Funding issues of Ballast Water Treatment systems

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  • 14/12/2016
MARSTRAT cargo harbour

Raymond Ko - Marstrat - Ship FinanceOn December 8 the Royal Association of Dutch Shipowners (KVNR) organised a seminar in Amersfoort (NL) on issues connected with the recently ratified international ballast water convention. Marstrat’s financial specialist Raymond Ko was asked to share his vision on funding issues connected with installing Ballast Water Treatment systems into existing ships. Other topics included legislative and operational impact of the convention, that come into force in September 2017.

Some 90 shipowners and associated KVNR members attended the session and held good discussions on regulations and technical solutions that are available. Installation of such solutions on an existing vessel is a huge investment, ranging from $  300,000 for small ships to $ 1,000,000 plus for large ships. A substantial investment, especially now that liquidity is under pressure due to continuing challenging economic times for shipowners. It is expected that most owners, especially smaller and medium-sized companies are going to bring forward special surveys before September 8, 2017. By doing so the vessels are compliant until the next obligatory class survey. In other words, it postpones investments and keeps them in the clear for another five years.

Raymond proposed shipowners to actively deal with this challenge instead of pushing decisions forward. They should engage and involve multiple parties like shipyards, suppliers and banks. “From a credit perspective banks might not see valid reasons to leverage further on a vessel, especially in this market, they have clear interest in their security vessels being compliant and therefore marketable.” Raymond explains. Additionally banks have an interest to support sustainable shipping. A combination of funding can be a solution when coordinated well: bank facility increase, seller’s credit and owners funds. Subsidies and guarantee schemes (such as EIB) were discussed as well but have proven challenging in the past given availability and size, even for the stronger owners.

Please contact Raymond Ko if you would like to share thoughts or seek advise.