Shipowners face retrofit funding challenge


With regulatory deadlines looming, the retrofitting of existing trading vessels maybe making more sense as solutions are developed using cleaner shipping technology, however, funding for retrofitting is presenting a challenge for shipowners and ship managers.

As there is now more evidence as to the efficiency of eco-designs for newbuildings and for retrofits the second solution is becoming more viable, but it is expensive and can still be something of a gamble.

"There are a lot of solutions but we have to think very carefully about them before taking a decision which is certain to be expensive," warns Takis Koutris, managing director of Greece’s Kristen Marine and Roxana Shipping. He is also chairman of Greece’s Maritime Technical Managers Association (MarTecMa), which has under its umbrella some of the shipping’s innovative and practical technical brains.

While chairing the Greener Shipping Summit in Athens, recently, Koutris also pointed out many of the technical solutions available today aimed at making shipping a greener industry, involve mandated regulatory demands and do not result in any financial gain for ship operators, quite the opposite.

"There is much debate about eco-shipping mainly because of the financial issues," Costas Vlachos, coo of Spiros Latsis-owned Consolidated Marine Management said in his keynote address. Vlachos wondered whether an eco ship is a “green ship” or an “economically operational ship' noting there is no common eco-ship definition. Vlachos, who chairs Intertanko’s Hellenic panel, said: “For me an eco-ship relates to technical and environmental terms as well as economic," he said, adding, "and then there is the need versus the necessity”.

Stylianos Mavrelos, technical director, of US-listed Capital Group considers taking energy efficiency related measures "is like taking a bet, you do not know how the future will develop regarding the price of bunkers and the price of [ship] assets". He also feels an eco-friendly ship may not mean a charter premium for the owner. "There is no doubt a well-maintained trading vessel could match the return of a newbuilding," said Mavrelos.

Indeed, as the 260 delegates representing 148 companies from nine countries spent eight hours debating the “retrofit challenge”, it became clear retrofit can be a complex option.

New York-listed Danaos Shipping has established teams to study all the options. "This is a must," said Danaos' deputy coo and technical director, Dimitris Vastarouchas. He noted emissions developed during the construction of a ship is "equal to 10 to 12 years of operation of the ship". "With this in mind an eco design must meet future market needs, not simply replace a ship," said Vastarouchas.

When looking at a retrofit, "one must not compare operational measures savings, such as reducing speed, with design or equipment measures savings," said Panos Zachariadis, technical director, Atlantic Bulk Carriers Management.

Some companies like MAN Diesel & Turbo and Mewis Duct developer Becker Marine Systems said owners are asking about financing for retrofits and their companies can help, especially with the model testing required as retrofits are individual-ship related. Both said if model tests do not produce the results predicted there would be no charge.

Delegates suggested a paying-as-you-go system depending on efficiency results achieved be introduced. As one delegate said: "Manufacturers are so confident about savings that will be achieved, payment can be made out of the savings.”

Zachariadis, who represents Greece at IMO, said energy saving retrofits, due to their fuel cost reducing potential, are easier for owners to self-finance, however, there is no financing available to install the very expensive regulation-mandated new equipment, such as BWTS and scrubbers, which are required simply to be allowed to continue trading. "Banks will simply not be seen as supplying equipment to owners. This may result in relatively new ships being scrapped rather than upgraded to meet regulation requirements," he said.

Stavros X. Hatzigrigoris, managing director of Maran Tankers Management and Maran Gas Maritime, said company experience showed, “most efficiency improvement methods have a reasonable pay back period” and “the more efficient vessels have a commercial advantage over less efficient ships”.

He said environmental protection is becoming ever more important, and emphasised “good planning is required” prior to investing and “accurate monitoring methods are necessary to measure any efficiency improvements”.

“For standard design ships delivered by quality yards in the late 2000’s the latest ‘eco’ ship designs offer an efficiency improvement of the order of 10%-15% for same speed,” he said the group had found. He concluded: “The ‘eco’ ships fuel consumption advantage can be reduced to around 5%-8% by retrofits and if  scrapping is not accelerated ‘eco’ design newbuildings should be ordered with extreme caution.”

Source from : Seatrade Global