Green Shipping: Fleet Retrofit - Financing for the Maritime Industries 3 rd Annual Japan Ship Finance Forum Klaus Schmidberger Vice President Maritime Industries Tokyo, November 7 th, 2018
2
Fleet Retrofit - Financing for the Maritime Industries Agenda 1 Background of KfW IPEX-Bank GmbH 2 KfW IPEX-Bank footprint on the maritime ground 3 Retrofit Fleet-Financing at KfW IPEX 4 Case Studies 5 Conclusion 3
KfW IPEX-Bank International project and export finance KfW s specialist financier with tailored products A bank with a top rating a strong shareholder committed staff and a stable business volume KfW IPEX-Bank GmbH Head office: Frankfurt am Main Rating: AA+ (S&P) / Aa2 (Moody s) 100 % subsidiary of the state-owned promotional bank KfW Rating: AAA (S&P) / Aaa (Moody's) / AAA (Scope) 680 employees* process approx. EUR 61.9 billion* in business In the market for 60 years Supporting the internationalisation and years of experience and a clear mission competitiveness of German/European exporters Focused on export industry, infrastructure, environmental/climate protection and securing the supply of raw materials KfW Photo Archive / Rüdiger Nehmzow * As of: 31 December 2017 4
IPEX s footprint on the maritime ground Strong partner in maritime finance 2017 Shipping portfolio league table Portfolio composition (Dec. 2017) 1. Financing of German and European shipbuilding Bn USD 2. Financing of vessles with German and European Supplies 3. Financing of German and European Shipowners 4. Financing of climate and environmental friendly investments 5. Active member of the maritime industry 18.0 16.0 14.0 12.0 10.0 8.0 6.0 4.0 2.0 0.0 CEXIM BNP Paribas KfW IPEX-Bank DNB Bank of China Nord/LB ABN Amro SuMi Trust DVB Credit Agricole HSH ICBC Citi Nordea KEXIM Source: Own Ilustration based on Marine Money International, June 2018 Maritime Energy 9% Tourism 55% Others 1% EUR 15.4 bn Container 11% Product/Chemical/ Oil Tankers 4% LNG/LPG Tankers 7% Bulker 1% Misc. Trade 1% Ferries 11% 5
Our customers and our network Shipping Offshore Cruise Antony Veder CMB Toisa Stolt Nielsen Sources: Containership - istock.com EvrenKalinbacak; Offshore Supply Vessel - istock.com claffra; Cruiseship istock.com - 26ISO 6
The BIG regulatory issues IMO 2020 sulphur regulation and GHG strategy Source: IMO Website, 02.11.2018 7
Green Retrofits pros and cons of different solutions Investing in IMO compliance and energy efficiency Switch to low sulfur fuel Switch to LNG/Gas as fuel (Newbuild & retrofit) Low CAPEX Availablity in main ports Price uncertainty, NO x / CO 2 emissions Global Emission compliance LNG availability, acceptance of technology? CAPEX Scrubber (Newbuild & retrofit) Fuel Efficiency Fuel Price HFO availability, environmental impact CAPEX & OPEX, increased CO 2 OPEX, lower Emmission IMO 2020 CAPEX 8
Case Studies Fleet Retrofit Financing Simplified structure ECA TopCo (Guarantor) ECA insurance Guarantee Ownership KfW IPEX Loan Borrower Unpledged vessels on lending SPV 1 SPV 2 SPV 3 SPV Mortgages (LtV tbd, if applicable) Yards & Suppliers 9
Case Study Support of major European Container Liner Fleet Retrofit Packages for 145 propellers supplied by German manufacturer The Structure The Challenge Higher fuel costs due to nonoptimal propeller design Retro-Fit of financed, pledged vessels Numerous drawdowns for each vessel over long period of time The Solution ECA covered unsecured Corporate Term Loan No further mortgages required due to solid credit rating of guarantor Loan Amount: >$ 100 mn Availability Period: 2 years Repayment Period: 8.5 years ECA-Guarantee Value Added by IPEX Competitive Pricing 100% Underwriting Arranger and Facility Agent ECA Agent 10
Case Study Support of major Asian shipowner re: IMO 2020 Fleet Retrofit Packages for scrubbers supplied by European manufacturer The Challenge 2020 IMO Regulation create sharp deadline Retro-Fit of financed, pledged vessels Numerous drawdowns for each vessel over long period of time The Structure Loan Amount: ~ $ 45 mn Availability Period: 2 years Repayment Period: 5 years ECA-guarantee The Solution Value Added by IPEX ECA covered unsecured Corporate Term Loan No further mortgages required due to solid credit rating of guarantor Competitive Pricing Arranger and Facility Agent ECA Agent 11
Financing Retrofits Conclusion Challenges Significant finaning amount Security - assets already pledged to other financier, junior financing expensive Financing out of operative Cash Flow or additional equity challenging and expensive Solutions & Benefits Corporate Recourse Risk diversificaton through fleet financing One facility for large volumes and numerous vessels Credit enhancement through collateral security (unpledged vessles) possible ECA insurance (with or without) further collateral possible, enhencement of ECA portion by bundling of equipment sourcing (e.g. GEMAX) 12
Enhancing Financing Structures through Bundling Selective Sourcing Provides ECA-cover Opportunities Target: Supporting German equipment exports for vessel retrofits worldwide Solution: Tailor-made financing structures with export financing/credit enhancement instruments GeMaX supports equipment identification process IPEX supports with Financing on the back of ECA-cover and corporate guarantees Role of IPEX depends on value of German/European content https://www.german-maritime-export.de/en 13
Contact Details Klaus Schmidberger Vice President Phone: +65 6422 7471 E-mail: klaus.schmidberger@kfw.de Koo Kim Leng Vice President Phone: +65 6422 1565 E-mail: kim_leng.koo@kfw.de KfW IPEX-Bank GmbH Singapore Representative Office 6 Shenton Way, OUE Downtown 2 #20-11, Singapore 068809 14
Appendix
Where we come from KfW Financing with a public mission for 70 years Name Mission Founded Shareholders Locations Best rating Financing volume Total assets Employees * As of 31 Dec. 2017 KfW Kreditanstalt für Wiederaufbau Promotional bank of the Federal Republic of Germany 1948 80 % Federal Republic, 20 % federal states Frankfurt am Main (head office) Berlin, Bonn, Cologne (branch offices) AAA (S&P) / Aaa (Moody's) / AAA (Scope) EUR 76.5 billion* EUR 472.3 billion* 6,284* KfW Historical Group Archive / Walter Hoffmann 16
KfW and KfW IPEX-Bank International leaders and winners of prestigious awards World s top 50 safest banks Leading export finance bank KfW tops the 2017 ranking of the World s 50 Safest Banks for the 5 th consecutive year. Award issued by the US magazine Global Finance Winners were selected through a survey of 500 banks, with a specific focus on: Long-term credit rating Total assets Around 170 exporters worldwide chose KfW IPEX-Bank as one of the best banks for export finance in EMEA in 2017. KfW IPEX-Bank was a top scorer in nearly all 9 key categories and achieved very good to excellent results in: Industry expertise Understanding of business User-friendliness Product offering 17