Wednesday, May 29, 2024

Mining M&A slips as firms lawyer-up to fight regulators

Colin McClelland | May 29, 2024 |

The U.S. Steel pig iron caster at the Gary Works, Ind. The Nippon deal faces scrutiny. Credit: U.S. Steel

Global mining dealmaking is falling this year but political drama and litigation are escalating in the United States and Canada, while other trends include paying premiums to get copper and guarding against liability at former mine sites.

The value of proposed, pending, completed and terminated mergers and acquisitions in the industry declined 12.5% to $74.2 billion this year to mid-May compared with the same period last year, according to Bloomberg data. The figures were presented at a May 20-22 conference run by the Society for Mining, Metallurgy & Exploration in New York.

Bids valued at $51.2 billion to acquire Anglo American (LSE: AAL), including $39.6 billion by BHP (NYSE: BHP; LSE: BHP; ASX: BHP) and $10.9 billion in a proposal with undisclosed details by Rio Tinto (NYSE: RIO; LSE: RIO; ASX: RIO), dominate the total, the data show.

M&A across all industries rose 16%, Todd Sibilla, a commodity applications specialist at Bloomberg, told the conference. But deals with diversified miners, like Glencore (LSE: GLEN) buying Teck Resources’ (TSX: TECK.A, TECK.B; NYSE: TECK) coal assets last year, plunged 94% this year compared with 2023, Sibilla said.

The Canadian uproar last year over Glencore’s interest in buying Teck, while the Swiss giant employs more Canadians than homegrown Teck, was cited as an example of a rising trend of misguided resource nationalism leading to court cases over blocked deals, according to a panel of lawyers at the annual conference on trends in mining finance. The panel also pointed to the bipartisan opposition in America to Nippon Steel buying US Steel while Japan is a major Western ally.

Court battles

An increasing number of deals are in litigation against the US government to overturn decisions and the number of abandoned deals in the last two years hit a record, said George Karafotias, partner in the M&A group at Shearman & Sterling in New York.

“It is a worrying trend and it’s the number one issue that we think about when we advise clients on bigger strategic deals,” he said. “A lot of work goes into anticipating and planning for an extensive regulatory review and part of that can also include coming up with a litigation strategy.”

US Steel shareholders approved Nippon Steel’s $14.9 billion takeover in April. The target company, formed more than a century ago, was the world’s biggest corporation, accounted for two-thirds of all steel produced in the US during the Second World War and employed 340,000 people.

Now, its contribution to defence is minor, it employs 23,000 and needs investment to modernize, Karafotias said. Nippon is not state-owned and Japan is a strong Western ally, he added.

President Joe Biden opposes the deal but hasn’t vowed to use executive authority to block it, though Donald Trump has.

“It begs the question: if Nippon Steel is an unacceptable buyer of this company, then who is?” Karafotias asked. “It may chill investment or further foreign investment in certain sectors in the US, so hopefully common sense prevails and we get there on this deal.”

Nippon has promised to keep the US Steel name, the headquarters in Pittsburgh, not to transfer jobs or productions overseas and to increase capital spending and technology sharing, the lawyer said. However, he noted Nippon operates in China and shares technology there.

“It wouldn’t surprise me if these aren’t things that can be sort of worked through and measures put in place to protect US interests,” he said. “Come November and once we get past the election, there may be scope to see this deal gets done.”

Teck talk

North of the border, Glencore’s pursuit of all of Teck was interesting for the political drama that BC Premier David Eby and federal opposition leader Pierre Pollievre created, even though they had no role in regulatory approvals, said Steven McKoen, a partner at law firm Blake, Cassels & Graydon in Vancouver.

“However, if you’ve got the person who might be the next prime minister and the person who is the premier of the province where the headquarters of the company you’re trying to acquire are, those are pretty formidable opponents to have a transaction,” McKoen said. “Very remarkable, not normal. This is not something you’d typically see in getting a transaction.”

Newmont’s (NYSE: NEM; TSX: NGT) $19.1 billion all-share acquisition of Newcrest at a 30.4% premium sought synergies and gave copper exposure to a gold company in tier one jurisdictions, John Wilkin, a partner at Blake, Cassels & Graydon in Toronto, said at the conference. They’re trends that may drive acquisitions over the next few years, Wilkin said.

