THE VIRGINIAN-PILOT
Copyright (c) 1996, Landmark Communications, Inc.
DATE: Thursday, January 18, 1996 TAG: 9601180454
SECTION: BUSINESS PAGE: D1 EDITION: FINAL
SOURCE: BY CHRISTOPHER DINSMORE, STAFF WRITER
LENGTH: Medium: 76 lines
Newport News Shipbuilding could soon be ordering tankers from itself.
The Peninsula shipbuilding and repair company is an investor in a partnership seeking federal loan guarantees to construct five petroleum product tankers at the shipyard, a yard spokeswoman confirmed Wednesday.
By backing the tanker buyers, Newport News Shipbuilding is acting aggressively to assure its future, analysts said. It's a practice that is not uncommon in shipbuilding circles worldwide, the analyst said.
The U.S. Maritime Administration is reviewing and is expected to act soon on the applications for shipbuilding loan guarantees from Hvide/Van Ommeren Tankers to build the five double-hulled ships.
Hvide/Van Ommeren Tankers is actually five shell companies set up to buy one tanker each from Newport News Shipbuilding.
Those five companies are owned 25 percent by a subsidiary of the Dutch shipping firm Van Ommeren N.V., said Jerri Fuller-Dickseski, Newport News Shipbuilding's spokeswoman.
The other 75 percent are U.S. investors, two of which are Hvide Marine Inc. and Newport News Shipbuilding, Fuller-Dickseski said.
Fort Lauderdale, Fla.-based Hvide Marine Inc. is the general partner of the U.S. investors, said John Blankley, Hvide Marine's chief financial officer. Hvide Marine owns and operates several chemical tankers and a fleet of tugs, barges and offshore supply vessels.
Blankley said the other U.S. investors are passive participants. He declined to identify them.
``We are doing this because we feel it is a solid investment,'' Fuller-Dickseski said. ``And like any other investment we will hold onto it as long as we see it wise to do so.''
She declined to elaborate.
The 46,500-ton tankers will ship oil and petroleum between U.S. ports. Numerous aging single-hull tankers are in use, but they are gradually being phased out under the Oil Pollution Act of 1990, which requires that only double-hull tankers be used in U.S. waters by 2015.
To operate between domestic ports, a ship must be U.S.-flagged and at least 75 percent U.S.-owned.
But Newport News Shipbuilding's participation as an investor raises the question of why some other investor couldn't be found. It could be that other investors didn't find building new product tankers to be economically viable yet, said one shipbuilding analyst, who asked to remain anonymous.
But it also could be that Newport News Shipbuilding wanted the depreciation, which is extremely valuable, the analyst said.
A company that owns a hard asset, such as a ship or a manufacturing plant, can write down the asset's value and use the reduction to offset its income tax liability.
``The depreciation thrown off by a ship is way in excess of what you need to shelter a ship's income,'' the analyst said.
That's why the ownership of most oceangoing vessels is so complicated, he said.
More importantly though, Newport News Shipbuilding's investment makes the deal work, the analyst said.
Newport News Shipbuilding needs the deal to sustain its return to commercial shipbuilding. With Navy ship orders falling off, the yard needs to develop other lines of business to stay in business. This five-tanker deal alone is expected to sustain from 700 to 1,000 of the yard's 18,500 jobs.
Nearly all the domestic commercial shipbuilding deals cut with federal loan guarantees in recent years have included some participation by the building shipyard, the analyst said. ``This happens overseas a lot, too,'' he said.
The Hvide/Van Ommeren order was threatened earlier this week by a suit filed by Kirby Corp., a rival tanker operator. On Tuesday, a federal judge denied Kirby's request for a temporary restraining order against the Maritime Administration to prevent the agency from approving the loan guarantees.
Kirby may still appeal the ruling. ``We're considering our options,'' said Mark Buese, vice president of the Houston-based firm. by CNB