Edda Fides, image: GIBDOCK

The Norwegian-owned offshore accommodation vessel, Edda Fides, one of the most advanced and sophisticated vessels of its type in the world, has been dry-docked at Gibdock in Gibraltar for a week-long package of work at the yard.

The ‘floatel’, owned by Østensjø Rederi, arrived at Gibdock on April 2nd and was docked the following day. The main scope of work involved disconnecting and lowering the starboard aft Voith Thruster and renewing the main thruster seal.

Edda Fides has a unique monohull form to enable the positioning of the accommodation forward and the Voith thrusters to the stern. The design is reckoned to achieve a 20% reduction in fuel and emissions compared with previous vessels of this type. Docking required Gibdock to set up a special block arrangement to accommodate the vessel.

Gibdock Production Director, John Taylor says: “This was a project with a very tight time deadline and replacing the thruster seal involved our own fitters and Voith Schneider technicians working together round the clock and throughout the Easter break. The project also required the deployment of Gibdock welders and steel workers to fabricate and install steel support guides onto the hull to lower the thruster unit safely from the vessel.” All the required lifting equipment was supplied by the yard.

Built by the HJ Barreras shipyard in Vigo and delivered in 2011 at an estimated cost of €150 million, the 130m long, 7,500dwt Edda Fides has accommodation for 600 persons onboard and features some groundbreaking technology intended to revolutionise the offshore accommodation sector. This includes a DP3 positioning system combined with Voith Schneider propellers, and a heave compensated gangway.

The floatel offers 177 cabins with a comfort class equivalent to cruise ships and is marketed by Edda Accommodation, a division of the Østensjø group, and has been deployed in the North Sea region as well as offshore eastern Spain.

Other work required during docking included comprehensive hull washing, the removal and refitting of 69 sea chest grids for cleaning and painting and the installation of 500m of cabling in the area around the engine room, emergency generators and main engine fans.

Gibdock also carried out a load test on the ship’s crane, installed stainless steel bypass lines for the sanitation supply system, flushing lines for the food waste disposal system, and

various items of galley equipment. In addition the yard surveyed the lifeboats and davits onboard to ensure compliance with safety standards. The work was completed on schedule.

“In general we still see growth in the cruise and offshore sectors, with new opportunities for Gibdock in fabrication and rigs to add to our existing repair and conversion work,” said Richard Beards, Gibdock Commercial Director.

“Edda Fides is a high quality, top end vessel, and Østensjø elected to come to a high quality yard. This is further evidence of the confidence that offshore vessel owners have in Gibdock.”

Mr Beards highlighted the recent arrival of the semi-submersible Etesco Millennium, which underwent initial steelwork while tank cleaning for and further work is anticipated. Other recent offshore projects have included work for Heerema (barge work to support work on the semi-submersible Balder J), Bourbon (Bourbon Borgstein), Boa Offshore (Boa Galatea), and Solstad Offshore (Normand Cutter and Normand Vester).

Mirabella V

To some gCaptain readers, the superyacht market may be an alien world, however, over the last ten years, this niche industry has exploded. With dedicated, professional teams in place globally, every aspect of their creation, management and running is professionally catered for. Indeed, many naval and merchant mariners have made the leap to the superyacht sector in these burgeoning years as demand grows for specialists in larger and larger vessels.

Whilst by no means the largest fleet on the seas (4,472 vessels over 30m with a further 404 currently in build at the time of writing*) and by no means the largest vessels (the largest, motoryacht Eclipse sits at 162.5m LOA*) they still remain awe-inspiring and stunning when seen in the flesh. Despite this volume, there are a number of iconic superyachts that stand apart from the rest of the fleet. At 72.5m, M5 (ex-Mirabella V) is officially the world’s largest sloop and resides in this pantheon of greats.

Only five years since her last refit at Compositeworks, M5 returns to port for a new substantial refit, this time at Pendennis Plus in the UK, days after the 62.2m motoryacht Virginian leaves the Falmouth facilities.

Mirabella V, image courtesy Pendennis Shipyard

The refit will see the removal of her 90m mast before she docks continuing with the redesign and extension of her stern by 3m, and the installation of a side-boarding platform, all steered by her original naval architect, Ron Holland. Another UK-based company, Green Marine, who will be supported by structural engineers High Modulus Europe Ltd, will undertake the structural fabrication of the composite stern.

