hvb_shipyardconsulting_07.09.07
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Shipyard ConsultingServices
SEPT 2006
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CONTACT PERSONS
HypoVereinsbank
Ingmar LogesHead of Shipyard Consulting
Phone +49 40 36 92 17 79
Fax +49 40 36 92 22 44E-Mail: [email protected]
BOHN, DOMAZET & ASSOCIATES GMBH
in co-operation with HypoVereinsbank
Dean DomazetPhone +49 89 32 19 58 61
Fax +49 89 32 19 58 63
E-Mail: [email protected]
HypoVereinsbankAlter Wall 22
D-20457 Hamburg
www.HVB.de/shipping
Domenik NizetShipyard Consulting
Phone +49 40 36 92 22 92
Fax +49 40 36 92 36 96E-Mail: [email protected]
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BACKGROUND INFOR MATION
Shipyards in Europe vs. Shipyards World-
wide
In view of labour cost differences (inclu-
ding indirect labour costs), worldwide
shipyards continue to benefit from cost
advantages in comparison with their
Western European counterparts. In most
cases, the quality of vessels built is similar.
Increasingly, rating problems are leading to
delays in the completion of new vessels
as supplies and wages are no longer able
to be pre-financed. As a result, problems
ensue with the timely delivery of new
vessels.
Vessels built outside of the core shipping
markets
In order to help the yards with their cash
flow, ship owners and their banks are
being confronted with a higher volume of
pre-financing allowing for the disburse-
ment of funds at an earlier stage.
In shipyards, the disbursement of pay-
ments once transferred by the ship ownersis less transparent; the payments are not
always used for the project in question.
Investors looking to purchase shipyards
Investors are now presented with the
opportunity to take part in the privatisation
of shipyards. Even though many yards in
Eastern Europe (with the exception of the
former East Germany) face bankruptcy,many are waiting for the chance to be pri-
vatised.
Some potential investors may have a lack
of knowledge regarding shipyards.
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Resulting Deficits
Financing banks are more and more often
the risk takers. Should a new contract
be cancelled, the bank as well as the ship
owner are in for a loss of business. The
problem lies in having little influence on
the distribution of capital once the bankhas approved a loan and transferred the
money to a shipyard. Is the money used
on the project for which it was intended
or for other purposes?
Most banks, ship owners, and investors
do not usually have the necessary insider
know-how to properly evaluate a shipbuil-
ding facility. Therefore, it is difficult for
them to evaluate and assess risk.
Our Involvement
We offer competent support and sound
advice in the following areas:
accurate evaluation
risk reduction
coordinating the various business aspects
optimising solutions
HypoVereinsbank (HVB) specialises in solving
problems related to shipbuilding and ship-
yards. Once the key players have been
chosen, we help to orchestrate the complex
relationship among banks, ship owners,
public authorities, and investors, worldwide.
Our clients continue to enjoy the benefit of
our knowledge in the industry.
WHAT WE PR OVIDE
Monitoring of the entire shipbuilding processin order to ensure timely delivery and tominimise the risk of increasing costs
Evaluation of the technological and economi-cal production standards of shipyards toassist banks intending to finance a shipyard
Evaluation of the technological and organisa-tional quality standards of shipyards prior tothe financing of a new vessel
Coordination of technical controlling andproject management functions related toshipbuilding projects on behalf of the client
Technical and organisational services:
A potential client no longer needs to
sort through the jungle of insider mar-ket knowledge, finance, and navalengineering. We provide the means tosuch knowledge enabling our clients tomake sound investments and minimisepotential risk.
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EXAMPLES OF OUR PROJECTS
For the benefit of the client, we monitor the
shipbuilding process from start to finish
in order to ensure timely deliveries of new
vessels and to minimise increasing costs.
Example: Timely Delivery
1. In order to ensure a timely delivery of the
new vessel 001, we, acting as representa-
tives of the ship owner, immediately took
part in and examined all aspects of finan-
cing, management, and production.
2. For the mid-term delivery date of vessel
002 in our example, we installed a pilot
project management team to oversee the
shipyard. The team was accompanied by
a representative of the ship owner.
3. Taking advantage of the long-term delivery
dates of vessels 003 and 004, we used our
experience gathered in pilot project 002
to set up a qualified project management
team determined to fulfil our commitment
to the investors.
Each of our actions was carefully plannedand discussed with the shipyard manage-
ment. The result was that all deadlines
concerning the delivery of the new vessels
were met, and, in some cases, the vessels
were even ready to sail ahead of schedule.
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Monitoring the shipbuilding process not only
ensures timely delivery but also minimises
the risk of increasing costs.
Example: Project Liquidity Gap
For the future liquidity assessment of new
ship construction, the ship owners instal-
ments generally formed the basis for the
corresponding forecast. However, should
miscalculations of costs have occurred at
the beginning of a project, liquidity deficits
can easily follow not only for one vessel but
can also start to accumulate from one ship
to the next.
The liquidity gap in respect to the vessel
shown below was caused by considerable
delays during its construction as well as by
higher costs than originally were expected.Under these circumstances, a timely delivery
of the vessel was certainly not possible. How-
ever, after having ascertained the causes for
the delay, it was still possible to expedite the
vessels delivery earlier than what one was
beginning to fear.
Subsequent to the investigations carried out
by HVB, negotiations were conducted leading
to the ship owners agreement to making
scheduled instalments at a later date and toallowing for state entities to provide loans.
The delay in instalments allowed for better
tracking of the distribution of capital, and the
state loans helped to avoid future delays in
the shipyard.
