‘save as you sail’ energy efficiency upgrade financial ......fuel consumption rt-flex82c engines...
TRANSCRIPT
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‘Save As You Sail’ Energy
efficiency upgrade
financial modelling tool
Prepared by:
Marinos Magoulas, Deloitte
Will Dawson, Forum for the Future
SSI Members involved in the workstream
Knowledge Partners to the workstream
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Introduction
This slide deck presents the workings of the Excel financial modelling tool for the Sustainable
Shipping Initiative’s Save As You Sail financing mechanism. It shows how the model operates
and how you can use the tool to better understand and discuss financing for efficiency upgrades
using the SAYS model. Please read the disclaimer before using the model.
The model and further information about SAYS can be found here: http://ssi2040.org/what-we-
do/workstreams/finance
http://ssi2040.org/what-we-do/workstreams/financehttp://ssi2040.org/what-we-do/workstreams/financehttp://ssi2040.org/what-we-do/workstreams/financehttp://ssi2040.org/what-we-do/workstreams/financehttp://ssi2040.org/what-we-do/workstreams/financehttp://ssi2040.org/what-we-do/workstreams/finance
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Disclaimer
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1. About Save As You Sail
2. The role of Deloitte in the financial modelling
tool
3. Worked example overview of technologies
4. Guide to Excel tool and worked examples
results
5. Opportunities for you to be involved
Contents
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What the SSI has achieved
The members of the
financing work stream have
worked together to develop
Save As You Sail (SAYS) –
a robust financing package
that will enable both owners
and charterers to benefit
from efficiency upgrades
with transparent
understanding of expected
savings, and new financing
facilities to fund upfront
costs.
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Save As You Sail for short term charters (
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Five reasons for Save As You Sail
1. The technology options are proven, available and used
widely
2. There are split incentive barriers in the time charter market
- over 85% of time charters are for less than 12 months
3. Shipping companies are struggling to gain access to
finance – Moody’s
4. The full cost savings are not passed through in time charter
rates – University College London
5. Bunker prices have stayed high
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Section 2 Role of Deloitte
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The Role of Deloitte
Sustainable Shipping Initiative – 29 May 2013, Athens
Evaluate
SAYS
Conduct
Sensitivity
Analysis
on Critical
Inputs
Discuss
Findings &
Improve the
Financial
Model
Review the
Financial
Model
Developed by
the SSI Team
Understand the
Save as you
Sail (SAYS)
Concept
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Save as you Sail (SAYS) at a glance
Sustainable Shipping Initiative – 29 May 2013, Athens
Financing via Loan
Efficiency premium agreed
Fuel Savings are generated
Loan Repayment
Baseline Measurements & Monitoring
Upgrade of the Ship Engine and/or Hull
Owner receives
enhanced charter
rates
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How does the quantitative financial model work?
Sustainable Shipping Initiative – 29 May 2013, Athens
KEY INPUTS
Upgrade costs
(USD)
Fuel Price
(USD/tonne)
Charterer’s expected
savings
(% of expected fuel cost
savings retained by
charterer)
Loan Profile
(loan to value, duration,
interest rate)
Fuel saving
(% fuel consumption
reduction)
Expected Fuel Cost
Savings (USD/day)
Owner’s Loan Payments Owner net profit,
NPV, IRR
Efficiency premium
(increase in charter rate
post upgrade)
