‘save as you sail’ energy efficiency upgrade financial ......fuel consumption rt-flex82c engines...

‘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

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

Disclaimer

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

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.

Save As You Sail for short term charters (

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

Section 2 Role of Deloitte

9

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

10

Save as you Sail (SAYS) at a glance


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

11

How does the quantitative financial model work?


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

12

Deloitte’s financial Model Review Procedures


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

13

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

Section 3 Worked example overview of technologies

15

Save as you Sail (SAYS) Pilot - Worked Examples


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

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

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

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

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.

20

Save as you Sail (SAYS) Pilot Screenshot of Excel model of Save As You Sail

For discussion purposes only

21

Save as you Sail (SAYS) Pilot Case study details location

Case studies in the model


22

Save as you Sail (SAYS) Pilot Screenshot of Case studies included


23

Save as you Sail (SAYS) Pilot Location of scenario input variables

Input variables


24

Save as you Sail (SAYS) Pilot Scenario inputs assumptions shown in orange cells


25

Save as you Sail (SAYS) Pilot Input variables and calculations for sensitivity analysis

Input variables


26

Save as you Sail (SAYS) Pilot Input variables for sensitivity analysis (shown in orange cells )


27

Save as you Sail (SAYS) Pilot Summary of project cash flows model outputs displayed


28

Save as you Sail (SAYS) Pilot Summary of investment appraisal analysis outputs


29

Assumptions

Sailing Time 250 days

Fuel Price $ 611 per tonne

Charter rate premium 50% of Expected Fuel Savings


Payback Period (Years) 2.5 years

Net Present Value ($ ‘000) 522

Internal Rate of Return (%) 82%

Assumptions








Assumptions


Fuel Price $ 458 per tonne (-25%)






Assumptions








Save as you Sail (SAYS) Pilot Worked Example 1 Results and Sensitivity Test –

Intelligence Combustion & Slow Streaming Upgrade Kit


30

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


31

Save as you Sail (SAYS) Pilot Sensitivity Tables – Intelligence Combustion & Slow Streaming Upgrade Kit

Sailing Days:


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)


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


32

Save as you Sail (SAYS) Pilot Worked Example 2 Results and Sensitivity Test –

Advanced Coating & Optimised Propeller

Assumptions








Assumptions








Assumptions


Fuel Price $ 458 per tonne (-25%)






Assumptions









33

Save as you Sail (SAYS) Pilot Sensitivity Tables – Advanced Coating & Optimised Propeller

Sailing Days:


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)



34

Save as you Sail (SAYS) Pilot Sensitivity Tables – Advanced Coating & Optimised Propeller

Sailing Days:


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)


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


The opportunity

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

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

[email protected]

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

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]

www.ssi2040.org

Registered charity no:

GB 162 3473 19 Will Dawson

[email protected]

SSI Members involved in the workstream

Knowledge Partners to the workstream

‘save as you sail’ energy efficiency upgrade financial ......fuel consumption rt-flex82c engines...

Documents