Green Investment

That’s the way it is in life- you get a position or a map but not both at the same time.”
William Least Heat Moon

Maritime vessel owners and operators are being pressured by international authorities and port state regulations to comply with regulations forcing vessel operations to be “clean”. That is, sea transport producing greatly reduced greenhouse gas emissions, reduced spread of invasive bio species through ballast water treatment and clean hulls, and reduction of overboard wastes.

All of this costs money, starting with the large capital outlays for the design, testing and building of ships of entirely new designs. In the long run over the life of a ship, much of this will be recovered by reduced annual operating and maintenance costs.

Meanwhile…Along comes ESG, Environmental, Social, and Governance compliance. In the past corporations followed CSR, Corporate Social Responsibility. Make a profit but along the way be good to your employees, customers, community and the environment. While CSR sounds wonderful, ESG now has corporations having to produce the metrics that show that they are actually working toward the CSR goals and making a difference.

In the environmental area this might be showing a reduction in carbon emissions, kilowatts of energy saved, reduction in tons of waste, reduction in water usage, and progressive targets for each year. This can be done with the older standards like ISO 9001 and the newer ISO 14001-Environmental Management System (EMS), and ISO 50001-Energy Management.

What does this have to do with the marine industry? Shipping has many similar regulations that have been put in place by the International Maritime Organization (IMO) forcing the “greening” of the industry. And ESG is used as a key assessment marker for investors.

It is reported that as of early 2019 a quarter of the world’s professionally managed investment funds only invest in companies that have sound ESG credentials.

A recent article in the New Orleans newspaper noted that Nationwide Insurance just invested in a Louisiana 50 megawatt 197,000 solar panel solar farm as part of its ESG stance. This electricity will be sold to a Fortune 500 Entergy Corporation who now has around 190 megawatts of renewable energy in its portfolio including waste heat recovery, biomass, and hydro power. Entergy states that in the past two years about 25% of the electricity used in Louisiana came from carbon free sources.  This is in a major oil producing state and follows up on my data on the drop in coal usage.

So, it can be many of the usual lenders that will find it in their interest and part of their new mission statement to fund new marine construction and conversions in the next decade. Working with owners and shipyards green loans can be made as part of the portfolio of loans to a company along with normal funding.


It is agreed that it is good to be green and many throw their “greenness” in front of lenders, investors and the public. But the truth is that there are no agreed to bases for measuring green.

Various sides push LNG, low sulfur fuel oil, ammonia, bio-fuels, hydrogen, methane, lithium power packs, etc., but like good sales people they accentuate the positive and eliminate the negative.

What are “zero emissions”?  All airborne emissions? Is that just the current headliner CO2, or does that also include the collection of Green House Gas (GHG) and/or lead? Is it just air emissions or also emission into the water through hull biofouling or the exhaust from open circuit exhaust gas scrubbers? And how about the emissions on shore from the production of these fuels or battery packs and the coal or LNG power plants that charge the batteries.

But there are interested and powerful parties that are working toward developing “score cards” that will measure the ecological soundness and advantages of environmentally sound designs and practices.

The Green Shipping Project is sponsoring the Sustainable Shipping Initiative (SSI) which will define criteria for new fuel’s sustainability. They will then work with other bodies to create a form of certification.

The main bodies interested are of course the IMO which has been working on emission standards for several decades, and probably classification societies and port state authorities that will be signing off on certifications.

Another step is the recently announced rating system put forward by the International Chamber of Shipping (ICS) where every vessel under IMO regulations for emissions (greater than 5000 G.T. will receive and operational efficiency rating, much like a report card. They will each have a grade, possibly A to E, or A to G, which can be updated annually. This grade will be included in each vessels IMO specifications so that anyone, be it shipper, charterer, or prospective buyer, knows where the ship stands in efficiency.

This system has been presented to the IMO to be made into a regulation. One might expect that when ratified, vessel operators with vessels under 5000 G.T. might seek credentials as part of green marketing.