The engineering work will see the replacement of M5’s main engines, generators, switchboards and sewage treatment plant, as well as the upgrade of the air conditioning system, electrics and entertainment system, all of which will be complemented by a 10-year DNB survey.

The main structural aspects of the refit, estimated to last 12months, will conclude with a full hull repaint with mast and rig overhaul.

Originally built in 2004 by VT Shipbuilding in the UK, M5’s refit marks a return to the British Isles and its artisan expertise for this super-sloop; indeed several British and Irish companies were shortlisted and commissioned for the refit.  Amongst them interior designers Redman Whiteley Dixon (RWD), hot on the heels of the delivery of their latest project, 96m motoryacht Vava II.

“We are very proud to have been selected to complete the refit of such an iconic sailing yacht,” said Managing Director of Pendennis Plus, Stephen Hills. “It is through projects such as this that the superyacht industry in the UK, including our yard in Falmouth, continues to enhance its world-class reputation for exceptional build quality, design, finish and engineering.”

“The team assembled for the works are testament to the quality of the workforce and facilities available in the UK,” continued the superyacht’s captain, Rocka Romke, before concluding: “Both Pendennis plus and RWD have established reputations as being among the best in their fields, with experience in both the large yacht and sailing yacht sectors. I believe the collaboration between these parties will elevate M5 to be one of the most impressive and original sailing yachts in the world, in both structure and style.”

M5 sits at 75.2m (246.7ft) Length Overall

60.96m (200ft) Length at the Waterline

14.81m (48.6ft) Beam

10.36m (34ft) Max Draft

3700 metre-squared Sail Area

90m (300ft) Air Draft

In collaboration and with thanks to SuperyachtNews.com

* Fleet and vessel specifications courtesy of SuperyachtIntelligence.com

According to China’s state-owned news company, Xinhua, 4 workers have died following a boiler explosion on board a bulk carrier at the Zijinshan Shipyard in Nanjing this past Friday night.

The ship was nearly ready to be handed over to the shipowner, China Changjiang National Shipping, when the blast occurred.

According to a statement by the shipyard, “of the 12 shipyard workers who were admitted to a hospital, two slightly injured have been discharged and the rest are still under emergency medical treatment.”

Husky SeaRose FPSO

Harland and Wolff Heavy Industries Ltd (H&W) has been awarded the contract for the drydocking and service of the SeaRose Floating Production Storage and Offloading (FPSO) vessel.

The 272-metre long, 46-metre wide SeaRose FPSO is located at the White Rose oil field, 350km off the Newfoundland coast, operated by Husky Oil.

H&W will dedicate its smaller 335m x 50m Belfast Repair Dock and 432m Repair Quay to the project during May and June 2012.   This intense period of activity will be preceded by a dedicated team planning and co-ordinating all activities, starting immediately.   The integrated project team will be made up of owner and H&W personnel along with key contractors and vendors.

”H&W, along with our key contractors, are pleased to have secured the SeaRose FPSO project and to demonstrate the capabilities of the UK Oil & Gas supply chain,” said H&W Project Manager James Lappin.  “This is an important opportunity, not only for H&W but for Northern Ireland, to extend a welcome to our Canadian visitors and demonstrate our world class facilities.”

“We are proud that they have put their trust in us,” H&W Chief Executive Officer Robert J Cooper said.   “All levels of H&W are committed to ensuring this important project is completed safely and successfully.”

Harland and Wolff was founded over 150 years ago in Belfast, Northern Ireland and has built some of the world’s most famous ships, including three from the White Star Line: the Olympic, Titanic, and the Britannic.  In recent years however, their business, like many others in the shipbuilding world, has evolved to include renewable energy projects such as offshore wind farm and tidal turbine construction.

Jag Lalit, a 158k DWT tanker owned by Great Eastern Shipping, image courtesy GESCO

Hyundai Heavy Industries, the world’s biggest shipbuilder, hailed the New Year by naming two 318,000 DWT VLCC (Very Large Crude Oil Carrier) for an Indian shipping line, Great Eastern Shipping Company (GESCO) today.

