Norwegian agencies step-up to support reborn shipbuilding sector

I was born and brought up – many years ago – in the north-east of England by the coast where, as a kid, unless we had porridge our breakfast often consisted of fried herrings. I loved them. Heavily fried you could always eat just about everything – bones and all, apart from skull, tail and the dodgy, gnarly dorsal fin. And the best bit is, for me, the crispy skin.

Back then, herrings – also known as ‘silver darlings’ - were still quite plentiful. But today, fresh herrings are a rarity. Sure, you can find plenty of kippers (smoked herrings) or roll mops (pickled) – but large-scale commercial fishing around the British Isles through the 60s to 90s depleted the herring stocks beyond any kind of reasonable recovery. Very sad indeed! But has the fishing industry globally ever really cared about the long-term outlook? Have governments ever given enough thought to no-catch zones and marine parks? For the most part, the answer on both counts is a resounding No.

So, earlier this year when I saw that the first specialised krill-fishing vessel had been launched at the Vard Shipyard in Allesund, Norway, having been financed by the Norwegian export credit agency (ECA) GIEK along with funds from Export Credit Norway (Eksportkreditt Norge), I was somewhat shocked that agencies from an OECD government had been so instrumental in a project of such marine sensitivity as the so-called ‘harvesting of krill’ – primarily in the fragile marine ecosystem of the Antarctic . 

Before we go any further I am presuming that everybody knows what krill is – but if you don’t, krill are micro shrimp-like crustacean. Krill are found in many seas around the world, but particularly so in the Southern Ocean and around the continent of Antarctica, where the largest species of krill can be found. They are the principal source of food for whales, penguins and a very important source of food for seals and fish. The important element here is the food chain in such a fragile ecosystem, and krill is very much the lifeblood of that entire ecosystem.

Since 2010, the krill-fishing industry has grown steadily, with the entry of Norwegian companies and fishing vessels, increased catches by South Korean vessels, and the emergence of the Chinese krill-fishing fleet. Currently, a total five countries fish for krill, namely: Chile, China, Norway, South Korea and Ukraine, and all spend time fishing in the waters of the Antarctic. Chilean, Chinese, Korean and Norwegian vessels and companies operate under the Association of Responsible Krill harvesting companies (ARK) which was established in 2012 to facilitate an industry contribution to ecologically sustainable krill harvesting. Ukrainian vessels and companies do not operate under these guidelines. (More about krill fishing below.)

The changing face of shipbuilding in Norway

The Norwegian shipbuilding industry has had to re-evaluate itself as the demand for offshore vessels for the oil & gas sector has declined in recent years. This has meant building more specialised vessels such as explorer cruise vessels, specific support ships and fishing-industry related vessels.

The krill-fishing vessel Antarctic Endurance was launched in January 2019, having been ordered by Aker BioMarine back in 2017. The ship was delivered by Vard Shipyard, while more than 40 sub-suppliers provided equipment and services. More than 900 people were involved in the building process, according to Vard. The ship is custom-made for harvesting krill in Antarctic waters. 

The overall cost was $141 million. The loan has a repayment period of 12 years and was disbursed by Export Credit Norway. GIEK guaranteed 60% of a $113 million loan to the buyer, Aker Biomarine. The remaining 40% was guaranteed by Norwegian commercial bank DNB. 

At the time, GIEK CEO, Wenche Nistad, stated: “This project is a good example of the close co-operation between government institutions, the maritime industry and banks to promote Norwegian exports. I am pleased that Aker Biomarine chose a Norwegian yard. I would also like to emphasise the company’s environmental consciousness and systems regarding sustainability.” 

The ship was the first to benefit from Export Credit Norway’s new scheme for Norwegian purchasers of ships constructed at Norwegian shipyards and destined for use in international trade. Adjustment of the export financing scheme to permit such transactions was announced by Prime Minister Erna Solberg at the Haram Conference in February 2017.

There is no doubt that the Norwegian agencies are being particularly innovative in supporting local industry and in this case using the ‘export’ factor as part of this financing. Ultimately, resultant krill products (see below) will be exported. Many European agencies have re-evaluated or re-invented parts of their financing activities in order to ensure support for local industries and ultimately jobs. 

Export Credit Norway CEO, Otto Soberg, said: “Our job is to help Norwegian exporters to succeed internationally. Vard is to be congratulated on winning this prestigious assignment. I hope that our competitive financing offer played a role in Aker BioMarine’s selection of a Norwegian shipyard. We are very pleased to be financing a krill-harvesting vessel through the new scheme.”  

