The convention is ratified. Regulations are due to enter into force. Manufacturers have developed and honed their technologies. Engineering companies and yards are optimising the installation processes. And the banks, well, they remain apathetic to the demands of the ballast water management convention. So just how can shipowners optimise their installation projects?
Historically, when shipowners needed capital equipment, the banks would be amenable. However, due to the financial crisis of 2008 and subsequent regulatory restrictions, many now consider small to medium sized shipping companies, particularly those involved in the bulk trades, a high risk; and this despite a retrofit market that analysts suggest will be worth about $60 billion between 2017 and 2022.
Nevertheless, while many balk at forking out for equipment that is perceived not to offer a return, finance for BWMS installations is available. “Whether it’s from a bank, a private equity investor or the shareholders, shipping companies will have to make a strong financial case for their ballast water plant installations,” says Ian Stentiford, global vice-president, Electrocatalytic business, Evoqua Water Technologies. “They cannot expect to receive funding simply because the equipment is now a mandatory requirement as no one will provide finance it if it cannot be financially justified.
“Of course, the larger shipowning groups will be able to invest equity themselves, but those small to medium sized shipowners that don’t have equity or struggle with cash flow will need to really evaluate their operations before they approach any prospective lender or investor. Above all they will need to proffer a realistic expectation of future revenues and provide confidence that any investment will be amortized or repaid in a given period of time.”
Although there is still conjecture about the true number of vessels requiring a retrofit installation, with Clarksons Research pointing to a projected demand of around 30,000 ships, shipowners do need to consider whether the sums stack up. “The age of the vessel, trading patterns, oil prices and operational efficiency are all extremely important considerations,” says Stentiford. “Say, for example, you have a 14-year-old bulker facing special survey at a cost of about $2 million, the $1 to £2 million needed for a ballast water system installation could make scrapping a more commercially attractive option.” Bulk carriers and tankers account for nearly half of the estimated BWMS retrofit demand, with over 80 percent of the current tanker fleet and about 65 percent of the bulker fleet. Evoqua Water Technologies’ SeaCURE electrochlorination-based ballast water system (BWMS) is geared towards the larger vessels in both of those market segments.
“There are other options available for smaller shipping companies struggling to fund a ballast water plant installation,” says Stentiford. “As a multi-billion-dollar organisation operating in all areas of water treatment, we do offer leasing and financing schemes in other areas of our business portfolio, so we can roll out similar schemes for SeaCURE BWMS, if there is a demand.”
Although commercial viability must be taken take into account when developing strategies to meet the regulatory requirements, equipment selection, operation and service support are of no less import, especially since there are currently 37 manufacturers and about 90 IMO-approved systems to choose from. “But this will retract,” he says. “I don’t think there will be this many manufacturers or systems in the market in, say, five years time.”
Stentiford thinks that the revised IMO G8 Guidelines, the rules governing BWMS approval procedures, which will be revised to include more robust testing and performance protocols during MEPC 71, later this year, will result in some companies and technologies pulling out of the race if the G8 more closely matches the more stringent testing regimes implemented by the USCG, which is anticipated.
Matt Granitto, Evoqua’s ballast business manager, agrees: “There is likely to still be a couple of differences between the IMO and USCG requirements, but they’re not expected to be dramatic. What this means though is that there will be a degree of treatment standardisation, which delivers greater confidence to shipowners, of course. So in time only those systems that, like our SeaCURE BWMS system, have passed the most stringent testing regimes in all water salinities will be selected.
“Closing the gap between USCG and IMO testing is not the big issue for us. From the outset we have taken the philosophy that the testing, passing and receiving US Coast Guard approval is only one step along the way. It's not the complete picture.”
Stentiford reveals that Evoqua “deliberately selected” independent laboratories (IL) because it wanted to “challenge SeaCURE BWMS” as part of the approval process. “We did not want to be a company that has all the certificates and badges in place but whose equipment fails in real time. We want to deliver a system that performs as we and our customers would expect a BWMS to operate in real life conditions. We knew the challenges that NSF would place on the system. We knew it would test our system under real water conditions, with real organisms in local environments. So we knew that if SeaCURE BWMS could pass these very tough tests then it is going to work in the real world. I am not going to put a system out into the market without being completely confident that it's going to operate at sea in the harsh environments ships encounter. That was our philosophy. It was a deliberate strategy.”
While the number of different BWMS technologies has been whittled down to three or so, Granitto believes the debate about the type of technology shipowners should select has ended. “We’re not competing against other technologies anymore. The market is changing and I think shipowners have now made the decision on what technology best suits the specific requirements, vessels and operations. Most shipowners know what they want now; it’s just a question of which manufacturer within that category supplies it.”
Stentiford concurs: “I think everyone will agree that the feasibility studies, the technological development, the bids, the kind of activity that has hitherto been dominating the market, is now dissipating; it’s real now. You can see that the whole industry has stepped up a gear in terms of the amount of real interest and real motivation to act. Certainly from our point of view activity has gone up dramatically and it's real activity. The tidal wave hasn’t hit yet in terms of actual installations but it is coming. I think 2018 will be the year we get the first wave. My sense is that the market's a lot more mature now than it was eighteen months ago.”
To ready itself for that first wave, Evoqua has honed its technology to reduce the system footprint to meet customer requirements. “We've drastically improved the life of the system which is now one of the smallest electrochlorination-based ballast water units on the market. We have adapted it as a modular system, reducing components and installation time and complexity,” says Granitto, adding that operation and service simplicity has been the key driver behind the optimisation.
In addition, Evoqua believes that the dual functionality of the SeaCURE BWMS may offer shipowners (and financiers) a return on their ballast water plant investments. Based on the company’s 50-year experience developing electrochlorination technologies, SeaCURE BWMS can be configured to also work as a vessel’s marine growth prevention system, protecting against the buildup of biofouling in seawater cooling systems. This means that some vessels will not need two separate electrochlorination systems.
“I don't know of any other system that combines ballast water treatment with marine growth prevention,” says Granitto. “It’s a nice optional extra. Another bonus is the side stream technology that's inherent to the system. You only need the one system to treat a number of different tanks, which is a real boon if you’re a tanker operator. With an in-line system you need to have a separate system for each tank, so the side stream system does offer a lot of flexibility. We’ve made tremendous steps.”
SeaCURE BWMS is expected to receive USCG type approval this summer.
Evoqua Water Technologies is the global leader in helping municipalities and industrial customers protect and improve the world’s most fundamental natural resource: water. Evoqua’s unparalleled portfolio of proven brands, advanced technologies, mobile and emergency water supply solutions and service helps cities across the world provide and discharge clean water, and enable leisure and commercial industry to maximize productivity and profitability. For more information, visit www.evoqua.com.
The opinions expressed herein are the author's and not necessarily those of The Maritime Executive.
This entry has been created for information and planning purposes. It is not intended to be, nor should it be substituted for, legal advice, which turns on specific facts.