Aegean Marine Petroleum Network (NYSE:ANW), an international marine
fuel logistics company that markets and physically supplies refined
marine fuel and lubricants to ships in port and at sea, announced
on February 20, 2018 the agreement to acquire HEC Europe Ltd, a
leading environmental group of companies active in the treatment of
maritime and offshore waste. Capital Link, the Investor Relations
and Media Advisor to Aegean Marine Petroleum Network had the
opportunity to interview Mr. Darren Laguea, the Group Chief
Executive Officer of HEC Europe on HEC’s business, the outlook of
the ship waste management business and the acquisition by Aegean
Marine Petroleum. Please find below the interview in its
entirety. A PDF copy of the interview can also be accessed on
www.CapitalLinkShipping.com or by clicking on the link below:
http://cdn.capitallink.com/files/docs/HEC_Interview_Final.pdf
CREATING A GLOBAL ONE STOP SHOP FOR
THE SHIPPING INDUSTRYINTEGRATING BUNKERING AND
SHIP WASTE MANAGEMENTINTERVIEW WITH DARREN LAGUEA,
CEO OF HEC EUROPE
Capital Link: Let’s open our discussion
by describing in broad terms the nature of HEC’s
business.
Darren Laguea: HEC collects,
transports, and treats oil residues coming from ships and land
units (such as industrial facilities and shipyards) and also
handles all other ship-generated liquid waste as defined in the
International Convention for the Prevention of Pollution from Ships
(“MARPOL”). Simply put, HEC works to contain and eliminate oil
waste.
HEC continues to grow and so does demand for its
services, services that international regulations have made
mandatory by requiring all ports around the world to provide port
reception facilities, and requiring all ships to deliver their
waste to these facilities without exception. This ensures that the
waste is properly managed. Hence HEC is one of the largest
companies worldwide in the field of oil waste management, with
nearly 20 years of experience in operating port reception
facilities and having collected and treated millions of tons of oil
waste.
Capital Link: Marine pollution has been
identified as an urgent issue on the front lines of environmental
protection. How does shipping factor into this and what is the
regulatory framework that underpins the growth of HEC’s
business?
Darren Laguea: Around 90% of
today's world trade is carried by the international shipping
industry with over 50,000 merchant ships trading internationally
and transporting every kind of cargo. This worldwide reliance on
seaborne trade and strong prospects for its further growth mean
that environmental protection and the tackling of marine pollution
should be, and indeed is, at the forefront of the industry's
agenda.
The environmental impact of shipping and the key
issues that must be addressed include greenhouse gas emissions,
acoustic pollution, and oil pollution.
Oil related ship generated waste comes mainly
from three sources: bilge water, oil residue and cargo tank
cleanings. While vessels have their own waste tanks on board, their
capacity is limited and therefore, it is essential that upon
entering a port, a vessel be able to deliver some or all of its
oily waste to an adequate port reception facility, i.e. an operator
who can receive and safely handle and dispose of the waste.
The disposal of ship waste is regulated by
MARPOL. Its prime objective is to prevent and minimize pollution
from ships -both accidental, from spillages, and from routine
operations- including oil and other harmful substances.
154 states have signed MARPOL, which includes
30,000+ ports around the world and are thus subject to its
requirements. According to MARPOL regulations ports must provide
adequate and proper reception facilities for the handling of ship
waste and this is exactly what HEC does.
To stress the need for more adequate Port
Reception Facilities by the States that signed the Convention, an
Action Plan has been produced at the international level to
overcome this major hurdle and achieve full compliance with MARPOL
as well as to promote environmental consciousness among
administrations and the shipping industry.
As you know, regulatory and industry sensitivity
alongside attention to environmental issues is growing. HEC is
operating within a sector that benefits both from increasing
industry sensitivity and regulatory trends.
The same way a ship needs fuel to navigate, it
needs to discharge its waste to continue operating. This is not an
optional function, but a mandatory one and it needs to be performed
properly and in accordance with MARPOL regulations.
Capital Link: What kinds of ship waste
does HEC handles and how is this waste generated?
