Philly Shipyard to start Hawaii shipping line and build four ships for it

Ships for start-up Jones Act operator will be the direct continuation of the Aloha Class series that Philly Shipyard is building for Matson Ships for start-up Jones Act operator will be the direct continuation of the Aloha Class series that Philly Shipyard is building for Matson

JUNE 8, 2017 — Philly Shipyard, Inc. (PSI), a wholly-owned subsidiary of Philly Shipyard ASA (Oslo: PHLY), says that it has initiated construction of up to four new, cost-effective and environmentally friendly containerships with deliveries in 2020 and 2021, and is actively promoting the formation of a new entrant into the containership trade between the U.S. mainland and Hawaii to operate these vessels.

Presently, says Philly Shipyard, "this trade route is serviced by only two carriers and is reliant in part on a group of near end-of-life steamships."

One of those carriers is, of course, Matson, for whom Philly Shipyard is currently building a series of two 3,600 TEU LNG-fueled Aloha class containerships, designed by KOMAC (Korea Maritime Consultants), with expected deliveries in 2018 and 2019.

The shipbuilder says that the four new ships it has now starting work on "will be the direct continuation of the [Aloha Class] series and that "the operational benefits offered by series production with familiar ships, coupled with its historical access to vessel financing, places PSI in an advantageous position to build vessels for a new cargo liner service between the U.S. mainland and Hawaii."

The shipbuilder says it has a successful track record of promoting the formation of new vessel owners in the Jones Act market, such as American Shipping Company and Philly Tankers.

It says it is presently engaged in advanced discussions with a major U.S. shipping operator about establishing a new, financially strong carrier with a fleet of modern vessels to be built by PSI to support commerce between the U.S. West Coast and Hawaii. Several prominent investors and lenders in the U.S. shipping market have expressed interest in taking part in this opportunity. In addition, a highly regarded maritime leasing company has issued an indicative offer with preliminary terms for a bareboat charter structure.

"We are excited to get started on building a new fleet of containerships for a new carrier in the Hawaii trade and are pleased to have received such positive feedback from well-known U.S. marine players and financing sources," remarked Steinar Nerbovik, Philly Shipyard's President & CEO. "Philly Shipyard has a strong track-record of building quality vessels for this trade, and we believe local communities can benefit greatly from the safe and reliable service provided by our modern, efficient and 'green' ships."

PSI has retained former senior U.S. shipping executives with significant experience in the Hawaii containership trade to assist with the initiative. These executives include John Keenan, who served in various key leadership roles at Horizon Lines, including as President and Chief Operating Officer from 2007-2011. Horizon Lines' Hawaii business was acquired by Pasha Hawai in 2015,

"When strict MARPOL/ECA emissions regulations take effect in 2020, several of the older steam powered vessels serving the Hawaii trade route today will be out of compliance without substantial, costly modifications," says PSI. "Even if these aging steamships are modified, they would be less reliable and carry significantly higher operating costs than modern vessels in areas such as fuel consumption and manning and maintenance requirements.

PSI says it believes these circumstances create a unique opportunity for a new Jones Act carrier to enter the Hawaii containership trade with a fleet of cost-efficient and eco-friendly container vessels built by PSI. It argues that unless these new ships enter the Hawaii trade route starting in 2020, local commerce may be adversely impacted by the new emissions standards.

For these reasons, PSI says,it has begun construction of a new fleet of containerships, with planned delivery dates for the first pair in 2020 and the second pair in 2021. In order to support this timetable, PSI has commenced design work and procurement activities. The vessels are being designed to address the present market trends for larger sized containers, faster transit times and LNG fuel. PSI has initiated placing orders and making financial commitments on long-lead items.

Philly Shipyard is listed on the Oslo Stock Exchange and is majority-owned by Aker Capital AS, which in turn is wholly-owned by Aker ASA. Aker is a Norwegian industrial investment company that creates value through active ownership. Aker's investment portfolio is concentrated on key Norwegian industries that are international in scope: oil and gas, fisheries and biotechnology, and marine assets. Aker's industrial holdings comprise ownership interests in Aker Solutions, Kvaerner, Aker BP, Aker BioMarine, Ocean Yield and Akastor.

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