ships have operated in geographic regions other than the Middle East and the US Gulf.
Maturity of time charter contracts
Time charter contracts are entered into on long-term (defined as more than 6 months) and short-term (less than 6 months)
basis. As at December 31, 2021 undiscounted payments receivable under long-term time charter contracts due within 12
months amount to $47.0 million, and $64.4 million within 24 months. As at December 31, 2020 undiscounted payments
receivable under long-term time charter contracts due within 12 months amounted to $35.9 million.
ALTERNATIVE PERFORMANCE MEASURES (‘APM’) – TIME CHARTER EQUIVALENT (TCE RATE)
The Company uses time charter equivalent (TCE rate) as an alternative performance measure (APM) in communications
with shareholders. TCE rate is operating revenue less voyage cost per operating day. Operating days are calendar days,
less technical o-hire. O-hire days in 2021 are impacted by dry docking schedule for a significant portion of the fleet.
DECEMBER 31,
2021
DECEMBER 31,
2020
Operating revenue 210,677 205,716
Voyage expenses (67,689) (61,618)
Voyage result 142,988 144,098
Calendar days 4,745 5,022
Technical o-hire days (177) (577)
Operating days 4,568 4,445
TCE per day ($)
31,302 32,418
(in USD thousands)
FOR THE YEAR ENDED
DECEMBER 31,
2021
DECEMBER 31,
2020
Bunkers 43,117 39,467
Port and canal charges 20,869 18,097
Commissions 3,060 2,537
Other 643 1,517
TOTAL VOYAGE EXPENSES 67,689 61,618
(in USD thousands)
11. VOYAGE EXPENSES
FOR THE YEAR ENDED
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AVANCE GAS - ANNUAL REPORT 2021 AVANCE GAS - ANNUAL REPORT 2021
DECEMBER 31,
2021
DECEMBER 31,
2020
Crewing costs 23,690 23,781
Maintenance and repairs 2,210 3,831
Insurance 1,445 1,914
Ship supplies and provisions 11,843 11,185
Ship management fee 2,470 3,936
Other 435 443
TOTAL OPERATING EXPENSES 42,093 45,040
(in USD thousands)
12. OPERATING EXPENSES
FOR THE YEAR ENDED
DECEMBER 31,
2021
DECEMBER 31,
2020
Employee benefit and secondment expenses 3,347 1,481
Information systems 1,142 893
Legal fees 230 230
Professional fees 985 1,025
Oice fees 254 217
Travel and entertainment expenses 31 30
Share option compensation expense 290 (165)
Other 186 159
TOTAL ADMINISTRATIVE AND GENERAL EXPENSES 6,466 3,870
(in USD thousands)
13. ADMINISTRATIVE
AND GENERAL EXPENSES
FOR THE YEAR ENDED
DECEMBER 31,
2021
DECEMBER 31,
2020
Interest on long-term debt 17,686 20,996
Amortisation of debt issuance cost 1,237 1,609
Commitment fee 383 -
Other finance costs 18 91
Capitalised borrowing cost (2,716) (393)
FINANCE COST EXPENSED 16,608 22,203
(in USD thousands)
14. FINANCE EXPENSES
FOR THE YEAR ENDED
15. INCOME TAX EXPENSE
16. RELATED PARTY TRANSACTIONS
At the date of this report there is no Bermuda income, corporation, or profits tax nor is there any, capital tax, capital
transfer tax, estate duty or inheritance tax payable by the Company. The Company has obtained from the Minister of
Finance of Bermuda under the Exempted Undertakings Tax Protection Act 1966, an assurance that, in the event of there
being enacted in Bermuda any legislation imposing tax computed on profits or income, or computed on any capital assets,
gain or appreciation or any tax in the nature of estate duty or inheritance tax, such tax shall not, until March 31, 2035 be
applicable to the Company or to any of its operations, or to the Company’s shares, debentures or other obligations, except
in so far as such tax applies to persons ordinarily resident in Bermuda and holding the Company’s shares, debentures,
or other obligations, or any property in Bermuda leased or let to the Company.
Tax expense recognised in the consolidated income statement in 2021 relates to income and withholding taxes in
foreign jurisdictions, with $498 thousand in 2021 consisting of income taxes of $33 thousand and withholding taxes of
$465 thousand. Withholding taxes related to an Equity distribution form Den Norske Krigsforsikring for Skib, or DNK,
the Norwegian Shipowners Mutual War Risk Insurance Association. Tax expense recognised in the consolidated income
statement in 2020 relates to income taxes in foreign jurisdictions, with $85 thousand in 2020. The Group has no deferred
taxes. The eective tax rate for the Group was 1.5% for the year ended December 31, 2021, and 0.12% for the year ended
December 31, 2020.
Shareholders Hemen Holding Limited (‘Hemen’) and Frontline Ltd. (‘Frontline’) combined hold 77% of the shares in Avance
Gas Holding Ltd. as of December 31, 2021, and 25% holding as of December 31, 2020, and have significant influence over
the Group. Hemen and companies associated with Hemen are considered related parties of the Group.
The Group entered into a corporate secretarial services agreement in July 2018, a technical supervision agreement
in Q2 2019 with Frontline Management (Bermuda) and an oice lease and shared service agreement with Seatankers
Management Norway AS in Q2 2019. Additionally, the Group entered into a separate technical supervision agreement for
the Group’s newbuilding program with Frontline Management (Bermuda) in Q1 2021 and a shared services agreement
with Front Ocean Management AS (Norway) in Q4 2021.
Related party receivables were $134 per December 31, 2021, and $163 thousand per December 31, 2020. Payables to
related parties were $532 thousand and $124 thousand per December 31, 2021 and 2020, respectively.
