Financing Conversions Converting to LNG has two major cost components: the cost of the infrastructure to fuel the vessels and the cost to replace or convert current vessels to LNG. In both cases, financing interest from investors is strong and will move projects forward. Financing for fueling infrastructure will likely come from two sources: either end users will invest and own/operate the refueling infrastructure themselves or the liquefaction will be done in a quasi-merchant plant model. In the latter case, a third-party invests the upfront capital and then sells the LNG to end users. Guaranteeing the off-take for quasi-merchant plants will be the largest risk for plant operators and end users in most regions of North America, because there is adequate pipeline capacity available to supply fueling stations. However, in the Northeastern United States, pipeline capacity constraint will be the largest obstacle for investors because the region’s lack of available capacity becomes more of an issue for investors. Financing the conversion of fleets is another area of opportunity/innovation. Third-party companies, such as energy investors, are interested in providing the upfront capital to convert or replace engines with LNG power plants. The owner of the vessels will then share the fuel savings realized for a designated payback period. Moving forward, the initial focus for LNG conversions will be containerships and bulk carriers – vessels that spend the most time in ECA-restricted areas. However, any vessel that spends 30 percent or more of its time within an ECA-restricted area will benefit from a switch to LNG. Today, this criteria represents approximately 10,000 ships, a number that is expected to increase by 10 to 15 percent by 2020. As ECA regulations take effect in North America, the need for a reliable source of LNG to marine vessel owners will drive infrastructure development. Vessel owners/operators know the impacts expected in the market over the next five years and will soon have to make key decisions for the near term and long term. Subject Matter Expert Garry Hart: HartGW@bv.com Contact us to learn more about what we can do for you.