The air pollution control agency for much of Southern California announced Friday that it had awarded $58 million from voter-approved Proposition 1B funding for ship-to-shore power projects at major ports in the state.
The South Coast Air Quality Management District awards will provide funding to help build 25 ship-to-shore systems for ships calling on area ports. Ten ship-to-shore systems will be built at the Port of Los Angeles, 12 at the Port of Long Beach and three at Port Hueneme. Currently, the Port of Los Angeles has four such systems and the Port of Long Beach has three. All of the projects are expected to be complete by the end of 2013.
Ship-to-shore systems allow vessels at outfitted docks to plug into the landside power grid for electricity to keep the vessel's onboard equipment and systems operating while berthed. Most vessels supply this power by running onboard diesel auxiliary engines, one of the leading generators of air pollution during a vessel call. Vessels plugging into a ship-to-shore system can shut off their auxiliary engines, cutting their emissions generated per call by up to 50 percent. Most vessels must be specially modified to plug into a ship-to-shore system.
Also included in the AQMD announcement was a $1.6 million award to Carnival Cruise Lines to modify one passenger cruise ship in its fleet so that it is capable of using ship-to-shore power while docked at the Port of Long Beach cruise terminal. AQMD previously awarded Carnival $5 million for the installation of a ship-to-shore system at the Long Beach cruise terminal. The project is expected to be completed this fall.
“The projects approved today will eliminate thousands of tons of pollution during the next decade,” AQMD Governing Board chairman William Burke said. “Clean, zero-emission technology is here and we must accelerate its use now for the health of all Southland residents – and especially those living in communities near the ports.”
Beginning Jan. 1, 2014, a California Air Resources Board regulation will require an increasing number of container and passenger ships to be capable of using ship-to-shore systems when at berth in California ports.
The shore-side power projects are expected to reduce 762 tons per year of nitrogen oxide emissions, or NOx, and 13 tons per year of particulate matter, or PM, emissions over 10 years. Modifying one Carnival Cruise ship to accept ship-to-shore power will reduce 59 tons per year of NOx emissions and 2 tons per year of PM.
Tuesday, May 10, 2011
Oakland Mayor Heads to China on Trade Mission
The new mayor of Oakland, and the city’s first Chinese-American to hold the post, has joined Port of Oakland officials on a trade mission to China.
Oakland Mayor Jean Quan, who was sworn in this January, is joining Oakland City Council President Larry Reid, port commissioners, Port Executive Director Omar R. Benjamin and other port staff on the trade mission, which began May 7 and is set to last through May 13.
The group will meet with Chinese business and civic leaders in Beijing, Hong Kong and Shenzhen during the trip.
A primary goal of the trade mission is to develop business connections that will hopefully translate into increased cargo volumes, both export and import, moving through the Oakland port.
Other goals include developing direct air service between China and Oakland and securing investments from Chinese businesses with an eye on creating more Oakland jobs and increase revenues at the port.
Oakland is California's third busiest container port.
“The Port and City of Oakland are poised to enjoy ‘good luck’ in our commercial and cultural relations with China, the second largest economy in the world. ‘Luck’ is often defined as the intersection of opportunity and preparedness, ” Port Commission First Vice-President Pamela Calloway said. “Mayor Jean Quan and Council President Larry Reid have expanded our opportunity to grow our business at the airport and seaport. We are prepared for this opportunity to enhance and increase more than 50,000 jobs within the Northern California megaregion.”
In 2010, the Port of Oakland, the third busiest container port in the state, handled 5.15 billion metric tons of cargo worth more than $14 billion worth either coming from or going to China.
Oakland Mayor Jean Quan, who was sworn in this January, is joining Oakland City Council President Larry Reid, port commissioners, Port Executive Director Omar R. Benjamin and other port staff on the trade mission, which began May 7 and is set to last through May 13.
The group will meet with Chinese business and civic leaders in Beijing, Hong Kong and Shenzhen during the trip.
A primary goal of the trade mission is to develop business connections that will hopefully translate into increased cargo volumes, both export and import, moving through the Oakland port.