Fees paid to related parties
DECEMBER 31,
2021
DECEMBER 31,
2020
Corporate secretarial services 117 121
Technical supervision 2,014 735
Oice lease and shared services 331 373
(in USD thousands)
FOR THE YEAR ENDED
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AVANCE GAS - ANNUAL REPORT 2021 AVANCE GAS - ANNUAL REPORT 2021
17. MANAGEMENT REMUNERATION
Remuneration to management:
Key management consists of the Chief Executive Oicer and Chief Financial Oicer of Avance Gas AS. The compensation
to key management is paid in NOK and the USD figure is not fully comparable year on year. The Company discloses
remuneration to management on aggregated levels. Total compensation and benefits of the key management were as
follows:
Remuneration to the Board of Directors:
The Directors of the Board received a yearly remuneration of $40.0 thousand for the years ended December 31, 2021
and December 31, 2020 respectively, paid proportionally for the time served on the Board. The Chairman of the Board
received $100.0 thousand for the year ended December 31, 2021 and $100 thousand for the year ended December 31,
2020. Total Board fees for the year ended December 31, 2021 were $247.2 thousand and $200.7 thousand for the year
ended December 31, 2020.
The table below shows the total number of shares owned directly or indirectly by Directors and key management as of
December 31, 2021. Key management of Avance Gas and remaining Directors do not, directly or indirectly, own shares
in Avance Gas as of December 31, 2021.
Management has received share options as part of the Company’s remuneration program for its employees. Information
about share-based payments is disclosed in Note 18.
DECEMBER 31,
2021
DECEMBER 31,
2020
Salary 497 325
Bonus 81 229
Other remuneration 6 13
Pension contribution 37 27
621 594
(in USD thousands)
FOR THE YEAR ENDED
2016
SHARE
OPTION
2017
SHARE
OPTION
2018
SHARE
OPTION
2019
SHARE
OPTION
2021
SHARE
OPTION
TOTAL
SHARE
OPTIONS
Average exercise price ($) 1.64 1.59 1.45 4.38 6.23
Outstanding January 1, 2021 58,750 55,000 197,500 160,000 - 471,250
Changes during the year:
Granted - - - - 1,549,999 1,549,999
Exercised (58,750) (13,500) (108,000) (80,000) - (260,250)
Expired - - - (80,000) - (80,000)
Forfeited - - - - (25,333) (25,333)
Outstanding December 31, 2021 - 41,500 89,500 - 1,524,666 1,655,666
Exercisable December 31, 2021 - 41,500 62,000 - - 103,500
Remaining average contractual
life - 0.9 1.8 - 3.6
18. SHARE-BASED PAYMENTS
The Company has set up a share option plan in order to encourage the Company’s directors, oicers and other employees
to hold shares in the Company. Following the award, declared and cancellation of share options since 2016, a total of
1,656,666 share options remained outstanding under the Company’s share option scheme as of December 31, 2021.
Jan Kastrup-Nielsen also serves as the chairman of the Audit Committee.
NAME
NUMBER OF SHARES % NUMBER OF SHARES
Jan Kastrup-Nielsen
4,300 < 0.1%
Options granted under the 2015-2018 Plan vest 25% each anniversary of continuing employment aer grant. The options
are not transferable. The subscription price is at the discretion of the Board, provided the subscription price is never
reduced below the par value of the share. The subscription price for options granted will be reduced by the amount
of all dividends declared by the Company in the period from the date of grant until the date the option is exercised.
Options may be exercisable when they are vested, and within five years from the date of grant. Options are forfeited by
employees upon termination of employment in most circumstances. The Group has no legal or constructive obligation
to repurchase or settle the options in cash.
In April 2021, 750,000 share options were issued to Mr. Kristian Sørensen in connection with his appointment as Chief
Executive Oicer of Avance GAS AS. The options have a 5 year term and become exercisable as follows; 200,000 options
vest aer 12 months at a subscription price of NOK 41.50 per share, 200,000 options vest aer 24 months at a subscription
price of NOK 51.50 per share, and 350,000 options vest aer 36 months at a subscription price of NOK 61.50 per share.
The subscription price will be adjusted for any distribution of dividends, equity issues and capital adjustments.
In May 2021, 213,000 share options were issued to Ms. Randi Navdal Bekkelund in connection with her employment
as Chief Financial Oicer of Avance GAS AS. The options have a 5 year term and become exercisable as follows; 53,250
options vest aer 12 months at a subscription price of NOK 43.14 per share, 53,250 options vest aer 24 months at a
subscription price of NOK 53.14 per share, and 106,500 options vest aer 36 months at a subscription price of NOK 63.14
per share. The subscription price will be adjusted for any distribution of dividends, equity issues and capital adjustments.
In May 2021, 586,999 share options were issued to employees of Avance GAS AS. The options have a 5 year term and
become exercisable as follows; 146,750 options vest aer 12 months at a subscription price of NOK 43.14 per share, 146,750
options vest aer 24 months at a subscription price of NOK 53.14 per share, and 293,499 options vest aer 36 months
at a subscription price of NOK 63.14 per share. The subscription price will be adjusted for any distribution of dividends,
equity issues and capital adjustments. During the year ended 31 December 2021, 25,333 of these shares were forfeited.
54 55
AVANCE GAS - ANNUAL REPORT 2021 AVANCE GAS - ANNUAL REPORT 2021
The original exercise price, prior to adjustments for dividends were $18.8 (options granted in 2016). There were no
dividend payments in 2016, 2017, 2018 or 2019, hence, no adjustment in exercise price. Following dividend payment in
2020, the original exercise price for options issued were adjusted for dividend of Norwegian kroner of 2.47/share, equal
to US dollars 0.30/share. Options granted in 2015 expired in 2020, options granted in 2016 expired in 2021.
Share based expense for the year ended December 31, 2021 was $290 thousand. For the year ended December 31, 2020,
share based expense was negative $164.8 thousand as a result of the derecognition of forfeited options.
The weighted average fair value of options determined using the Black-Scholes valuation model was $0.72, $0.82, $0.79,
$0.66 and $1.47 per option for options granted in 2016, 2017, 2018, 2019 and 2021 respectively. The significant inputs
into the model were weighted average share price of $2.19, $2.34, $2.16, $3.05 and $5.43 per share for options granted in
2016, 2017, 2018, 2019 and 2021 respectively, an expected option life of five years, and an annual risk-free rate of 1.24%,
1.84%, 2.83%, 1.46% and 0.87% for options granted in 2016, 2017, 2018, 2019 and 2021 respectively. The volatility was
measured based on the share price development for the period since the IPO.