The CEO of Aker BioMarine, Matts Johansen, commented: “We have had to draw on all of our experience and knowledge to achieve our ambitious aims and meet the operational needs arising on this type of vessel. This is a unique ship in every way, and the first in the world to be designed specifically for krill-harvesting operations.”

There is no doubt that Antarctic Endurance will be a sharp contrast to some of the existing vessels fishing for krill in the Southern Ocean. Aker BioMarine says the ship is a custom designed newbuild, rather than an existing supply or trawler vessel with equipment retrofitted to it and is fitted-out with a host of innovative technologies and equipment from a wide variety of Norwegian companies. It also says the vessel is 30% more environmentally efficient, compared to today's trawlers.  

In a statement, the company says: “Aker BioMarine is one of two companies in Norway licensed by the Norwegian authorities to harvest krill. It cooperates with environmental organisations and has invested substantial resources to ensure that its operations are sustainable.”

It adds: “Five nations currently harvest krill, an activity that is strictly regulated by the Commission for the Conservation of Antarctic Marine Living Resources (CCAMLR). The commission was established to manage marine resources in the Southern Ocean.”

Krill, krill, krill and the licence to krill

The real added value of krill products for the companies marketing them is with their use as a health/dietary supplement and their perceived medicinal benefits. In health shops across the world you will see jars of omega-3 krill oil, where the labelling will claim things like ‘may reduce the risk of coronary heart disease’ and ‘100% pure krill oil supports heart, joint and brain health’.

Go onto the website homepage of Aker BioMarine - the largest krill fishing company in the world - and the opener is: “The Krill Advantage – For Human & Planetary Health’. And they describe themselves as: “We are the world’s leading supplier of krill, the superior source of omega-3 from the pristine waters of Antarctica.”

Depending on the quality of the catch from many of the international vessels involved in krill-fishing, some of the krill will go to make these ‘health’ products. But the bulk of the catch will often go as fishmeal for fish farms and pet food.

So-called krill ‘health supplements’ are experiencing a surge in growth, and this is expected to increase as more rising-income families, in Asia in particular, seek such products as part of a changing lifestyle.  A 2017 market research report predicted that global demand for krill oil/meal will double by 2021, largely for dietary supplements, followed by food for farmed fish and pets, and pharmaceuticals.

In March last year, following years of extensive research which also involved satellite tracking of krill-fishing vessels, Greenpeace released a damning report on the krill-fishing industry entitled ‘Licence to Krill’. It noted: “Greenpeace investigations reveal how krill-fishing companies are expanding operations in the fragile Antarctic ocean, putting an entire food web at risk. What’s more, they are often involved in fishing practices that could damage wildlife and protected ocean areas.”

The report synopsis also added: “Despite the industry’s attempts to portray itself as one of the world’s most sustainable fisheries, evidence collected by Greenpeace demonstrates a pattern of fishing activity increasingly close to shore and in the immediate vicinity of penguin colonies and whale feeding grounds.

“Crucially, krill fishing is taking place in areas which have been put forward as ocean sanctuaries. Such protected areas will help these marine ecosystems to build resilience to the combined impacts of climate change, pollution and fishing. As well as robbing marine animals of a vital food supply, industrial krill fishing in such pristine waters carries huge environmental risks.”

Unlike many other aspects of the global fishing industry, krill-fishing is taking place in such remote areas that independent observation of that activity is exceedingly difficult. And many of these areas are environmentally sensitive, particularly where vessels have been fishing very close to the ice-shelf. Greenpeace is one of the very few organisations to have spent considerable time making such investigations – and it used extensive data over a period of five years from the vessels’ automatic identification system signals.

The report also noted that: “Greenpeace’s investigation also exposes the regular use of transhipping, when a catch is transferred from one vessel to another. Our tracking of krill-fishing vessels shows that they have anchored in protected waters, despite the recommendation that anchoring should be avoided as it can damage animals and structures on the seabed.

“For these reasons, Greenpeace is calling for krill-fishing companies to restrict all fishing activity in areas under consideration as ocean sanctuaries. We are also calling on krill-buying companies to stop sourcing from vessels that continue to fish in these same areas.”

And in a broader context, Greenpeace rightly declared: “Ultimately, we are calling for international collaboration between governments, companies and civil society to create a large-scale network of ocean sanctuaries, including in the Antarctic Ocean, to protect at least 30% of the world’s oceans by 2030.”