Other goals include developing direct air service between China and Oakland and securing investments from Chinese businesses with an eye on creating more Oakland jobs and increase revenues at the port.
Oakland is California's third busiest container port.
“The Port and City of Oakland are poised to enjoy ‘good luck’ in our commercial and cultural relations with China, the second largest economy in the world. ‘Luck’ is often defined as the intersection of opportunity and preparedness, ” Port Commission First Vice-President Pamela Calloway said. “Mayor Jean Quan and Council President Larry Reid have expanded our opportunity to grow our business at the airport and seaport. We are prepared for this opportunity to enhance and increase more than 50,000 jobs within the Northern California megaregion.”
In 2010, the Port of Oakland, the third busiest container port in the state, handled 5.15 billion metric tons of cargo worth more than $14 billion worth either coming from or going to China.
Seattle Port Officials Visit Inland Quincy Port, Eye Cooperation
Several Port of Seattle port commissioners and executives visited the Washington State Port of Quincy Intermodal Terminal last week, with an eye toward the viability of utilizing Quincy as an inland port to facilitate intermodal shipments by rail from central Washington to the Port of Seattle.
The Seattle port officials also met with Quincy port commissioners during the visit to hear about the recent economic and transportation developments that have occurred at the Port of Quincy, including high-tech data center expansions by Microsoft and Yahoo and new major data center development projects by Dell and Sabey.
In addition, Quincy staff provided the Seattle officials with a tour of the Port of Quincy Intermodal Terminal and the Pacific Northwest-Chicagoland Express "Cold Train" Intermodal Service.
The "Cold Train" service is a refrigerated intermodal container rail and distribution service running between Quincy, in central Washington state and Chicago, Illinois. Since starting a little over a year ago, the service has rapidly grown in popularity with produce shippers in the Pacific Northwest, according to Quincy officials, as well as with shippers in the Midwest.
The "Cold Train" service departs the Port of Quincy five days a week loaded with fresh or frozen produce destined for the Midwest. The produce, grown and packed by local growers/packers in Washington state, is loaded into "Cold Train" 53-foot refrigerated containers and brought to the Port of Quincy Intermodal Terminal. At the terminal, the containers are double-stacked onto an expedited nonstop train to Chicago.
According to a Port of Quincy release, Seattle officials on the trip – which included port CEO Tay Yoshitani and port commission president Bill Bryant – expressed interest in how the "Cold Train" service could work with the Port of Quincy as an inland port to facilitate intermodal shipments by rail from central Washington to the Port of Seattle.
In addition, Quincy officials report that there was discussion about how the "Cold Train's" success of shipping both inbound and outbound cargo has effectively turned the Port of Quincy Intermodal Terminal into a key distribution hub for the central Washington area.
The Seattle port officials also met with Quincy port commissioners during the visit to hear about the recent economic and transportation developments that have occurred at the Port of Quincy, including high-tech data center expansions by Microsoft and Yahoo and new major data center development projects by Dell and Sabey.
In addition, Quincy staff provided the Seattle officials with a tour of the Port of Quincy Intermodal Terminal and the Pacific Northwest-Chicagoland Express "Cold Train" Intermodal Service.
The "Cold Train" service is a refrigerated intermodal container rail and distribution service running between Quincy, in central Washington state and Chicago, Illinois. Since starting a little over a year ago, the service has rapidly grown in popularity with produce shippers in the Pacific Northwest, according to Quincy officials, as well as with shippers in the Midwest.
The "Cold Train" service departs the Port of Quincy five days a week loaded with fresh or frozen produce destined for the Midwest. The produce, grown and packed by local growers/packers in Washington state, is loaded into "Cold Train" 53-foot refrigerated containers and brought to the Port of Quincy Intermodal Terminal. At the terminal, the containers are double-stacked onto an expedited nonstop train to Chicago.
According to a Port of Quincy release, Seattle officials on the trip – which included port CEO Tay Yoshitani and port commission president Bill Bryant – expressed interest in how the "Cold Train" service could work with the Port of Quincy as an inland port to facilitate intermodal shipments by rail from central Washington to the Port of Seattle.
