August 7, 2006
NASSCO and USS finalize $1 billion tanker deal
General Dynamics NASSCO, a wholly owned subsidiary of General Dynamics (NYSE: GD), announced today that it has finalized a $1 billion contract with U.S. Shipping Partners L.P. (NYSE: USS ) to build nine product carrier tankers.
The contract includes options for five additional ships. Construction of the first tanker is scheduled to begin in the third quarter of 2007, with delivery to occur by the second quarter of 2009.
"NASSCO is the leading builder of U.S. Navy auxiliary ships and has delivered more Jones Act ships than any other shipyard in the country today," said Frederick J. Harris, president of General Dynamics NASSCO. "This contract is the largest commercial shipbuilding contract in NASSCO's history and positions this shipyard to remain the premier builder of Jones Act ships."
The 49,000 DWT product carrier tankers will be 183 meters (600.4 feet) in length and 32.2 meters (105.6 feet) in beam, with a design draft of 11.8 meters (38.7 feet). The ships are to be double hulled and will have a cargo capacity of 331,000 barrels.
"USS is committed to building and operating the largest, most technologically advanced deep water fleet in the United States," said Paul Gridley, chairman and CEO of U.S. Shipping Partners L.P. "These new ships will allow us to add the needed new capacity that the domestic energy market is demanding. "
USS operates a fleet of 10 deep sea vessels that carry refined petroleum and chemical products among customer facilities along the U.S. coast and has 5 double-hulled, articulated tug barges on order or under construction. The majority of the USS fleet is on long-term time charters or contracts of affreightment with major oil and chemical companies based in the United States.
Financing for the transaction is being provided by a joint venture among affiliates of the Blackstone Group; USS Product Carriers, a wholly owned subsidiary of USS; and other investors. Investment banking services were provided by Lehman Brothers and CIBC World Markets, with Sterling Investment Partners, a controlling partner of USS, providing advisory services negotiating and structuring the transaction.
The PC tankers are based on an existing design from DSEC, a wholly owned subsidiary of Daewoo Shipbuilding and Marine Engineering of Seoul, Korea. NASSCO entered into an agreement with DSEC last March to produce ships for the U.S. market under the Jones Act, in which DSEC will provide detail designs and services related to construction of the ships. All of the ships will be constructed at the NASSCO shipyard in San Diego.
Harris said, "The strategic alliance with DSEC facilitates our ability to build cost-efficient ships for the Jones Act market. We will utilize DSEC's proven designs and expertise to build these ships while continuing to introduce state-of-the-art technology into U.S. commercial and Navy shipbuilding."
The PCs are the second class of tankers NASSCO has been contracted to produce since 2000. NASSCO is scheduled to deliver its final double-hulled tanker to BP Shipping Company of Alaska on August 18, under a four-ship contract. By comparison, the BP tankers are 185,000 DWT, 287 meters (941 feet) in length, and have a capacity of about 1.3 million barrels.