In the simultaneous naming ceremony, the vessels were named Maneklal Ujamshi Sheth and Ardeshir HBhiwandiwalla, after the former owner and the founder of GESCO respectively. Maneklal Ujamshi Sheth was delivered today and Ardeshir HBhiwandiwalla is scheduled to be delivered in the middle of February this year.

GESCO’s current fleet stands at 34 vessels, comprising 24 tankers (9 crude carriers, 14 product carriers, 1 LPG carrier) and 10 dry bulk carriers (1 Capesize, 3 Kamsarmax, 1 Panamax, 4 Supramax, 1 Handymax) with an average age of 8.9 years aggregating 2.62 mn dwt.

Starting with the ships featuring 319m in length, 60m in width, and 30m in depth with service speed of 16.3 knots, Hyundai Heavy plans to deliver 93 ships this year.

Meanwhile, Hyundai Heavy is aiming to secure new orders worth USD 30.6 billion in 2012, 19.6% up from a year earlier and sales of KRW 27.6 trillion (USD 23.9 billion), 9.5% up from last year.

The Ormonde Wind Farm is a wind farm west of Barrow-in-Furness in the Irish Sea. Image courtesy OWEC Tower

Singapore’s Keppel Corporation declared their intentions today to diversify their shipbuilding business portfolio and branch out into the wind energy industry.  For about NOK 61 million, KV Ventus B.V., a wholly-owned subsidiary of Keppel, entered into an agreement to acquire a 49.9% stake in offshore wind turbine foundation designer OWEC Tower (AS).

This plan comes a few months after Korean shipbuilder, DSME, announced similar intentions in the proposed acquisition of German wind turbine manufacturer, Bard Holding GmBH.

OWEC Tower, headquartered in Norway, is a leader in the design and engineering of offshore wind turbine foundations. The company has developed a proprietary jacket foundation design known as OWEC Quattropod, which is currently the only proven jacket design in the market. The OWEC Quattropod design separates and optimises the piling and jacket installation process, resulting in reduced installation costs and faster project delivery.

With the aim of getting a slice of the offshore wind foundation business, this investment will enable Keppel Offshore & Marine to tap on OWEC Tower’s expertise to further develop its business in the design and construction of offshore wind turbine foundations as well as installation and support vessels thereby providing value-added solutions to its customers.

Mr Michael Chia, Director of Group Strategy and Development at Keppel said in their press release:

“We are seeing offshore wind energy rapidly gaining traction around the world and a large number of offshore wind farms are under construction and planning. This will result in a huge increase in demand for foundation structures. With OWEC Tower’s leading design in this segment, our partnership puts us in the ideal position to capture a share of this market.

As offshore wind farms move into deeper waters with bigger capacity turbines, a large number of jacket foundations will be required. With our experience and expertise as a leading rig builder, we see good potential in supporting OWEC Tower to meet this demand in a cost-effective and reliable manner. Together with our proprietary designs for offshore wind turbine and foundation installers, we are confident of further enhancing our suite of solutions for the offshore wind industry.”

To-date, OWEC Tower is the only company with a track record of having its jacket foundation design installed for offshore wind farms. Projects include the Beatrice pilot test off the coast of Scotland, the German pilot project Alpha Ventus, Ormonde wind farm in the UK, and the Belgian Thornton Bank project.

Europe is currently the leader in offshore wind energy. According to the European Wind Energy Association (EWEA), at the end of 2010, Europe had 1,136 offshore wind turbines installed and connected to the grid on 45 wind farms in nine countries. In total, these have a power capacity of 2.9 GW and can produce 11.5TWh of electricity in a normal year.

Offshore wind will become increasingly important as European countries move towards renewable energy. EWEA has set a target of 40 GW installed by 2020 and 150 GW by 2030. The huge number of offshore wind farms under construction and planning will result in a corresponding demand for foundation structures. Investments in offshore wind farms in Europe alone are projected at €209 billion from 2010-20.

Executives of publicly traded shipping and offshore drilling companies have a legal duty to act in the interest of the shareholders of their respective organizations.

To fulfill this duty, executives and their financial managers must identify and undertake honest and ethical investment opportunities that offer a greater investment return than shareholders would otherwise be able to make in the open financial markets for the same level of risk.