In addition, Quincy officials report that there was discussion about how the "Cold Train's" success of shipping both inbound and outbound cargo has effectively turned the Port of Quincy Intermodal Terminal into a key distribution hub for the central Washington area.
Japanese Firms Eye Vegetable Oil Facilities at Hueneme Port.
Osaka-based Fuji Oil Col Ltd. and Itochu International, a New York-based subsidiary of Itochu Corp. in Tokyo, are proposing to invest $30 million in facilities at and near the Port of Hueneme to transport and process 100,000 metric tons of unprocessed vegetable oils a year.
The plan could create more than 60 full time jobs in the port area and generate up to $25 million in regional economic activity per year.
The two firms are discussing the plan with the Oxnard Harbor District, which oversees the port. The plan calls for the two firms to bring in the oil through the port, ship it via underground pipelines to a near dock storage farm and then truck the oil to a nearby processing plant. The $30 million estimate would cover the construction of a small office, a steam boiler and six to ten storage tanks on a two-acre site within the port area and the construction of a five-building processing plant on a ten-acre parcel nearby in Oxnard.
Under the proposal, the two firms would make the $30 million investment in exchange for an at least 40-year lease with the port. The lease rate and estimate wharfage and dockage revenues under the proposal would net the port about $1.2 million a year.
The plan could create more than 60 full time jobs in the port area and generate up to $25 million in regional economic activity per year.
The two firms are discussing the plan with the Oxnard Harbor District, which oversees the port. The plan calls for the two firms to bring in the oil through the port, ship it via underground pipelines to a near dock storage farm and then truck the oil to a nearby processing plant. The $30 million estimate would cover the construction of a small office, a steam boiler and six to ten storage tanks on a two-acre site within the port area and the construction of a five-building processing plant on a ten-acre parcel nearby in Oxnard.
Under the proposal, the two firms would make the $30 million investment in exchange for an at least 40-year lease with the port. The lease rate and estimate wharfage and dockage revenues under the proposal would net the port about $1.2 million a year.
Friday, May 6, 2011
Some Maritime Terms Explained – Part 2
By Marilyn Raia
marilyn.raia@bullivant.com
This second part of a multi-part series continues the review of some words and phrases commonly found in maritime contracts and marine insurance policies but perhaps not in other contexts.
Force Majeure
Force majeure is a French phrase meaning “superior force”. A force majeure clause is commonly found in maritime contracts. It relieves the parties to the contract of their obligations and liabilities when circumstances beyond their control prevent them from performing under the contract. Examples of circumstances that might constitute a force majeure are war, strike, riot and Act of God. A force majeure clause does not, however, excuse a party from its negligence or failure to perform under conditions that are ordinary or expected, such as a storm that is forecast.
General Average
General average is an equitable principle by which a voluntary loss suffered by one party to a maritime venture is shared proportionately by all parties to the venture, the venture most commonly being the transportation of goods.
In the early days of shipping, merchants or guards would travel with the goods to assure they would not be stolen or thrown overboard. If the vessel encountered a peril requiring the jettison of cargo, the master would designate the shipment(s) to be sacrificed to enable the vessel and the cargo to be saved from the peril. Disputes arose between the masters and shippers who did not want to lose their goods for the benefit of others. A system was developed to compensate the owner of goods that were sacrificed. Those who benefited from the sacrifice contributed proportionately to the party whose goods had been sacrificed. That system is called general average and can be traced to the sixth century. It pre-dates marine insurance.
In more modern times, there are two types of “sacrifices” that give rise to a declaration of general average: 1) the physical loss of a part of the vessel or her cargo to stabilize the vessel during the peril; and 2) an extraordinary expense incurred for the joint benefit of the vessel and cargo such as charges for towing a disabled vessel. When the sacrifice is made or an extraordinary expense is incurred, a general average may be declared triggering the obligations of those who benefited to make a contribution toward the amount of the sacrifice or expense.
