OSV newbuilds required, but who will finance them?

Global OSV markets have swung in owners’ favour with rising utilisation and charter rates but a shortage of available vessels, delegates heard at Riviera Maritime Media’s Annual Offshore Support Journal Conference, in London, UK, 7 February.

Vessels are ageing due to a lack of newbuild deliveries in the past 10 years, and more than 50% of platform supply vessels (PSVs) and anchor handlers will be over 15 years old within the next two years.

This should encourage owners to consider expanding or modernising their fleets with newbuildings, but inflation means vessels cost 50% more to build than 10 years ago, there are a lack of shipyard slots and available finance.

During a panel debate at the conference, DOF board member Harry Knox said those willing to provide finance and capital would require vessels built ready to service both offshore oil and renewables sectors with emissions-reduction technology on board.

“Owners should look at how to finance new energy support vessels and not just OSVs,” he commented. “Those that just focus on oil and gas will struggle. Those focused on renewables will get more finance and more opportunities for their business model.”

But vessels are needed to support oil and gas developments and maintenance requirements. “There is high demand and lack of supply, it is a tight market with not enough ships,” said Mr Knox. “Something needs to change. But the financing landscape has changed dramatically and it is a struggle to get finance.”

Arctic Securities head of shipping and offshore corporate finance Truls Wiel said owners purely focused on renewables could also struggle as they may not have sufficient cash flow or long-term contracts. He said there are alternatives to bank finance, such as alternative or debt capital markets and private equity providers, especially for companies looking to recapitalise existing debt.

“Owners should look at how to finance new energy support vessels"

Oaktree Capital Management’s European principal group vice president Fredrik Ulstein said alternative lenders are ready to provide finance for the right deal. He said Oaktree supports owners with fleets of 3-10 vessels in acquisitions to expand fleets, and converting debt to equity. “This is a reliable alternative to shipowners, with more favourable terms than available from banks,” he said.

Export Finance Norway Eksfin, head of maritime and shipyards Solveig Frøland said if owners need finance for newbuilds “vessels would need to service a range of offshore needs including oil, gas and renewables” and they would “need cash flow and long-term charters.”

But with the lack of shipyard slots, any OSV ordered in 2024 will not be delivered until 2026 or 2027.