2017 Sep 22

Chinese yards set for passenger ship order bonanza

The business model involved in SunStone Ships’ newbuild contracts and partnerships elsewhere with European companies is set to open doors for many more Chinese shipyard cruise and ferry contracts

Chinese shipyards’ entry into building cruise ships and ferries is being aided by an innovative business model that helps shipowners place contracts for newbuilds in that country – in addition the support of European ship designers and suppliers is boosting their work in this area.

Tillberg & Reyes Group president Carlos Reyes and general manager Andrew Zhang, brokered SunStone Ships’ contract with China Merchants Industry Holdings (CMIH) using a business model and resources that they (Mr Reyes and Mr Zhang) put together and, in the process, created Tillberg & Reyes Financial Leasing. The company is also involved in the Viking Line newbuild construction at China’s Xiamen Shipbuilding Industry (see box) by supporting the shipyard in the process of building the ferry.

Mr Reyes told Passenger Ship Technology: “We found great support from the shipyard to develop a passenger ship business and building model. The fact that the shipyard does not have experience building passenger vessels is a major obstacle for an owner to make the decision to build in China.” He added that the various aspects of the business and the building had to be supported by a comprehensive plan that provides enough confidence to the owner. This provides them with confidence by organising the financial terms for them and by acting as a middle man between shipowner and yard as well as involving the support of companies in Europe and the US.

Mr Reyes’ business model includes along with what he called innovative supportive financial tools. “We had to create a financial model that was not only attractive in terms of price but, more important, extremely attractive in terms of finance,” he said.

It combines components from different financial models, he said, including a tool often used in real estate development in Colombia, where he was born. All components support each other to achieve an attractive finance package, he explained.

His model makes use of the differences in the common financial practices in different regions. For example, he said, in many countries in Europe the usual maturity term of a loan is 12 years with a down payment of at least 20%. But China is not bound by the same financial regulations; there, a loan could stretch from 12 to 15 years and the 20% payment is not mandatory, he said.

Mr Reyes and Mr Zhang are using their business model to broker more deals between western passenger ship operators and Chinese shipyards and were already in negotiations with other cruise operators at the time of writing in early September.

“China has developed tremendously in terms of shipbuilding and [its yards] are very keen to enter the passenger ship market,” Mr Reyes said. “We are very happy to help integrate resources and they see us as a valuable [support]. It is a difficult business and there will be issues, some of which our model can resolve.”

Mr Reyes decided to launch the model within the expedition cruise sector. He explained: “At the beginning, several processes and ways to execute and control a project will need to be implemented and this size of vessel is less risky and more controllable than [starting] by building large cruise ships, at least for now.”

International elements

An important part of the model is that European and US companies are involved in the newbuilding. CMIH has entered into an agreement with Norway’s Ulstein Design & Solutions, which will supply the vessel’s design and equipment package, as well as the supervision for the building of the vessels.

CMIH has also entered into an agreement with Mäkinen of Finland, which is providing the whole turnkey package for the hotel parts of SunStone Ships’ new expedition cruise ships. Their interior design will be done by US-based Tomas Tillberg Design International, with whom SunStone has worked with for many years.

SunStone Ships chief executive officer Niels-Eric Lund told Passenger Ship Technology that it was important for the cruise company to involve European and US companies. “We decided when negotiating with the yard that we wanted a technical company involved from Europe, so chose Ulstein. They have supervised the building of 45 ships in China so they have knowledge of building in this country.”

Furthermore, the equipment that Ulstein will be installing comes from European suppliers. “We are building a European quality ship that is being assembled in China,” Mr Lund said. “The Chinese do not yet have the experience, yet they want to learn how to build cruise ships and we are transferring that expertise over a period of time from Europe to China.”

“We had to create a financial model that was not only attractive in terms of price, but more important, extremely attractive in terms of finance” Carlos Reyes (Tillberg & Reyes Group)
An example is that Mäkinen will establish a cabin assembly plant and interior workshop at the shipyard’s facilities to make the construction easier. Establishing this factory enables the Chinese yard to learn from Mäkinen about assembling cabins and means that more of the work for SunStone’s future newbuilds can take place in China without having to prefabricate cabins in Europe and ship them to China.

