Sale of ferry route brings clarity to Scandlines

This article first appeared in the Spring/Summer 2015 issue of International Cruise & Ferry Review. To read other articles, you can subscribe to the magazine in printed or digital formats

The recent sale of the Helsingør-Helsingborg ferry service has been broadly welcomed by all connected with what is a crucial transportation link in the Øresund region between Denmark and Sweden. Equity bank First State Investments is taking over the ferry route, including the five vessels operating the line. The contract with First State Investments, confirmed in early February, became effective retroactively as of 1 January 2015.

The transaction has allowed Scandlines to repay debt of around €66 million and to focus its efforts on the Puttgarden-Rødby and Rostock-Gedser ferry routes and its two BorderShops in Puttgarden and Rostock.

Since 2001, Scandlines has been operating the Helsingør-Helsingborg route in association with Stena Line. Late last year, the 50-50 equal partners signed an agreement with First State Investments for the new owners to take over the operation at the end of January. The route continues to be marketed under the name Scandlines Helsingør-Helsingborg.

First State is an investor in infrastructure and is part of the Commonwealth Bank of Australia. The company manages assets of over €3.1 billion invested in portfolios of transport, telecommunications and social infrastructure in Australasia and Europe on behalf of institutional investors.

Asked if the deal is a good one for Scandlines, given the track record of similar transactions in the European ferry sector, CEO Søren Poulsgaard Jensen says that it has not always been easy to have two equal partners. “So, when we recently received an attractive offer on the entire route, we chose to accept it,” he says.

There is no question that Jensen is enthusiastic about the acquisition, firmly believing the deal, which means that in future there will be only one proprietor of the route, will benefit both employees and customers alike.

“Scandlines will continue our close collaboration with Scandlines Helsingør-Helsingborg and the new owner on the important transit traffic from Sweden via Denmark to Germany and vice versa. Accordingly, we hope to have ensured that neither employees nor customers will experience any changes in the working day, and that it becomes business as usual for everybody. “The revenue from the sale also enables us to reduce our debt, which is very important in order for us to prepare for the fixed link on the Fehmarn Belt.”

In relation to the fixed undersea link that will connect German and Danish islands, he is bullish. It is clear to Scandlines that the traffic forecast for the tunnel is too optimistic and does not take into account a continuation of the Puttgarden-Rødby service running even after the fixed link has opened.

Jensen was appointed CEO of Scandlines in 2012 having joined the Scandlines management team in 2009 as COO. Previously he was MD of Maersk Line Hong Kong where he was responsible for all Maersk Line commercial activities for customers located in Hong Kong, including several global accounts and Maersk Line’s combined sales to freight forwarders. In the 2000s, he held various senior positions in Maersk China, Indonesia and Russia. He was MD of Maersk Group Thailand in 2006 with primary focus on the integration of P&O Nedlloyd operations and staff into the Maersk operation.

With such a strong pedigree Scandlines is in good hands. Indeed the company is in the fortunate position of having its entire fleet meet the new sulphur emission requirements that came into effect at the start of the year. Jensen is well aware that not all operators have had such an easy start with the new requirements. “I think it is a good thing that the shipping industry is challenged, but I am not happy with the approach in this case. Maritime regulations should really be made to support the global need.

“The hybrid propulsion system on Puttgarden-Rødby is a key element of our strategy for more sustainable ferry traffic. This is the first time a ferry operator has deployed this technology on such a scale,” he says. “We are proud that Scandlines is taking a pioneering role in this area. We are learning tremendously from this, and we look forward to taking even further steps towards zero emission.”

The two ferries currently being fitted out at the Danish shipyard Fayard for the Rostock-Gedser service will also use the hybrid propulsion system. The Berlin and the Copenhagen were originally ordered from the German shipyard P+S Werften GmbH for a reported €230 million in 2010. Concerns over the construction and delivery of the two new vessels eventually forced Scandlines to cancel the order.

The pair were subsequently purchased for a reported €31 million from the receiver of P+S Werften. Upon signing the Letter of Intent at the end of April 2014, Scandlines arranged the transfer of the ferries from Stralsund to the Blohm+Voss yard in Hamburg for extensive pre-engineering work before proceeding to Denmark for completion.

According to Jensen, the completion of the two new vessels is progressing according to plan. It is expected that the two new passenger ferries will be put into operation on the Rostock-Gedser route in the second half of 2015.

“During recent months, the vessels have been on a strict diet to reduce the weight, and a new bridge has recently been installed on both vessels,” he explains. “As opposed to the original design, the bridge has been moved to the top deck, so the navigators get an even better view. The navigation equipment has been sent to the supplier for an update in order to avoid installing outdated equipment in the newbuildings. With the bridge in place, the shipyard has reached a visible milestone in completing the vessels.

“The remaining work contains, among other things, the installation of closed-loop scrubbers, the replacement of the cabling, installation of the heating, ventilation and air conditioning systems as well as the new interior in lightweight materials on decks 7 and 8.

“Scandlines and Fayard have collaborated for more than 35 years and we know the yard as a reliable partner who meets the delivery times. That has been crucial for us in this process,” Jensen says.

The two new vessels will replace the Kronprins Frederik and the Prins Joachim and are tailor-made for their intended route. They will offer ample space as each ferry will have a capacity of 1,300 passengers and 460 cars or 96 trucks compared to 977 passengers and 210 cars or 42 trucks today.

Throughout 2014, Scandlines has continued its journey towards becoming the best and most efficient ferry operator in the market. Looking at 2015 and beyond, the company is well placed to meet the threat posed by the fixed link.

“I am satisfied that we have realised our important objectives around improved customer focus, a successful launch of our environmental initiatives at the Baltic Sea and effective communication about our competitive position at the Fehmarn Belt, respectively,” says Jensen.