Copenhagen-based product tanker shipowner and operator TORM on Friday entered into a joint venture with Guangzhou Shipyard International and scrubber manufacturer ME Production to manufacture scrubbers.
The joint venture, ME Production China, will manufacture and install scrubbers in China and deliver them to a range of maritime industry customers for both newbuildings and retrofitted vessels.
TORM holds an ownership stake of 27.5% in the new joint venture.
“Our long-standing relationships with GSI and ME Production helped to facilitate this unique joint venture at a time when demand for scrubbers is expected to increase significantly,” says Executive Director of TORM Jacob Meldgaard.
“This strategic move provides us with a substantial economic interest in a venture that has the potential to be a large-scale international scrubber manufacturer.
“It will also result in TORM obtaining attractive prices for the scrubber investments that already have a short payback time.”
TORM has ordered a total of 16 scrubbers with ME Production China and signed a letter of intent for additional 18 scrubbers with the new joint venture. With these orders, TORM has committed to install scrubbers on 21 vessels and potentially up to 39 vessels or roughly half of TORM’s fleet.
The CAPEX related to the confirmed scrubber orders is on average estimated below USD $2 million per scrubber including installation costs. TORM expects to be able to obtain financing for a significant portion of this investment.
“We are very pleased to enter into a joint venture that will leverage the synergies of a leading scrubber manufacturer, one of the world’s largest shipyards and TORM, one of the world’s largest product tanker companies,” notes Head of Technical Division at TORM Jesper S. Jensen.
“In addition to the economic potential of the joint venture, it allows us to secure availability of high-quality scrubbers, which could pose a challenge to some owners as we approach the 2020 deadline for sulphur compliance set by IMO.”
TORM expects the installation of scrubbers to be an environmentally and commercially positive business case with a short payback time due to current market expectations for the future price spread between high and low sulphur fuel.
Photo credit: TORM
Published: 12 November, 2018
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