Krill companies agree to cooperate in sustainable measures in Antarctica

But in what could be described as a monumental spirt of cooperation between Greenpeace and other environmental groups and the majority of krill fishing companies, an agreement was reached in mid-2018 whereby the largest krill fishing companies operating in the Antarctic voluntarily agreed to stop fishing in huge areas around the Antarctic peninsula, including ‘buffer zones’ around breeding colonies of penguins, to protect Antarctic wildlife. In dialogue with Greenpeace, the world’s leading krill companies have committed to stop fishing in some of the identified ecologically sensitive areas recommended for protection.

The companies have also pledged to support the scientific and political process for the creation of a network of large-scale marine protected areas in the Antarctic, including areas in which they currently operate. The companies (Aker BioMarine, CNFC, Insung, Pescachile, and Rimfrost) are all members of ARK and represent 85% of the krill fishing industry in the Antarctic. Unfortunately, Ukrainian vessels and companies operate outside of ARK, and will not abide by this agreement. 

Following the signing of the agreement, Frida Bengtsson of Greenpeace Protect the Antarctic campaign, said: “This is a bold and progressive move from these krill fishing companies, and we hope to see the remainder of the krill industry follow suit.” 

Kristine Hartmann, EVP at Aker BioMarine, the largest krill fishing company in the world, said: “Safeguarding the Antarctic ecosystem in which we operate is part of who we are. Our ongoing dialogue with ARK members, scientists and the community of environmental NGOs, including Greenpeace, is what makes additional efforts like this possible. We are positive that ARK’S commitment will help ensure krill as a sustainable and stable source of healthy omega-3s for the future.”

Hartmann adds: “Through our commitment we are showing that it is possible for no-fish zones and sustainable fisheries to co-exist. Our intention with this commitment is to support CCAMLR’s work on establishing a network of large-scale science-based marine protected areas in the Antarctic,” Hartmann added.

From 2020, these krill companies will observe a permanent closure of these areas, whilst continuing to support the process to create a vast protected area in the region.

In terms of widening protection in Antarctica to other vessels, Andrea Kavanagh, director of Antarctic and Southern Ocean conservation, Pew Charitable Trusts, had this to say: “The Association of Responsible Krill harvesting companies’ support for the creation of a network of marine protected areas (MPAs), including large no-fishing zones, is a truly visionary step that more commercial fishing interests in Antarctica and around the world should follow. Governments should follow industry’s lead and support MPAs.”

In another major development, in October 2018, governments from around the world involved with CCAMLR met to discuss and decide on the creation of the Antarctic Ocean Sanctuary - the proposed largest protected area on earth. At 1.8 million square kilometers, it would have been five times the size of Germany, or 200 times the size of Yellowstone National Park. Such a sanctuary would have formed a safe haven for penguins, whales and seals, and fish putting the waters off-limits to industrial fishing vessels and mineral exploitation.

Unfortunately, while 22 governments in the CCAMLR supported the plan for a new Antarctic Ocean Sanctuary, Russia, China and Norway did not. Interesting eh! It is a crying shame that these governments could not do what some of the krill fishing companies have agreed to. With so much global geopolitical tension, one might have expected Russia and China to be difficult and pull the plug on such an important agreement, but Norway? It beggars belief!

At the time, Frida Bengtsson of Greenpeace commented: "Twenty-two delegations came here to negotiate in good faith but, instead, serious scientific proposals for urgent marine protection were derailed by interventions which barely engaged with the science."

Back on the shipbuilding front

As noted above, as the Norwegian shipbuilding sector is trying to transform itself, GIEK and Export Credit Norway are central to the funding of these vessels and in the conversion of Norwegian shipyards where necessary.

There is considerable design and engineering expertise within the Norwegian shipping sector that will help in driving the changes and the future of the sector. And there have been some prominent successes over the past 18 months in all areas of Norwegian specialist shipbuilding.

In early 2018 the American expedition cruise and adventure travel company Lindblad Expedition Holdings received financing from Export Credit Norway and GIEK for a new polar expedition vessel being built by Norway’s Ulstein Verft shipyard. The state-of-the-art new polar vessel with 69 spacious guest cabins is expected to be delivered from the Ulstein yard in January 2020.