2015
SHARE
OPTION
2016
SHARE
OPTION
2017
SHARE
OPTION
2018
SHARE
OPTION
2019
SHARE
OPTION
TOTAL
SHARE
OPTIONS
Average exercise price ($) 8.39 1.69 1.75 1.71 4.27
Outstanding January 1, 2020 33,000 133,750 55,000 230,000 1,050,000 1,501,750
Changes during the year:
Granted - - - - - -
Exercised - (75,000) - - - (75,000)
Expired (33,000) - - - - (33,000)
Forfeited - - - (32,500) (890,000) (922,500)
Outstanding December 31, 2020 - 58,750 55,000 197,500 160,000 471,250
Exercisable December 31, 2020 - 58,750 37,000 110,000 80,000 285,750
Remaining average contractual
life - 0.8 1.0 2.8 3.7
20. ACCUMULATED OTHER
COMPREHENSIVE INCOME
Accumulated other comprehensive income represents the gain or loss arising from the change in fair value of interest
rate swaps and translation adjustments. Accumulated other comprehensive loss is broken down between the two
categories as follows:
FOREIGN
CURRENCY
RESERVE
CASH FLOW
HEDGE
RESERVE
ACCUMULATED
OTHER
COMPREHENSIVE
INCOME
As of January 1, 2020
58 (11,266) (11,208)
Eective portion of changes in fair value of
interest rate swaps
- (14,821) (14,821)
Reclassified to income statement
- 4,640 4,640
Translation adjustment, net
7 - 7
As of December 31, 2020
65 (21,447) (21,382)
Eective portion of changes in fair value of
interest rate swaps
- 6,608 6,608
Reclassified to income statement
- 6,267 6,267
Translation adjustment, net
(12) - (12)
As of December 31, 2021
53 (8,572) 8,519
19. AUDITOR’S REMUNERATION
PricewaterhouseCoopers AS is the auditor of the Company. The following table shows the annual fees for the
appointed auditor:
Audit fees are agreed and billed in NOK.
DECEMBER 31,
2021
DECEMBER 31,
2020
Audit 120 91
Other assurance services 15 17
TOTAL AUDIT FEES 135 108
(in USD thousands)
FOR THE YEAR ENDED
(in USD thousands)
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AVANCE GAS - ANNUAL REPORT 2021 AVANCE GAS - ANNUAL REPORT 2021
21. SUPPLEMENTAL INFORMATION TO THE
CONSOLIDATED STATEMENT OF CASH FLOWS
Reconciliation of net prot to cash generated from operations:
Note
DECEMBER 31,
2021
DECEMBER 31,
2020
Net profit 32,109 70,906
Adjustments to reconcile net profit to net cash from
operating activities:
Depreciation and amortisation of property, plant and
equipment and intangibles 47,209 41,705
(Reversal of) impairment losses on non-current assets 5 - (33,733)
Net finance expense 14 16,472 22,054
Share Based Compensation expense 18 290 (165)
Gain on sale asset 5 - (5,829)
Changes in assets and liabilities:
Decrease (increase) in receivables (4,805) 9,775
Decrease (increase) in prepaid expenses, inventory,
related party receivables, mobilisation cost and other
current assets (8,869) 12,097
(Decrease) increase in accounts payable 5,030 (11,382)
(Decrease) increase in accrued voyage expenses, other
current liabilities, and related party balances 3,716 (5,571)
Other 6 23
Cash flows from operating activities 91,158 99,880
(in USD thousands)
FOR THE YEAR ENDED
NON-CASH CHANGES
DECEMBER 31,
2020
CASH
FLOWS
AMORTI-
SATION
OTHER
DECEMBER 31,
2021
Long-term debt 284,069 (58,959) 1,164 (693) 255,581
Long-term revolving credit facility 88,110 (6,126) - - 81,984
Lease financing arrangements 44,366 38,957 73 (980) 82,416
Total liabilities from financing activities 416,545 (26,128) 1,237 (1,673) 389,981
NON-CASH CHANGES
DECEMBER 31,
2019
CASH
FLOWS
AMORTI-
SATION
OTHER
DECEMBER 31,
2020
Long-term debt 353,043 (25,978) 1,604 399 284,069
Long-term revolving credit facility 100,000 (11,890) - - 88,110
Lease financing arrangements - 45,000 5 (639) 44,366
Total liabilities from financing activities 453,043 (37,868) 1,609 (240) 416,545
Changes in liabilities arising from nancing activities:
22. SUBSEQUENT EVENTS
In January, 2022 the Company took delivery of Avance Polaris, the first of six 91,000 cbm VLGC newbuildings from Dae-
woo Shipyard in South Korea. The vessel was shortly aer delivered to Total Energies on a Time Charter Agreement for
2 years.
In January 2022, the Company entered into a Time Charter Agreement with Petredec for a period of 2 years for the sec-
ond dual fuel VLGC, Avance Capella. The company took delivery of the vessel in February 2022.
In January, 2022 the Company entered a contract to sell the 2008-built VLGC Thetis Glory. The sale was completed in
February 2022 and following repayment of debt, the sale generated cash proceeds of approximately $22.5 million and a
book profit of approximately $6.0 million.
In February, 2022 the Board of Directors declared dividend of $0.05 per share for the fourth quarter 2021.
In March, 2022 the Company entered a contract to sell the 2008 built VLGC Providence. The sale is expected to be com-
pleted May 2022 and following repayment of debt, the sale is expected the generate cash proceeds of approximately
$24.3 million and a book profit of approximately $4.8 million.
In March, 2022 Kristian Sorensen resigned as Chief Executive Oicer and Erik O. Jacobsen resigned as Chairman of the
board. Øystein Kalleklev was appointed Executive Chairman and Jens Martin Jensen was appointed as a Director of the
Company.
58 59
AVANCE GAS - ANNUAL REPORT 2021 AVANCE GAS - ANNUAL REPORT 2021
STATEMENT OF
Corporate
Governance
1 INTRODUCTION
This section of the annual report provides an overview on
how Avance Gas follows the Norwegian Code of Practice for
Corporate Governance as of 14 October 2021 (the “Code”).
Avance Gas is an exempted company limited by shares
incorporated in Bermuda and is subject to Bermuda law,
and is listed on the Oslo Stock Exchange.