Mäkinen’s contract spans the cabins, public areas, galleys, pantries and crew areas and is based on a very strong relationship with SunStone Ships. Mäkinen has refurbished many of the previous ships in SunStone’s fleet. Mäkinen CEO Sameli Lahdesmaki told Passenger Ship Technology “The cooperation has started really well and I have a strong belief that it will be a very successful project.”

He singled out some of the main challenges of working with a Chinese shipyard that has not built passenger vessels before. “It is a learning curve for all parties,” he said. Mäkinen is sourcing as much of the raw materials in China as possible. “Good quality basic materials are available in China and we are buying as much as possible there because of transportation costs and time,” Mr Lahdesmaki said. An example is that certain electrical and air conditioning components will come from Europe.

Other priorities and considerations for Mäkinen include ensuring that the interiors are built for polar conditions. For example, windows must have high insulation capability and lockers need to be built to lockers need to be built to store the parkas, boots and other equipment that passengers use to go out on.

Commenting on the benefits of using Mäkinen, Mr Lahdesmaki said “Our strong experience in newbuild and refurbishment and the fact that we have worked on the refurbishment of SunStone expedition vessels before means we know really well the quality of standards needed.”

The cruise expedition sector is a market that Mäkinen is keen to focus on. “There is a big trend in the cruise expedition market and we are interested in getting heavily involved,” Mr Lahdesmaki said.

Deltamarin reveals Viking Line newbuild’s groundbreaking energy savings

Deltamarin has designed Viking Line’s new LNG-fuelled newbuild and has inked a contract with Xiamen Shipbuilding for engineering and construction support services.

Deltamarin’s sales manager Nina Savijoki said that, from a naval architectural point of view, “they presented us with every concept developer’s dream challenge: to come up with a concept that is even more energy efficient in relation to cargo capacity than their Viking Grace, one of the most energy-efficient and sophisticated ferries on the market.”

And Deltamarin rose to the challenge: the newbuild will be 10% bigger than Viking Grace and have several megawatts more power, yet still be 10% more fuel efficient on the same route as Viking Grace.

There are several ways Deltamarin achieved what Ms Savijoki called a “huge improvement”. Viking Line had lot of ideas about how to change and improve the design and Deltamarin studied several different alternatives to improve the concept, she said. She singled out three main areas or improvement:

• Weight: The structure of the hull was analysed carefully to reduce weight, which was further reduced by using low density materials, for example in insulation.

• An extensive hull form development programme using CFD simulation was used to ensure that the vessel would be energy efficient, not only at its design speed but over a large speed range that the vessel will use in its daily transits.

• An engineroom configuration simulation tool was run several times to model the operation profile on the route between Turku and Stockholm to create a very detailed understanding of the ship’s energy needs to streamline its engineroom configuration. Deltamarin used the same tool to support the owner in selecting the correct types of heat and cold recovery systems for the route.

This energy simulation tool was launched by Deltamarin in Q2 of this year and was the result of a long development process. It can be used for various purposes, for instance to compare different engineroom configurations on the same operational profile to see which ones are beneficial and which are not as streamlined as they could be.

“It really gives us an edge; we look at how many engines are needed at certain times on the route and how much excess heat is created. It is really quite a complex set of calculations that are easily manipulated through our mathematical simulation tool.” said Ms Savijoki.

The trend for building passenger vessels in China with the co-operation of European naval architects and suppliers is growing steadily – and is something Deltamarin is very much part of.

As well as designing Viking Line’s newbuild it has used its consultancy services to support Xiamen to streamline its production so that it is suitable for building ropax vessels. It is also involved with the building of Stena Line’s four gas-ready ropax vessels being built by AVIC Shipyard in China, providing both design services for the vessels and shipyard consultancy services.

Deltamarin has a long background of working with Chinese yards. Among other projects, it has designed car carriers built by Xiamen and elsewhere, roro-vessels, heavy-lifters, chemical tankers and over 100 bulkcarriers built by different shipyards in China. “We have good relationships in the Chinese market and so it feels quite natural to support yards in more complex projects, like passenger ships,” Ms Savijoki said.


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