More scrubber orders and finance deals announced by owners

Malcolm Latarche
Malcolm Latarche
ShipInsight

02 November 2018


Two more owners have announced new orders for scrubbing systems to meet the 2020 sulphur cap, adding to the rapidly expanding list of orders made this year.

Tanker operator Frontline announced yesterday that it has ordered scrubbers for a further 12 vessels from Feen Marine Scrubbers following the Company's previously announced commitment to order six systems with additional fixed price options from Feen Marine and its acquisition of a 20% ownership interest in the system maker in June 2018. In total, Frontline has thus far committed to install 20 scrubbers, including two being installed on the newbuilding VLCCs Front Discovery and Front Defender.

Robert Hvide Macleod, CEO of Frontline Management said, "Backed by the ongoing commitment and support from Frontline's largest shareholder, we have taken significant steps to modernize our fleet, decreasing the average age of our owned vessels to 4.7 years. Following the committed installations, over 40% of our owned fleet will be equipped with scrubbers. Notably, the majority of these installations will be performed prior to 2020, when new sulphur emissions compliance requirements go into effect. Further installations will be considered, and we are uniquely positioned to access scrubber capacity from Feen Marine. We believe our actions will position the Company to generate significant earnings for our shareholders."

The second owner to commit to scrubbers is Greece-based bulker operator Seanergy Maritime Holdings.

Seanergy announced that it has entered into commercial agreements for the installation of scrubbers on five of its capesize bulk carriers before the 2020 deadline. Upon completion of the installations

scheduled for Q2 and Q3 2019, the vessels will commence index linked period employment with three

leading dry-bulk charterers ranging in durations between three and five years.

The company has secured the scrubber equipment from Hyundai Materials and has reserved retrofitting slots at an experienced dry-dock facility in China. The total investment, to be covered by the charterers, is expected to exceed $12.5 million, including equipment and installation costs.

Stamatis Tsantanis, the Company’s Chairman & Chief Executive Officer, said, “We are very excited to announce these commercial agreements which should result in approximately $12.5 million accretion in our NAV. We believe that the significant investment that will be implemented in full cooperation with our charterers represents a balanced and comprehensive approach towards the new environmental regulations. Seanergy was one of the first Greek dry-bulk companies to conclude a feasibility study on scrubbers, in cooperation with the US class society ABS”.

Revealing details of the arrangement with it’s the time charterers, Tsantanis said “This significant investment by our charterers, in combination with innovative charter agreements, is expected to increase the market value of the subject vessels without our Company incurring additional debt or diluting our shareholders. It is important to further note that the underlying time-charters are index linked, maximizing Seanergy’s exposure to the positive fundamentals and outlook of the Capesize market. Moreover, through profit sharing agreements calculated on the spread between high and low sulfur fuel, we believe we will be able to capitalize on short-term distortions in the bunker market. We aim to complete the installations of the scrubbers during 2019 before the IMO 2020 regulations come into force. Finally, upon implementation of the new IMO regulations, all of Seanergy’s fleet will be fully compliant with the new rules.”

The daily hire on all the agreements is index-linked rate based on the 5-routes T/C average of the

Baltic Exchange Capesize Index (BCI). As part of the time charter agreements, the charterers will cover 100% of the equipment and installation cost for retrofitting the vessels with scrubbers. On top of the daily hire, Seanergy will receive an additional compensation based on the spread between the price of High Sulphur Fuel Oil and the price of Marine Gas Oil or other IMO-compliant and ISO certified Low Sulphur Fuel Oil throughout the term of the time charters.

Image Courtesy of the VDL Groep.