PRIMARY OUTPUTS CALCULATIONS
Pre-upgrade fuel
consumption rate
(tonnes/day)
Charterer
Net profit
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Deloitte’s financial Model Review Procedures
Sustainable Shipping Initiative – 29 May 2013, Athens
Data provided by Wartsila/AkzoNobel
Input tested
Investment Appraisal
• Fuel Savings as %
• Cost of Upgrade
• Other technological inputs
• Fuel Price Volatility
• Sailing Time
• Efficiency Premium
• Loan Profile
‒ Interest, duration
• Investment Appraisal
Criteria Developed
‒ Discounted (and simple)
Payback Period
‒ Net Present Value
‒ Internal Rate of Return
• Sensitivity Analyses on:
‒ “Heavy” Factors:
• Sailing Time
• Fuel Price Volatility
• Charter rate premium
‒ “Soft” Factors:
• Loan Profile (interest,
duration)
• Loan to Value
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Save as you Sail (SAYS) Pilot Deloitte’s Future Role
• Monitor the Fuel Savings Figures
• Collect Data from Real Life Examples
• Update the Model with Actual Data
• Monitor & Refine the Model to Better Ascertain the Implied
Return
Deloitte Future
Role
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Section 3 Worked example overview of technologies
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Save as you Sail (SAYS) Pilot - Worked Examples
Sustainable Shipping Initiative – 29 May 2013, Athens
Worked example 1: Slow steaming
and intelligent combustion
retrofitted to a container vessel
Worked example 2: Advanced
fluoropolymer foul release coating,
optimised propeller and propulsion
efficiency optimiser fitted to a handymax
dry bulker in dry dock
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25 September 2013 Customer Webinar 16 © Wärtsilä
Fuel Consumption RT-flex82C engines
Tier ll tuning
With TC type
A100 or MET-
MB
6.3 g/kWh 7.5 g/kWh 9.7 g/kWh
RT-flex Delta Tuning and Low Load
RTA vs. RT-flex LLT up to 6.4%
RT-flex Std. vs. LLT up to 2.7%
Technologies in Worked Example 1 Slow Steaming & Intelligence Combustion
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25 September 2013 Customer Webinar 17 © Wärtsilä
Computational Fluid Dynamics
Solutions are calculated by the CFD department
Wakefield measurements of existing model test
helps determine calculation parameters
CFD is used for
determination of strut angle
Calculating and comparing efficiency
Propeller and Propulsion Technologies in Example 2 Optimised Propeller Design
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All products supplied and technical advice or recommendations given are subject to our standard Conditions of Sale.
Advanced Foul Release Coatings
Creates a very smooth surface reducing skin friction and improving
vessel efficiency
Biocide-free & high solids reducing environmental footprint & waste
Hull coating technologies in Example 2
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Section 3 Guide to Excel tool and worked examples results The following slides show the results of running the financial model in the two worked examples. In the slide with four tables, each table alters one of the inputs that has a significant impact on the business case for the vessel owner – fuel price, sailing time or efficiency charter rate premium. In each of the runs of the model the follow factors that have a low impact on the owner’s return are kept constant as follows: Loan details: 5% fixed interest repayment rate, paid quarterly over a 3 year term Cash investment from the owner: 20% of the project cost Discount rate: is the ship owner’s Weighted Average Cost of Capital, which is modelled on the average cost of capital for Greek shipping owning companies Investment period: cashflows are calculated over 10 years, the hull coating has an additional cost after 5 years to recoat included in the model.
