Hanwha Ocean eyes Jones Act market with Philly Shipyard acquisition

South Korea’s Hanwha Systems and Hanwha Ocean are taking a leap into the US Jones Act market, with a US$100M acquisition of American shipbuilder Philly Shipyard (PSI).

A publicly traded shipbuilder controlled by Norway’s Aker ASA, the Philadelphia-based shipyard has delivered both product tankers and container ships for the US market since it was established in 1997. It is currently building a subsea rock installation vessel for the offshore wind market, 3,600-TEU, LNG-fuelled container ships, and a series of National Security multi-mission vessels under a US Maritime shipbuilding initiative. Philly Shipyard teamed with Vard Marine to complete a design study for a series of hospital ships for the US Navy.

As of the end of Q1 2024, Philly Shipyard has an order backlog of US$1.6Bn, with deliveries stretching into 2027.

The keel was laid in early May for the Ulstein-designed subsea rock installation vessel for Great Lakes Dredge & Dock, while the three container ships are due to be delivered to Matson in 2026 and 2027.

The deal would give Hanwha Systems a “strategic opportunity” to “deploy its state-of-the-art naval systems and associated technologies in the US market," said Hanwha Systems chief executive Charlie SC Eoh.

Hanwha Ocean, the former Daewoo Shipbuilding & Marine Engineering, would gain a foothold in the US commercial and government shipbuilding market. Hanwha Ocean chief executive Hyek-woong Kwon sees an opportunity to support “the expanding needs of the US for decades to come."

Hanwha Systems sees opportunities to serve the unmanned underwater vehicles, smart ships and unmanned surface vehicles markets. Sister company Hanwha Ocean is a leader in LNG shipbuilding, and produces navy ships such as destroyers, submarines and frigates.

Hanwha Ocean’s acquisition is somewhat of a twist. The deal follows on the heels of a memorandum of understanding reached between Philly Shipyard and South Korea’s HD Hyundai Heavy Industries (HHI) “to explore a potential business relationship relating to future US government shipbuilding projects as well as maintenance, repair and overhaul projects.”

The two parties had worked together for a span of more than a dozen years on the construction of 22 product tankers built at Philly Shipyards from 2005-2017. HHI provided design and procurement support for the tankers.

While the transaction is set to close in Q4 2024, it must first obtain regulatory approvals, including the approval of the Committee of Foreign Investments in the US.

The parties have also agreed in principle to adjust the purchase price at closing “in the event of cost overruns in excess of US$100M in current projects undertaken by PSI compared to the company’s current estimates,” according to an Oslo exchange filing.