COVER STORY

are going sharply up, and this is phenomenal. Five years ago, it was very difficult to attract finance interest and to qualify for finance. Whereas today, the finance – whether that’s funds, private equity, private placement or owner’s own money – is all of a sudden there.”

HAUNTING PAST PERFORMANCE

But financiers have history to overcome when it comes to funding MPVs. “We used to call multipurpose ships ‘multiuseless’ ships – they crushed a number of shipping banks and funding them was a complete disaster,” Sveen said. “The MPV market was totally overtonnaged and rates were dreadful. As soon as there was an upturn, laid-up tonnage was made available and ghost tonnage controlled by the banks just appeared.” It took generations to get “a fine time” in this market, he added.

MPV operators have undertaken some good initiatives to consolidate, clean-up and make the sector tidier – in time for the market surge. This turnaround has prompted Maritime & Merchant Bank ASA to “look seriously” at the sector, engaging with the connections the Bank has in the German sector. But the bank will not consider speculative finance, only finance attached to contracts, making it difficult for tramping services to tie down funds.

However, there are traditional banks out there, especially in Germany, that are committed to the industry, Hollaender said. “They are financing their clients without long-term charters and they are financing clients without large balance sheets – that is happening again. They are committed and they

A commitment to environmentally friendly solutions will open finance options for MPVs.

CREDIT: DANNY CORNELISSEN, PORTPICTURES.NL

understand the philosophy and how the business works.”

KGs – the German Kommanditgesellschaftthus scheme that gives tax breaks to individuals investing in ships – are back. And with the MPV market on a roll, more are expected. “Shipping is always needed – in crisis, in peace or war,” Hollaender said.

There is room for everyone offering finance and a lender for everyone,

Comparison of Seaborne Trade and CO2 Emissions

Since 2009, growth in CO2 emissions from maritime transport has been decoupled from the continuous increase in seaborne trade volume.

Seaborne trade

CO2 emissions

562Mt

4008Mt

1990 709Mt 849Mt 1135Mt

957Mt 1056Mt

5064Mt 6480Mt 8231Mt 9513Mt 11019Mt

2000 2005 2010 2015 2020

Source: Fourth IMO GHG Study 2020

It took generations to bring the MPV sector back to an even keel.

CREDIT: DANNY CORNELISSEN, PORTPICTURES.NL

Sveen said, pointing to the continuous increase in the variety of lenders open to shipping finance. Hollaender agreed that it is becoming easier for MPV operators to secure finance today, in contrast with previous years. And the more money comes in, the easier it is to achieve that all-important ESG compliance.

Hollaender goes a step further to observe that today there are not enough ship financing projects out there for the demand from interested investors. The bottlenecks to increasing the number of MPV projects are market complexity, ship complexity and the difficulty in undertaking due diligence. Also, while significantly better than just a few years back, MPV returns still can’t compete with those for the container ship sector, he said. But this may be the MPV sector’s saving grace. This, as Hollaender noted, will “put a nice lid on it,” and avoid a rapid return to ship oversupply – sidestepping the cyclical pattern of previous upturns. In the past, overordering and a lack of discipline “destroyed confidence” in financing for MPVs, Sveen noted. But today the sector is looking more attractive, and funding is now there for the taking – just so long as the green doesn’t wash off.

Carly Fields has reported on the shipping industry for the past 22 years, covering bunkers and broking and much in between.

A EYE TO SUSTAINABLE BIOFUELS BY MIKKEL HOLT LENSKJOLD

In the short-term, liquefied natural gas and biofuels are expected to become the most popular alternatives to conventional marine fuel and gasoil. Both are relatively available in the larger bunkering hubs, the technologies are well-proven for marine applications, and will make users compliant with the International Maritime Organization’s 2030 emission targets.

For the breakbulk segment in particular, sustainable biofuels could be a good choice to initiate emission reductions, due to its drop-in capabilities. In Bunker Holding, we have conducted trials on our own operations and with customers, and we believe that biofuel offers great opportunities for immediate and flexible emission reductions.

Looking ahead, there seems to be a consensus that green methanol and green ammonia will play a significant role in the future fuel mix. But as these fuels require a complete transition of the existing bunkering infrastructure, on top of massive upstream investments in production, it is only expected to become available in the larger bunkering hubs in the late 2020s.

In Bunker Holding, we are preparing for are multifuel future and we recognize the need for partnerships and close collaboration with both producers and customers to reach the current targets of emission reductions. Therefore, we are actively involved in projects, trials and partnerships related to all of the fuels mentioned above, and we are actively onboarding additional technical experts to guide our customers on decarbonization pathways. The green transition is extremely complex and driven by a large variety of different dynamics. Interestingly, it seems that the “pull-effect” from the market is slowly becoming stronger than the “push-effect” from regulators. This pulleffect mainly derives from an increasing demand for green transport from the end-users, as well as financers beginning to require emission-reducing initiatives from debtors. In addition, ESG has been put on the agenda in many large corporations recently, which also forces companies to start questioning how to reduce emissions in their own value chain.

INCENTIVES NEEDED

However, the shipping industry needs stronger incentives to justify and finance significant investments in decarbonization. One such mechanism could be a carbon tax, or some form of market-based measure to minimize the price premium between sustainable fuels and fossil alternatives and to stimulate the green transition.

The ideal level of a potential carbon taxation is still up for discussion, but fundamentally, sustainable marine fuels need “artificial support” from a carbon tax on fossil fuels or some kind of marked-based measure, to make a viable business case for investing in sustainable marine fuels. BB

Mikkel Holt Lenskjold is head of corporate development at the Group Strategy Office for Bunker Holding.