Not all sacrifices or extraordinary expenses are a proper basis for the declaration of general average. A vessel that is required to make a sacrifice or incur an extraordinary expense because of unseaworthiness is not entitled to recover from the other parties in general average.
A general average adjuster determines the amount of the contribution to be made by each party benefiting from the sacrifice. The general average adjuster prepares a general average adjustment and bases the contribution amount for each party on the saved value of that party’s property, including the vessel itself and cargo.
When preparing the general average adjustment, the general average adjuster is guided by certain rules. In 1864, an international maritime conference was held in York, England to codify the rules that would apply to general average adjustments. A second conference was held in 1877 in Antwerp, Belgium, after which the first set of York-Antwerp Rules was adopted. The rules have been revised several times since then, most recently in 2004. The preparation of a general average adjustment can take several years depending on the circumstances and number of parties involved. A declaration of general average by the owner of a large cargo vessel can involve hundreds, if not thousands, of interests.
Often cargo owners who must make a contribution in general average are asked to provide financial security for their contributions before they can take delivery of their cargo, pending the final general average adjustment. That security can take the form of a bond or guarantee from an insurance company.
Himalaya Clause
A Himalaya clause is customarily found in bills of lading but can be found in other maritime contracts. It is a clause by which the benefit of the defenses and limitations of liability in the contract are given to third parties who are not parties to the contract, but may play a role in the performance of the contract.
The clause came from a 1950’s British case, Adler v. Dickson, involving a vessel named SS Himalaya. In that case, a passenger was injured when a gangway fell and she was thrown to the dock below. Her ticket contained a provision exonerating the carrier from liability. The passenger sued the master and boatswain instead, arguing they could not benefit from the exculpatory provision in the passenger ticket because they were not parties to it. While the court agreed that a carrier of goods or passengers could provide for the exoneration of third parties from liability, it held the injured passenger’s ticket did not expressly or even impliedly allow the carrier’s employees to benefit from its terms. Since Adler v. Dickson, Himalaya clauses have become commonplace in bills of lading to extend the defenses and limitations of liability to stevedores, terminal operators, and other parties who participate in the handling and transportation of cargo.
Himalaya clauses may vary in their terms. When there is a dispute over whether a particular party may benefit from a Himalaya clause, the court will interpret the Himalaya clause like other contractual terms. That is, the court will consider what it actually says. For example, if the language of the Himalaya clause in a bill of lading requires a direct contractual relationship between the carrier and the party seeking to be a beneficiary of the bill of lading, the court will not extend the benefits of the bill of lading to a party not in a direct contractual relationship with the carrier. In that situation, if a stevedore who damaged a shipment were hired by the terminal operator and not by the carrier, the stevedore likely will not be allowed to benefit from the defenses and limitations of liability in the bill of lading issued by the carrier. On the other hand, if the Himalaya clause extends the benefits of the bill of lading to “any person who participates in the transportation of the cargo”, direct contractual privity between the carrier and the third party beneficiary is not required for the extension of the bill of lading benefits to the third party and the stevedore hired by the terminal operator likely could enjoy the benefits of the bill of lading.
Inchmaree Clause
An Inchmaree clause is commonly found in named perils marine insurance policies. Like the Himalaya clause, it originated with a British case. Thames & Mersey Marine Ins. Co. Ltd. v. Hamilton, Fraser & Co., an 1887 case, involved the SS Inchmaree, which suffered a rupture of the air chamber in a donkey pump due to the closure of a valve that should have been left open.
The Inchmaree’s hull policy covered certain named perils of the seas and “other like perils.” The vessel owner argued the closure of the valve was covered because it was due to “other like perils”. The court disagreed, holding the covered “other like perils” must be related to the perils of the seas and what caused the rupture, likely crew negligence in failing to open the valve, was not so related. As a result of that case, underwriters voluntarily expanded the coverage available to insureds under named perils hull policies.
