New Backers of Offshore Energy Vessels
Editorial StaffThe Facts -
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- Infrastructure funds finance expensive ships for the offshore energy market.
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- These ships work under long-term charters, similar to traditional infrastructure.
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- Floating assets offer steady cash flow and pass-through operating cost increases.
Infrastructure Funds Boost Offshore Energy Market with Purpose-Built Ships
NEW YORK — Infrastructure funds are increasingly financing expensive, purpose-built ships for the offshore energy market, according to investment bankers at Marine Money’s 36th annual conference.
This shift comes as bankers highlight that these niche vessels share key traits with traditional infrastructure investments. Notably, these ships operate under long-term time charters, panelists noted during the “Infrastructure Funds and Maritime Finance – The Love Affair Continues” session.
“It is a widening of the (infrastructure fund) lens,” said Loli Wu, managing director, co-head of North America Infrastructure Investment Banking at Bank of America. The funds have become “a good source of capital for a certain type of asset,” he added.
Infrastructure funds finance the construction of ships that store and process crude oil from offshore rigs and others that re-gasify super-cooled Liquid Natural Gas (LNG), benefiting commercial use. Marine terminals often charter these vessels to transfer cargo downstream to oil majors or utilities.
The purpose-built “midstream” vessels are typically dedicated to specific projects and work under long-term charter contracts. The goal is “to make it look like infrastructure,” said Denny Sreckovic, a partner at Global Infrastructure Partners, which finances and owns these ships.
“Now, shipping is considered critical infrastructure,” said Arthur Regan, CEO of Energos Infrastructure in Stamford, CT. It financed the construction of six of the approximately 50 FSRUs (Floating Storage Regasification Units) operating worldwide, each costing several hundred million dollars.
FSRUs transport, store, and re-gasify LNG, delivering market-ready fuel to consignees without onshore regasification terminals.
Floating assets appeal to infrastructure fund managers and their “buy and hold” investors because of the ships’ steady cash flow and contract provisions that pass through operating cost increases to the lessee, speakers explained.
Infrastructure funds were initially slow to embrace niche market shipping investments, starting a few years ago, Regan noted. Private equity funds, with limited investment horizons, had begun these investments about a decade earlier, he added.
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