Avance Gas is primarily governed by the Bermuda Companies
Act, its memorandum of association and its bye-laws. Further,
Avance Gas is subject to certain aspects of the Norwegian
Securities Trading Act, the Norwegian Accounting Act and
the continuing obligations for companies listed on the Oslo
Stock Exchange.
Avance Gas continuously strives to protect and enhance
shareholder equity through transparency, integrity and
equitable treatment of all shareholders. Sound corporate
governance is key to achieving these goals. The corporate
governance principles adopted by the Board of Avance Gas
are based on the Code. The Code is available at www.nues.
no. Other than the deviations listed and explained in Section
1.1 below, Avance Gas is in compliance with the Code.
1.1 DEVIATIONS FROM THE CODE
The Board has identified the following deviations from
the Code:
Deviation from section 2 “Business”:
In accordance with common practice for Bermuda
incorporated companies, Avance Gas’ objectives as set
out in the memorandum of association are wider and more
extensive than recommended in the Code. The Board of
Directors has not adopted specific guidelines for how it
integrates considerations related to its shareholders into its
value creation, but such considerations form an integrated
part of the Company's decision making processes.
Deviation from section 3 “Equity and
dividends”:
Pursuant to Bermuda law and common practice for
Bermuda incorporated companies, the Board has
wide powers to issue any authorised but unissued
shares on such terms and conditions as it may decide,
subject to any resolution of Avance Gas’ shareholders
to the contrary, and to declare dividends to be paid
to the shareholders and repurchase shares in Avance
Gas. The powers of the Board to issue and purchase
shares are neither limited to specific purposes nor to a
specified period, and the Board can declare dividends to
shareholders without the prior authorisation or approval
by the general meeting as recommended by the Code.
Deviation from section 5 “Freely
negotiable shares”:
The shares in Avance Gas are freely negotiable and Avance
Gas’ constitutional documents do not impose any transfer
restrictions on the shares other than as set out below. The
bye-laws include a right for the Board to decline to register
the transfer of any share in the register of members, or
instruct any registrar appointed by Avance Gas to decline, to
register the transfer of any interest in a share held through
the VPS where such transfer, in the opinion of the Board,
is likely to result in 50% or more of the shares or votes
being held or owned directly or indirectly by individuals or
legal persons resident for tax purposes in Norway or being
eectively connected to a Norwegian business activity or
Avance Gas otherwise being deemed a “Controlled Foreign
Company” as defined pursuant to Norwegian tax legislation.
The purpose of this provision is to avoid the company
being deemed a “Controlled Foreign Company” in Norway.
Deviation from section 6 “General
meetings”:
As is common for companies incorporated under the laws of
Bermuda, the bye-laws of Avance Gas set forth that, unless
otherwise is agreed by a majority of those attending and
entitled to vote at a general meeting, the Chairman of the
board shall act as chairman of the meeting if he is present.
If the Chairman of the Board is absent, a chairman of the
meeting shall be appointed or elected by those present at
the meeting and entitled to vote.
Deviation from section 7 “Nomination
committee”:
The bye-laws provide that Avance Gas may have a
nomination committee, but the shareholders have resolved
to not establish a nomination committee.
2 MAIN OBJECTIVES
FOR CORPORATE
GOVERNANCE IN
AVANCE GAS
Yaroslav Akulov, Chinook
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AVANCE GAS - ANNUAL REPORT 2021 AVANCE GAS - ANNUAL REPORT 2021
The way that Avance Gas is managed is vital to the
development of Avance Gas’ value over time. Avance Gas’
corporate governance policy is based on the Code, and
Avance Gas aims to have good control and governance
procedures to ensure equal treatment of all shareholders,
thereby providing a foundation for trust and positive
development of shareholder values. The Board monitors
the governance of Avance Gas and develops and improves
the corporate governance policy as required.
3 CORPORATE
GOVERNANCE REPORT
3.1 IMPLEMENTATION AND
REPORTING
The Board has adopted a corporate governance policy
which is based on the Code. The Board further ensures that
Avance Gas at all times has sound corporate governance.
This corporate governance report is included in Avance Gas’
annual report to the shareholders, and is made available on
Avance Gas’ website in the annual report. Any deviations
from the Code are described and explained under Section
1.1 above.
The Board has defined Avance Gas’ value base and
formulated ethical guidelines and guidelines for corporate
social responsibility in accordance with these values.
3.2 BUSINESS
Avance Gas and its subsidiaries’ is a leading player in
the VLGC (very large gas carrier) market, operating a
fleet of modern vessels providing customers with global
transportation services via a combination of Time Charter
Contracts and spot market voyages. Avance Gas’ objectives
as set out in its memorandum of association are wider and
more extensive than recommended by the Code.
The Board is responsible for the Company’s strategic
planning, and defines clear objectives, strategies and risk
profile for the business that form the basis for Avance Gas'
creation of value for the shareholders in a sustainable way.
The Board is in this respect taking inter alia economic,
social and environmental conditions into account. The
Board evaluates Avance Gas’ objectives, strategies and risk
profile at least once per year.
Further, long-term sustainability and profitability forms
an integral part of Avance Gas' strategies, plans and
everyday work to create value for its shareholders, while
also considering the interests of the other stakeholders
of the company (employees, suppliers, customers, etc.).
Deviation from the Code: See Section 1.1 above.
3.3 EQUITY AND DIVIDENDS
The Board and the management of Avance Gas aim at all
times to keep Avance Gas’ capital structure at a level that
is suitable in light of Avance Gas’ objectives, strategy and
risk profile.
Avance Gas’ objective is to generate competitive returns to
its shareholders. The company’s dividend policy is balanced
between growth opportunities for Avance Gas and cash
returns for the shareholders. Whilst it is the intention to
pay regular dividends, the level of any dividend will be
guided by current earnings, market prospects, current and
future capital expenditure commitments and investments
opportunities.
Pursuant to bye-law 2, the Board has wide powers to issue
any authorised but unissued shares on such terms and
conditions as it may decide, subject to any resolution of the
shareholders to the contrary, and to declare dividends to
be paid to the shareholders without the prior authorisation
or approval by the general meeting. Further, pursuant to
bye-law 3, the Board may exercise the power of Avance
Gas to purchase its own shares for cancellation or acquire
them as treasury shares in accordance with Bermuda law
on such terms as the Board thinks fit. The powers of the
Board to issue and purchase shares are neither limited to
specific purposes nor to a specified period as recommended
by the Code.