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Save as you Sail (SAYS) Pilot Screenshot of Excel model of Save As You Sail
For discussion purposes only
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Save as you Sail (SAYS) Pilot Case study details location
Case studies in the model
For discussion purposes only
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Save as you Sail (SAYS) Pilot Screenshot of Case studies included
For discussion purposes only
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Save as you Sail (SAYS) Pilot Location of scenario input variables
Input variables
For discussion purposes only
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Save as you Sail (SAYS) Pilot Scenario inputs assumptions shown in orange cells
For discussion purposes only
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Save as you Sail (SAYS) Pilot Input variables and calculations for sensitivity analysis
Input variables
For discussion purposes only
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Save as you Sail (SAYS) Pilot Input variables for sensitivity analysis (shown in orange cells )
For discussion purposes only
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Save as you Sail (SAYS) Pilot Summary of project cash flows model outputs displayed
For discussion purposes only
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Save as you Sail (SAYS) Pilot Summary of investment appraisal analysis outputs
For discussion purposes only
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Assumptions
Sailing Time 250 days
Fuel Price $ 611 per tonne
Charter rate premium 50% of Expected Fuel Savings
Investment Appraisal
Payback Period (Years) 2.5 years
Net Present Value ($ ‘000) 522
Internal Rate of Return (%) 82%
Assumptions
Sailing Time 208 days
Fuel Price $ 611 per tonne
Charter rate premium 50% of Expected Fuel Savings
Investment Appraisal
Payback Period (Years) 3.0 years
Net Present Value ($ ‘000) 380
Internal Rate of Return (%) 59%
Assumptions
Sailing Time 250 days
Fuel Price $ 458 per tonne (-25%)
Charter rate premium 50% of Expected Fuel Savings
Investment Appraisal
Payback Period (Years) 3.5 years
Net Present Value ($ ‘000) 309
Internal Rate of Return (%) 49%
Assumptions
Sailing Time 250 days
Fuel Price $ 611 per tonne
Charter rate premium 40% of Expected Fuel Savings
Investment Appraisal
Payback Period (Years) 3.3 years
Net Present Value ($ ‘000) 352
Internal Rate of Return (%) 55%
Save as you Sail (SAYS) Pilot Worked Example 1 Results and Sensitivity Test –
Intelligence Combustion & Slow Streaming Upgrade Kit
For discussion purposes only
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Sailing Days:
250 Charter rate premium (% of Expected Fuel Savings)
100% 90% 80% 70% 60% 50% 40% 30% 20% 10%
Fuel
Price
(USD
per
tonne)
733 1.3 1.3 1.5 1.8 2.0 2.5 3.3 4.5 8.3 > 10
703 1.3 1.5 1.5 1.8 2.3 2.8 3.5 4.8 9.0 > 10
672 1.3 1.5 1.8 2.0 2.3 2.8 3.5 5.3 9.8 > 10
642 1.5 1.5 1.8 2.0 2.5 3.0 3.8 5.5 > 10 > 10
611 1.5 1.8 1.8 2.3 2.5 3.0 4.0 6.0 > 10 > 10
580 1.5 1.8 2.0 2.3 2.8 3.3 4.3 6.3 > 10 > 10
550 1.8 1.8 2.0 2.5 2.8 3.5 4.5 7.0 > 10 > 10
519 1.8 2.0 2.3 2.5 3.0 3.8 5.0 7.5 > 10 > 10
489 1.8 2.0 2.3 2.8 3.3 4.0 5.5 8.3 > 10 > 10
DISCOUNTED PAYBACK PERIOD (in years) results when altering the charter rate premium and
the fuel price from which this is calculated. The Red box shows the default fuel price.
Investment Cost: $ 370k
Save as you Sail (SAYS) Pilot Sensitivity Tables – Intelligence Combustion & Slow Streaming Upgrade Kit
For discussion purposes only
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Save as you Sail (SAYS) Pilot Sensitivity Tables – Intelligence Combustion & Slow Streaming Upgrade Kit
Sailing Days:
250 Charter rate premium (% of Expected Fuel Savings)
100% 90% 80% 70% 60% 50% 40% 30% 20% 10%
Fuel
Price
(USD
per
