March 17, 2006
Horizon to add new tonnage
Ship Finance International Limited (NYSE:SFL), whose largest shareholder is John Fredriksen's Hemen Holding, has entered into an agreement to acquire five newbuilding container vessels from various interests and will put the vessels on long term charter to Horizon Lines. Inc. (NYSE:HRZ)
The five sister vessels are being built at Hyundai Mipo in Korea and will be delivered over the course of six months commencing at the end of 2006. The 2,800 TEU vessels are capable of 23 knots service speed.
The vessels will enter into a long term bareboat charter with Horizon Lines and will operate under the U.S flag.
The five new vessels will be deployed in Horizon Lines' weekly service linking the U.S. West Coast with Guam and Asia, upgrading the current "TP1" service that is being served with five Jones Act-qualified vessels today.
The Jones Act covers ocean cargo services to and from Puerto Rico, Hawaii and Alaska, as well as cargo moving between other U.S. origin and destination ports, ensuring those cargoes are carried on U.S.-flag, U.S.-built and U.S.- manned vessels.
Charles G. (Chuck) Raymond, Horizon Lines' CEO and President, said, "The enhanced service will provide us with additional space and faster transit time between the U.S. West Coast and Guam, as well as the return voyage from Asia to the U.S. West Coast."
The move allows Horizon to redeploy Jones Act vessels from the TP1 service to its Hawaii and Puerto Rico routes.
It says this "will provide additional capacity and service scope to better meet the future needs of Horizon Lines' customers well into the future" and will also allow its Jones Act vessels "to be used as reserve capacity to meet seasonal and dry-dock needs, as well as to respond to potential new opportunities such as coastwise container services."
"Horizon Lines," says Raymond, "is focused on using capital efficient methods to enhance our service capabilities in our Jones Act markets while at the same time upgrading our service to Guam and Asia with assets that are more appropriate for those trades. This initiative is consistent with our tested strategy of obtaining new tonnage at appropriate costs for the trades we serve."
The five new vessels are anticipated to be deployed commencing in early 2007. As of July 2007, Horizon Lines plans to operate 17 active ships and to have four vessels in reserve status. The average age of the company's active vessel fleet will be 20 years at that time, which, it says, is "an industry standard."
"This transaction expands our footprint in the container sector where we already had two smaller feeder container vessels. The project is financed on an independent financial basis and gives a solid return on the equity and demonstrates the company's ability and commitment to grow beyond its initial business mix and diversify its client and asset base." said Tor Olav Troim, Chairman of SFL.