Access to finance for net zero retrofits remains an intractable struggle: Tufton

With the industry agreed that shipping cannot fleet-renew its way to net-zero, existing tonnage will need to be retrofitted and overhauled to meet future targets. But this will be a major challenge, as existing models are unable to provide an incentive for this, Nikos Petrakakos, MD of Tufton Investment Management, told SMI in the sidelines of London International Shipping Week events held this week at the LISW Global hub.

“You would really have to change the entire global finance, to say that you can finance different parts you install on a ship, separately. Change the way every single lending document is done.

“But because of the regulations, banks are not interested in investing in a new and shiny thing either! So banks are not investing in hydrogen ships, the way the framework is, they block the innovative stuff. Not by their own choice – they are stuck in limbo.”

In developing countries, despite massive potential for renewable generation, and therefore to generate renewable fuels of non-biological origin (RFNBOs) to support shipping’s energy transition. Many of the countries where solar and wind are the strongest, are also those that have poorest access to foreign capital investment. New projects carry high premiums, purely because of the challenge of financing – meaning that, in many cases, they lose out to comparatively suboptimal installations in developed countries.

“If for example, you are an international investor and you invest in Namibia, an example of an emerging market, you have to pay the cost of capital,Ó said Nikol Hearn, Head of Transactions, Namibia Green Hydrogen Institute. “That is 14% more over the entire life of the project than an equivalent in a developed country.”