Deviation from the Code: See Section 1.1 above.
3.4 EQUAL TREATMENT
OF SHAREHOLDERS
3.4.1 General information
Avance Gas has only one class of shares. Each share in
Avance Gas carries one vote, and all shares carry equal
rights, including the right to participate in general meetings.
All shareholders are treated on an equal basis, unless there
is just cause for treating them dierently.
3.4.2 Share issues without pre-emption
rights for existing shareholders
Pursuant to Bermuda law and common practice for
Bermuda incorporated companies, the shareholders of
Avance Gas do not have pre-emption rights in share issues
unless specifically resolved by the Board or the shareholders
of Avance Gas. Any decision to issue shares without pre-
emption rights for existing shareholders will be justified
and publicly disclosed in a stock exchange announcement
in connection with the increase in share capital.
3.4.3 Transactions in own shares
Any transactions Avance Gas carries out in its own shares
are carried out either through the Oslo Stock Exchange or
with reference to prevailing stock exchange prices if carried
out in another way. If there is limited liquidity in Avance
Gas' shares, Avance Gas will consider other ways to ensure
equal treatment of shareholders.
3.5 SHARES AND
NEGOTIABILITY
Avance Gas' constituting documents do not impose any
transfer restrictions on Avance Gas' common shares, other
than as described in Section 1.1 above, and Avance Gas’
common shares are freely transferable, provided that the
beneficial interests in the common shares are registered
in the VPS.
Deviation from the Code: See Section 1.1 above.
3.6 GENERAL MEETINGS
3.6.1 Exercising rights
The Board seeks to ensure that the greatest possible
number of shareholders can exercise their voting
rights in Avance Gas’ general meetings and that the
general meetings are an eective forum for the views of
shareholders and the Board.
Among other things, the Board ensures that:
.
the notice and the supporting documents and
information on the resolutions to be considered at
the general meeting are available on Avance Gas’
website no later than 21 days prior to the date of the
general meeting;
.
the resolutions and supporting documentation, if any,
are detailed, comprehensive and specific enough to
allow shareholders to understand and form a view
on matters that are to be considered at the general
meeting;
.
the deadline, if any, for shareholders to give notice
of their intention to attend the general meeting is set
as closely as practically possible to the date of the
general meeting;
.
the shareholders have the opportunity to vote
separately on each individual matter, including on
each candidate nominated for election to Avance Gas’
Board and committees, if applicable; and
.
the members of the Board will have the opportunity
to participate at the General Meeting.
3.6.2 Participation without being present
Shareholders who cannot be present at the general meeting
have the opportunity to vote using proxies. Avance Gas:
.
provides information about the procedure for attending
via proxy;
.
nominates a person who will vote on behalf of a
shareholder as their proxy; and
.
prepares a proxy form such that the shareholder can
vote on each item to be addressed and vote for each of
the candidates that are nominated for election.
3.6.3 Summary of provisions in the bye-
laws that deviate from the provisions in
Chapter 5 of the Norwegian Public Limited
Companies Act
Below is a summary of the provisions in Avance Gas’ bye-
laws that deviate from the provisions of Chapter 5 of the
Norwegian Public Limited Companies Act:
.
The annual general meeting shall be held each year
at such time and place as the Chairman of the Board
shall appoint.
.
The Chairman of the Board may convene a special
general meeting whenever in his judgment such a
meeting is necessary.
.
The Board shall, on the requisition of shareholders
holding not less than one-tenth of the paid-up share
capital that carries the right to vote at general meetings,
convene a special general meeting.
.
At any general meeting two or more persons present
in person or by proxy shall form a quorum.
.
Subject to the Bermuda Companies Act and the bye-
laws, any question proposed for the consideration of
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the shareholders at a general meeting shall be decided
by the airmative votes of a majority of the votes cast.
. At the annual general meeting, the financial
statements and accounts are laid before the
meeting for information, but under Bermuda law, no
approval of the shareholders is required.
. The Board may, subject to the Bermuda Companies
Act and the bye-laws declare dividends and
other distributions (in cash or in specie) to its
shareholders.
. Subject to the bye-laws, anything that may be
done by resolution of the general meeting may be
done without a meeting by written resolution in
accordance with the bye-laws.
Deviation from the Code: See Section 1.1 above.
3.7 NOMINATION COMMITTEE
Bermuda law do not require that a nomination committee
is established, but Avance Gas’ bye-laws provide that
Avance Gas may have a nomination committee, comprising
such number of persons as the shareholders in a general
meeting may determine from time to time, and members
of the nomination committee are appointed by resolutions
of the shareholders. The shareholders have not resolved
to establish a nomination committee.
The functions and duties of the nomination committee are
therefore performed by the Board members, including to (i)
identify and evaluate proposed candidates for nomanation
to the Board, (ii) recommend remuneration of the Board
members, and (iii) regularly assess its own work in this
regard.
Shareholders may still propose changes to the composition
of the Board and the remuneration payable to the Board
members. The Board members are elected by the
shareholders at the annual general meeting or any special
general meeting called for that purpose, unless there is a
casual vacancy, and the shareholders of Avance Gas may
authorise the Board to fill any vacancy in their number le
unfilled at a general meeting of the shareholders. If there
is a vacancy of the Board occurring as a result of death,
disability, disqualification or resignation of any Board
member or as a result of increase in the size of the Board,
the shareholders of Avance Gas or the Board has the power
to appoint a member to fill the vacancy.
The term of oice of the current Board members expires
at the next Annual General Meeting.
Deviation from the Code: See Section 1.1 above.
3.8 BOARD; COMPOSITION AND
INDEPENDENCE
The composition of the Board ensures that the Board can
attend to the common interests of all shareholders of
Avance Gas and meets the company’s need for expertise,
capacity and diversity and ensures that it can function
eectively as a collegiate body.