DLS Marine will be watching this and the many other design and regulatory factors that may be affecting vessel values in 2021 and forward. As if the economy in 2021 and forward is not enough to research and consider in our valuations.

Norman Laskay


Is One Section of River Traffic Fading Away?

Traveling by boat is the best way to travel, unless one can stay at home.”
Mark Twain


I recently received a question on the market for river service open hopper barges.

The answer starts with information from the U.S. Energy Information Agency (EIA). EIA statistics show that the Capacity Weighted Average Construction Cost of solar voltaic generators has fallen about 50% between 2013 and 2018. Offshore wind generator costs are down 27% and natural gas 17%.

The average construction cost in 2018 for wind farms were $1676 per MW for 25-100 MW farms, $1435 for 100-200 MW farms, and $1268 for 200+ MW farms.  All these per megawatt costs have been steadily dropping since 2014.

The cost of natural gas fired generators in 2018 was a low of $604 for turbine units and twice that, $1211 for internal combustion engines. These annual cost vary with the cost fluctuations of natural gas.

EIA also states that from 2011 to mid-2020 75 gigawatts of coal capacity was shut down or switched to a different fuel source. Another 25 GW is slated to be shut down by 2025.

From 2008 to 2018 domestic coal shipments to the U.S. power sector, by all forms of transportation, fell about 57%. In 2018, the coal shipped to power plants by barges dropped 9%.

The U.S. Army Corps of Engineers (USACE) Waterborne Commerce Tables show that coal shipments from 1997 to 2014 averaged around 300,000,000 short tons, plus or minus no more than 10%. In 2015, it fell to 233,900,000 ST, and in 2016, the latest in the table, 197,700,000 ST.

Domestic coal production peaked in 2008 and in 2018 it was the lowest it has been since the coal miner’s strike in 1978.

The statistics show the trend away from coal is obvious and can’t be ignored.

Most coal is carried by rail, but some of this is from inland coal areas, such as the largest coal producer Wyoming. Rail cars take some of it to rivers for transshipment to barges, but rail car loadings are down about 50% now over a high of around 100,000 carloads in early 2018.

EIA indicates a 25-30% decrease in exports in 2020 from the same period in 2019, and sees this 30% drop through all of 2020.

Where does this leave the demand for open hopper barges?

The USACE marine tonnage tables as of 2018 showed a total of 8122 open hopper barges. This number includes the 175 x 26 and 195 x 26 open hoppers in upper river service, like the Ohio River.

The oldest open hopper was built in 1972.  A total of 978 (12%) were older than 35 years, and 1464 (18%) were younger than 10 years. The two largest construction years shown in their tables were 2007 and 2008 when a total of 589 barge were delivered.

Closer to most market interest are the statistics on just the standard Jumbo 195/200’ x 35 x 12/13/14’ open hoppers. The IEG Vantage Barge Fleet Profile 2019 lists, as of 2018, a total of 5909 in that specific category. It should be noted that the Barge Fleet Profile works with operators by sending out questionnaires and there is not 100% participation. Barge operators, large or small, may not provide data. The average age of these barges is 17.6 years. (The average age of covered hopper barges is 13.5 years.) The Profile also shows that in 2015, 338 open hoppers were built, a statistic not noted by the USACE. However, in another table it shows that there were only 117 2015 built open hoppers in use in 2019. This may be due to some operators of 2015 barges not participating in the Profile.

A wider overview on demand factors

International trade is one factor. But the big name in trade uncertainty, China, is not an important market for U.S. coal exports. The largest importer is India with their demand for steamer coal for electricity generation. Next is Japan with a near equal need for metallurgical and steamer coal. The Netherlands is 3rd as mainly a transshipment hub for the rest of Europe, mainly Germany.

Other top ten buyers are Brazil (metallurgical), South Korea (steam), Canada and the Ukraine (metallurgical), Egypt (steam), and Italy and Morocco (mainly metallurgical).

Weather affects utilization, with cold or hot weather increasing home and commercial electrical demand. Storms and icing shut down navigation causing barges to sit as temporary floating storage units. This latter situation can also occur when the Corp of Engineers has to shut down a lock system due to damage or maintenance.

