BC Ferries awards $165 million in contracts for three new Liquefied Natural Gas fuelled intermediate class ferries

VICTORIA, July 3, 2014 /CNW/ - Following the completion of an extensive competitive bidding process, BC Ferries has awarded Remontowa Shipbuilding S.A. of Gdansk, Poland contracts totaling $165 million to build three new intermediate class vessels.

The contracts have been approved by BC Ferries' Board of Directors, as well as a total project budget of $252 million that includes financing and project management costs that would have been incurred regardless of where the vessels were built.  The budget also includes
$51 million for Canadian taxes and federal import duties.  The total project budget is within the capital envelope set by the BC Ferries Commissioner.

"These are design-build, fixed-price contracts that provide BC Ferries with substantial guarantees related to delivery dates, performance criteria, cost certainty and quality construction," said Mark Wilson, BC Ferries' Vice President of Engineering.  

Other highlights of the contracts include:

• Remontowa assumes all design, construction and delivery risk
• Guarantees are in place for vessel completion dates
• Favourable payment terms with 80 per cent payment upon vessel completion
• Vessel performance guarantees related to speed, carrying capacity, manoeuvrability and fuel consumption
• Warranties above industry standard
• Penalties for late delivery
• Refund guarantee

"As we begin the next phase of our newbuild program, a key objective is to achieve capital and operating cost savings and efficiencies through an overall class and standardization strategy," said Wilson. "Standardization offers greater interoperability and lower crew training and maintenance costs, and also enhances safety.  This is a significant step forward in taking BC Ferries from 17 classes of ships to five classes." 

The new intermediate class vessels will be the first vessels in BC Ferries' fleet to operate as dual-fuel capable using Liquefied Natural Gas (LNG) or diesel fuel for propulsion and power generation. "This is an exciting initiative for BC Ferries that can reduce upward pressure on fares due to lower fuel costs for LNG, and reduce the environmental emissions substantially since LNG is a cleaner and greener fuel compared to current alternatives," said Wilson.

Two of the new ships will replace the 49-year old Queen of Burnaby, which sails between Comox and Powell River and the 50-year old Queen of Nanaimo, which services the Tsawwassen – Southern Gulf Islands route.  The third vessel will augment peak and shoulder season service on the Southern Gulf Islands route, plus provide refit relief around the fleet.  These new 105 metre vessels will accommodate 145 vehicles and 600 passengers. 

The first new intermediate class vessel is scheduled to arrive in British Columbia in August 2016, the second in October 2016 and the third in February 2017.  Remontowa is responsible for delivering the vessels to Victoria.  The first vessel is expected to be in service in the fall of 2016, following extensive crew training and familiarization.

The Gdansk ship repair and shipbuilding yard Remontowa Shipbuilding S.A , which is one of the world's leading shipyards with state-of-the-art design and production facilities, is a member of the Remontowa Holding capital group specializing in ship design and construction of new ships, conversions and repairs, offshore units and steel structures. The shipyard was established in 1952 and privatized in 2001.

BC Ferries conducted an extensive competitive bidding process to ensure that the company secured the best bid for its customers and the taxpayers of British Columbia.  One shipyard from BC, Seaspan's Vancouver Shipyard, was among the five shipyards shortlisted and invited to participate in the RFP process, however they decided to withdraw as they indicated they have maximized their available capacity due to commitments with the federal government building vessels under the National Shipbuilding and Procurement Strategy as well as constructing BC Ferries' new cable ferry.

Criteria for shipyard selection included the design and construction plan, recent experience building intermediate ferries, capability of introducing new technology such as LNG, customer satisfaction (references from other customers), delivery schedule, price and payment terms, financial stability and ability to provide guarantees. 

Under contract to the Province of British Columbia, BC Ferries is the service provider responsible for the delivery of safe, efficient and dependable ferry service along coastal British Columbia. 

CONTRACT TERMS

Delivery of the Vessel
Remontowa Shipbuilding S.A. is responsible for delivering the vessels to Victoria.  Title transfer will occur in BC.  Guaranteed production milestones and delivery dates are specified in the contracts. 

Design and Construction
Remontowa assumes full design and construction risk associated with each vessel.

Regulatory Requirements
Remontowa is responsible for building vessels that comply with all Transport Canada regulations, as well as classification (international shipbuilding standards) and environmental regulations.  The vessels are classed and delegated to Lloyd's Register of Shipping.

Payment Terms
The total cost of the three vessels is $165 million Canadian. Four payments of five per cent per vessel are payable during the construction period, with the remaining 80 per cent payable upon completion of each vessel.

Delivery Dates to Victoria
Vessel #1 – August 2016
Vessel #2 – October 2016
Vessel #3 – February 2017

Refund Guarantee
A refund guarantee from Remontowa's bank will be in place to provide security for
BC Ferries' pre-delivery instalment payments.

Liquidated Damages
Remontowa guarantees the delivery and the performance of the vessels; specifically speed, fuel consumption, weight and freight capacity, acceleration time and rate of turn.  Increasing financial penalties, up to the point of contract cancellation with a full refund, will be levied if the performance of the vessel does not meet the contract specifications.

For example, if the vessels are late for delivery, a penalty of approximately $20,000 Canadian per day will be levied after the first 15 days to a maximum of approximately $6 million Canadian.  After 180 days, BC Ferries can rescind the contract for a full refund.

Another example is speed.  If the vessels are more than 2/10 of a knot below specification, a penalty of approximately $125,000 Canadian will be levied for each 2/10 of a knot up to one knot.  If the vessels are more than one knot less than the guaranteed speed, BC Ferries can rescind the contract for a full refund.

Corporate Guarantee
Remontowa will also provide a corporate guarantee from its parent company, Remontowa Holding, as security for the performance of all of Remontowa's obligations under the contracts.

Builder's Warranty
An extended builder's warranty of 24 months from delivery will apply to materials, construction, design and workmanship.  This is 12 months longer than the standard terms of warranty of a typical shipbuilding contract. 

Noise and Vibration
Remontowa guarantees that the vessels will be built to the highest shipbuilding standards for noise and vibration.  If they are not, BC Ferries has the right to reject the vessels for a full refund or BC Ferries may accept a substantial penalty from the builder for excessive noise and vibration at its option.

Title to Design, Plans and Drawings
BC Ferries will acquire the title to the vessels' design, plans and drawings upon delivery at no additional cost to BC Ferries.  This will be an important benefit for BC Ferries as the company embarks on future fleet renewal projects and advances on an overall class strategy. 

SOURCE: British Columbia Ferry Services Inc.

BC Ferries, Communications, Victoria: [phone]