“We’ve had the largest gold merger in history, but what was one of the most important factors to sell the premium: the company’s focused on copper,” he said. “Part of the strategy here is to create this tier one portfolio and selling off some of the assets.”

Newmont said in February it was selling some of its properties, though they have turned out to be ones it held before acquiring Newcrest. The company is pivoting away from Ontario and Quebec to focus on the Golden Triangle in northwest BC where Newcrest had the Red Chris and Brucejack mines and the Saddle North and Galore Creek copper-gold projects.

Brownfields

Redeveloping old sites is becoming more prevalent in M&A as rising metal prices and technology improve economics, but they bring concerns about liability, Carolyn McIntosh, senior partner at Cleveland-based law firm Squire Patton Boggs, told the panel.

“If you buy a previously mined area, you may be stuck with the responsibility for remediating it,” McIntosh said. “Understanding what that scope of potential liability may be is a critical part of your M&A.”

Miners in the US must be aware of the Comprehensive Environmental Response Compensation and Liability Act, the Clean Water Act and the Resource Conservation Recovery Act, she said. Not just governments, but non-governmental organizations and citizens can lodge complaints to seek enforcement.

“If your technology will recover metal then you’re going to be doing cleanup as you go along,” McIntosh said. “But all of those things should be taken into account to make sure that the investment is not underwater from the outset.”

Report: Singapore Port Congestion Mounts as Ships Divert from Red Sea

Linerlytica says port congestion at Singapore has reached a critical stage (file photo)
PUBLISHED MAY 28, 2024 3:51 PM BY THE MARITIME EXECUTIVE

Major carriers have repeatedly warned of the impact the Red Sea diversions are having on their services. In a report from Hong Kong-based market intelligence firm Linerlytica, they warn the diversions are causing the resurgence of port congestion while warning the situation is likely to get worse in the coming month.
Analysts have warned of the extra transit times as vessels are forced to divert around South Africa on their normal Asia to Europe runs. Now with the Houthi threatening further distance, including into the Indian Ocean, carriers have been warned to ensure that their vessels increase the diversions meaning even longer distances and greater travel times.
Linerlytica paints a picture of inter-related issues causing the latest congestion. According to their analysis, Southeast Asia is the worst bottleneck accounting for more than a quarter (26 percent) of congestion while North-Eastern Asia is close behind at 23 percent.
Singapore, however, they believe is the current epicenter of the backlogs. Linerlytica calculates that there are up to 450,000 TEU in the queue for shipping. They warn that vessels are now having to wait up to seven days for a berth at Singapore, versus normal conditions where at most a vessel had a half-day wait for a berth.
Contributing to the backlog is the dramatic increase in transit times for containers coming out of Asia. It has caused the shipping companies to push every available vessel into service and according to Linerlytica will force them to extend their charters.
Another market intelligence firm, Sea-Intelligence recently reported that transit times on the most popular routes between Asia and Europe were all seeing increases in times but that the worst is to the Mediterranean ports, where in many cases carriers have been transshipping containers through intermedia ports since they are diverting away from the Suez Canal. According to Sea-intelligence, transit times during the first three months of 2024 increased on average by 39 percent on the most popular route pairings between Asia and the Mediterranean while it also only slightly less with a 15 percent increase for the most popular port pairings between Asia and Northern Europe. They report it is worst for the ports in the Eastern Mediterranean where the average minimum transit time increased by 61 to 63 percent, while to the Central Mediterranean average transit times are up by 39 to 40 percent.
The growing congestion at Singapore is also causing other effects says Linerlytica. Vessels are being forced to wait outside associated anchorages and further from port as in the case of Singapore. Carriers trying to manage the longer transit times and growing delays have also elected to skip less busy ports such as Port Klang, Malaysia meaning boxes are piling up or being rerouted to ports such as Singapore which is then strained by the increased volumes. The increase in congestion is also causing vessel bunching at points along the routes.
Globally, Linerlytica estimates that two million TEU of ship capacity, or seven percent of the global fleet, is now caught in congestion.
As these pressures grow, it is also contributing to sudden increases in shipping costs. Several reports have warned that prices are returning to pandemic levels as a new wave of port congestion moves through segments of the market.

