Havila Must Refinance Norwegian Cruise Ships due to Russian Sanctions

The European Union’s sanctions against Russia as a result of the invasion of Ukraine have become the latest challenge to Havila Kystruten’s efforts to launch its Norwegian coastal passenger operations. The company confirmed that it is seeking new financing to replace agreements with a Russian-owned leasing company that could cause yet further delays in the launch of the company’s new ships.

Among the companies targeted in the latest round of EU sanctions imposed last week was Russian-owned leasing company GTLK. Havila confirmed that its first coastal cruise ship vessel, Havila Capella, is funded by GTLK Asia and that it planned to finance the three additional ships being built for Havila Voyages through leasing agreements with GTLK Europe and GTLK Asia, two established companies in ship financing.

“We support the authorities' sanctions against Russia and comply with sanction provisions set by the authorities,” said Bent Martini, CEO of Havila Kystruten. “We are now working to refinance Havila Capella to break all ties with sanctioned and Russian-owned companies,” he said while noting that it would also require alternates for the three other ships still under construction at the Tersan shipyard in Turkey.

They noted that Havila Coastal Route assumes that the sanctions will prevent GTLK from carrying out the financing of the three remaining vessels, the first of which is due for delivery this week. Currently, the three ships are owned by the Tersan shipyard and would remain with the yard until delivery to Havila. Under the previous arrangements, GTLK was acquiring the ships and leasing them to the Norwegian company. 

Martini says “We had assessed what has now happened as a possible outcome and have for a period worked to find alternative financing for our coastal cruise ships.” Martini says it is difficult to time when new financing can be put in place, but they plan to take delivery of the second ship, Havila Castor, as scheduled. New financing will be required for delivery of the third and fourth ships planned for later this year as well as to refinance their first vessel which has been in service since December 2021.

Sailings of Havila Capella are expected to go as planned. The company notes that the ship is registered in Norway and approved by the Norwegian authorities and satisfies all requirements in the Norwegian Maritime Act. “Even though we have paid rent to a Russian-owned company, the ship is Norwegian for all practical purposes,” Martini explains.

The impact of the sanctions on the planned financing comes as the latest in a series of challenges the company has faced since it was first awarded a contract by Norway in 2018 to operate a portion of the coastal service. The contract was historic as Norway for the first time split the route between Hurtigruten, which has maintained coastal voyages since 1893, and Havila. 

The plan called for Havila to initiate its service in January 2021. Havila, however, encountered numerous delays starting with a failed agreement with Spain’s Barreras Shipyard that resulted in the cancelation of the first construction contract. A new contract was awarded in September 2018 to Tersan calling for the delivery of two vessels late in 2020. The contract was later expanded with two additional sister ships due for delivery in late 2021.

Each of the vessels is 15,470 gross tons with a length of 407 feet and accommodations for 640 passengers. Their primary power is from liquified natural gas, although each ship is fitted with one of the largest marine battery installations yet developed by Corvus Energy. They will be able to operate for up to four hours on their batteries.

Construction of the new designs was complicated by the onset of the pandemic presented further challenges forcing Havila to seek agreements with the Norwegian government to delay the launch of the operations several times. Initially expected to start sailing in January 2021, Havila Capella entered service in December 2021.

The maiden voyage of the company’s second ship, Havila Castor, was delayed earlier this year after the ship’s sea trials were postponed due to issues with an electric motor. Media reports said that the shipyard was having challenges with one of its subcontractors which delayed the second ship and which Havila reported were expected to also delay the delivery of its third and fourth vessels. The Norwegian government agreed to the further delays not requiring the company to provide substitute vessels.

Havila Castor had been scheduled to enter service on April 7 but the maiden voyage was rescheduled for May 10 before the current challenges. Havila Voyages expects however that it will be able to operate that trip as planned. The third vessel Havila Polaris is currently expected to be ready for delivery in the third quarter of 2022 and the fourth, Havila Pollux, in the fourth quarter of this year.

“With the experiences we had so far, there is uncertainty about the exact date of delivery of these ships,” Martini said. He noted that they would announce dates for their maiden voyages once the delivery dates had been established.