The introduction of the International Maritime Organization’s new sulphur emissions regulations on 1 January next year is hugely significant to shipping companies operating tonnage in the Baltic Sea, the North Sea, the English Channel and the entire northern European transportation network.
Just one of the many operators in the Emission Control Area (ECA) where the new rules will have a major impact is DFDS, a household name to northern European ferry passengers. The company’s main business, however, is transporting trailers and trucks, with 50 ro-ro and ro-pax vessels deployed on 25 routes in the ECAs. Under the new regulations, also adopted by the European Union, ships operating in these areas will only be able to use oil with a maximum of 0.1% sulphur. Such oil costs up to 40% more than oil with 1% sulphur.
Never one to rest on its laurels, DFDS has for a number of years tested a prototype scrubber and last year completed the installation of the system on three vessels in the fleet. The company is investing DKK300 million in installing scrubbers in eight more ships in 2014, bringing to eleven the number of DFDS ships which will comply with the new regulations, representing a total investment of DKK400 million. The installation of scrubbers on another 10 ships that are compatible with scrubber systems is also being considered.
Not all shipping companies have the opportunity to make the major investment that a scrubber system requires. In addition, only about half of all ships are suitable for having scrubbers fitted. Much has been said about LNG but, as Smedegaard says, in reality this is only a solution for new ships. “We must act quickly to find solutions and, preferably, transition rules for the many ships that are not suitable for scrubber installation, possibly through temporary exemptions, if shipping companies contribute to investments in solutions where possible,” he says.
“Scrubbers represent major investments. Therefore it is paramount that we have clear and appropriate rules for their use and rules that provide companies with a secure basis for deciding on investments. This includes a safe system for enforcing the sulphur rules. Otherwise, it would be irresponsible for shipping companies to make such large investments for the benefit of the environment and infrastructure in Europe.”
Investment in scrubber systems may not be suitable for older ships. DFDS could therefore relocate some vessels to southern Europe, where the regulations come into effect only from 2020. The company currently has one route in the Mediterranean, operating between Marseilles and Tunis.
Last year DFDS made a bid for private equity-controlled ferry company Scandlines, which operates routes from Denmark to Sweden and Germany. Smedegaard says he had been ready to pay more than €1 billion, but owners 3i Group and Allianz Capital Partners turned down the offer.
“The rejection of our bid to acquire Scandlines does not change our strategy or situation. We presented the offer, which we believe corresponds with the value of Scandlines to DFDS,” says Smedegaard.
“It is still our goal to grow through organic growth or acquisitions. But as the bid for Scandlines has documented, DFDS is in a very strong financial situation and has the ability to finance possible acquisitions, should the opportunity to make a sound investment arise.”
The company is certainly growing. In January, DFDS and STEF SA, a French temperature-controlled logistics provider, entered into an agreement whereby DFDS acquires STEF’s logistics activities in Scotland, and STEF acquires the continental distribution and handling activities of DFDS Logistics located in Boulogne. The transaction is expected to generate substantial operational synergies through the integration of DFDS and STEF operations in Scotland, including a turnaround of the acquired activities.
While DFDS seeks sound investments in business acquisitions and environmental technology, it is not neglecting opportunities to enhance the experience of its customers. Its two Copenhagen-to-Oslo cruise ferries, Pearl Seaways and Crown Seaways, are the subject of a €16 million upgrade, with alterations including new facilities for families with children and for conference guests.
The Pearl Seaways was first for refit, carried out by Fayard at Lindø in Denmark, while the Crown Seaways was slotted off from 10–31 March. DFDS hopes the work will contribute to an even better cruise experience on the scenic, traditional trip between Copenhagen and Oslo.
“We are very pleased that we can offer our customers an improved product on this iconic route. The Pearl Seaways has already been upgraded and is again in service between Oslo and Copenhagen. The route is very popular, but we need to continuously develop our services to always be in line with the expectations and wishes of our passengers,” says Smedegaard.
“Therefore, we conducted a survey among thousands of customers as well as staff to get a very detailed picture of what our customers consider to be most important for a perfect sea journey between Oslo and Copenhagen. The results are further luxury cabins, improved conference facilities, an improved wellbeing area and an extension of the restaurant choice on board, with an Italian restaurant as well as improved bar areas.
“The upgrade has been very well received by our customers on the first journeys – the first being from Copenhagen on 24 January.”
This article appeared in the Spring/Summer 2014 edition of International Cruise & Ferry Review. To read other articles, you can subscribe to the magazine in printed or digital formats.