Darren Laguea: Without getting
too technical, as I mentioned before, oil related ship generated
waste comes mainly from three sources; bilge water, oil residue
(sewage) and cargo tank cleanings. This waste is the result of
normal ship operations and thus it keeps occurring and accumulating
as the vessel operates.
Oily bilge water is a mixture of liquids that
are collected in the bilge of a ship. It is made of a mixture of
fresh water, sea water, oil, sludge, chemicals and various other
fluids that drain into the bilge as the result of vessel
operations. Oil residue (sludge) is the waste from the purification
of fuel or lubricating oil or separated waste oil from oil water
separators, oil filtering equipment or oil collected in drip trays,
as well as waste hydraulic and lubricating oils which are used to
prevent damage to engine components, reduce wear and improve fuel
combustion. Finally, cargo tanks in oil tankers need to be cleaned
before a new cargo is loaded that is not compatible with the
previous cargo or before dry-docking.
Besides handling all kinds of ship generated oil
waste, HEC also collects, transports, and treats oil residues
coming from land units (such as industrial facilities and
shipyards) and offshore rigs.
As I mentioned, vessels have their own waste
tanks on board, but their capacity is limited. Furthermore, on
board treatment of oily bilges and sludge and the related discharge
of waste into the sea can be carried out only while the ship is in
passage outside designated sea areas, which, generally speaking,
limits this only to deep ocean areas. Thus, for a vessel to
continue operating it is essential upon entering a port to be able
to interface with a port reception facility and discharge all or
part of its waste.
Capital Link: What is the interaction
between ports, vessels and HEC? What types of services do you
perform?
Darren Laguea: HEC is one of
the few operators globally who provide the whole chain of Ship
Waste Management – we collect, transport, store, treat and dispose
of the waste.
As I said, States that have signed the MARPOL
convention must provide proper and adequate port reception
facilities for the collection and treatment of waste. So, when a
vessel enters one of the ports we service, after paying the port
fee – which you can compare to a toll both operation – HEC will
collect the waste from the vessel with one of our own specialized
barges or trucks. The waste is then delivered to either a HEC
floating or land-based waste treatment facility which separates
oily waste into recovered oil and purified water. The purified
water is safely discharged while the recovered oil is sold to
industrial users at market prices. Here I would like to make
special mention of the fact that our treatment facility is Piraeus
has an internationally patented process for the separation of oil
and water and the water produced is purified to 5 PPM.
According to European Union regulations port
fees are a function of the vessel’s tonnage and the aim is to
ensure that they cover the costs of the port reception facilities
for ship-generated waste, including the treatment and disposal of
the waste. Vessels have to pay the port fee whether they discharge
their waste or not. Thus, ships have no incentive to discharge
their waste into the sea, where permitted. Instead, they are
incentivized to make use of a local Port Reception Facility. The
port fee covers a certain quantity of waste that the vessel can
hand over. Any excess quantity is given at extra cost.
So, this is a utility-like business model which
operates within the regulatory framework and addresses a vital and
recurring need of the vessel’s continued operation. Several
countries outside the European Union have already started
considering this “toll booth” mechanism as a prime means that will
enable them to provide proper Port Reception Facilities.
Capital Link: Where does HEC operate
today and what kind of infrastructure do you have in
place?
Darren Laguea: HEC operates
today in three main areas which have been strategically chosen. We
operate in the ports of Piraeus, as well as most of the other Greek
ports, Gibraltar and Hamburg.
We have an exclusive concession agreement with
the Piraeus Port Authority until 2049 to cover all vessels entering
the port of Piraeus. It is worth mentioning that Cosco has made a
significant investment in container terminals in Piraeus
underscoring the significance of Piraeus as an entry point for a
significant quantity of cargo coming into Europe. Piraeus is also a
major hub for the cruising industry, and cruise ships due to their
size and operation generate significant quantities of waste. Out of
Piraeus we also serve the needs of all major Greek ports and
continue to work with dozens of island ports, marinas, and fishery
reserves.
In Hamburg we are one of the three providers of
port reception facilities. Hamburg is one of the busiest ports in
the North Sea and the Baltic.