Singapore is Ready for Commercial Methanol Bunkering Operations

Methanol bunkering in Singapore while the X-Press Feeder vessel was also handling containers (X-Press Feeders)
PUBLISHED MAY 27, 2024 5:58 PM BY THE MARITIME EXECUTIVE

Singapore reports that it has completed its preparation and is now ready to offer full-scale commercial operations for the bunkering of methanol as a marine fuel. It joins other ports such as Antwerp and Rotterdam that are now locations for methanol bunkering and it can provide a model for the future adoption of ammonia as a marine fuel.
Two large methanol bunkering operations were completed in Singapore at the end of last week and again today, May 27, establishing the patterns and testing the processes developed by the Maritime and Port Authority of Singapore and government agencies. The port highlights that it began planning for the first methanol bunkering in July 2023 for the Laura Maersk containership including safety training and establishing an Emergency Operations Center. They also did plume modeling and reported they are now completing the technical reference for methanol bunkering.
Today’s bunkering of the ECO Maestro for X-Press Feeders also provided the opportunity to trial the use of the mass flow metering system for methanol and Singapore’s use of digital bunkering. Singapore has been the world’s largest bunker port for traditional fuels and is anxious to maintain its lead by developing alternative fuel options.
The new X-Press Feeders vessel was recently delivered in China as the first of 14 methanol dual-fuel vessels for the company. The ship, which is 13,900 dwt and 660 feet (201 meters) in length has a capacity for approximately 1,200 TEU. It stopped in Singapore before sailing for Cape Town as it heads to Rotterdam which along with Antwerp will be the homeports for X-Press Feeders’ new Northern Europe green routes. The vessel, which was the first of its kind built in China, uses a MAN 5S50 ME dual-fuel engine.
The bunker also marked the first time Singapore has been the location for methanol bunkering simultaneously with container operations. Close to 300 metric tonnes of bio-methanol were loaded from the bunker vessel Kara in a four-hour operation while the vessel was on dock at the Tuas terminal. According to port officials, after completing this operation the port is now ready for commercial methanol bunkering operations.

Proman's product tanker bunkered a methanol mix lass week in Singapore's anchorage after her naming ceremony (MPA)

Last week, on May 24, the port also saw the bunkering of 1,340 metric tons of a blended methanol mix of 20 percent green/80 percent conventional methanol for the Stena Prosperous (49,000 dwt) product tanker just delivered to Proman. It was a seven-hour operation also undertaken by the Kara in a ship-to-ship operation in the anchorage. Proman highlights the blend will result in a 31 percent tank-to-wake reduction in CO2 emissions.
The Laura Maersk loaded 300 metric tonnes of bio-methanol last summer in the first operation for Singapore conducted while the ship was in a secure part of the anchorage. After that, the port authority issued a tender for which it received 50 submissions from over 60 regional and international companies.
Singapore was also the location for the first two ammonia bunkering operations. Both were undertaken as part of the trials and certification of Fortescue’s pioneering vessel, a converted offshore supply ship that is the first to use ammonia.

Cyprus Terminates Larnaca Port Concession Over Development Dispute

Larna Cyprus — Larnaca is the second largest port on Cyprus and plans called for a large redevelopment (Port of Larnaca)

The Government of Cyprus in an ongoing dispute with the long-time leaseholder at the port of Larnaca announced it has terminated the concession and assumed direct management of the port. They immediately issued a statement reassuring that port operations would continue, including the use of the port as the staging area for the relief aid being shipped to the U.S.’s temporary pier in Gaza.

There are big development plans to expand the port and turn it into a major industrial and recreational facility. Larnaca was created in the early 1970s from a historic open anchorage and started commercial operations in 1973. Today, it is the second commercial port behind Lemesos and several smaller marinas and recreational ports on the island.

Larnaca is a multi-use port that occupies an area of approximately 110 acres on the southern coast. It serves all kinds of cargo from bulk, (feed, grain, plaster) to conventional cargoes such as timber, iron, fertilizers, cars, pipes, as well as petroleum. It also has become a port for cruise ships and ferries.

Kition Ocean Holdings was the long-term lease holder of the port but it had been involved in a legal dispute with the government. The government accused the company of failing to renew a letter of guarantee for the planned reconstruction of the port while the company had been in court for the past few months to force the government to move forward on the agreement. They responded to the news that operations transferred to the Cyprus Port Authority as of midnight May 27 accusing the government of a breach of contract.

