Page 19: of Maritime Reporter Magazine (September 15, 1977)

$45-Million Subsidy

Repayment Approved

The Maritime Subsidy Board (MSB) has approved the applica- tions of Wilmington Trust Com- pany to repay approximately $45 million in construction-differen- tial subsidies (CDS) which the

Maritime Administration previ- ously awarded for the construc- tion of two liquefied natural gas (LNG) vessels. The MSB also granted permission for the two vessels to be employed in the carriage of LNG between Indo- nesia and Japan.

In addition, the owners would be required to pay interest at the

Treasury rate on the subsidy funds expended in construction of the vessels. The interest is es- timated to be $2.7 million on one vessel and $2.3 million on the other. The estimated actual cost of the vessels are approximately $104.6 million and $105.4 million, respectively.

These vessels, each with a ca- pacity of 125,000 cubic meters, were part of a three-ship pro- gram contracted for in Septem- ber 1972 with the Quincy, Mass., shipyard of General Dynamics

Corp., to be used for the impor- tation of LNG from Algeria to

New England and New York.

However, that gas importation project (known as Easco) was canceled earlier this year, result- ing in the transfer of these two vessels to the Indonesia-Japan trade.

The repayment of CDS plus in- terest, which would be deposited in the United States Treasury upon delivery of the vessels, is due to this change in employment of the vessels from U.S. foreign trade to a foreign-to-foreign op- eration. The two vessels, as yet unnamed, are tentatively sched- uled for delivery in late 1977.

The Wilmington Trust Com- pany is the owner-trustee of both vessels under trust agreements with the equity owners, consist- ing of subsidiaries of Citibank,

N.A., First Chicago Leasing Cor- poration, and GATX Corporation.

The vessels are bareboat char- tered to U.S. citizen operating companies—Summit II and Sum- mit III — and time-chartered to domestic subsidiaries of Burmah

Oil Shipping, Inc., a Delaware corporation, which is a subsidiary of Burmah Oil Company, Ltd., a

British corporation.

Under the revised agreement,

Burmah would use the two ves- sels under a Transportation

Agreement with the Indonesian national energy company, Perta- mina, to carry LNG from Indo- nesia to Japan. These two ships would replace two other LNGs that had been contracted for in

April 1976, also to be built by the General Dynamics Quincy shipyard. The contracts for these two vessels would be canceled.

In granting the approvals, the

MSB established the additional conditions that the Government retain the right to the design and engineering data for the vessels and that the ships be subject to the purchase and requisition rights of the United States under the same compensation basis as for other vessels constructed un- der CDS. The vessels would con- tinue to be owned by an American company and operated under the

U.S. flag with American crews.

In a companion action, the As- sistant Secretary approved an in- crease in the Title XI guarantees for the two vessels. If CDS were repaid, the maximum Title XI guarantee would increase from 75 percent to 87 y2 percent, as pro- vided by Section 1104 of the Mer- chant Marine Act of 1936, as amended. Based on redetermined actual costs, including the inter- est payments, the Title XI guar- antees will be about $91.5 million for one ship and $92.2 million for the other.

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