Saverys says investing in future-proof ships makes sense now, reveals a pipeline of 120 hydrogen and ammonia-powered ships

Belgian owner of marine and industrial applications CMB.TECH plans to add approximately 120 hydrogen and ammonia-powered vessels to its fleet and has five hydrogen infrastructure projects worldwide in the pipeline, Alexander Saverys, the company’s chief executive, revealed in a capital markets day presentation on Friday.

The company is targeting a capital deployment ranging between $3-5 billion over the next five years, with investment to be directed toward green marine hydrogen assets and green marine ammonia assets.

Saverys spoke on the company’s strategic integration with Euronav and aims to create a leading force in green shipping, and a ‘future-proof’ shipping platform.

Belgian tanker shipping company Euronav NV and its controlling shareholder CMB NV have entered into a share purchase agreement for the acquisition of 100% of shares in cleantech maritime group CMB.TECH for $ 1.150 billion in cash.

The proposed acquisition of CMB.TECH is set to create a formidable alliance, combining Euronav’s tanker expertise with CMB.TECH’s cutting-edge green technology. If approved at the special general meeting on February 7, the newly formed entity aims to be listed in Brussels and New York under the new ticker symbol CBT.

The strategic move was revealed after a protracted fallout between Frontline and Euronav after plans on a merger fell through. The solution to the stalemate was finally found with a deal on Frontline’s acquisition of 24 ECO VLCCs from the Belgian tanker owner and CMB taking a controlling stake in the tanker shipping company.

Talking about the companies coming together again in 2023, Saverys emphasized the profound shared history of the two entities and a vision of a joint future.

“In 1991, our family stepped into CMB as a controlling shareholder. In 1995, we co-founded Euronav together with CMB. In 1997, Euronav became the 100% owned tanker division of CMB, and a couple of years later, in 2004, our ways split as Euronav was spun off as a separate listed company on the Brussels Stock Exchange.”

Over the years, while CMB has diligently diversified its fleet, it has notably shifted its focus towards decarbonizing its roots since 2015. On the other hand, Euronav has grown into the largest independent tanker owner. The acquisition of CMB by Euronav last year, pending approval at the next special general meeting, will weave together these distinct narratives into one formidable and investable company, Saverys pointed out.

CMB.TECH aspires to be the global reference in sustainable shipping and envisions a future where hydrogen powers small vessels, while ammonia is the energy source for larger ships. The focus is also being put on powering green marine value chains, including hydrogen and ammonia production infrastructure.

This vision is underpinned by a commitment to creating value through a diverse, sustainable, and high-quality asset base, rewarding shareholders, prioritizing environmentally friendly practices, and attracting top talent.

With the addition of Euronav’s platform, CMB.TECH’s divisions encompass a large marine division, a robust tanker platform, and active involvement in land-based heavy industrial applications.

The company’s fleet consists of 101 ships, with 53 new buildings in the pipeline, boasting an average fleet age of 4.6 years. While two-thirds of the fleet, primarily comprising tankers and CCTVs, are currently powered by diesel, the third is already in the pipeline to transition to ammonia and hydrogen.

CMB.TECH’s business model aims to facilitate the green-to-green transition in the maritime industry, with a specific focus on hydrogen and ammonia.

According to Saverys, the current pipeline of approximately 120 vessels is set to include:

• 20 hydrogen-powered tugboats
• 20 hydrocats
• 10 hydrogen-powered CSOVs
• 10 hydrogen-powered small bulkers

On the ammonia front, the company is working on 20 ammonia-powered Ultarmax bulkers, 20 ammonia-powered 4000-10,000 TEU container vessels, ten ammonia-fuelled LR2 tankers and ten 26,000 dwt chemical tankers.

The fleet diversification strategy aims to shelter the company from poor performance and volatility in certain shipping markets enabling it to recycle profits and invest without interruptions.

Euronav would continue as a tanker unit of the new CMBT, as oil demand is still expected to be strong despite energy transition progress. With that in mind, the company aims to build a future-proof fleet to be able to meet that demand in line with the ever-stringent regulatory landscape.

The announcement also included details about a large-scale project in Namibia, aiming to produce close to 200,000 tons of ammonia annually. Additionally, CMB.TECH is actively pursuing off-take agreements for hydrogen and ammonia in the US and Europe, further expanding its commitment to low-carbon solutions.

The company’s growth trajectory is underscored by its aspiration to be a growth stock, capitalizing on long-term trends towards low-carbon solutions, a competitive advantage in offering sustainable solutions, and a massive addressable market with over 100,000 commercial vessels globally.

Saverys indicated that the green-powered vessels are already hitting the waters and are not a distant future, referring the the recently delivered Hydrotug in the Port of Antwerp as well as one container vessel and two Newcastlemaxes delivery recently in China.

With regulatory frameworks tightening globally, CMB.TECH’s strategic move towards green shipping aligns with the growing demand for sustainable solutions in the maritime industry.

Europe has already put in place a regulatory landscape that is taxing shipping companies for their CO2 footprint and other regions are expected to emulate the regulations shortly.

What is more, with the IMO’s tightening of its decarbonization objectives, there is growing pressure on a global front to transition from fossil fuels to green solutions. Saverys indicated that China has also set sights on clear targets for low carbon industry, including shipping in its five-year plan.

Specifically, on January 1, 2024, the ETS ETS came into force, meaning that ships calling at European ports have to pay for their CO2 emissions. The tax equals roughly $90.00 per ton of CO2, resulting in higher costs of burning diesel on ships. It applies 100% to emissions of ships that trade within Europe, and 50% to the CO2 emissions from vessels that come from outside of the EU.

“On the 1st of January 2025, the FuelEU Maritime Directive will come into play, gradually lowering the allowable emissions for ships per energy unit. This means that, for instance, as of 2030 if you operate 10 large container vessels and you continue to burn diesel you will be faced with an extra bill per year of 30 to 50 million euros spread out over these ten ships. As of 2035, the rules become even more stringent, resulting in huge penalties if you continue to burn diesel. Adding just one ship powered by ammonia could bring the emission bill down to 0,” Saverys said.

“The clean fuels are more expensive so this is not a saving of 30 to 50 million euros straight to the bottom line. If we are very conservative, we will probably keep 10 to 15% of that savings. But then comes 2035 and 2040 and then it’s going to accelerate. Therefore, it already makes sense today to invest in future-proof ships. The benefits will come because the regulations in the EU are already there and will be emulated in other regions of the world.”

Saverys emphasized the growth potential of CMB.TECH, citing long-term trends, structural shifts toward low-carbon solutions, and a vast addressable market.

Speaking on the cost side, Saverys underscored that a significant portion of the company’s clientele, specifically 80%, expresses a desire to adopt environmentally sustainable practices; however, reluctance to bear the associated costs is prevalent among them.

Nevertheless, he added that talks were underway with numerous customers who not only express a willingness to embrace green initiatives but are also eager to co-invest and partner with CMB.TECH in the development of low-carbon solutions. The belief is that this collaborative approach will expedite the expansion of the addressable market and increase the number of customers participating in this pivotal transition toward a more sustainable future.