The entry of Chinese shipyards into cruise and ferry shipbuilding is being aided by an innovative business model that helps passenger ship owners place contracts for newbuilds.
Tillberg & Reyes Group president Carlos H Reyes and general manager Andrew Zhang brokered the SunStone Ships new contract with China Merchants Industry Holdings via the business model and resources they put together. The company is also involved in the Viking Line project at China’s Xiamen Shipbuilding Industry Co by supporting the shipyard.
The hotel design of the new Sunstone fleet will be designed by US-based Tomas Tillberg Design International, with whom SunStone has worked with for many years. Mr Tillberg is one of the most recognised names in the industry, a second generation initiated by his father Robert Tillberg.
Mr Reyes told Passenger Ship Technology “We found great support from the shipyard and Sinosure to develop a passenger ship business and building model. The fact that the shipyard does not have experience of building passenger vessels is a major obstacle for an owner to make the decision to build in China. The various aspects of the business and the building had to be supported by a comprehensive plan that provides enough confidence to the owner.”
Mr Reyes’ business model includes the support of companies in Europe and the USA and innovative supportive financial tools.
“We had to create a financial model that was not only attractive in terms of price, but more important, extremely attractive in terms of finance,” he said. “We took components from different financial models, including a tool often used in real estate development in Colombia, where I was born. All components support each other to achieve an attractive finance model.” As a result, Tillberg & Reyes Financial Leasing Co Ltd was also created.
The model leveraged the differences in the common financial practices in different regions. He singled out an example: In many countries in Europe the usual maturity term of a loan is 12 years with a down payment of at least 20%. But China is not bound by the same financial regulations – Mr Reyes pointed out that it could stretch from 12 to 15 years and that 20% wasn’t mandatory.
Mr Reyes and Mr Zhang are using their business model to broker more deals between western passenger ship operators and Chinese shipyards – and are already in negotiations with other cruise operators.
“China has developed tremendously in terms of shipbuilding and they are very keen to enter the passenger ship market. We are very happy to help integrate resources and they see us as a valuable resource. It is a difficult business and there will be issues, some of which our model can resolve.”
Explaining why they launched their work within the expedition cruise sector, Mr Reyes explained “In our opinion, at the beginning several processes and ways to execute and control a project will need to be implemented and this size of vessel is less risky and more controllable than initiating by building large cruise ships, at least for now.”