BREAKBULK EUROPE REGIONAL REVIEW

BY FELICITY LANDON REASONS TO BE CHEERFUL

Europe’s Energy Infrastructure Projects Set Hopeful Outlook

Earlier this year, the European Union signed off a European Commission proposal to invest €1.04 billion in five cross-border infrastructure projects under the Connecting Europe Facility, or CEF, for trans-European energy networks.

The proposals are in support of Europe’s Green Deal and the largest amount of funding, €657 million, is earmarked for the EuroAsia interconnector project to support the first electricity interconnection between Cyprus and the European grid.

The other projects are the Baltic Synchronisation Project Phase II, for grid reinforcement in Poland and transmission infrastructure upgrades in the three Baltic States: • The Aurora Line, involving development of a third transmission line between Sweden and Finland, to support the integration of onshore and offshore renewable electricity. • The Chiren expansion to increase gas storage facilities in Bulgaria. • The Northern Lights Phase II, where a study will consider the expansion of CO2 transport and temporary storage capacity in Norway.

Well integrated energy infrastructure networks are necessary for the energy transition, as they facilitate the integration of renewable energy, enhance security of supply and help keep energy prices in check, said Energy Commissioner Kadri Simson. “The allocation of CEF funds therefore supports the implementation of the European Green Deal.”

Notably, Simson’s comments were made before the Russian invasion of Ukraine, which has placed far greater pressure on Europe in terms of the need for energy security.

BREAKBULK EUROPE REGIONAL REVIEW

The story is not only around these specific projects. Assuming they move ahead, there will inevitably be a knock-on effect in terms of green energy investments. And across Europe, countries are investing heavily not only in energy but also in transport infrastructure.

“Looking at the details of the European energy deal, the program will provide much-needed aid in developing a well-integrated energy infrastructure network necessary for some of the region’s green energy transition,” said Eike Muentz, AAL Shipping’s general manager Europe.

Depending on the engineering, procurement and construction companies involved in the targeted project areas and the decisions they make as to where geographically their components and materials might be sourced from, this could provide solid cargo opportunities for the long-haul MPV sector, he said. “A final, formal decision by the Commission on the CEF grants is expected in the coming weeks.”

RENEWABLES COMMITMENT

Energy-related investment will play a major role during the next few years, particularly when related to green technologies, said Franco Ravazzolo, head of project logistics & breakbulk at Gebrüder Weiss in Austria. “The present situation is pushing this development even more.”

However, he said, the recent announcements are not about to deliver instant business for project logistics. “We often attend our clients from the very early planning stage until the realization of the projects – a timeframe that can encompass several years.” There is a lot of talk of investment in Europe, Ravazzolo said. In Austria, for example, the government has set targets for a huge increase in solar and wind power by 2030.

“They are talking about increasing total output from 8 terawatt, or TW, to about 28-30 TW. That sounds great, but the Austrian market right now consumes about 90 TW per year, so it’s 10 percent at best.” The target is aiming for 30 percent based on today’s consumption, he added – and energy consumption is growing, so the percentage will lessen.

Plans include hundreds of new wind turbines mostly in the western part of Austria, together with an investment in solar panels, including on the roofs of private homes and official buildings.

“There is a lot of investment discussion, but these projects will take a lot of time to be realized,” he said. “Politicians can announce things now, but it can take up to a decade to be transformed into reality.”

Among recent jobs, Gebrüder Weiss has moved project cargo for the Voith Vorotan water power project in Armenia, the Palmavossen water power project in Norway and the Energie Ausserschyz biomass power plant in Switzerland. “Depending on the routes, we combined road/river ship/sea transport – cargoes were as long as 36 meters and as heavy as 150 tonnes.”

Ton Klijn, director of ESTA, the European association for the abnormal road transport and mobile crane rental sectors, agreed that moves will take some time to ramp up: “I think you would have to wait until at least 2023 or 2024 before you see the first things moving [relating to the EU plans].”

A priority should be dramatically increased road infrastructure investment, he said, as underlined by recent accidents. “We have seen a few major accidents in Italy, for example; related to, on the one hand, deteriorating infrastructure – bridges, crossovers, culverts, etc., – and on the other hand people not abiding by normal permitting rules and just driving without a permit. One ran over a bridge and the bridge collapsed.”

There was a similar case in Germany: “Someone without a permit used a flyover over a valley. The load was far too heavy. But also, a lot of infrastructure in Germany has been downgraded. Typically, a permit for transport that is a bit heavy can involve huge detours – perhaps doubling the distance of the original route.”

The issues are not only whether your infrastructure is better or worse, but also how many people want to make use of it, Klijn said. “For example, it is Germany where the problems are biggest; it is Eastern Europe, including Slovenia and Romania, where the infrastructure is worst, but there is not so much traffic.”

Some countries are responding to the deterioration of road infrastructure and high maintenance costs by avoiding the issue and slapping bans on heavy transport. “France already has regions that don’t allow transport if it is only transiting,” he said. “If the end destination is not that region, they won’t let the load in. But if they all do that, no one can go anywhere.”

Franco Ravazzolo

Gebrüder Weiss

Ton Klijn

ESTA

WAITING GAME

Wallenius Wilhelmsen is keeping a particularly close eye on – and expects development – in infrastructure construction. “While the NextGenerationEU plan is less targeted in terms of sectors, there are clear references to transport infrastructure there as well,” said Robert Berg, WW market intelligence and finance manager. Sarah Schlüter Sarah Schlüter, HapagHapag-Lloyd Lloyd’s senior