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Retrofit fund links repayments to fuel savings
FEET uses unsecured leases and a pay-as-you-save mechanism to finance ship retrofits, backed by GCMD, AIM Horizon Investments, the Development Bank of Japan, ING and DBS Bank
By offering unsecured leases on retrofits, the newly launched Fund for Energy Efficiency Technologies (FEET) has separated retrofit finance from vessel mortgages and assembled commitments of up to US$35M for shipboard energy efficiency projects.
The Global Centre for Maritime Decarbonisation (GCMD), AIM Horizon Investments and their partners announced they have closed FEET after attracting commitments above the initial target.
The fund documentation stated FEET “provides up to 100% upfront financing for retrofits and introduces a pay-as-you-save repayment mechanism linked directly to verified fuel and regulatory savings.”
In simple terms, FEET pays for energy efficiency equipment and its installation at the outset and then leases the hardware to shipowners. Instead of entirely fixed instalments, repayments are tied to measured fuel and regulatory savings, with ownership of the equipment transferring to the shipowner for a nominal fee at the end of the lease.
The fund targets energy-efficiency technologies such as wind-assisted propulsion systems and air-lubrication systems that reduce fuel use and emissions.
GCMD said such retrofits could deliver immediate fuel savings and help shipowners remain competitive as regional carbon regulations tighten, but that variable fuel savings and a lack of standardised measurement methodologies had limited uptake and created uncertainty over payback periods.
To support the pay-as-you-save structure, GCMD reported it has been undertaking performance pilots in which vessels are equipped with additional sensors to collect high-precision, high-resolution data, with rigorous analytics used to quantify fuel savings “with statistical confidence”.
As more data is gathered under different operating and environmental conditions, GCMD said these datasets could be used to model and predict savings and help isolate the contribution of the retrofit to overall fuel performance.
FEET has been structured as blended finance.
GCMD provides catalytic equity and acts as decarbonisation adviser, while AIM Horizon Investments manages the fund. Shareholders of AIM Horizon Investments hold the commercial equity position and the Development Bank of Japan holds the preferred equity position.
Two banks specialising in shipping finance, DBS Bank and ING, have in principle agreed to provide senior debt financing, with ING acting as co-ordinating bank.
GCMD and AIM Horizon Investments said the fund has been designed to grow beyond this first closing and they are targeting a scale of US$500M by 2030, which they indicate would be capable of supporting around 200 ships.
Global Centre for Maritime Decarbonisation chief executive officer Professor Lynn Loo said, “Bringing FEET to life has taken persistence and a willingness from everyone involved to step into the unknown. There was no playbook; our teams were learning as we went. This is exactly the kind of collaborative, problem-solving mindset needed to move the needle on maritime decarbonisation.”
She added, “My hope is that FEET will accelerate the uptake of shipboard energy-efficiency solutions and help unlock the scale of action needed to turn the industry’s decarbonisation ambition into tangible progress.”
Development Bank of Japan’s corporate finance department, division 4, said it believes the adoption of energy efficiency technologies is “an effective solution for maritime decarbonisation” and FEET provides “a platform to support this”.
ING global head of the shipping sector Stephen Fewster described the initiative as “another building block in our strategy to support the maritime industry in transitioning to a more sustainable future”, while DBS managing director and group head, shipping, aviation, logistics and transport, Max Lim said the FEET initiative “not only supports the adoption of technologies for energy efficiency, but also seeks to help shipowners manage financial and climate risks”.
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