The guarantee from GIEK is a buyer credit guarantee of $75 million and covers a loan from Export Credit Norway to US-based Lindblad. This is the first the guarantee GIEK has issued to Lindblad. Citibank in London acted as agent and participated in the financing.

In another example, in mid-2018, Norway’s Vard Group delivered the cruise vessel Le Laperouse, the first cruise ship in a series of six new ships, to the French cruise company Ponant. The Vard Søviknes yard now has full capacity utilisation, and the group’s shipyards will supply cruise ships to several well-known cruise operators on a continuous basis until 2021. Last year the CEO of Ponant, Jean Emmanuel Sauvee, speaking of GIEK support on the cruise vessel purchase said: “We have been very happy to benefit from the Norwegian export credit agency support, making up with Vard a comprehensive offer delivered in a very professional way.”

Wenche Nistad, CEO of GIEK commented: “Our guarantees are often crucial for Norwegian yards to win construction contracts that would otherwise go to overseas competitors.” 

She added: “The past few years have been demanding for the shipbuilding industry, but the industry is changing rapidly. Now cruise ships make up more than 50% of the order backlog at Norwegian shipyards. The cruise market partly compensates for the decline in the offshore industry and is now the largest market for Norwegian shipyards.” 

And in early May this year Teekay Offshore Partners announced that it had secured $165.5 million in financing and guarantees from Export Credit Norway and GIEK for four new eco-friendly shuttle tankers. Although the tankers are being built by SHI in South Korea, a considerable amount of equipment and technology is being supplied by Norwegian companies. The vessels will be fitted with equipment from will be fitted with equipment from Wartsila, and Norwegian suppliers such as Brunvoll, Kongsberg, MacGregor Pusnes, and Jotun, among others.

Photo credit: Aker BioMarine – photographer: Ingeborg Tennes

Note: The above text is the view of the author and does not represent the views of TXF Ltd.

 

Now time to get up to speed on the markets.
       Here's our exclusive TXF Essentials subscriber content

Blended finance: Refloating an old idea with new capital
Much that is useful in blended finance is not new, and much that is new in blended finance is not useful – but the concept has captured the imagination of DFIs looking to access a large pool of below-market capital from philanthropists and impact investors that are willing to partner up to achieve their ESG goals.

US-EXIM: Back in big business?
The US Senate is scheduled to vote today on the three nominees to serve on the board of US-EXIM.

Turk Exim: Reassembling the Turkish economy
TXF talks to Banu Erkok, manager at Turk Exim, to find out more about the Turkish ECA’s bid to stimulate the country’s crisis-stricken economy.
 

Plus, to top things off...the news you thought you had but didn't 

Altice French broadband debt syndication launched
Following close of the debt package backing the Altice/SFR FTTH French broadband network expansion in early April, the lead banks on the deal – BNP Paribas, Credit Agricole, Natixis, RBC and Societe Generale – are said to be syndicating down some of the debt.

Final bids in for EuroAsia Interconnector
The EuroAsia Interconnector – an HVDC submarine power cable project – has concluded the procurement process for prospective EPC contractors for the $3.5 billion scheme.

Rogers joins CPPIB
Bill Rogers has started a new role at CPP Investment Board as senior principle for power and renewables based in the UK. Rogers joins from Green Investment Group (GIG) where he was head of strategy and distributed energy/onshore renewables.

Christian Krebs joins Energy Estate
Christian Krebs has left his role as head of structured finance Asia-Pacific at NordLB in Singapore, which he occupied since January 2014, to join Energy Estate in Australia. He is currently on gardening leave and starts his new job in July.

RFQs in for Zambia's Ngonye Falls hydropower plant
Western Power Company (WEC) – a joint venture between InfraCo Africa (through eleQtra) and African Power Projects – received pre-qualified bids on 5 April 2019 from prospective EPC contractors for the 180MW Ngonye Falls hydropower project in Zambia.

Africa seen as a bright spot for syndicated loan opportunities
Loan syndication in the developing markets is currently of the lowest volume in nearly a decade. This does not just concern the developing markets but is seen as a global issue.

Fintech on the rise in Africa
Mobile phone ownership has exploded in the developing markets, due to low-end smartphones becoming increasingly available, in a game changing shift in Africa’s technological development.

Blue Elephant acquires stake in Montecristi solar project
Blue Elephant Energy has secured a 65% majority stake in the 116MW Montecristi solar park in the Dominican Republic, with F&S solar retaining the remaining 35% equity stake in the project.