Swedish shipowner Stena Bulk and Swiss methanol producer and tanker group Proman are forming shipping’s first sustainable methanol fund.
Stena Bulk and Proman’s energy transition investment advisory company ProMarine said it is setting up Low Emission Methanol Shipping Company (LEMSCO).
The fund will have an initial portfolio of four methanol-fuelled MR tankers owned by Proman and Stena Bulk, financed by Dutch bank ABN Amro.
These are the 50,000-dwt Stena Pro Patria, Stena Pro Marine, Stena Promise and Stena Prosperous (all built 2022).
LEMSCO is also backed by other unnamed equity investors.
The new venture will benefit from a dedicated methanol supply contract from Proman, ensuring that the fleet’s operations are cost-effective and powered by a proven and globally available low-emission alternative fuel, the companies said.
LEMSCO has pledged to invest in shipping and associated infrastructure with the aim of reducing emissions.
Andrew Craig, Proman’s executive director of corporate finance and board member of ProMarine, told TradeWinds the origins of the fund date back to Proman’s 2019 decision to partner with Stena Bulk by building six low-emission methanol tankers.
“We really started that discussion then, and then as things evolved, we looked at what was going on within sustainable finance and saw the opportunities that builders and operators of wind farms and solar parks have taken to use third-party finance to provide long-term returns to investors,” he said.
“And we thought, actually, with these vessels, there’s an opportunity to do that as well. So that’s one of the key characteristics of the fund because we know that our methanol plants will operate for 30 to 40 years, providing certainty of income with the vessels operating all day, every day, providing the ability to give long-term income support to the fund,” Craig added.
A natural thing to do
And he said: “The operating life of a new vessel is typically 20 to 25 years. So putting in place third-party financing to provide long-term returns to investors seems like a natural thing to do.”
David Cassidy, chairman of the ProMarine board and chief executive of Proman, said LEMSCO will be a pioneering force addressing air pollution and wider environmental concerns surrounding the maritime industry.
“We all recognise that the transition to sustainable shipping requires significant capital investment. By providing an alternative financing mechanism, LEMSCO plays a crucial role in bridging this gap and facilitating the industry’s transition to lower-emission fuels,” he added.
Cassidy said the new venture is grateful to ABN Amro for its early support.
“LEMSCO demonstrates the market’s readiness to offer practical financial incentives through reduced cost funding for ships fuelled by low-emission methanol and can be the catalyst for further investments into sustainable shipping,” the CEO added.
‘Pivotal moment’
Stena Bulk CEO Erik Hanell, who also sits on the ProMarine board, said the launch is a “pivotal moment”.
“Through strategic collaboration and innovative green financing, we are shaping a new era of maritime operations, prioritising lower-emission methanol as a viable alternative fuel,” he added.
The Dutch bank’s debt financing was independently assessed against the LMA Green Loan Principles and has been successfully designated as a green loan by class society DNV.
Remco Jongkind, managing director of ABN Amro, said: “This transaction is the result of executing our climate strategy to decarbonise the shipping sector whereby LEMSCO is setting the example through the set-up of a low-emission fund.”
“ABN Amro is keen to continue its support for the growth of the low-emission portfolio backed by two strong industry-leading sponsors,” he added.