Redevelopment plan calls for expansion of the commercial port and a new marina (Port of Larnaca)

The government and Kition in 2022 agreed on a port redevelopment and marina project for Larnaca valued at approximately $1.2 billion. The plan called for the second largest port in Cyprus to be expanded with 10 piers, a state-of-the-art passenger building, and new environmentally friendly equipment. At the same time, the existing infrastructure of the port was to be upgraded including the piers, internal road network, and storage areas.

The President of Cyprus Nikos Christodoulides said today that the expansion project would continue without delay while saying they would also be looking for a capable company to handle the development and operations. He confirmed that there have been discussions with the Emir of Qatar about strategic investments in Cyprus, including possibly the port. He also mentioned his recent meeting with the Chinese ambassador.

The Cyprus Port Authority is now overseeing gate operations, the port perimeter, and ship management. Government officials stressed that operations would continue as normal.

First LNG Tugboat with Hybrid System Goes Into Operation in Singapore

[By: Rolls-Royce]

A new technological highlight has been in regular operation in the port of Singapore since mid-May 2024: JMS Sunshine, the world's first LNG tug powered by a hybrid system with mtu gas engines from Rolls-Royce. Seatrium Limited, a leading engineering solutions provider to the global offshore and marine industry is the designer, builder and operator of the new 29-metre, 65-tonne bollard pull tug. The Port of Singapore has committed to the Maritime R&D Roadmap 2030 with the aim of making it environmentally friendly and reducing energy consumption.

Rolls-Royce has supplied two 16-cylinder mtu Series 4000M55RN gas engines and the gas regulating unit (GRU) for the harbour tug. Chiam Toon Chong, Technical Superintendent, Seatrium Marine Services, acknowledged: “The handling of mtu engines is straight-forward, and user-friendly. Additionally, spare part availability and service support is excellent for the operation of tugs.”

"We are proud that we were able to contribute to Seatrium's innovative project with our gas engines. The workboat market is one of our strategic business areas. The mtu engines were selected because they meet the demanding requirements of harbour tug operations - in terms of reliability, ease of operation, dynamic engine behaviour and low emissions," said Chew Xiang Yu, Head of Rolls-Royce Power Systems' civil marine business in Asia.

The mtu gas engines are already well below the limit values of current emission guidelines (such as IMO III) without exhaust gas aftertreatment. The particulate mass is below the detection limit and they emit only small quantities of nitrogen oxides.

The hybrid system is particularly suitable for the load profile of the harbour tug: it enables very precise manoeuvring and a strong bollard pull when the full power is used. To achieve maximum thrust, the total power of the two azimuth stern thrusters is 4000 kilowatts. This is achieved by adding to the 1492 kilowatts each supplied by the mtu gas engines and 500 kilowatts of electric motor power on each shaft. The tug is equipped with a battery capacity of 904 kilowatt hours. The battery power is used to absorb peak loads, for example during acceleration, to manoeuvre purely electrically in port and to supply the ship on board with electricity.

11 ships worldwide sailing with mtu gas engines
Rolls-Royce's Power Systems division has already received orders for mtu gas engines as propulsion systems and on-board gensets for a total of eleven ships worldwide. These include ferries, tugs and government vessels. Two catamarans belonging to the Doeksen shipping company have been operating reliably with mtu gas engines on the North Sea in the Wadden Sea nature reserve since 2021. The Richmond ferry has been operating a commuter service on the Lake Constance drinking water reservoir in southern Germany since 2023. Operators and passengers are delighted: the engines are particularly quiet, produce no vibrations, no unpleasant odours and no black smoke.

The products and services herein described in this press release are not endorsed by The Maritime Executive.

USCG Aids Supply Ship Taking on Water in the Caribbean

The U.S. Coast Guard assisted an offshore supply ship named Sea Falcon that reported it was taking on water while sailing in the Caribbean. When the call was received, the master declared an emergency reporting that the pumps on his vessel were not able to keep up with the ingress of water.

The Sea Falcon, built in 1980, is a 121-foot (37-meter) supply vessel that is operating in the Caribbean. When the vessel, which is registered in Vanuatu, called for assistance it reported that there were four people aboard. It was carrying two vehicles, construction materials, glass, and a container filled with dry goods.

