A place for private equity

Private equity has penetrated many segments of the shipping industry but some are starting to run for cover.

Moore Stephens, a consultancy based in the UK, believes steel isn’t the only type of investment that alternative sources of capital should consider going forward.

In a market briefing the firm argued that “the time is right” for both providers and end-users of innovative products and services to pursue partnerships with private equity.

Citing commentary from Alison Jarabo of Fathom Shipping, Moore noted that developers of exhaust scrubbers and ballast water treatment systems, in particular, are in need of cash- as are a growing number of prospective buyers.

“Although we have seen a partial return to the shipping sector by banks during the past twelve months or so, there is still a shortfall in available finance,” added Richard Greiner, a partner with the firm’s shipping division.

“This comes at a critical time for the industry, with significant investment required in technology and services to achieve compliance with environmental regulation and to maximise commercial performance.

“Shipping services providers who have developed the technology to meet these requirements need the financial resources to bring them to market.

“Similarly, end-users who have identified the technology solutions which are right for them need the funding to access and implement them.”

Greiner claims the shipping services market is already starting to see more interest from private equity, a trend he attributed, in part, to the fact that this corner of the industry, like many others, is highly fragmented.

“Private equity investors who have a firm grasp on the potential risks and rewards available in today’s shipping services sector could be a good match for well-founded shipping services and technology providers who have a clearly identified market for their products,” he said.

“Indeed, it could be argued that recent developments have created something of a perfect storm to bring the two together.”

Some alternative sources of capital are already pursuing partnerships with owners that intend to equip tonnage with dual-fuel propulsion systems or exhaust scrubbers in a bid to comply with increasingly stringent emissions standards.

Industry observers are quick to point out that this can be a costly proposition for operators. The re-powering of two Jones Act containerships controlled by Totem Ocean Trailer Express, for instance, carries a price tag of approximately $120m.

source:www.tradewindsnews.com