There can also be individual operators that have to spend capital on Subchapter M upgrades to tug boats making the operation of some utilization/low income open hopper barges of no interest.

A small silver lining in this market is that some of the barges have been used to ship wind farm blades. But this will not balance the loss of coal, or the softer market for things like fracking sand.

The market place

Hopper barges in general do not often come up on the open market. They can change hands among lessors at the end of lease transactions but these are usually en bloc sales with the numbers rarely public knowledge.

Currently brokers have shown a few of these open hoppers on the market. Sales have ranged from a single barge to a group of 19. Their ages ranged from the mid 1970’s to the year 2001 with asking prices running from around $125,000 to $250,000. These asking prices equal about 25% to 50% of replacement costs.

The catch here is that replacement costs over the last 10 years has varied greatly between around $450,000 and $600,000, depending on the cost of steel and the leverage the builder had with profit margins. And there is no apparent connection between the ages of these barges and their asking prices. Age and asking price had no connection.

From this information it seems that the asking market price is going to vary by the specific condition of the barge and the owner’s interest in selling.


Lenders are familiar with the domestic Uniform Standards of Professional Appraisal Practice (USPAP) the standards for appraisal reports on Real Property, Personal Property and Business Valuation. With our appraisers all being members of the American Society of Appraisers, our appraisal reports have been USPAP compliant for over 20 years.

Internationally, a non-profit registered in the United States and headquartered in London, The International Valuation Standards Council, has worked with interested parties throughout the world to produce standards for appraisal reports that international investors and accounting firms can rely on for detailed, transparent and unbiased valuations. These standards are in many ways similar to USPAP. DLS has followed the progress of IVS and has had several engagements with international banks where an IVS compliant appraisal was requested.

Most of the thrust of IVS is on Business Valuation and the value of intangibles, but Personal Property is included in their guidelines. For now, because the U.S. works under the rules of GAAP (Generally Accepted Accounting Standards) and internationally it is IFRS (International Financial Reporting Standards), USPAP and IVS have similar goals via slightly different routes. However it is in the interest of worldwide industry and investors to have common regulations and FASB and IASB, the U.S. and international accounting standards boards, are working towards one standard.

Norman Laskay

Staying Ahead of Technology

Experience is the name everyone gives to their mistakes.”
Oscar Wilde (1854-1900)


Looking into the not so distant future there are new concerns for surveyors, owners and lenders.

LNG powered vessels are being launched almost weekly. There is also a push by engine manufacturers and shipyards to have standard fuel oil powered vessels retrofit to Liquefied Natural Gas. LNG is the fuel choice of propulsion to meet current exhaust emission standards and will be with us for the next 10 to 20 years. But technological advances and the need to meet stricter Green House Gas (GHG) emission regulations will force the move to fuels that are cleaner over their lifetime. That means clean in their production, use and disposal, and clean in the manufacturing of the systems through which they are used.

All of the new systems bring new safety issues. LNG involves flammable gas. Storage and onboard delivery systems must be redundant and include safety switches, valves and alarms. Hybrid vessels also have battery blocks which must have protection from the fire dangers associated with lithium batteries.

Surveyors need to be concerned with the fueling system safety features, how the bunker port is arranged, and what the LNG fueling safety procedures are.

When surveying one of these vessels, the type and capacity of the fueling system are both important parts of the vessel’s value, but the condition and efficacy of the associated safety systems are also extremely important.

We are used to being around a “benign” fuel, diesel oil. The new fuels and fuels of the future, like LNG and ammonia, might take a mindset more like being around gasoline. There is also the future possibility of “layered technology” where LNG is blended with a bio-fuel or methane.

The days of simple fuel pumps and fuel rails on larger commercial vessels are numbered.


With LNG or other future fuels, be they ammonia, bio fuels, hydrogen, or even solar or wind assist, batteries will be involved.