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Evaluation of the technological and econo-
mical standards of shipyard production for
banks intending to finance a yard
Example: Project Ship repair yard
A repair yard is heading for insolvency. A
technically complicated project could not be
finalised. Mismanagement led to high liqui-
dity losses during the shipbuilding process
which were not compensated by the client.
Simultaneously, debt increased arising from
the need to finance an ambitious expansion
programme.
A detailed restructuring plan is dependent oneconomic forecasts, and, accordingly, on the
survival chances of the yard.
A survey on the premises of the yard, ana-
lyses of the regional yards capacity, and dis-
cussions with representatives of potential
clients led to the conclusion that, from aneconomic point of view and under certain
preconditions, it would be justifiable to
continue the development of the shipyard.
Furthermore, an analysis of the assets of
the yard showed that there was sufficient
collateral to allow for a restructuring pro-
gramme.
Concentration on the main areas of a busi-
ness is advisable and offers better survival
chances.The services provided by HVB assist banks in
analysing risk factors and the chances for an
eventual restructuring programme.
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Evaluation of technical and organisational
quality standards of shipyards prior to finan-
cing a vessel
Example: Productivity Analysis
Based on a comparison of the productivity
development and the corresponding recalcu-
lations, it is possible to forecast the expected
cost development and, therefore, the future
level of the yards liquidity.
HVB has the financial tools to make precise
forecasts both as far as the general develop-
ment of productivity and also the planned
individual yard productivity in respect tovessel manufacturing. The factors which
play an important role are the level of used
capacity and the degree of difficulty in the
construction of a vessel.
The influence of productivity on cost as well
as the influence of liquidity on the timely deli-
very of a vessel allow for the evaluation of the
technological and organisational competence
of a yard even before shipbuilding orders
have been placed. Such information is
obviously of great interest to a financing
bank.
After HVB had discovered the reasons forthe drastic fall in productivity regarding the
vessel in question, the shipbuilding contract
was, in fact, not cancelled, and the vessel was
delivered. It had later become apparent that
the particular problem experienced with this
vessel was exceptional for the shipyard and,
therefore, not typical.
Projectphases 001 Productivity hrs./CGT
Assumption for offered price 32,1Yard standard for 2001 48,6
Ex-Post calculation (02.05.2002) 76,8
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Handling of technical controlling and
project management in regard to ship-
building projects
Example: Controlling
Instalment payments transferred from the
ship owner to the yard may only partly or not
at all be used for the project in question as
general liquidity problems arise. A controller
from HVB appointed by the ship owner over-
sees the task of ensuring that payments are
used according to plan.
Example: Project Management
Coordination
The multi-tasking involved in overseeing
complicated shipbuilding projects requires
the talent of an experienced and competent
team. We, at HVB, provide a network of pro-
fessionals who can dive in to any necessary
positions that may need to be filled.
As the nature of modern shipbuilding lends
itself towards per-project employment, it
could make more sense to employ qualified
managers on a temporary rather than on apermanent basis.
Example: Restructuring a Yard
HVB is in a position to arrange for the entire
technical and organisational work processes
and eventual restructuring of a yard; HVB can
also handle legal coordination, if required.
HVB has a network of first-class experts from
leading management positions within the
shipping industry and, therefore, has thenecessary experience and expertise to ensure
complete project quality.
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SHIPYARD ASSESSMENT FOR BANKS/OWNERS
Our objective is to assess the following targets:
Quality Focus on the agreed quality
Quality assurance using flexible internal standards
Supervision /Quality Verification as required
Timely Delivery Adhering to the agreed Milestones and Deadlines
Optimising the overall flow of Deliveries
Incorporation of Contingencies in regard to Planning
Keeping the Budget Identification of potential Cost Overruns
Implementation of Budget System
Control of Cash Flow
Based on a 2-3 day visit to the shipyard + general know-how
SHIPYARD CONSULTING WHAT YOU CAN EXPECT FROM OU R SERVICES :
Know-How and Competence
in Shipyard Restructuring
Creation of Transparency
Definition and Implementation of Operational,
Structural, and Strategic Solutions
Structuring and Support of Financial Concepts
Development of Transparent Liquidity Management
Rewards of a Long-Term Relationship + a First-Class
Track Record within the Shipping Industry
A Comprehensive Network of Customers, Banks,
Public Authorities, etc.
Transparency
Restructuring of Proposals
(incl. support, upon request)
Financing Concept
(incl. support, upon request)
Liquidity Management
ADDED VALUE
FOR THE CUSTOMER
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Shipping: Setting the Course for Success
We offer the full range of shipping financing services from one single source. With a proven ability
to get things done quickly, we have the expertise in handling all requirements. Our aim is to comply
with your objectives.
Taking prompt action in meeting your needs without getting caught up in endless paperwork and
procedures explains how we have managed to earn such an enviable international reputation for
sound advice and outstanding service.
SHIPYARD ASSESSMENT CHECKLIST
Production Facilities, Equipment, Shops,
Logistics
Current Order Book
Track Record, Experience, and Output
Product Mix
Human Resources and Organisation
Planning and Design
Production Process and Controlling
Procurement Procedures
incl. Subcontractors
Quality Assurance
Energy Flow
Safety, Health, and Environment
Relations to Unions
Financial Status
ADDRESSES AND CONTACTS
Hamburg Head Office
Shipping International Markets
Alter Wall 22
D-20457 HamburgPhone +49 40 36 92 17 79
www.hvb.de/globalshipping
Oslo Office
HypoVereinsbank
Representative Office Oslo
Haakon VIIs gate 1N-0161 Oslo
Phone +47 22 01 74 80
www.hvb.de/globalshipping
Piraeus Office
Shipping Unit
Notara 62
GR-18535 PiraeusPhone +30 210 410 05 06
www.hvb.gr
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