tonne)
733 1,717 1,512 1,307 1,102 898 693 488 283 79 (126)
703 1,631 1,435 1,239 1,043 846 650 454 258 61 (135)
672 1,546 1,358 1,171 983 795 607 420 232 44 (143)
642 1,461 1,281 1,102 923 744 565 386 207 27 (152)
611 1,375 1,205 1,034 863 693 522 352 181 10 (160)
580 1,290 1,128 966 804 642 480 317 155 (7) (169)
550 1,205 1,051 898 744 590 437 283 130 (24) (177)
519 1,119 974 829 684 539 394 249 104 (41) (186)
489 1,034 898 761 625 488 352 215 79 (58) (194)
NET PRESENT VALUE
(in 000s USD)
Investment Cost: $ 370k
These results show that there is a positive investment
case for the owner in this scenario at current fuel prices if
they can negotiate an increase in charter rates equivalent
to 20% of the charterer’s expected savings on bunker
costs or at 30% if fuel prices fall to $489/tonne
For discussion purposes only
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Save as you Sail (SAYS) Pilot Worked Example 2 Results and Sensitivity Test –
Advanced Coating & Optimised Propeller
Assumptions
Sailing Time 250 days
Fuel Price $ 611 per tonne
Charter rate premium 50% of Expected Fuel Savings
Investment Appraisal
Payback Period (Years) 3.0 years
Net Present Value ($ ‘000) 713
Internal Rate of Return (%) 66%
Assumptions
Sailing Time 208 days
Fuel Price $ 611 per tonne
Charter rate premium 50% of Expected Fuel Savings
Investment Appraisal
Payback Period (Years) 3.5 years
Net Present Value ($ ‘000) 479
Internal Rate of Return (%) 48%
Assumptions
Sailing Time 250 days
Fuel Price $ 458 per tonne (-25%)
Charter rate premium 50% of Expected Fuel Savings
Investment Appraisal
Payback Period (Years) 3.8 years
Net Present Value ($ ‘000) 362
Internal Rate of Return (%) 39%
Assumptions
Sailing Time 250 days
Fuel Price $ 611 per tonne
Charter rate premium 40% of Expected Fuel Savings
Investment Appraisal
Payback Period (Years) 3.5 years
Net Present Value ($ ‘000) 432
Internal Rate of Return (%) 44%
For discussion purposes only
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Save as you Sail (SAYS) Pilot Sensitivity Tables – Advanced Coating & Optimised Propeller
Sailing Days:
250 Charter rate premium (% of Expected Fuel Savings)
100% 90% 80% 70% 60% 50% 40% 30% 20% 10%
Fuel
Price
(USD
per
tonne)
733 1.5 1.5 1.8 2.0 2.3 3.0 3.8 5.5 > 10 > 10
703 1.5 1.5 1.8 2.0 2.5 3.0 4.0 5.8 > 10 > 10
672 1.5 1.8 2.0 2.3 2.5 3.3 4.3 6.0 > 10 > 10
642 1.5 1.8 2.0 2.3 2.8 3.3 4.5 6.5 > 10 > 10
611 1.8 1.8 2.0 2.5 3.0 3.5 4.8 7.0 > 10 > 10
580 1.8 2.0 2.3 2.5 3.0 3.8 5.0 7.8 > 10 > 10
550 1.8 2.0 2.3 2.8 3.3 4.0 5.5 8.3 > 10 > 10
519 2.0 2.3 2.5 3.0 3.5 4.3 5.8 9.3 > 10 > 10
489 2.0 2.3 2.8 3.0 3.8 4.8 6.5 > 10 > 10 > 10
DISCOUNTED PAYBACK PERIOD
(in years)
Investment Cost: $ 680k
For discussion purposes only
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Save as you Sail (SAYS) Pilot Sensitivity Tables – Advanced Coating & Optimised Propeller
Sailing Days:
250 Charter rate premium (% of Expected Fuel Savings)
100% 90% 80% 70% 60% 50% 40% 30% 20% 10%
Fuel
Price
(USD
per
tonne)
733 2,675 2,338 2,002 1,666 1,329 993 657 320 (16) (353)
703 2,535 2,212 1,890 1,568 1,245 923 600 278 (44) (367)
672 2,394 2,086 1,778 1,469 1,161 853 544 236 (72) (381)
642 2,254 1,960 1,666 1,371 1,077 783 488 194 (100) (395)
611 2,114 1,834 1,554 1,273 993 713 432 152 (128) (409)
580 1,974 1,708 1,441 1,175 909 643 376 110 (156) (423)
550 1,834 1,582 1,329 1,077 825 572 320 68 (184) (437)
519 1,694 1,455 1,217 979 741 502 264 26 (212) (451)
489 1,554 1,329 1,105 881 657 432 208 (16) (240) (465)
NET PRESENT VALUE (in USD)
Investment Cost: $ 680k
These results show that there is a positive investment
case for the owner in this scenario at current fuel prices if
they can negotiate an increase in charter rates equivalent
to 22% of the charterer’s expected savings on bunker
