Philly Shipyard places TOTE containership project on hold and considers alternative projects

January 26, 2018

Reference is made to a release today by TOTE where the company announced that its plans to enter the U.S. mainland to Hawai’i containership service are on hold as a result of its Phase 1 technical review of Piers 1 and 2 in Honolulu Harbor. As a result of this delay, TOTE and Philly Shipyard, Inc. (PSI) will not extend their Letter of Intent (LOI), which is set to expire on January 31, 2018.

In September 2017, Piers 1 and 2, along with 40+ acres of adjacent land, were allocated to TOTE by the Hawai’i Department of Transportation (HDOT) for its access and use commencing in 2020, to coincide with the planned start of TOTE’s new operations in Hawai’i. According to TOTE’s release, its preliminary study of the site’s infrastructure indicated that this terminal space will require upgrades and improvements to accommodate TOTE’s new Hawai’i service.

The LOI, which was signed by TOTE and PSI in July 2017, contemplates the construction and sale of up to four state-of-the-art, cost-effective and eco-friendly vessels, with planned deliveries for the first pair (Hulls 031-032) in 2020 and the second pair (Hulls 033-034) in 2021. Due to the scope and timing of the required upgrades and improvements to Piers 1 and 2, the LOI will not be renewed.

TOTE, however, noted in today’s release that it continues to be open to working with HDOT to update plans and a timeline for access to a deep water terminal in Honolulu Harbor that would allow TOTE to launch its new Hawai’i service.

Based on these developments, the project to build Hulls 031-034 as containerships is being put on hold. PSI is suspending substantially all construction-related activities on these vessels, including design, planning and procurement work. As previously disclosed, PSI has placed orders for all major long-lead items for the first pair. If these orders were to be cancelled, then the cancellation costs would be substantially lower than the value of the orders placed.

PSI intends to resume this project when there is more clarity regarding the new order situation and related capital requirements. Accordingly, PSI is exploring alternatives in order to secure contracts and financing for these vessels. In addition, PSI is continuing to pursue potential new construction projects for other types of Jones Act vessels.

PSI has delivered 28 vessels in its 20 year history, including four vessels for use in the Hawai’i containership trade which were delivered in 2003-2006. Currently, PSI is building two 3,600 TEU containerships for use in the Hawai’i trade for Matson (Hulls 029-030).

About Philly Shipyard:
Philly Shipyard is a leading U.S. commercial shipyard constructing vessels for operation in the Jones Act market. It possesses a state-of-the-art shipbuilding facility and has earned a reputation as the preferred provider of oceangoing merchant vessels with a track record of delivering quality ships. 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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Philly Shipyard press release