To put it bluntly, if company management doesn’t produce enough growth for investors, the investors may decide to entrust their money elsewhere and the company’s stock price will fall.

When it comes to creating growth within shipping and offshore drilling companies, financial managers typically have two options. They can either build a new vessel or acquire an existing vessel from another company.

This article looks at the financial analysis used by drilling companies when determining whether or not it makes sense “financially” to build a brand new drilling rig.

For our case study, we’ll need to consider estimated construction costs, operating expenses and revenues of a state-of-the-art $800 million 6th generation drillship.  We’ll also assume the ship will have a service life of 20 years.

The Opportunity Cost of Capital:

The first step in our decision of whether or not to build a new ship is to consider the “opportunity cost of capital“.

We’re all familiar with the expression “a dollar today is worth more than a dollar tomorrow”. If you had the choice of $10,000 today or $10,000 a year from now, which option would you rather have?

If you’re like most people you’d probably opt for $10,000 today. If for no other reason, you could put the money in a bank account and earn interest on it for the year.

The opportunity cost of capital is a business term that places a value on exactly how much more a dollar is worth today vs. a dollar a year from now (expressed as a percentage). In the example above, we chose to collect the $10,000 today vs. waiting a year to collect it.

Had we instead waited a year to collect the same $10,000 we would have lost out on the interest of investing that money in bank savings account. If the bank was paying 2% interest, that 2% represents our opportunity cost of capital.

In other words, it cost us 2% of our capital (the $10,000 that was owed to us)  deciding to wait a whole year to get paid.

The concept of the “opportunity cost of capital” helps financial managers analyze investment options and cashflows on an “apples to apples” basis vs. comparing money received in one time period to money received in another time period.  As you’ll see in a bit, we’ll use this principle when determining the economic viability of our hypothetical drillship project.

In this particular case, we’ll assume that the opportunity cost of capital for building a new drillship is 10%. In other words, the shipping company is expecting to earn at least a 10% return on their investment in a new drillship or else they may as well invest the money in stocks and bonds of similar risk to save the hassle of managing a shipyard project.

Understanding “Net Present Value”

With our opportunity cost of capital determined, we can then “discount” all projected future cashflows (revenue minus expenses) to find the value in today’s dollars of what our drillship investment will “earn” us in the future. The value of the project in “today’s” dollars is also called the “Net Present Value” or “NPV” of the investment.

For example, lets say the opportunity cost of capital for the $10,000 we talked about above was 10% and we wouldn’t receive the $10,000 until the end of 5 years. How much is $10,000 at 10% interest 5 years down the road worth today? To calculated this we simply divide the “principle”, which in this case is the $10,000, by (1.10)^5.

In this simple example, $10,000 at 10% opportunity cost of capital paid 5 years from now is “only” worth $6,209.

Getting back to our drillship example, to calculate the “Net Present Value” of our project, we need to estimate the annual (sometimes called “incremental”) cashflows for each of the 20 years the ship is in operation and then “convert” these cashflows to today’s dollars using the NPV formula we used in the example above.

Remember, we had to cough up $800 million to build our drillship, so the goal here is for the “net present value” of all future cashflow from operating the ship to be greater than $800 million. If the “net present” value of our ship building project is negative (including the cost of the ship) then we are better off foregoing the project and investing the $800 million in something else.

Hopefully I haven’t confused you too badly up to this point, but don’t worry if I have!  To bring the whole picture together, I’ve created some simple spreadsheets in Excel (below) to help illustrate the entire process.

Projected Expenses:

Now that the drilling company has agreed on an appropriate “opportunity cost of capital”, the company must consider the projected expenses of operating the drillship over its 20 year service life. To keep things relatively simple, I have broken these costs down into 3 categories:

Construction Costs: Let’s assume that the drilling company is paying cash for the construction of the new drillship with $400 million being paid at the start of the project and the remaining $400 million paid at the beginning of the next year (we’ll assume a two-year construction period).

Operating Costs: As you can probably imagine, the yearly operating costs for a 6th generation drillship can add up quickly. Between crew salaries, general maintenance, repairs, - “support” staff, consumables and other daily operating expenses, drilling companies spend tens of millions a year operating each one of their drilling units.

