Page 28: of Marine News Magazine (November 2022)

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Finance to 2008, and to reduce the carbon intensity of interna- their business and remaining competitive, some marine in- tional shipping by at least 40% by 2030 relative to 2008. dustry companies decide to order newly constructed ves-

Alternative fuel is the path to achieving these goals. sels. Prior to entering into purchase agreements, companies

Pasha, Crowley Maritime Corporation and Maersk are need to be aware of the current shipbuilding landscape.

three marine industry leaders adding alternative fuel ves- We’re seeing high pricing, and longer than “typical” sels to their ? eet. build times, due to the same factors our economy has

Pasha Hawaii recently added a 774-foot Lique? ed Natu- faced since the beginning of the pandemic. For example, ral Gas (LNG) fueled containership – the ? rst LNG con- main engine and crankshaft suppliers are unable to meet tainership to fuel on the U.S. West Coast, and the ? rst to demands because of supply chain and labor challenges still serve Hawaii. LNG-fueled containerships are signi? cantly plaguing our marketplace.

cleaner and better for the environment than traditional Companies who consider ? nancing their newbuild ves- cargo ships. Pasha is adding a second LNG-fueled contain- sels may face challenges in securing loans for this type ership, currently under construction, which will achieve of purchase. Since new-build construction comes with energy ef? ciencies through a state-of-the-art engine, an increased risk (e.g., lengthy timeline to build, seaworthi- optimized hull form and an underwater propulsion system ness of the ? nished product, in? ationary risks causing with a high-ef? ciency rudder and propeller. build costs to go over budget, etc.), some lenders won’t

Crowley Maritime Corporation is currently having a ? nance new builds.

416-foot LNG-powered bunker barge constructed in Wis- Again, companies should plan in advance, be aware of consin, which will be on a long-term time charter with their options and understand the challenges they’re likely

Royal Dutch Shell. When ? nished, it is expected to be- to face along the way.

come the largest Jones Act Compliant vessel of its kind. It

Financing considerations will also allow for delivery of LNG to various LNG con- tainment systems as more of these vessels come into ser- Modern marine technology is a large investment, so vice. The vessel is expected to serve LNG fueled ships on many companies choose to ? nance – allowing them to and around East Coast Ports. reap the bene? ts of state-of-the-art vessels with minimal

Compared to ships running on traditional fuels, LNG- impact to capital budgets. When ? nancing the acquisition powered cargo ships achieve a 99.9% reduction in diesel of new vessels, marine companies should consider return particulate matter and sulfur oxide emissions, 90% less on investment (ROI), the ? nancing structure and the nitrogen oxides and a 25% reduction in carbon dioxide. lending team’s capabilities.

Maersk recently ordered six additional methanol-fueled, Here are ? nancing considerations – in both type and 17,000 TEU container ships as part of its decarbonization structure – to contemplate: strategy. According to the company website, Maersk set a • Current asset values are higher than they were net-zero emissions target for 2040. The company also an- 12-18 months ago, due to both in? ationary and nounced it will only order vessels that can be operated on supply issues as new builds have taken longer to green fuels. complete and enter the marketplace. Many

Due to the cost of new construction and supply chain lenders will be particularly focused on advance rates issues, many companies choose to retro? t existing vessels on vessel ? nancings, to ensure they aren’t with alternative-fueling capabilities. Retro? tting is not a over-advancing on vessels should values decrease in quick process either, and companies need to be aware of the next 12-24 months. the timeline and plan ahead. • Most lenders on large ? nancings, particularly on either multi-vessel or single vessel syndicated

New construction options facilities prefer a loan structure with an advance

As they focus on meeting GHG goals while also growing rate lent against the Orderly Liquidation Value(s) 28 | MN November 2022