The covered perils added to a hull policy in the Inchmaree clause include, among others, accidents in loading or discharging cargo; bursting of boilers; negligence of the masters, officers, crew or pilots; negligence of charterers and repairers if they are not insured under the policy; breakdown of machinery; breakage of shafts or latent defects in the hull and machinery. Coverage under the Inchmaree Clause has a condition. There is no coverage for the added perils if the loss or damage was caused by the lack of due diligence by the insured or the owners and managers of the insured vessel. And, the masters, officers, crew and pilots are not considered owners of the vessel for the purpose of determining whether due diligence was exercised, even if they own shares in the vessel.
Part 3 of this series will continue the review of some frequently used terms in maritime and marine insurance contracts.
Marilyn Raia is of counsel in the San Francisco office of Bullivant Houser Bailey. She specializes in maritime and transportation-related matters. She can be reached at marilyn.raia@bullivant.com.
marilyn.raia@bullivant.com
This second part of a multi-part series continues the review of some words and phrases commonly found in maritime contracts and marine insurance policies but perhaps not in other contexts.
Force Majeure
Force majeure is a French phrase meaning “superior force”. A force majeure clause is commonly found in maritime contracts. It relieves the parties to the contract of their obligations and liabilities when circumstances beyond their control prevent them from performing under the contract. Examples of circumstances that might constitute a force majeure are war, strike, riot and Act of God. A force majeure clause does not, however, excuse a party from its negligence or failure to perform under conditions that are ordinary or expected, such as a storm that is forecast.
General Average
General average is an equitable principle by which a voluntary loss suffered by one party to a maritime venture is shared proportionately by all parties to the venture, the venture most commonly being the transportation of goods.
In the early days of shipping, merchants or guards would travel with the goods to assure they would not be stolen or thrown overboard. If the vessel encountered a peril requiring the jettison of cargo, the master would designate the shipment(s) to be sacrificed to enable the vessel and the cargo to be saved from the peril. Disputes arose between the masters and shippers who did not want to lose their goods for the benefit of others. A system was developed to compensate the owner of goods that were sacrificed. Those who benefited from the sacrifice contributed proportionately to the party whose goods had been sacrificed. That system is called general average and can be traced to the sixth century. It pre-dates marine insurance.
In more modern times, there are two types of “sacrifices” that give rise to a declaration of general average: 1) the physical loss of a part of the vessel or her cargo to stabilize the vessel during the peril; and 2) an extraordinary expense incurred for the joint benefit of the vessel and cargo such as charges for towing a disabled vessel. When the sacrifice is made or an extraordinary expense is incurred, a general average may be declared triggering the obligations of those who benefited to make a contribution toward the amount of the sacrifice or expense.
Not all sacrifices or extraordinary expenses are a proper basis for the declaration of general average. A vessel that is required to make a sacrifice or incur an extraordinary expense because of unseaworthiness is not entitled to recover from the other parties in general average.
A general average adjuster determines the amount of the contribution to be made by each party benefiting from the sacrifice. The general average adjuster prepares a general average adjustment and bases the contribution amount for each party on the saved value of that party’s property, including the vessel itself and cargo.
When preparing the general average adjustment, the general average adjuster is guided by certain rules. In 1864, an international maritime conference was held in York, England to codify the rules that would apply to general average adjustments. A second conference was held in 1877 in Antwerp, Belgium, after which the first set of York-Antwerp Rules was adopted. The rules have been revised several times since then, most recently in 2004. The preparation of a general average adjustment can take several years depending on the circumstances and number of parties involved. A declaration of general average by the owner of a large cargo vessel can involve hundreds, if not thousands, of interests.
Often cargo owners who must make a contribution in general average are asked to provide financial security for their contributions before they can take delivery of their cargo, pending the final general average adjustment. That security can take the form of a bond or guarantee from an insurance company.
Himalaya Clause
A Himalaya clause is customarily found in bills of lading but can be found in other maritime contracts. It is a clause by which the benefit of the defenses and limitations of liability in the contract are given to third parties who are not parties to the contract, but may play a role in the performance of the contract.
