Small- and medium-sized shipping companies may not survive the financial impact of installing ballast water management systems (BWMS), said a marine finance consultant, Alan McCarthy on November 30. “With a lack of financing and funding, it is going to be really quite tricky” for such companies, he said.
As a result, “over the next two or three years we are going to see some quite profound impacts and changes on that sector of shipping,” he added. “No matter how passionately you feel about shipping if it is going to take away your family’s wealth you will stop doing it,” he said. “I think [some owners] will be forced to do that.”
He was addressing a seminar in London organised by the UK Chamber of Shipping about planning for enforcement of IMO’s Ballast Water Management Convention (BWMC). He told delegates that most large shipowners are funding installations out of cashflow and equity, but the poor state of the markets means that, for small- and medium-sized owners, “your equity went a long time ago.”
They would have to approach banks, shareholders or other investors, he said, but shareholders are “the hardest people to convince to put more money into a business.” As for banks, financing equipment installations is not traditional shipping finance, although obtaining short-term loans with renewable lines of credit to fund installations is theoretically possible, he said. But in preparation for his presentation he had spoken to a few banks “and I have not found one that is even thinking of doing it.”
To make a successful application to a bank he said that owners must have best-practice corporate governance and suggested that smaller companies should combine to create a consolidated structure with a parent company to support the liabilities of the individual shipowning companies. “This is the way the industry is moving,” he said.
With the market so poor and likely to remain so for a few years, it is difficult to make a case based on an expected upturn, he suggested. “If you cannot make the corporate case or the market case then the question I have to ask is: why are you in the business?” he told the seminar.
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Source: Ballast Water Treatment Technology