MARAD Prioritizes Offshore Wind Vessels for Title XI Financing
Following on a new initiative announced by the White House and 11 states’ governors to accelerate the development of the offshore wind power sector, MARAD is prioritizing the Title XI financing program for vessels in the offshore wind power sector. The Department of Transportation designated offshore wind vessels as “Vessels of National Interest” to accelerate their review and financing under the existing financial support program.
MARAD said in announcing the designation that will facilitate more offshore wind construction and will prioritize applications for such projects for review and funding through Title XI. Currently, MARAD reports the approximate subsidy available for Title XI is $35.5 million, as of March 2022. Based on the average risk for projects MARAD previously guaranteed, this could support approximately $475 million in new loan guarantees.
The Title XI program assists the domestic shipbuilding industry by providing support for U.S. shipyards to modernize their facilities, to build and retrofit vessels, and to assist U.S. shipowners cost-effectively purchasing new domestically produced vessels. It can provide a full faith and credit loan at longer terms and a lower interest rate than traditional private loans. To date, Title XI has provided $9.3 billion in loan guarantees.
The Title XI statute was amended in 2019 to add the authority to designate Vessels of National Interest. Such a designation informs and encourages shipbuilders and shipowners that DOT/MARAD will prioritize and expedite applications for loan guarantees for offshore wind related vessels.
“We’re excited that some American shipyards have already secured contracts to build vessels to service offshore wind developments,” said Maritime Administrator Ann Phillips. “By growing this industry, we further support essential offshore wind installations, and continue to add jobs and strengthen our important domestic industrial base, including our shipyards and shipbuilding industry.”
Yesterday, the Biden Administration announced the new Federal-State Offshore Wind Implementation Partnership that will accelerate the growing offshore wind industry. The effort, which includes a focus on building the supply chain for offshore wind including the vessel necessary for installation and maintenance, is in response to reports that cited the lack of a national plan to support the goal of 30 GW of offshore wind power generation by 2030.
Demand from the emerging sector is contributing to growth in shipbuilding and port development work. Because the U.S. is applying the Jones Act to the offshore wind sector similarly as it has been used in the offshore oil and gas business, it is expected to contribute to new shipbuilding orders. So far, Dominion Energy has ordered the first installation vessel from Keppel AmFELS and the Philly Shipyard is building a subsea rock installation vessel for Great Lakes Dredge & Dock Company. Most of the orders have been for smaller crew and support vessels, with analysts warning that there will not be enough installation vessels to meet the demand from the wind farm projects currently in the planning stages.
The White House and MARAD expect this new initiative will help to drive more shipbuilding orders to support the offshore wind sector driving work at the shipyards and for seafarers.