The clause came from a 1950’s British case, Adler v. Dickson, involving a vessel named SS Himalaya. In that case, a passenger was injured when a gangway fell and she was thrown to the dock below. Her ticket contained a provision exonerating the carrier from liability. The passenger sued the master and boatswain instead, arguing they could not benefit from the exculpatory provision in the passenger ticket because they were not parties to it. While the court agreed that a carrier of goods or passengers could provide for the exoneration of third parties from liability, it held the injured passenger’s ticket did not expressly or even impliedly allow the carrier’s employees to benefit from its terms. Since Adler v. Dickson, Himalaya clauses have become commonplace in bills of lading to extend the defenses and limitations of liability to stevedores, terminal operators, and other parties who participate in the handling and transportation of cargo.
Himalaya clauses may vary in their terms. When there is a dispute over whether a particular party may benefit from a Himalaya clause, the court will interpret the Himalaya clause like other contractual terms. That is, the court will consider what it actually says. For example, if the language of the Himalaya clause in a bill of lading requires a direct contractual relationship between the carrier and the party seeking to be a beneficiary of the bill of lading, the court will not extend the benefits of the bill of lading to a party not in a direct contractual relationship with the carrier. In that situation, if a stevedore who damaged a shipment were hired by the terminal operator and not by the carrier, the stevedore likely will not be allowed to benefit from the defenses and limitations of liability in the bill of lading issued by the carrier. On the other hand, if the Himalaya clause extends the benefits of the bill of lading to “any person who participates in the transportation of the cargo”, direct contractual privity between the carrier and the third party beneficiary is not required for the extension of the bill of lading benefits to the third party and the stevedore hired by the terminal operator likely could enjoy the benefits of the bill of lading.
Inchmaree Clause
An Inchmaree clause is commonly found in named perils marine insurance policies. Like the Himalaya clause, it originated with a British case. Thames & Mersey Marine Ins. Co. Ltd. v. Hamilton, Fraser & Co., an 1887 case, involved the SS Inchmaree, which suffered a rupture of the air chamber in a donkey pump due to the closure of a valve that should have been left open.
The Inchmaree’s hull policy covered certain named perils of the seas and “other like perils.” The vessel owner argued the closure of the valve was covered because it was due to “other like perils”. The court disagreed, holding the covered “other like perils” must be related to the perils of the seas and what caused the rupture, likely crew negligence in failing to open the valve, was not so related. As a result of that case, underwriters voluntarily expanded the coverage available to insureds under named perils hull policies.
The covered perils added to a hull policy in the Inchmaree clause include, among others, accidents in loading or discharging cargo; bursting of boilers; negligence of the masters, officers, crew or pilots; negligence of charterers and repairers if they are not insured under the policy; breakdown of machinery; breakage of shafts or latent defects in the hull and machinery. Coverage under the Inchmaree Clause has a condition. There is no coverage for the added perils if the loss or damage was caused by the lack of due diligence by the insured or the owners and managers of the insured vessel. And, the masters, officers, crew and pilots are not considered owners of the vessel for the purpose of determining whether due diligence was exercised, even if they own shares in the vessel.
Part 3 of this series will continue the review of some frequently used terms in maritime and marine insurance contracts.
Marilyn Raia is of counsel in the San Francisco office of Bullivant Houser Bailey. She specializes in maritime and transportation-related matters. She can be reached at marilyn.raia@bullivant.com.
Bay Area’s WETA Seeks Proposals for Water Transit System Operations
The San Francisco Bay Area Water Emergency Transportation Authority ("WETA") has issued a Request for Proposals ("RFP") pursuant to the Federal Transit Administration’s Best Value Procurement Guidelines. The purpose of this procurement is to select a firm to operate the WETA Water Transit System.
WETA has prepared a description of the work activities and deliverables (the “Work”), appended to the RFP as Appendix A (the “Scope of Work”), and a form of Agreement for the Provision of Water Transit Services (see Appendix E for the “Agreement”).
Together, the Scope of Work and the Agreement detail the Work, performance standards, term, compensation mechanism, insurance requirements, and other contractual issues. Each response to the RFP (“Proposal”) submitted by a water transit operations firm (“PROPOSER”) must respond to the entire Scope of Work.
