UPDATE 2-French LNG cryogenics specialist GTT for sale

Tue Jun 25, 2013 1:02pm EDT

* Total, Hellman & Friedman could sell 30 pct GTT stakes in IPO

* GDF Suez to keep 40 pct stake; GTT value up to 1.8 bln euros

* New investor likely to bet on LNG as bunker fuel alternative

* GTT CEO expects 20 pct of ships could switch to LNG fuel (Adds Korean shipping; LNG as shipping fuel)

By Geert De Clercq

PARIS, June 25 (Reuters) - Total and private equity firm Hellman & Friedman plan to sell their 30 percent stakes in GTT, the world's No. 1 maker of cryogenic hull linings for LNG tankers, in an IPO that could value GTT at up to $2.4 billion, sources close to the companies said.

Gaztransport & Technigaz (GTT), also 40 percent owned by GDF Suez (GSZ.PA), has 70 percent of the market for the high-tech alloy membranes that line the hulls of the world's liquified natural gas (LNG) carriers.

Its main customers are Korean and Chinese shipbuilders who pay GTT up to $10 million per ship. GTT says it has equipped about 240 of the world's LNG carriers, which cost about $220 million apiece.

GTT chief executive Philippe Berterottiere told Reuters in the firm's campus-like headquarters in a leafy suburb west of Paris that lead shareholder GDF Suez was unlikely to sell, as it increasingly sees itself as an LNG company.

"A sale of our stake in GTT is not on the cards," a GDF Suez spokesman told Reuters. He declined to say whether GDF Suez was willing to buy out the two other shareholders.

A source familiar with one of the shareholders told Reuters that shareholders "will formally lodge a request to go public with the French authorities in the second half of this year."

Neither Total nor Hellman & Friedman returned requests for comment.

"Total is less likely to remain a GTT shareholder. As for Hellman & Friedman, the logic of private equity firms is that they go in and out," one industry source said.

The same source said GTT had been valued at between 1.3 and 1.8 billion euros.

Hellman & Friedman bought its 30 percent stake from Italian energy engineering group Saipem in 2008 for 310 million euros.

MINUS 163 DEGREES

GTT and Norwegian competitor Moss Maritime have a virtual duopoly on the lucrative niche market despite Korean shipbuilders - which have a near monopoly on LNG tankers - have tried for years to develop their own cryogenic technology.

They have paid GTT more than a billion dollars in royalties over the past few years, according to Korean media reports.

The closure of Japan's nuclear plants following the Fukushima disaster has led to a huge increase of LNG shipping to to Asia and cheap shale gas in the United States is set to be shipped to Asia in huge quantities in coming years.

GTT lines the inside of tanker hulls with 0.7 millimetre thick nickel-iron Invar sheeting and insulation layers that contain the LNG, frozen at minus 163 celsius.

Moss, which is a part of Italy's ENI-Saipem group, has a very different technology and stores LNG in aluminium spherical tanks that give its LNG carriers their distinctive shape.

Last year, sources told Reuters that Daewoo Shipbuilding & Marine Engineering, Hyundai Heavy Industries , and Samsung Heavy Industries were considering a joint billion-euro ($1.3 billion) bid for GTT to prevent a Chinese rival from challenging their domination of the global LNG carrier market.

South Korean shipping-to-shipbuilding conglomerate STX Group and Shanghai's Hudong-Zhonghua Shipbuilding, controlled by China State Shipbuilding Corp, are also GTT customers.

Berterottiere said the most likely buyer would be a company willing to pay a premium for GTT's potential to develop the market for using LNG as fuel for ships.

While LNG carriers are propelled by the "boil-off" from the LNG in their tanks, a small percentage of the frozen liquid that slowly evaporates during the voyage, most ships use bunker fuel.

Berterottiere said that environmental regulations and the shale-gas driven fall of gas prices are pushing shipowners to install LNG-fired engines.

The trend is still in its infancy, as harbours lack the infrastructure for LNG refuelling, but gas producers expect LNG could quickly gain market share once the logistics are in place.

Berterottiere said he expects 20 to 30 percent of ships worldwide could switch to LNG by the end of the decade.

"Whoever is going to buy a stake in GTT has to be convinced that LNG will take a significant share of the market for ship propulsion," Berterottiere said.

GTT last year earned a net profit of 30 million euros on sales of 90 million and expects turnover to more than double this year to 200 million. ($1 = 0.7649 euros) (Editing by Louise Ireland)

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