The vessel was approximately 22 nautical miles south of Puerto Rico when the call for assistance was received late on Friday, May 24. The Sea Falcon was traveling to Tortola, British Virgin Islands when the captain reported they discovered a crack in the vessel’s hull. The estimated rate of flooding the USCG reports was approximately 300 gallons per minute.

While calling for vessels in the area to assist, the USCG also dispatched an MH-60T Jayhawk helicopter.

Reaching the vessel, the Coast Guard put a rescue swimmer aboard the Sea Falcon to assess the situation. The rescue swimmer confirmed approximately three inches of water in the engine room due to a three-inch crack in the vessel’s hull.

To aid with the situation, the Coast Guard lowered an additional pump to the vessel from the helicopter. They assisted in getting the pumping operation and the rescue swimmer confirmed the water level had decreased to about two inches before leaving the vessel.

The rescue swimmer was recovered by the aircrew and the Coast Guard helicopter returned to Air Station Borinquen. The Sea Falcon with the aid was able to continue to Tortola. She tied up at approximately 11:48 a.m. Saturday in the British Virgin Islands.

Two Rescued After Luxury Yacht Sinks Off St. Augustine

On Saturday, local first responders rescued two people from a sinking luxury yacht off the coast of St. Augustine, Florida.

Just after 1130 hours on Saturday morning, Sector Jacksonville received a call on Channel 16 from the yacht Atlantis, an 80-foot Sunseeker. The operator believed that they had struck something in the water, and the vessel was flooding.

Coast Guard Station Mayport launched a boat crew to the scene, and the local sheriff's office, the police department, county first responders and nearby good samaritans all converged on the vessel. Local police marine units arrived first, and they safely rescued the two people aboard the yacht. One individual sustained minor injuries and was taken to a hospital for treatment.

The submerged object was likely a dredge pipe piling, according to St. Johns County Fire Rescue. Photos released by the rescue agency show a large hole in the bow of the vessel at the waterline.

All images courtesy St. Johns County Fire Rescue

Atlantis was a 1999-built Sunseeker Predator 80 with a top speed of 45 knots, according to Boat International. Local media assessed its value as approximately $1 million.

As of Saturday, the vessel remained partially afloat, with just the bow visible. The Coast Guard has marked the hazard with buoys and issued a notice to mariners to warn of the potential risk to navigation. The vessel's owner is making salvage arrangements, according to the Coast Guard.

Full Reopening of Baltimore's Ship Channel Delayed

Contractors work to clear the last wreckage from the federal channel, May 23 (USACE)

The challenging task of removing the final piece of Baltimore's Francis Scott Key Bridge will take a bit longer than expected, according to the federal unified command that is managing restoration of the navigation channel.

Since May 20, merchant ships have been able to take advantage of a channel measuring 50 feet deep and 400 feet wide. This is the typical control depth of the federal channel, and its restoration means that typical vessel traffic can pass through the gap. Even though the damaged boxship Dali has been refloated and removed, the channel is still narrower than before the bridge collapse, because one remaining section of the main span remains embedded in the mud.

In order to restore the rated width of the channel, the U.S. Army Corps of Engineers, the Navy Supervisor of Diving and Salvage, and a team of commercial contractors are still digging, cutting and hauling to remove steel from the water.

“We are not taking our foot off the gas,” said Col. Estee S. Pinchasin, USACE, Baltimore District commander. “We are pushing forward as quickly and safely as possible to reach 700 feet and ensuring we remove all wreckage to prevent any impact to future navigation.”

The team still has to pull the bottom chord of the last truss section out of the riverbed. This requires cutting it carefully and safely into three pieces, then hoisting it with a giant crane. About one-third of the truss section is visible in imagery from the scene; the majority is below water, and much of it is embedded in sediment. The current plan is to dig it out of the mud line where needed to make access for scuts, sever it into sections underwater, and rig it for lifting. “This effort is more complex than initially estimated,” Pinchasin said.

Because of the difficulty of this task and the need to perform it with a high level of safety, the team now estimates that the work will take until June 8 at the earliest, and possibly as late as June 10. Initially, the unified command had hoped to fully reopen the federal channel by the beginning of June.

