Philly Shipyard places TOTE containership project on hold and considers alternative projects
January 26, 2018
Reference is made to a release today by TOTE where the company announced that its plans to enter the U.S. mainland to Hawai’i containership service are on hold as a result of its Phase 1 technical review of Piers 1 and 2 in Honolulu Harbor. As a result of this delay, TOTE and Philly Shipyard, Inc. (PSI) will not extend their Letter of Intent (LOI), which is set to expire on January 31, 2018.
In September 2017, Piers 1 and 2, along with 40+ acres of adjacent land, were allocated to TOTE by the Hawai’i Department of Transportation (HDOT) for its access and use commencing in 2020, to coincide with the planned start of TOTE’s new operations in Hawai’i. According to TOTE’s release, its preliminary study of the site’s infrastructure indicated that this terminal space will require upgrades and improvements to accommodate TOTE’s new Hawai’i service.
The LOI, which was signed by TOTE and PSI in July 2017, contemplates the construction and sale of up to four state-of-the-art, cost-effective and eco-friendly vessels, with planned deliveries for the first pair (Hulls 031-032) in 2020 and the second pair (Hulls 033-034) in 2021. Due to the scope and timing of the required upgrades and improvements to Piers 1 and 2, the LOI will not be renewed.
TOTE, however, noted in today’s release that it continues to be open to working with HDOT to update plans and a timeline for access to a deep water terminal in Honolulu Harbor that would allow TOTE to launch its new Hawai’i service.
Based on these developments, the project to build Hulls 031-034 as containerships is being put on hold. PSI is suspending substantially all construction-related activities on these vessels, including design, planning and procurement work. As previously disclosed, PSI has placed orders for all major long-lead items for the first pair. If these orders were to be cancelled, then the cancellation costs would be substantially lower than the value of the orders placed.
PSI intends to resume this project when there is more clarity regarding the new order situation and related capital requirements. Accordingly, PSI is exploring alternatives in order to secure contracts and financing for these vessels. In addition, PSI is continuing to pursue potential new construction projects for other types of Jones Act vessels.
PSI has delivered 28 vessels in its 20 year history, including four vessels for use in the Hawai’i containership trade which were delivered in 2003-2006. Currently, PSI is building two 3,600 TEU containerships for use in the Hawai’i trade for Matson (Hulls 029-030).