I have read of at least six types of lithium batteries that can be used in electric vehicles. Some of these types may not be transferable to the larger sizes needed in marine vessel storage banks.  Since the technology is changing so quickly there are no hard statistics on battery life. What is known is that the larger the battery the better it seems to stand up to drainage and recharging cycles. Currently some scientists believe the life of a battery block to be around 10 years. In their systems, ABB appears to guarantee a 10-year life. Other systems speak of a five-year life. Therefore, like engine overhauls, battery block life can be a major maintenance or life extension cost affecting a vessels value.

Along with battery renewal there is the flip side, battery recycling. What can be done to salvage battery components? Will salvage recovery be enough to partially offset the cost of battery block renewal and a factor in future values calculations? This will be changing as battery design and materials change. There are already businesses that are set up to recycle/reuse some parts of some of the lithium battery designs.

This leads to the ecological problem of how “green” hybrid electric vessels are. In use there is no question that electric power or electric assist saves fuel burn. But if you include the manufacturing and disposal of large marine battery blocks, does one still reduce overall GHG? There are indications that with continued improvements in the market and in the right usage there is and will be savings.

Another plus on the electrical side is the growing use of more efficient neodymium magnets in permanent magnetic motors. These magnets are used instead of windings and have a long life, are efficient, and reduce maintenance costs.


The owners who jumped into retrofitting their ships with exhaust scrubber systems, feeling it was the safest approach to compliance with the IMO 2020 emission standards, are now repenting in leisure.

This time last year the anticipated cost difference between the then acceptable High Sulfur Fuel Oil (HSFO) and the post January 1, 2020 Low Sulfur Fuel Oil (LSFO) was estimated to be in the range of $300 to $400 per tonne. A ship’s engine retro fit could be paid off within a year of operation. The retrofit breakeven price differential for LSFO was estimated at $170 per tonne. In 2020 the price spread has been averaging closer to $70 per tonne, running the payoff time for a scrubber system to closer to five years.

Scrubber maintenance has also become a costly problem. Class societies are talking about seeing systems out of order or requiring constant maintenance. Anecdotally there is a story of an operator who estimated scrubber system maintenance at $10,000 per year per ship and the actual cost has been closer to $100,000.  Your mileage may vary.

There are also some stories of open loop scrubbers where the mix of sulfurous exhaust and salt water has eaten away areas at or around the scrubber discharge allowing ingress of water. And while on the subject of open loop systems, more countries and ports are banning ships with open loop scrubber systems as they don’t want the sulfurous discharge in their harbor water. The argument still rages as to whether the discharge is or is not ecologically dangerous.

Not confined to either open loop or closed loop type systems, there have been failures in a vessel’s exhaust stack, where these systems are installed, that allowed salt water to pour down into the engine room causing extensive damage and even a few cases of loss of propulsion or generator power.

Currently ships with scrubbers still show a slight advantage in charter rates over non-scrubber ships using LSFO, but it’s difficult to see this as an overall advantage that would warrant a valuation premium.

I’ve been commenting on all the changes that will be coming in order to make transportation cleaner. These technologies will apply to cars, trucks, construction equipment, aircraft and marine. So many entities are pushing their research their products and their services. A group called the Green Shipping Project headquartered in Vancouver and supported by the University of British Columbia has assembled a worldwide group of educators, NGO’s and some governments to study and independently quantify the economics of green initiatives. Their website https://greenshippingproject.com/projects/ shows some of the studies done, most involving port facilities.  

While COVID-19 disrupts the world the marine industry continues on a technological roll. Even though the United States is not politically involved in some of the technological research and changes, domestic engine companies and industrial manufacturers who sell internationally have to stay competitive. This is also true of U.S, flag vessels, whether large blue water cargo vessels or oilfield service vessels, which have to conform to world standards in order to work around the world.

So while the DLS staff have been cut off from face-to-face education, the growth of marine related webinars have been a blessing. DLS has tried to stay current on technological changes by sitting in on important webinars and internally spreading information we have learned. Some of this also comes to you, our readers, through this monthly posting.

Norman Laskay

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