The narrower channel has not deterred shipping interests from returning to Baltimore. Over the past week, the unified command demobilized its temporary office space in Baltimore's cruise terminal so that passengers could board the Royal Caribbean cruise ship Vision of the Seas this weekend. It was the first time that a cruise ship departed the port since the Dali hit and destroyed the Key Bridge in late March.

"It's excitement, you know, it's a great day for Baltimore, a great day for the community here . . . and we're looking forward to continue cruising out of Baltimore," Capt. Mise Tevsic told local 11 News.

Panama Canal Completes Clean-Up from MSC Boxship Oil Spill

The Panama Canal Authority was working to complete the clean-up of one of the locks at the southern end of the waterway near Balboa after an oil spill. The incident happened on Sunday, May 26 while an MSC vessel was transiting the locks bound for Ecuador.

According to the report, the authority suspended operations in one lane at the Miraflores locks after they discovered the oil during the locking operation. Crews were able to contain the spill to the one lock chamber and began a cleaning and recovery operation. The MSC Kataya R. (63,259 dwt) was held in the lock chamber during the cleanup.

The vessel, built in 2002, is approximately 922 feet (281 meters) in length with a capacity of 4,100 TEU. She is owned by SFL and has been operating for MSC on charter since 2015. The containership is registered in Liberia.

The lock remained closed all day on Monday, May 27, with pictures showing crews washing down the vessel and collecting the oil from the lock water. The authority said the vessel would remain in the upper chamber of the lock until the clean-up operation was completed and inspections were completed. No reason was given for the oil discharge.

As of Wednesday, the vessel has been moved into the Panama Anchorage and the canal was reporting that the Miraflores center was reopening.

The temporary delay comes as the Panama Canal is working to increase the number of daily transits. The authority reported this week that water levels in the main reservoirs had for the first time exceeded levels of a year ago. With increased rain and waterflow the authority plans to restore transits. By June 1, the authority expects to be back to 32 daily transits and they are planning to begin increasing the draft levels to ease the transit for more vessels. Panama begins its rainy season in June which is expected to contribute to further improvements after severe restrictions due to the lack of rain in 2023.

GAO Criticizes Missteps and Unstable Design for Constellation Frigate

Citing multiple missteps in the design process, the Government Accountability Office issued a report today with five recommendations to get the U.S. Constellation frigate construction program back on track. The report cites an unstable design process noting that work on the first vessel is largely at a standstill months after construction began and the delivery schedule for the new vessels is compromised.

The GAO is making five specific recommendations in its 52-page report after it reviewed the status of the project. The Navy has fully accepted four of the points which focus on restructuring the “design stability metric,” as well as improving the metric to assess the design stability before beginning construction of a second vessel. Last week, the Department of Defense reported that it had exercised the options for the fifth and sixth vessels of the class after having placed an order for up to 10 ships in 2020.

The report outlines how the Navy was looking to accelerate construction for this new class of vessel, a multi-mission, small surface combatant warship. The Navy aims to build up to 20 frigates at a combined cost of $22 billion. To achieve the goals for accelerating the program, the Navy planned to incorporate proven elements of other vessels and modify the design of an existing class of vessels developed by Fincantieri.

“However, the Navy’s decision to begin construction before the design was completed is inconsistent with the leading ship design practices, and jeopardizes this approach,” concludes the GAO. While work was begun on the grand modules of the vessel, the GAO published a chart that shows the vast majority of the design was calculated as of October 2023 to be less than three-quarters complete.

Only two systems, the propulsion and machinery control systems, have yet to be demonstrated. The GAO calls for using the construction delays to conduct land-based testing of these two unproven systems. As such, the GAO believes it would reduce the chances of problems once the vessel is on the water.

The Navy confirmed that the project is far behind the original schedule for delivery of the first vessel in April 2026. The GAO reports that the Navy now forecasts the first ship will be delivered three years late in 2029. The contract for the sixth ship called for a 2030 delivery.

The GAO wants the Navy to restructure its design stability metric to measure progress based more on quality than quantity of design documents. They also warn that the Navy must use an improved metric to assess the stability of the design before proceeding to the second vessel. According to the GAO, the flawed system limits insights into whether the program’s schedule is achievable.

“If the Navy begins construction on the second frigate without improving this metric, it risks repeating the same errors that resulted in construction disruptions and delays with the lead frigate,” the GAO warns.