costs or at 30% if fuel prices fall to $519/tonne
For discussion purposes only
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The opportunity
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Be involved in the pilot
1. Higher value ship, attracting higher charter
and resale rates
2. Retrofit loan from ABN AMRO
3. Higher quality performance data to use in
marketing
4. Increased income during and after the loan
period
5. Support from 21 SSI members, Deloitte and
HFW
6. Dedicated SSI communications support to
showcase your leadership with articles and
presentations targeting top-tier channels
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Further resources for you…
1. A summary document that sets out SAYS
in more detail and includes two worked
examples
2. An Excel financial model with explanatory
slides produced by Deloitte
3. Contractual guidance summary by HFW
4. Contacts with ABN AMRO to discuss
financing options*
5. Contacts with Akzo Nobel and Wartsila to
discuss technology options*
*SAYS can be used with other finance and
technology providers
To access the resources visit
www.ssi2040.org
To express interest in using SAYS contact
To reach Will Dawson: [email protected]
0044 7824 692 149
Forum for the Future
Sustainable Shipping Initiative (SSI)
Inputs / Outputs Sheet Back Button
UPGRADE OPTIONS PMI1 TCCO1 PMI1+TCCO1 Bubble hull
Technology Inputs Calculation Metric
Sailing Time Per Annum [1] Hours per Year 6,000 6,000 6,000 6,000
Vessel Maximum Power Output [2] KW 48,000 48,000 48,000 48,000
Average Power Output as % of Maximum Power [3] % 40% 40% 40% 40%
Average Power Output [4] = [2] X [3] KW 19,200 19,200 19,200 19,200
Energy Use per Year [5] = [1] X [4] KWh 115,200,000 115,200,000 115,200,000 115,200,000
Fuel Savings [6] g/KWh 2.0 3.5 5.5 14.0
Fuel Savings (in tonnes per year) [7] = [5] X [6] Tonnes/Year 230 401 631 1,613
Fuel Price [8] USD/Tonne 626 626 626 626
Fuel Savings (in financial terms) [9] = [7] X [8] USD/Year 144,230 250,961 395,191 1,009,613
Cost of Upgrade Option USD 117,000 250,000 367,000 683,000
CONTROL PANEL (SENSITIVITY ANALYSIS SELECTION)
Upgrade Option PMI1
Sailing Time (in hours per year) 6,000
Fuel Price Reduction 0%
Fuel Price 626
Fuel Savings 144,230
Fuel Savings Split (Owner's share) 50%
Cost of Upgrade 117,000
Loan to Value 80%
Loan 93,600
Cash 23,400
Loan Profile
Loan Interest Rate (annual) 5%
Loan Interest Rate (effective) 1.3%
Loan Installments (number) 12
INVESTMENT APPRAISAL CRITERIA (OWNER)
Payback Period (in months) 9 0.8
Discounted Payback Period (in months) 9 0.8
Average Cost Savings / month (during loan period; after loan payments) 3,215
Average Cost Savings / month (after loan period) 6,010
Equity IRR [Internal Rate of Return] (%) 169% Should be compared to Cost of Equity
Net Present Value (in USD) 294,542 Should be positive to Accept
Project IRR [Internal Rate of Return] (%) 61% Should be compared to Weighted Cost of Capital
3 years; Interest Payments every 3 months
Sailing Time (in days per year): 250
Payback Period (in years)
Discounted Payback Period (in years)
http://www.ssi2040.org/mailto:[email protected]:[email protected] Model_Deloitte version_v7.xlsm
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Contacts
Technology providers
Maarten Van der Klip of Wartsila : [email protected] : +31 38 425 3109
John Wilsher of AkzoNobel : [email protected] ; +44 191 401 2564
Finance provider
Gust Biesbroeck - ABN AMRO [email protected] : +31.10.4019701
Wider information
Will Dawson – Forum for the Future : [email protected] +44 7824 692 149
mailto:[email protected]:[email protected]:[email protected]:[email protected]
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www.ssi2040.org
Registered charity no:
GB 162 3473 19 Will Dawson
SSI Members involved in the workstream
Knowledge Partners to the workstream