GCMD and lenders unveil world’s first ‘pay as you save’ retrofit fund

A GROUP of financiers have raised more than $35m for the world’s first “pay as you save” fund, which will offer unsecured leases to pay for green ship retrofits.

The Fund for Energy Efficiency Technologies links repayments to verified fuel and regulatory savings.

This is meant to bypass the uncertainty about how much fuel technologies such as wind and air lubrication will save, which has limited their adoption.

Singapore’s Global Centre for Maritime Decarbonisation came up with the idea with Singapore-based asset manager AIM Horizon Investments (formerly FPG AIM Capital). They hope to grow the fund to $500m by 2030.

“This is exactly the kind of collaborative, problem-solving mindset needed to move the needle on maritime decarbonisation,” GCMD chief executive Lynn Loo said in a statement.

Ships are usually financed with loans, which have a first-priority mortgage over the vessel. Retrofits are far cheaper than ships, so providing this type of security isn’t practical for shipowners or prospective financiers.

So, the FEET offers unsecured leases instead: it pays for the equipment, installation and sensors to measure the fuel savings upfront, and the shipowner pays back the cost linked to the savings made.

Ownership of the EET is transferred to the shipowner at the end of the lease for a nominal fee.

Banks ING and DBS have agreed to provide senior debt financing, while the Development Bank Of Japan holds the senior equity.

The GCMD said the fund blended seed capital, commercial and preferred equities and senior debt to balance financial risks with keeping costs competitive.

“Several projects have already been identified and have progressed to the final investment decision stage, reflecting strong industry interest and confidence,” the GCMD said.

“Scaling FEET will create a virtuous cycle: as the fund grows in size and its projects diversify, financing costs will decrease and richer performance data on EET will be generated.

“This in turn will spur further innovation and deliver greater benefits for shipping companies, investors and EET manufacturers.”

AIM Horizon partner Michiel Muller said: “We are proud to work in this partnership and bring an innovative financial product for maritime decarbonisation.

“It has taken a huge collective effort to create a solution that immediately reduces carbon emissions and has competitive economics that will enable it to really scale.”