A majority of the shareholder-elected members of the
Board is independent of Avance Gas' executive personnel,
material business connections and major shareholders (i.e.
holders of more than 10% of the shares). The members
of the Board, including the Chairman, are elected by the
general meeting on an annual basis and their current term
of oice expires at the next annual general meeting. In
March 2022, the Company announced resignation of CEO
and changes to the Board composition. The CEO resigned
and the Chairman of the Board elected to step-down. To fill
the vacancy and in the best interest of the shareholders,
the Board resolved to appoint an Executive Chairman of
the Board and a new Director with immediate eect. The
Board maintain their independency of the Company's
executive personnel, material business connections and
at least two board members are independent of the major
shareholder as set out in the guidelines. For an overview
of the composition of the Board and the expertise and
independence of such Board members, as well as records of
their attendance at the Bord meetings, please see page 15.
The members of the Board are encouraged to hold shares
in Avance Gas.
3.9 THE WORK OF THE BOARD
3.9.1 General
The Board has prepared guidelines for its own work, as well
as for the executive personnel, with particular emphasis
on clear internal allocation of responsibilities and duties.
The Board is responsible for the overall management of
Avance Gas and may exercise all of the powers of Avance
Gas not reserved to Avance Gas' shareholders by the bye-
laws or Bermuda law.
The Company has put in place guidelines on the handling
of agreements with related parties. The Board ensures that
members of the Board and executive personnel make the
company aware of any material interests that they may
have in items to be considered by the Board. Matters of
a material character in which the chairman of the Board
is, or has been, personally involved, will be chaired by
some other member of the board. In cases of transactions
between the Company and a shareholder, a shareholder's
parent company, Director, Oicer or Executive Personnel
of the Company or persons closely related to any such
parties, or with another company in the same group, which
are not immaterial for either the Company or the close
associate involved the Board will obtain a valuation from an
independent third party. Agreements with related parties
are given account for in the Annual Report.
3.9.2 Audit committee
The Board has established an audit committee as a
preparatory and advisory committee. The current member
of the committee is Mr James O'Shaughnessy (chair and
sole member), who is among the independent members
of the Board. Based on Mr James O'Shaughnessy’s former
experience as a part of top management, CFO and extensive
service as board member, he is deemed to have suicient
competence and expertise. The members of the audit
committee serve for as long as they remain members of
the Board, or until the Board decides otherwise or they
wish to retire.
The duties and composition of the audit committee is
regulated in the charter for the audit committee adopted
by the Board. The audit committee reports and makes
recommendations to the Board, but the Board retains
responsibility for implementing such recommendations.
3.9.3 Remuneration committee
Since all the members of the Board are independent of
Avance Gas' executive personnel, the Board has concluded
that the best way to ensure a thorough and independent
preparation of matters relating to compensation of the
executive personnel is to involve all the members of the
Board in the preparation of such matters. The establishment
of a separate remuneration committee has thus been
considered, but not deemed necessary.
3.9.4 Annual evaluation
The Board evaluates its performance and expertise on an
annual basis.
3.10 RISK MANAGEMENT AND
INTERNAL CONTROL
The Board ensures that Avance Gas has sound internal
controls in place and systems for risk management.
Internal controls and the systems for risk management
encompass Avance Gas’ considerations for how it integrates
considerations related to stakeholders into its creation of
value.
The Board conducts annual reviews of Avance Gas’ most
important areas of exposure to risk and its internal control
arrangements.
3.11 REMUNERATION OF THE
BOARD
The remuneration of the Board is decided by the
shareholders at the annual general meeting of Avance
Gas. The level of compensation to the members of the
Board reflects the responsibility of the Board, its expertise
and the level of activity in both the Board and any Board
committees. The remuneration is not linked to Avance Gas’
performance. None of the Board members hold any share
options in Avance Gas.
Any assignments taken on by Board members and/or
companies with which they are associated in addition to
their appointment as Board members shall be disclosed to
the Board and the remuneration for such additional duties
shall be approved by the Board.
No remuneration has been paid to the Board members
in addition to normal board and committee fees for the
financial year 2021. Please see note 17 of the consolidated
financial statements for an overview of remuneration paid
to the members of the Board for the financial year 2021.
3.12 REMUNERATION OF
EXECUTIVE PERSONNEL
The Board has established guidelines for remuneration of
the executive personnel of Avance Gas. These guidelines
are clear and understandable, and contribute to the
Company's business strategy, long term interests and
financial sustainability. They are communicated to the
annual general meeting and are also made available on
the Company's website. Performance-related remuneration
of the executive personnel in the form of share options,
bonus programmes or the like are linked to value creation
for the shareholders or Avance Gas’ earnings performance
over time. Performance-related remuneration is subject to
an absolute limit.
3.13 INFORMATION AND
COMMUNICATIONS
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3.13.1 General information
Avance Gas provides timely and precise information to
its shareholders and the financial markets in general
(through the Oslo Stock Exchange information system).
Such information is given in the form of annual reports,
quarterly reports, press releases, notices to the stock
exchange and investor presentations.
Avance Gas publishes an annual, electronic financial
calendar with an overview of the dates of important events,
such as the annual general meeting, publishing of interim
reports and open presentations, if applicable.
3.13.2 Information to shareholders
Avance Gas has procedures for communication with
shareholders to enable the Board to develop a balanced
understanding of the circumstances and focus of the
shareholders. Such communication is undertaken in
compliance with the provisions of applicable laws and
regulations.
Information to Avance Gas’ shareholders is posted on
Avance Gas’ website at the same time that it is distributed
to the shareholders.
3.14 TAKE-OVERS
3.14.1 General
In the event Avance Gas becomes the subject of a take-
over, the Board will ensure that Avance Gas’ shareholders
are treated equally, that Avance Gas’ activities are not
unnecessarily interrupted, and that the shareholders have
suicient information and time to assess the oer.
3.14.2 Main principles for action in the
event of a take-over bid
In the event of a take-over situation, the Board will abide
by the principles of the Code, and ensure that the following
takes place:
.
the Board will ensure that the oer is made to all
shareholders, and on the same terms;
. the Board will not undertake any actions intended to
give shareholders or others an unreasonable advantage
at the expense of other shareholders or Avance Gas;
.
the Board will strive to be completely open about the
take-over situation;
.
the Board will not institute measures that have the
intention of protecting the personal interests of
its members at the expense of the interests of the
shareholders; and
.
the Board must be aware of the particular duty the
Board carries for ensuring that the values and interests
of the shareholders are safeguarded.
