Per Sævik looks back on a difficult start-up along the historic coastal route but refuses to throw in the towel and give up
“This ship is the first proof of our investment, and we are proud of what we have created,” says Sævik.
This is emphasized by the 82-year-old shipowner, chairman and main shareholder in the new venture on the historic coastal route between Bergen and Kirkenes in a press release from the company.
It is a late afternoon in February when Per Sævik arrives at the Westcon shipyard in Florø. Havila Kystruten’s first ship, HAVILA CAPELLA, is docked for a ten-day so-called guarantee docking and maintenance check, and Sævik, who has spent the last three hours in his car from his home in Remøy in Herøy, has come to oversee the work.
“Since we were awarded the contract, we have been facing strong headwinds, with gale-force winds and even hurricanes,” he continues.
The contract Sævik refers to was awarded to Havila Kystruten by the Norwegian Ministry of Transport in 2018 and was an agreement for the company to operate four of the 11 ships on the Bergen-Kirkenes-Bergen coastal route. It could have happened earlier. Sævik saw an opportunity to participate in the previous tender round, but…
“We saw that it was not feasible to operate 11 ships – only one company had the capacity to do so. That led me to conduct significant lobbying efforts against the previous government; if they wanted competition on the tender, they had to split up the package. In light of that, you could say we succeeded. But even with the split into three packages, there were only two companies bidding for the packages: Hurtigruten and us”
Why the shipyard went bankrupt
Havila Kystruten chose to divide the construction of the four new coastal cruise ships between two shipyards; one in Spain and one in Turkey.
“There was little interest from the five shipyards we contacted in Norway to build these ships when we entered the competition on the coastal route. In addition, we considered it safer to place two ships on separate shipyards with regards to delivery time. In hindsight, I have no problem saying it was a misjudgment, as the shipyard in Spain went bankrupt. I am convinced that it was not due to our contracts, but because a large 180-meter yacht was being built at the same time. We have also received support on this manner by a court order in London”, explains Sævik.
Thus, the company moved the construction of the two ships that were supposed to be built in Spain to the Tersan shipyard in Turkey. Unfortunately, the bad luck did not stop there. Shortly after, the coronavirus pandemic hit hard, and when it was finally in the process of normalizing, a war broke out in Ukraine. These events naturally delayed the construction of the ordered coastal cruise ships, and Havila Kystruten is still waiting for delivery of their last two ships.
“Of course, our situation is not worth mentioning in comparison to the tragedy these war-affected people have experienced, but for us, the financing solution we chose has nevertheless been a nightmare”.
Initially, the Russian-owned company GTLK was supposed to finance the four ships through a leasing structure where the shipping company, after a written agreement, would by back all the ships after ten years.
“We got very good financing on all four ships, which was supposed to give us full control over our fleet. GLTK is huge on leasing financing in aviation and shipping, but of course, you do not feel very smart when you see how it ended up. The war in Ukraine was not part of my assessment when we signed the contracts in 2019”, he says.
Will stick it out
In December 2021, HAVILA CAPELLA was put into operation along the Norwegian coast, and in May the following year, HAVILA CASTOR was in service between Bergen and Kirkenes.
“Despite the challenges, the past year has made me confident that we have a very good product. We have received very good feedback from our guests, both about the way our ships are equipped and about the food concept, which is of very high quality. I do not see any particular reason why we should have chosen differently in this regard”, says Sævik, and continues:
“It is no secret that there have been a disproportionately number of uphill battles, but this is a project I am confident will go at least as well as we hoped when we started”.
Sævik now hopes that the issues surrounding sanctions and financing of the fleet will be resolved, to be able to look forward.
Of course, our situation is not worth mentioning in comparison to the tragedy these war-affected people have experienced, but for us, the financing solution we chose has nevertheless been a nightmarePer Sævik, shipowner
“I hope that, as soon as we have a solution in place, we can reset and get a smoother sailing and good times when both HAVILA POLARIS and HAVILA POLLUX are in operation. It has been tough to stick with it over the last few years, but we have never thought that we would not be able to stick it out. I have never worried about it in dark autumn and winter nights – this is not an issue. I deeply and sincerely believe in this product and am confident that we will experience significant success in the future”, Sævik say, adding that the booking numbers for 2023 exceed expectations.
Recommend earlier tender process
Initially, the plan was for the operators of the historic coastal route to have over two years from the signing of the contract to start of operations. Sævik believes that the Norwegian authorities should consider an earlier tender process.
