In May 2020, the German Maritime Centre commissioned PricewaterhouseCoopers GmbH WPG (PwC) to prepare a study on financing instruments in the maritime industry.
The study presents and analyses the current status of financing options for the maritime industry in Germany. In addition, it examines financing instruments in other important international shipping locations.
This assessment of the situation in Germany has shown that
- The availability of debt and equity capital in the field of ship financing in Germany has decreased considerably over the last ten years.
- There will be a further consolidation in the German shipyard sector due to steadily increasing global competitive pressure and as a result of the effects of the COVID 19 pandemic.
- There is a considerable need for modernisation and renewal for large parts of the German fleet, which must be adapted in light of the constantly growing regulatory requirements in the areas of environmental and climate protection and energy efficiency. The onward march of digitalisation also poses great challenges for the industry.
Unlike in Germany, governments in important shipping locations in Europe (such as France, the Netherlands and Norway) as well as outside Europe (such as the People’s Republic of China, Japan and the Republic of Korea/South Korea) are taking extensive measures to support maritime shipping and shipbuilding. Important strategic goals are at issue here, such as increasing the environmental friendliness of maritime shipping, retaining expertise and jobs in the industry, and protecting the maritime sector. These measures are justified by the fact that both sectors are regarded as central to the respective national economies and therefore worth preserving.
Based on the international comparison, specialist events and discussions with experts, three central areas for which the maritime sector in Germany needs access to sustainable financing instruments can be identified:
- Decarbonising maritime shipping or initiating a transformation towards climate-friendly maritime shipping (keyword: green shipping),
- Maintaining the maritime sector’s competitiveness and security of supply (economic and technological maritime sovereignty), and
- Protecting key maritime industries and technologies to safeguard the necessary nautical-technical expertise.
The study’s recommendations for action focus on these three areas. They have been derived, on the one hand, from the instruments used in other countries; on the other hand, they have emerged in response to the gaps in Germany’s existing regulations.
The recommendations focus on the shortest possible timeframe for implementation. The proposed instruments are intended to provide food for thought for an in-depth implementation-oriented discussion between business, politics and the public.¹
1. KfW programme “Energy Efficiency in the Maritime Industry”.
The study recommends creating a separate permanent financing window at KfW bank to support investment in particularly climate-friendly and environmentally friendly seagoing vessels or to retrofit existing vessels with low-emission and particularly efficient propulsion systems.
2. Fund for investment in a more environmentally and climate-friendly coastal ship fleet
The study recommends setting up a fund in Germany for investments in modern coastal ships in particular, similar to the Netherlands Ship Dept Fund (NSDF). This fund could be managed by a 100% subsidiary of the issuing bank for a fee. The investment sum could come from the issuing bank (which would also provide a smaller share of the equity), and also from institutional investors and the private sector. Up to 80% of the investment sum should be secured by federal guarantees.
3. Adaptation of the Green Shipping Financing Tool (GSFT) of the European Investment Bank (EIB)
The study recommends that the German government enable increasing use of the GSFT by German shipping companies.
This would be made possible by making the KfW bank an intermediary for the GSFT. Another possibility would be for shipyards to negotiate a framework loan agreement with a bank and the EIB for funds from the GSFT. Based on this, individual loans could be passed on to the respective shipping companies.
4. Use emission trading schemes for green shipping
If shipping is to be included in an EU emission trading system in the future, mechanisms and measures must be developed in a timely manner to reinvest the revenues thus generated in the development of more environmentally friendly and efficient ships.
5. Opening up the Hermes guarantee mechanism for use by domestic shipowners
The study recommends enabling domestic shipowners/buyers in Germany to use export guarantees (as also occurs in the Netherlands, France and Norway). This should be possible if the ship is used in cross-border traffic and delivers foreign cash flows – through the associated export of services.
6. Taxation measures
The study proposes taxation measures. The following can be considered: a) reduced depreciation and b) the reintroduction of the reinvestment clause in § 6b of the Income Tax Act (EstG) as an alternative to profit calculation according to tonnage (tonnage tax).
Both measures can create incentives for shipping companies to invest in more climate and environmentally friendly ships that are particularly energy efficient in the future.
7. Programmes for the sustainable modernisation of seagoing vessels
The study recommends that the existing programmes for the sustainable modernisation of seagoing vessels be expanded. This should apply to both the funding levels and the eligibility of individual ship types.
8. The study recommends that the German government advocate for a strategically coordinated industrial policy at EU level in order to achieve systematic protection of key maritime-sector industries and technologies within the EU.
9. The study recommends creating conditions that are conducive to innovation and production, that maintain the competitiveness of the maritime sector and that secure jobs and related expertise in the long term.
You can find the short summary of the study (only in German) here.
If you have any questions or are interested in the complete study, please do not hesitate to contact us.