Key Dates
Issue RFP: May 6, 2011
Pre-proposal conference: 9 a.m. May 26, 2011
Deadline for RFP questions/clarifications: 3 p.m. June 14, 2011
Deadline for WETA Response to questions/clarification: June 20, 2011
Deadline for submission of Proposals: 3 p.m. July 12, 2011
To Download the RFP, please visit http://watertransit.org/contract_opp.aspx
Attn: Ernest Sanchez
Manager, Transportation Services
Pier 9, Suite 111, The Embarcadero
San Francisco, California 94111
WETA has prepared a description of the work activities and deliverables (the “Work”), appended to the RFP as Appendix A (the “Scope of Work”), and a form of Agreement for the Provision of Water Transit Services (see Appendix E for the “Agreement”).
Together, the Scope of Work and the Agreement detail the Work, performance standards, term, compensation mechanism, insurance requirements, and other contractual issues. Each response to the RFP (“Proposal”) submitted by a water transit operations firm (“PROPOSER”) must respond to the entire Scope of Work.
Key Dates
Issue RFP: May 6, 2011
Pre-proposal conference: 9 a.m. May 26, 2011
Deadline for RFP questions/clarifications: 3 p.m. June 14, 2011
Deadline for WETA Response to questions/clarification: June 20, 2011
Deadline for submission of Proposals: 3 p.m. July 12, 2011
To Download the RFP, please visit http://watertransit.org/contract_opp.aspx
Attn: Ernest Sanchez
Manager, Transportation Services
Pier 9, Suite 111, The Embarcadero
San Francisco, California 94111
Horizon Lines Obtains Charter Payment Rate Cut on Three Alaska Tradelane Vessels
Charlotte, NC-based Jones Act carrier Horizon Lines announced Monday that it has finalized an agreement with former parent-firm CSX Corporation to reduce the carrier's charter payments on three vessels being leased from CSX.
Under the terms of the deal, the embattled carrier's charter hire expense on the three vessels has been reduced by $3 million per year, retroactive to January 2011, and carrying through the January 2015 expiration of the charter. The agreement, according to Horizon, will represents a total savings of $12 million for the carrier over the remaining life of the charter.
The three chartered vessels, the Horizon Anchorage, Horizon Tacoma, and Horizon Kodiak, serve in the Alaska tradelane and were built in 1987.
"We greatly appreciate the willingness of CSX to provide meaningful financial assistance as we work to refinance our debt and position Horizon Lines for long-term success," Horizon Executive VP and CFO Michael Avara said in a statement. "As our former parent company, CSX remains a valued and very important business partner."
The reduction in charter hire expense of $3 million achieved this year under the agreement was previously included in the carrier's estimated 2011 cost-savings projections of $18 million or greater.
A May 21 default by the carrier under a convertible note indenture was staved off when a federal court agreed last week to reduce Horizon's fine related to a rate and surcharge fixing conspiracy involving maritime cargo handling over a six-year period. The court agreed to reduce the carrier's fine from $45 million to $15 million.
Under the terms of the deal, the embattled carrier's charter hire expense on the three vessels has been reduced by $3 million per year, retroactive to January 2011, and carrying through the January 2015 expiration of the charter. The agreement, according to Horizon, will represents a total savings of $12 million for the carrier over the remaining life of the charter.
The three chartered vessels, the Horizon Anchorage, Horizon Tacoma, and Horizon Kodiak, serve in the Alaska tradelane and were built in 1987.
"We greatly appreciate the willingness of CSX to provide meaningful financial assistance as we work to refinance our debt and position Horizon Lines for long-term success," Horizon Executive VP and CFO Michael Avara said in a statement. "As our former parent company, CSX remains a valued and very important business partner."
The reduction in charter hire expense of $3 million achieved this year under the agreement was previously included in the carrier's estimated 2011 cost-savings projections of $18 million or greater.
A May 21 default by the carrier under a convertible note indenture was staved off when a federal court agreed last week to reduce Horizon's fine related to a rate and surcharge fixing conspiracy involving maritime cargo handling over a six-year period. The court agreed to reduce the carrier's fine from $45 million to $15 million.
