Optimism on MISC’s entry into CCS shipping via K Line JV

KUCHING (Feb 3): MISC Bhd (MISC) has entered the carbon capture and storage (CCS) sector through a joint venture with Japan’s Kawasaki Kisen Kaisha Ltd (K Line), securing a 10-year time charter for newbuild liquefied carbon dioxide (LCO2) carriers.

According to the research team with MBSB Investment Bank Bhd (MBSB Research), the move aligns with MISC’s long-term strategy to expand into low-carbon and transition-enabling maritime solutions.

It said the joint venture will charter newbuild 12,000 cubic metre LCO2 carriers scheduled for delivery between the second half of 2028 and the first half of 2029.

The vessels will support Phase 2 of the Northern Lights Project, part of Longship, the Norwegian government’s full-scale CCS initiative.

The project involves the cross-border transportation of carbon dioxide from European industrial emitters to permanent offshore storage sites in Norway.

A 50:50 joint venture between MISC and K Line will be established to own and charter the vessels. As MISC currently does not operate any LCO2 carriers, the contracted newbuilds will mark the group’s first exposure to LCO2 shipping.

While financial details were not disclosed, MBSB Research does not expect the charter to have a material impact on near-term earnings as the vessels are only expected to come on stream from 2028 onwards.

“That said, the contract provides MISC with some exposure to the growing CCS industry, which is expected to benefit from increasing regulatory pressure and a stronger push by corporates towards ESG-aligned operations.

“Over the longer term, we view this as earnings-enhancing for the group, as CCS-related shipping demand is likely to expand alongside global decarbonisation efforts,” it said in a note on Tuesday.

TA Securities also views the development positively as MISC is entering a niche segment with high barriers to entry and long-term structural growth potential.

“While the earnings contribution is long-dated, there are several positives: the charter is backed by blue-chip counterparties such as Equinor, TotalEnergies and Shell via Northern Lights, which reduces counterparty risk.

“Furthermore, CCS shipping offers utility-like, long-term contracted cash flows with limited exposure to spot market volatility; and the contract strengthens MISC’s positioning as a transition-enabling maritime solutions provider, potentially opening doors to future CCS-related shipping tenders in Europe and Asia,” it said.

Both research houses made no changes to their earnings forecasts at this stage, pending further details at the upcoming analyst briefing.