The GAO believes the design should be completed before construction begins on any of the grand modules. They also call for a review of the procurement process before acquiring an 11th frigate.

It is the latest in a series of highly critical reports from the GAO about the Navy and Coast Guard’s construction programs. Last year, the GAO found similar design problems in the Polar Security Cutter program and the new Coast Guard cutters.

China Steps Up Vessel Inspections After Serious Shipping Accidents

Authorities are looking hard at ships with a record of deficiencies or electrical problems

Traffic at Shanghai, 2010 (Werner Mayer / public domain)

China is stepping up its port state control inspections, according to class society DNV. The China Maritime Safety Administration is now looking much more closely at ships that have a history of multiple detentions or serious deficiencies.

The MSA's initiative is targeted at repeat offenders. Triggers for a close inspection include two detentions at any port(s) within the past 12 months, or multiple serious deficiencies. This includes vessels with a PSC record of intentional MARPOL violations, false certificates, unapproved vessel modifications, manning issues, or malicious disabling of AIS - a common sanctions-evasion strategy.

All inspections on board these vessels are likely to be performed "in a detailed manner," DNV advises, and vessels on the target list may be subject to scrutiny at every port call in China. To get removed from the list, the owner can contact the MSA and appeal for relief.

In the wake of the Lixinsha Bridge strike and Francis Scott Key Bridge allision earlier this year, China's MSA has also announced a "special campaign" aimed at the safety of mechanical and electrical equipment. The objective is to prevent loss of power/propulsion, and inspectors at every Chinese port will put a special emphasis on electrical system problems through the end of October.

The campaign extends beyond port state control. Class societies will be required to "strengthen the inspection and testing" of mechanical and electrical equipment, both for newbuilds and existing tonnage. In the event of any mechanical or electrical failures, crewmembers must report the incident to the local maritime authorities and accept "special safety inspections"; if they fail to make a report, they will be "severely punished," DNV warned.

If a ship has two or more mechanical or electrical failures in 12 months, it will have to file a failure analysis and corrective action plan, and undergo joint inspections.

The China MSA's prearrival checklist for this campaign includes ensuring the function of all systems connected to the main engine, including alarms, fuel supply, cooling and lube oil systems; checking the boiler system; ensuring that auxiliary power is in order, and that standby and emergency generators are ready; checking switchboards and controls; and testing the steering gear and its emergency backup systems.

DNV recommends testing the emergency generator and the standby generator thoroughly before arriving in China, and keeping accurate preventive maintenance logs.

Ørsted Agrees to Pay $125M Settlement to Cancel New Jersey Wind Farms

Seven months after announcing it was walking away from two large offshore wind farms planned for New Jersey, Ørsted and the New Jersey Board of Public Utilities agreed to settle their claims for a fraction of the total guarantees the company issued the state. The company will pay $125 million to settle all claims with the state and to release claims made against each other after Ocean Wind 1 and Ocean Wind 2 were canceled in what has become known as a Halloween surprise on October 31, 2023.

Ørsted was moving forward with the development plans for what were going to be the first two offshore wind farms in New Jersey. Ocean Wind 1, which was to have been located near Atlantic City, was the most advanced of the projects. It called for 98 turbines with a total capacity of 1.1 GW to power about 500,000 homes. The second phase, Ocean Wind 2, was a similar project with a projected capacity of 1.15 GW. Ørsted cited increased costs due to inflation and supply chain problems announcing would write off the projects as part of an anticipated total impairment of approximately $5.5 billion to restructure its offshore wind portfolio.

Ørsted had entered into a $100 million guarantee and total commitment of $300 million with New Jersey assuring the state that the projects would be completed on time. Under the terms of the agreement, the company would forfeit the guarantees by not proceeding with the projects, but days later it said it wanted the $200 million portion returned.

New Jersey Government Phil Murphy angrily said they would move to ensure the company honored its obligations in full. He called the company’s decision to abandon its commitments “outrageous.”

The Board of Public Utilities said today the $125 million settlement with the company will be used to support investments in qualified wind energy facilities, investments in offshore wind component manufacturing facilities, and other clean energy programs.

At the same time, New Jersey highlighted its efforts to accelerate its programs for renewable wind energy. The state currently has a fourth solicitation underway due to close July 10 seeking 1.2 to 4 GW. They also announced plans to accelerate the fifth solicitation which had been scheduled for Q3 2026. New Jersey plans to hold that round in Q2 2025.