Gibraltar enjoys unique vessel traffic given
that it serves as gateway and passage between the Mediterranean
-and by extension the Black Sea- and the Atlantic. Over 75,000+
vessels transit the Straits of Gibraltar annually and we have
established a partnership with the Gibraltar Port Authority.
Our current infrastructure includes two
land-based treatment plants in Greece and Germany, one floating
treatment plant operating in Greece, 12 sea collection and
transport vessels operating in Greece (seven), Gibraltar (three)
and Germany (two) and 23 land collection and transport vehicles
operating in Greece and Germany. Our treatment facility in Greece
has a waste management patent for the treatment of oily waste
resulting in water purification and oil separation.
HEC was established in 2000, so we have been in
business almost for 20 years. However, our strong development and
growth has mainly taken place over the last few years. In Piraeus,
where we maintain hub operations, the investment in our state of
the art facilities was only completed and started operation in July
2016. This finished and patented installation was built at a cost
of roughly €60million and can be replicated on a smaller scale by
HEC to meet the needs of any other locations if necessary.
We expanded into the German market in May 2015,
when we acquired Eckelmann's historic environmental business in
Hamburg, modernized the treatment plant and its equipment, and
commenced operations, gaining much praise from the national and
international press.
The opportunity to open operations in Gibraltar
was of a strategic importance to HEC. We were given this
opportunity after the company formerly providing the services in
Gibraltar opted to close their operations. We started operations in
January 2016 after successfully obtaining all operational and
environmental licenses. Gibraltar operations are conducted by
vessels and barge, the oily waste is collected and stored on board.
One of the larger vessels serves as a floating installation for the
storage of all the collected waste from the other vessels. Once the
floating storage vessel is full, arrangements are made to export
all the collected waste to our Hub installation in Greece for final
processing and treatment.
Capital Link: As it was announced,
Aegean Marine Petroleum has agreed to acquire HEC. What is the
synergy between the two and the benefit to HEC?
Darren Laguea: The unique
opportunity and common vision and objective is to establish a
“One-Stop-Shop” for the shipping industry, integrating bunkering
and ship waste management. The synergies are unique and
extensive.
As we elaborated during the conference call
announcing the agreement for the acquisition, we can benefit from
Aegean’s global client base, operational infrastructure and global
asset base and expand into new geographies.
In terms of customer base, Aegean has an
extensive and high quality global customer base. We can now offer
to those clients a “One-Stop-Shop” solution and handle both their
bunkering and waste management needs. Don’t forget that, as I
mentioned before, there is higher regulatory oversight and
increasing industry sensitivity from oil majors, trading houses,
charterers, shipowners, national and local authorities on
environmental issues, of which waste management is a key element.
Offering to those blue-chip clients the opportunity to address
their combined bunkering and waste management needs through a
reliable, reputable and efficient operator like Aegean and HEC can
really make a difference in their business, and by extension to our
business.
It is worth pointing out that in many ports the
waste management service is fragmented and occasional. Local
operators do not provide a full service to customers, service on
occasion may come from several providers and is subject to
different quality standards, and this could be limited to the
collection, transportation and/or final treatment. By contrast HEC
is capable of providing customers with the full range of services
required, giving customers a complete and transparent solution to
their disposal route for all their waste.
Furthermore, we are branding all our
subsidiaries “Global Green Ports”. We have “Green Ports Hamburg”,
“Green Ports Gibraltar” and soon to be renamed “Green Ports
Greece”. The brand “Global Green Ports” (GGP) will represent
the largest and most experienced environmental companies globally
in the field of liquid waste management. It is driven by the
maritime environmental initiative, continually responding to
increasingly stringent environmental protection legislation, as per
the demands of MARPOL. Please note that no port can be
acclaimed as a “Green Port” without such infrastructure as the
legislation compels. So, our intention is to create for our
customers the confidence and peace of mind that they will be
getting the same transparent, high quality service throughout all
our locations around the world, as our operations will adhere to
the same high standards. This is a pioneering initiative which is
very much in line with industry trends and requirements.
In terms of asset synergies, currently Aegean
has several vessels in lay-up. HEC can use several of them,
ensuring that they start making an immediate return by redeploying
and repurposing underutilized assets. We can also use some of the
land-based storage facilities and office space throughout Aegean’s
worldwide port network. Aegean’s global footprint and its
experience in these locations will undoubtedly help by accessing
developed relationships with the port authorities and local
operators as well as all of Aegean’s back office functions.