In this example, I have estimated operating costs to be $47 million the first year the vessel is in operation. I have also decided to increased these operating costs 3% each year to take into account inflation.

Drydock Costs: Whether or not the shipping company will be able to get their new drillship into a dry dock or not is another question, but regardless, money will need to be budgeted for major service upgrades every 5 years. In this particular example, I decided to include a $5 million upgrade at the 5 year mark, $35 million upgrade during the 10th year dry dock service, and $10 million upgrade at the 15 year mark to keep the vessel among the most capable in the industry.

The following Excel sheet captures these costs:

Projected Revenue:

The market for 5th and 6th generation rigs is still very strong and new-build 6th generation drillships are still commanding $500,000 day rates. Hypothetically, lets assume that our fictitious drilling company scored a 10 year contract at $500,000 per day.

Let’s also assume that the drilling company could operate the vessel with a revenue efficiency of 93% (less than 7% downtime). This would result in projected annual revenues of $169,725,000 for the first 10 years.

Let’s also consider that the vessel will score a 10 year contract extension (at the end of the current contract) only this time at $657,500 per day. At the same revenue efficiency of 93% this will amount to a projected annual revenue stream of $223,200,000 per year (for the final ten years of the vessel’s “life”).

The projected revenue over the “life” of our fictitious drillship is included in the table below. I have also included the “cashflow” from each year which is simply the revenues from that particular year minus the yearly operating expenses from the Excel sheet above:

Using the NPV formula I mentioned above, I programmed the Excel sheet to calculate the NPV of the estimated cashflows for each year of the ship’s projected life. This NPV is the “converted” value of the cashflows in “today’s dollars”. As you’ll see in the total at the bottom of the spreadsheet, the value of the opportunity to invest in the new drillship is over $200 million dollars!

In other words, the investment in building the new drillship (based on our very basic assumptions) is worth $200 million more to shareholders over and above the “opportunity cost of capital”.  That is the growth and value shareholders are looking for.

Although our example drillship, contract, and expense and revenue projections are all fictitious, the principles remain the same. The promise of “riches” is why we’ve seen virtually every drilling company in the world expand the size of their ultra-deepwater drilling fleets with aggressive new-build programs.

We’ve even seen companies with virtually no connection to the oil and gas industry commission new-build drillships on “spec”.

Demand is still strong for these vessels but as more and more are built on “speculation” and enter the market, day rates will inevitably come down and the promise of “huge” investment returns (like those we just calculated) will likely disappear.

The deckhouse for DDG 1000, the first Zumwalt-class destroyer, is currently under construction at Ingalls Shipbuilding's Composite Center of Excellence in Gulfport, Miss. (image courtesy HII)

PASCAGOULA, Miss., Dec. 2, 2011 (GLOBE NEWSWIRE) — Huntington Ingalls Industries (NYSE:HII) today announced that the company’s Ingalls Shipbuilding division has been awarded an advance procurement contract for work on the U.S. Navy’s third Zumwalt-class destroyer, DDG 1002. The contract is valued at $46 million, with the majority of the work taking place at the company’s Composite Center of Excellence in Gulfport.

“Strategically, this is a very important contract to our company and specifically to the composite shipbuilders working in Gulfport,” said Karrie Trauth, Ingalls Shipbuilding’s DDG 1000 program manager. “The Gulfport facility is a national asset in terms of composite capability and capacity. Our shipbuilders continue to prove this on a daily basis with the significant work they are performing in composites for U.S. Navy shipbuilding programs. With this funding, we can prepare our facility and provide the necessary resources for our talented shipbuilders to continue working on these complex products.”

The funding for this contract allows Ingalls to purchase material and equipment in support of DDG 1002 advanced construction activities, as well as provide engineering and production support services. Ingalls is already building the deckhouse, hangar and peripheral vertical launch systems for DDG 1000 and DDG 1001.

The deckhouse for DDG 1000 is expected to be delivered in the second quarter of 2012.