“Offshore wind development remains a once-in-a-generation opportunity that will result in significant economic and environmental benefits throughout the Garden State,” said Governor Murphy in a statement issued today. “At this pivotal inflection point for the industry both in New Jersey and across the nation, it’s critical that we remain committed to delivering on the promise of thousands of family-sustaining, union jobs, and cleaner air for generations to come.”

The Bureau of Ocean Energy Management announced last week that it has completed the final environmental review for New Jersey Atlantic Shores wind farms. It is a key step to move those projects forward with approval of the construction and operation plan still required. Atlantic Shores would initially provide 1.5 GW and possibly a total of 2.8 GW but it is not likely to start commercial operations until 2027 and 2028.

BOEM Releases Final Environmental Statement on First NJ Offshore Wind Farms

The Bureau of Ocean Energy Management (BOEM) is continuing its efforts to push forward with the review and approval of U.S. offshore wind projects. In the latest step, they are releasing the final Environmental Impact Statement (EIS) for two New Jersey projects which are critical to the state’s efforts to jump-start its renewable wind energy efforts.

Atlantic Shores Offshore Wind, a joint venture partnership between Shell New Energies US and EDF-RE Offshore Development, submitted a combined Construction and Operations Plan for two wind energy facilities and associated export cables on the Outer Continental Shelf offshore New Jersey. If approved, the two projects could generate about 2,800 megawatts of electricity, enough to power almost one million homes.

“We are encouraged to see forward progress and getting another step closer to delivering New Jersey’s first offshore wind projects,” said Joris Veldhoven, chief executive officer of Atlantic Shores Offshore Wind.

The original lease auction was in 2015 and completed in 2016 although later assigned in 2018. The New Jersey Board of Public Utilities (NJBPU) awarded Atlantic Shores Project 1 an Offshore Renewable Energy Credit (OREC) in 2021, to deliver 1,510 MW of renewable power to the State of New Jersey.

New Jersey established the goal to achieve 100 percent clean energy by 2035 but has had delays and a major setback in 2023 when Ørsted abandoned two planned projects citing the changing economics. Governor Phil Murphy called it a “bump in the road” promising to launch a new solicitation in the summer of 2024.

Atlantic Shores remains the most advanced of New Jersey’s projects but it is not likely to be online till 2027 and 2028. The next step will be the approval of the construction and operation plan by BOEM as the project continues through the approval process.

The joint venture partnership has a total of three lease areas (Atlantic Shores)

The combined proposal for the first two projects includes up to 200 total wind turbines and up to ten offshore substations with subsea transmission cables potentially making landfall in Atlantic City and Sea Girt. The lease area covers approximately 102,124 acres and is approximately 8.7 miles offshore of New Jersey at its closest point. The FEIS for Atlantic Shores Project 1 and 2 will be published in the Federal Register in the coming days.

The company has a total of three lease areas under development with a third lease awarded in 2021 located in an area of the Atlantic Ocean known as the New York Bight. BOEM has just begun the environmental review process for that proposal.

The Department of the Interior highlights that it has approved the nation's first eight commercial-scale offshore wind projects with a combined capacity of more than 10 gigawatts of clean energy as part of the Biden administration's goal to deploy 30 gigawatts of offshore wind energy capacity by 2030. Since January 2021, the Department has held four offshore wind lease auctions and recently released a new five-year offshore wind lease schedule, which includes up to 12 potential offshore wind energy lease sales in the Atlantic, Gulf of Mexico, Pacific, and the waters offshore of the U.S. territories over the next five years.

While the approvals continue to move forward the industry is continuing to struggle to complete its first large projects. South Fork Wind, developed by Ørsted and Eversource, was completed in March 2024, but Vineyard Wind, being developed by Avangrid and Copenhagen Infrastructure Partners, is reported to be behind schedule. A report in a local newspaper, the Commonwealth Beacon, said as of mid-May only 16 of the planned 62 turbines are installed but the companies hope to accelerate installations with better weather in the summer months.

In May, two more large projects, Revolution Wind which will power Connecticut and Rhode Island, and Dominion Energy’s project off Virginia Beach both began installing foundations. Revolution Wind does not expect first power till 2025 while Dominion expects its project in late 2026.

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