“The Ministry of Transport has the option of an additional year on the agreement, which expires in 2030. It is still relatively sufficient time for the next tender. However, it is difficult to predict shipyard bankruptcies, a pandemic that affects the whole world, and a war in the heart of Europe. In a normal situation, from them time the contract was signed until start of operations, the time should have been sufficient. Nevertheless, and I say this with a bit of experience from the shipbuilding industry, I do not hide the fact that it may be sensible to add a little extra time in large building projects”, he says.
He also thinks it is not difficult to see that the Tersan shipyard may have underestimated the complexity of building this type of ship.
“Incorporating 11,000 square meters on each ship has been more challenging than both the shipyard and we could have anticipated. I believe that the combination of the pandemic, which resulted in significantly fewer workers in operation, and the complexity of the ships, has contributed to the construction of these ships taking a little longer than expected”.
Havila Kystruten’s new ships are built for the future and are already the most environmentally friendly ships to ever sail along the Norwegian coast. According to Sævik, this is not coincidental.
“I am one of those who strongly believe that if you want to be a part of the winning team in the future, you have to invest in the environment. This was a focus point for us when we designed these ships. And that is why we invested 50 million Euros more than needed to meet the criteria required by the contract with the Norwegian authorities”, he explains.
The four identical sister ships are currently operated with a combination of liquified natural gas (LNG) and a battery pack that allows the ships to sail emission-free and silently for up to four hours at the time. Sævik reveals that the ships could already have sailed the entire Bergen-Kirkenes-Bergen route climate-neutral today, by running 100% on biogas.
“We could have done that without moving a single screw on board our ships. But it requires assistance from the authorities. They need to facilitate the production and distribution of biogas along the coast. If they are looking for an environmental beacon along the coastal route, these ships are ready today”.
In addition, Havila Kystruten has made design adjustments to the ships, to be able to switch to other types of fuels, such as hydrogen, with minor modifications. This will allow the ships to operate completely emission-free on the entire coastal route in the future.
“It is unclear whether Norwegian authorities want to continue the work of reducing emissions along the Norwegian coast and in the shipping industry or if it is just empty rhetoric”, says Sævik.
“The technology and opportunities are there, and we are ready to take the next step to operate climate-neutral or emission-free right now. The potential is just not fully utilized yet”.
Sævik also highlights the possibility of charging the ships batteries along the coastal route, in ports with a longer layover.
“There is no doubt that several ports are behind in offering sufficient charging infrastructure. We want to use our batteries as much as possible to further reduce our fuel consumption and emissions. To speed up this process, there must, of course, be sufficient demand. Everyone needs to see that it is not only necessary for the environment, but also profitable for distributors and consumers”, he says.
Want to grow
To succeed on the coastal route, Sævik believes it is important to get the company known in the market.
“Marketing is one of the areas we have underestimated a bit in terms of the resources required to break into different markets and become a full-fledged partner along the coastal route. Fortunately, we are doing something about it now, with a lot of digital advertising and TV commercials in Norway, Sweden, and Germany, to name a few”, the chairman says.
“If we deliver a product that is good enough, have enough and the right marketing in the right markets, and satisfied customers, I believe we can face the future without worries. We are in a niche with great potential and growth opportunities”.
Sævik want the company to grow and does not rule out increased efforts in the future.
“First and foremost, it is a question of whether the authorities trust us after the delays and troubles we have had. Our goal for now is to get these four ships in operation and deliver what we have committed to. Nevertheless, I do not rule out that we want to increase our efforts over time and perhaps consider other investments in tourism and shipping. Despite encountering setbacks that were hard to anticipate when we decided to invest in the coastal route, we must accept that some people are starting to feel that it is taking too long to get expensive ships in operation”.
Sævik has no problem seeing that some decisions along the way could have been different.
“In hindsight, we must acknowledge that with gas prices skyrocketing in 2022, I may regret not investing in so-called “dual fuel”. This would have made it possible to use both LNG and diesel as fuels in addition the battery packs. But in 2018 I felt, and I was probably not alone, that there would be a stable, good access, and low prices for natural gas”, he says.
The chairman highlights a sentence he as often had in mind in his many business ventures: “The one who does nothing usually knows how everything should have been solved. And for those who try, one must expect to make some misjudgements”.
“I acknowledge that we have made plenty of misjudgements. We are competent, and hopefully in the not-too-distant future we will have four ships in operation. Then our investment will prove to be worth it”, he says.
At the turn of the year, Havila Kystruten had 349 employed seafarers who will operate the ships along the coastal route. And there will be more employees with two new ships in operation.
“We have a fantastic crew that are with us on this adventure, both in the hotel on board and in the operation of the ships. They work every day for the coastal communities and our guests. Their efforts are invaluable to our shipping company and shows me that we have something special that will be a success story”, Sævik concludes.