The Ingalls Composite Center of Excellence is home to the world’s largest numerically controlled, five-axis saw capable of sawing, drilling and milling very large composite components to highly accurate tolerances. Located on 125 acres with access to water, rail and highway transportation links, the center has more than 322,000 square feet of manufacturing space (5.6 football fields) with 253,000 square feet (4.5 football fields) that is environmentally controlled. It has the only U.S. Department of Labor Composite Apprentice Program and is a certified OSHA Voluntary Protection Program (VPP) Star Site.

Huntington Ingalls Industries (HII) designs, builds and maintains nuclear and non-nuclear ships for the U.S. Navy and Coast Guard and provides after-market services for military ships around the globe. For more than a century, HII has built more ships in more ship classes than any other U.S. naval shipbuilder. Employing nearly 38,000 in Virginia, Mississippi, Louisiana and California, its primary business divisions are Newport News Shipbuilding and Ingalls Shipbuilding.

Ms. Kim giving a victory wave from her crane.

Occupy Wall Street has grabbed the headlines but momentum is slowing and their message is falling on deaf ears in Washington. Maybe they would be more effective if they took lessons from the maritime world on how to conduct a  protest. And to that end gCaptain has found the perfect teacher; Ms. Kim a shipyard worker who’s fortitude is producing results in South Korea. :

A solo protest that lasts 309 days is rare but Kim Jin-suk did it atop a 115 foot high crane with no access to basic necessities like running water – and it finally ended on Thursday.

Ms. Kim, a labor activist and former employee at the Busan-based Hanjin Heavy, came down from the crane after union workers accepted an offer from the shipyard’s management to rehire 94 workers who were laid off last year. The workers will also receive some compensation.

Her protest attracted attention in and out of the country. Supporters portrayed her as a martyr of the unemployed and less privileged. Hanjin criticized her for sabotaging their operations by occupying the crane “illegally” since she had been fired from the company more than 20 years ago.

Labor leaders and politicians rallied to her cause, visiting the shipyard, and other labor groups staged “Bus of Hope” protests outside the shipyard, in which several thousand people were bused to Busan for rallies.

Ms. Kim kept in touch via cellphone, sending Twitter messages to more than 27,000 followers.

The saga started in December last year, when Hanjin workers walked out in protest against the planned layoff of 400 workers, and the company, in turn, closed the shipyard. On Jan. 6, Ms. Kim started her crane-top protest.

“I knew I would come down alive. I could endure this because of you and (fellow) unionists. You saved me,” she said when she climbed down on Thursday. She was then taken to a nearby hospital for medical check-up.

Before coming down, though, Ms. Kim told a radio station that she’s worried that Hanjin won’t carry out its promise to rehire the 94 workers.

Ms.Kim’s protest underscored a difficult reality for companies in Korea: it’s hard to fire people no matter how bad business is going. After the onset of the global economic crisis in 2008, Hanjin went for nearly three years without getting any new orders for ships. It reported a net loss of 51.7 billion won, or about $45 million, last year.

By John Konrad, gCaptain International and Jaeyeon Woo, Dow Jones Asia

The World cruise ship, moored in Israel earlier this week.

South Korea has been trying for years to boost its tourism industry as part of its effort to strengthen the domestic economy. On Wednesday, it unveiled its latest plan: getting into the cruise ship business.

The plan includes tax benefits for cruise ship operators and training programs for workers who will be employed by the industry, as well as a green light for on-board casinos for foreigners.

The initiative comes amid expectations that Chinese tourists—who are already a key source of income for Korea’s relatively small tourism and retail industry–will boost demand for cruise tourism in Asia in coming years.

Korea doesn’t have a local cruise ship operator yet, but the government hopes that changes in regulations will allow the industry to develop.

The plan also includes increased terminal and port capacity to accommodate a greater influx of cruise ship tourists. Korea now has just two ports for cruise ships, one in the southern port city of Busan and another at Jeju island, but the government aims to build up or expand dedicated terminals in existing ports as well as in other areas like Incheon and Yeosu on the southwest coast.

It remains to be seen whether a domestic cruising industry will spring up (if it does, surely only the hardiest travelers would be interested in chugging around Korea’s coastline during the frigid winter months).

But the plan highlights the need for South Korea to do more to boost its relatively poor infrastructure for tourists and make its economy more resilient to the ebbs and flows of global trade.

By Se Young Lee, Copyright 2011 Dow Jones