Capital Link: Clearly, Aegean provides
you with extensive synergies and growth opportunities. But how do
you plan to grow? Can you serve every port Aegean
serves?
Darren Laguea: This will be a
selective process, but in a way, it is a good problem to have, when
you have to pick and choose the best locations out of an attractive
list. We have to see which locations make sense both for HEC and
Aegean. But the opportunities are there.
Generally speaking, when we look at new
locations we take into consideration several factors. For example,
we are looking for mature ports with a large diversification of
shipping services, with over 5,000 vessel calls per annum. The port
must be part of the international shipping routes, have the
appropriate legislation in place and of course we look at
limitations regarding new licenses, and current concessions.
When it comes to entering a new market, we
follow a strategy that maximizes our operational flexibility and
minimizes our risk. It is company policy to keep land-based
Capex low until the operations in the respective port have been
able to develop and prove its growth for the first 2-3 years.
During this period, we would deploy current underutilized assets
(vessels and barges) to carry all operations by floating means.
Capital Link: Concluding, what are the
competitive advantages for HEC and what does the future
hold?
Darren Laguea: What makes us
stand apart is our track record, infrastructure and footprint in
liquid waste management. HEC is already a global leader in this
growing market. One of the areas I would also like to highlight is
our continued investment in R&D. We already have an
internationally patented operation in Piraeus and continue to
invest in research, in order to achieve tailored, state-of-the art
services that involve all stages of waste management, developing
innovative patented treatment processes.
The HEC acquisition by Aegean will create the
first global “One-Stop-Shop” which will service both the bunkering
and waste management needs of the shipping industry. This is an
innovative and pioneering initiative.
The industry in which we operate benefits from
regulatory trends, and the services we provide address core and
recurring needs of the shipping industry. We operate in a growing
industry with strong prospects of innate profitability.
The combination of HEC with Aegean will enable
HEC to accelerate our ability and vision to create a Global Green
Ports Network taking full advantage of the synergies presented by
Aegean’s client base, global infrastructure and asset base. We
believe that the addition of HEC, with is high margin and
sustainable growth business, can help generate a new era of growth
and stability for Aegean.
About Aegean Marine Petroleum Network
Inc.
Aegean Marine Petroleum Network Inc. is an
international marine fuel logistics company that markets and
physically supplies refined marine fuel and lubricants to ships in
port and at sea. The Company procures product from various sources
(such as refineries, oil producers, and traders) and resells it to
a diverse group of customers across all major commercial shipping
sectors and leading cruise lines. Currently, Aegean has a global
presence in more than 30 markets and a team of professionals ready
to serve its customers wherever they are around the globe. For
additional information please visit: www.ampni.com.
About the HEC Group
The HEC Group is a leading environmental company
active in the treatment of maritime and offshore waste, using both
chemical and mechanical technologies, in order to support vessel
and terminal operators, as well as various governmental and
regulatory bodies and port authorities. The vision of the HEC Group
is to create a dynamic global network (Global Green Ports) that
will become one of the largest international reception facilities
networks worldwide. H.E.C., through its affiliates, provides its
services to some of the largest international shipping and oil and
gas companies. The HEC Group operates in a highly regulated and
legislation driven market. Treatment of marine waste is mandatory
with regulations applying to all vessels prohibiting the dumping of
vessel-generated waste at sea. The waste treatment process takes
place both in the HEC Group’s modern land-based facilities and in
their floating facilities. For additional information please visit:
www.hec.gr
Capital LinkCapital Link is a
New York based Advisory and Investor Relations firm with strategic
focus on the maritime sector. Capital Link is compensated for
providing Investor Relations and Media services to several listed
companies, including Aegean Marine Petroleum Network. The
interviews are for informational and educational purposes and
should not be relied upon. They do not constitute an offer to buy
or sell securities or investment advice or advice of any kind. The
views expressed are not those of Capital Link which bears no
responsibility for them. For additional information please visit:
www.capitallink.com
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