The Board will not attempt to prevent or impede the take-
over oer unless this has been decided by the general
meeting in accordance with applicable laws.
If an oer is made for Avance Gas’ common shares, the
Board will issue a statement evaluating the oer and making
a recommendation as to whether or not the shareholders
should accept the oer. If the Board finds itself unable to
give a recommendation to the shareholders on whether or
not to accept the oer, it will explain the reasons for this.
The Board’s statement on a bid will make it clear whether
the views expressed are unanimous, and if this is not the
case, it will explain the reasons why specific members of
the Board have excluded themselves from the statement.
The Board will consider whether to arrange a valuation from
an independent expert. Any such valuation will be made
public no later than at the time of the public disclosure of
the Board’s statement.
3.15 AUDITOR
Avance Gas’ auditor is appointed by the shareholders at the
general meeting, and the shareholders authorise the Board
or the audit committee to fix the auditor’s remuneration.
The auditor participates in the audit committee’s review
and discussion of the annual accounts and quarterly interim
accounts, and will annually submit the main features of
the plan for the audit of the company to the Board or the
Audit Committee.
The auditor normally participates in meetings with the
Audit Committee that deal with the annual accounts,
accounting principles, assess any important accounting
estimates and matters of importance on which there has
been disagreement between the auditor and the executive
management of the company. The auditor shall at least
once a year present to the Board or the Audit Committee
a review of the Company’s internal control procedures,
including identified weaknesses identified by the auditor
and proposals for improvement.
The Audit Committee has established routines for the
use of the auditor by the executive personnel for services
other than audit.
* * *
Auditor’s
Report
Avance Gas, Avance Polaris
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PricewaterhouseCoopers AS, Postboks 748 Sentrum, NO-0106 Oslo
T: 02316, org. no.: 987 009 713 VAT, www.pwc.no
State authorised public accountants, members of The Norwegian Institute of Public Accountants, and
authorised accounting firm
To the shareholders and Board of Directors of Avance Gas Holding Ltd
Independent Auditor’s Report
Report on the Audit of the Financial Statements
Opinion
We have audited the consolidated financial statements of Avance Gas Holding Ltd and its subsidiaries
(the Group), which comprise the consolidated balance sheet as at December 31, 2021, the consolidated
income statement, the consolidated statement of comprehensive income, the consolidated statement
of shareholders’ equity and consolidated statement of cash flows for the year then ended, and notes to
the financial statements, including a summary of significant accounting policies.
In our opinion the accompanying consolidated financial statements give a true and fair view of the
financial position of the Group as at December 31, 2021, and its financial performance and its cash
flows for the year then ended in accordance with
International Financial Reporting Standards as
adopted by the EU.
Our opinion is consistent with our additional report to the Audit Committee.
Basis for Opinion
We conducted our audit in accordance with International Standards on Auditing (ISAs). Our
responsibilities under those standards are further described in the Auditor’s Responsibilities for the
Audit of the Financial Statements section of our report. We are independent of the Group as required
by laws and regulations and the International Ethics Standards Board for Accountants’ International
Code of Ethics for Professional Accountants (including International Independence Standards)
(IESBA Code), and we have fulfilled our other ethical responsibilities in accordance with these
requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to
provide a basis for our opinion.
To the best of our knowledge and belief, no prohibited non-audit services referred to in the Audit
Regulation (537/2014) Article 5.1 have been provided.
We have been the auditor of the Group for 8 years from the election by the general meeting of the
shareholders for the accounting year 2014.
Independent Auditor's Report - Avance Gas Holding Ltd
(2)
Key Audit Matters
Key audit matters are those matters that, in our professional judgment, were of most significance in
our audit of the financial statements of the current period. This is the matter we addressed in the
context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we
do not provide a separate opinion on this matter.
The Group’s business activities are largely unchanged compared to last year. As described below,
impairment assessment for vessels and newbuildings remain the key audit matter where the audit
team have focused their attention.
Key Audit Matter
How our audit addressed the Key Audit Matter
Impairment assessment for vessels
and newbuildings
Refer to note 2 (Significant accounting
policies) and note 5 (Property, plant
and equipment) where management
explains how they assess the value of
the vessels and newbuildings.
As at 31 December, 2021, the Group
owns 13 VLGC vessels and 6
newbuildings. The vessels have a
combined carrying amount of USD 716
million. The newbuildings have a
combined carrying amount of USD 93
million. The Group has not recognised
an impairment on the VLGCs in or
newbuildings 2021.
Indicators for impairment and reversal
of previously recognised impairment
were assessed and not considered
present during 2021. As explained in
the notes, management considered the
conditions in LPG freight market,
estimated fair value less cost of sale of
the vessels and newbuildings, discount
rate and market capitalisation versus
net book value of the Group, which
gave no indication of impairment or
reversal of previously recognised
impairment. As a result of the above
factors, management have not
performed an impairment test.
We evaluated and challenged management’s assessment
of indicators of impairment or reversal of previously
recognised impairment and the process by which this was
performed. We assessed management’s accounting policy
against IFRSs and obtained explanations from
management as to how the specific requirements of the
standards, in particular IAS 36 – Impairment of assets,
were met. We also assessed the consistency year on year of
the application of the accounting policy.
In order to assess each of the assumptions in the
impairment indicator assessment, we interviewed
management and challenged their assumptions. For
certain key assumptions we specifically used external
market data to assess the assumptions used to build the
discount rate. We considered that the discount rate
assessed was within an appropriate range and changes did
not lead to any indication of impairment.
We utilised current and historical external market data to
corroborate the freight rates assessed by management. We
challenged management on their assessment of current
market rates. We also corroborated management’s
assessment with external market reports where possible.
We considered that freight rates used by management
were within an appropriate range and changes did not
lead to any indication of impairment. In addition, we
noted current freight rates are broadly in line with those
utilised by management in the last performance of full
impairment for this period.
In order to assess the estimates for fair value less costs of
disposal as an indicator of impairment, management
compiled broker valuation certificates for the vessels and
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Independent Auditor's Report - Avance Gas Holding Ltd
(3)
Management considers each vessel and
newbuilding to be a cash generating
unit (“CGU”, “vessel” or
“newbuilding”) in their assessment of
impairment indicators, consequently
we assessed for impairment indicators
on the same basis.
