July 27, 2010
Rand Logistics to repower Lakes steamship
Rand Logistics, Inc. (Nasdaq:RLOG) today announced the planned repowering of one of its Canadian-flagged Great Lakes vessels with a new, highly automated emissions compliant power plant.
Rand will be converting its last steam powered vessel, the 1952-built SS Michipicoten, to diesel power, consistent with the engine replacement completed on the 1953-built steamship Saginaw in 2008. The company expects to take the vessel out of service in December 2010 and have it fully operational in the spring of 2011.
Based on the actual results from the Saginaw repowering, which was completed in June 2008, the project, which is estimated to cost approximately U.S. $15 million, is expected to generate an annual return on invested funds in the mid teens. The benefits of the conversion include increased revenues from higher speeds and lower costs from reduced fuel consumption, labor, maintenance and other operating expenses.
Rand has received a commitment from its lenders to amend its existing credit agreement to provide for an additional CDN $20 million of term debt to complete the engine repowering project and other capital expenditures. Including this project, since the acquisition of Lower Lakes Towing by Rand, the company has invested more than U.S. $100 million in fleet expansion, life extension and operating improvement projects.
Laurence S. Levy, Chairman and CEO of Rand, stated, "The Michipicoten upgrade will significantly improve the vessel's performance and boost its margin contribution to our overall results. This project demonstrates our continued commitment to making investments in our fleet to provide the best available service to our customers. Based on the actions announced today, we believe that commencing with the launch of the repowered Michipicoten in the spring of 2011, Rand should generate approximately $0.90 to $1.00 of free cash flow per share per year, assuming no drastic deterioration in economic conditions."