We focused on this area due to the
significant carrying value of the vessels
and newbuildings and the judgement
inherent in the assessment of
indicators of impairment or reversal of
previously recognised impairment.
newbuildings. We satisfied ourselves that the external
brokers had both the objectivity and the competence to
provide the estimate. In order to assess this, we
corroborated that under the terms of the bank lending
facilities, specific brokers are identified as being approved
for use, for purposes of minimum value clause covenant
reporting. Management used brokers from this approved
list. We interviewed selected brokers to understand how
the estimates for fair value were compiled. We also
satisfied ourselves that the brokers were provided with
relevant facts in order to determine such an estimate, by
testing key inputs such as build date, build location and
certain key specifications back to the ships register. We
concluded that management sufficiently understood the
valuations from third party brokers, including having
obtained an understanding of the methodology used in
arriving at the valuations and performing sensitivity
analysis and performing comparisons to other available
market data where possible.
We have read note 5 – Property, plant and equipment and
assessed this as appropriate.
No matters of consequence arose from our procedures.
Other Information
The Board of Directors (Management) is responsible for the other information. The other information
comprises information in the annual report, except the financial statements and our auditor's report
thereon.
Our opinion on the financial statements does not cover the other information and we do not express
any form of assurance conclusion thereon.
In connection with our audit of the financial statements, our responsibility is to read the other
information and, in doing so, consider whether the other information is materially inconsistent with
the financial statements or our knowledge obtained in the audit or otherwise appears to be materially
misstated.
If, based on the work we have performed, we conclude that there is a material misstatement of this
other information, we are required to report that fact. We have nothing to report in this regard.
Based on our knowledge obtained in the audit, it is our opinion that the Board of Directors’ report
• is consistent with the consolidated financial statements and
• contains the information required by applicable legal requirements.
Independent Auditor's Report - Avance Gas Holding Ltd
(4)
Our opinion on the Board of Director’s report applies correspondingly to the statements on
Corporate Governance and Corporate Social Responsibility.
Responsibilities of Management for the Financial Statements
Management is responsible for the preparation of financial statements that give a true and fair view in
accordance with International Financial Reporting Standards as adopted by the EU, and for such
internal control as management determines is necessary to enable the preparation of financial
statements that are free from material misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, management is responsible for assessing the
Group’s ability to continue as a going concern, disclosing, as applicable, matters related to going
concern and using the going concern basis of accounting unless management either intends to
liquidate the Group or to cease operations, or has no realistic alternative but to do so.
Auditor’s Responsibilities for the Audit of the Financial Statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements
as a whole are free from material misstatement, whether due to fraud or error, and to issue an
auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not
a guarantee that an audit conducted in accordance with ISAs will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and are considered material
if, individually or in aggregate, they could reasonably be expected to influence the economic decisions
of users taken on the basis of these consolidated financial statements.
As part of an audit in accordance with ISAs, we exercise professional judgment and maintain
professional scepticism throughout the audit. We also:
• identify and assess the risks of material misstatement of the consolidated financial statements,
whether due to fraud or error. We design and perform audit procedures responsive to those
risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our
opinion. The risk of not detecting a material misstatement resulting from fraud is higher than
for one resulting from error, as fraud may involve collusion, forgery, intentional omissions,
misrepresentations, or the override of internal control.
• obtain an understanding of internal control relevant to the audit in order to design audit
procedures that are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Group's internal control.
• evaluate the appropriateness of accounting policies used and the reasonableness of accounting
estimates and related disclosures made by management.
• conclude on the appropriateness of management’s use of the going concern basis of
accounting, and, based on the audit evidence obtained, whether a material uncertainty exists
related to events or conditions that may cast significant doubt on the Group's ability to
continue as a going concern. If we conclude that a material uncertainty exists, we are required
to draw attention in our auditor’s report to the related disclosures in the consolidated financial
statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are
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based on the audit evidence obtained up to the date of our auditor’s report. However, future
events or conditions may cause the Group to cease to continue as a going concern.
• evaluate the overall presentation, structure and content of the consolidated financial
statements, including the disclosures, and whether the consolidated financial statements
represent the underlying transactions and events in a manner that achieves a true and fair
view.
• obtain sufficient appropriate audit evidence regarding the financial information of the entities
or business activities within the Group to express an opinion on the consolidated financial
statements. We are responsible for the direction, supervision and performance of the group
audit. We remain solely responsible for our audit opinion.
We communicate with the Board of Directors regarding, among other matters, the planned scope and
timing of the audit and significant audit findings, including any significant deficiencies in internal
control that we identify during our audit.
We also provide the Audit Committee with a statement that we have complied with relevant ethical
requirements regarding independence, and to communicate with them all relationships and other
matters that may reasonably be thought to bear on our independence, and where applicable, related
safeguards.
From the matters communicated with the Board of Directors, we determine those matters that were of
most significance in the audit of the consolidated financial statements of the current period and are
therefore the key audit matters. We describe these matters in our auditor’s report unless law or
regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we
determine that a matter should not be communicated in our report because the adverse consequences
of doing so would reasonably be expected to outweigh the public interest benefits of such
communication.
Report on Other Legal and Regulatory Requirements
Report on compliance with Regulation on European Single Electronic Format
(ESEF)
Opinion
We have performed an assurance engagement to obtain reasonable assurance that the consolidated
financial statements with file name Avance Gas Holding Limited-2021-12-31-en.zip have been
prepared in accordance with Section 5-5 of the Norwegian Securities Trading Act
(Verdipapirhandelloven) and the accompanying Regulation on European Single Electronic Format
(ESEF).
In our opinion, the consolidated financial statements have been prepared, in all material respects, in
accordance with the requirements of ESEF.
Management’s Responsibilities
Management is responsible for preparing and publishing the consolidated financial statements in the
single electronic reporting format required in ESEF. This responsibility comprises an adequate process
and the internal control procedures which management determines is necessary for the preparation
and publication of the consolidated financial statements.
CONTACT:
WWW.AVANCEGAS.COM
IR@AVANCEGAS.COM
+47 22 00 48 00
Gilbert Tuazon, Passat