March 09, 2009

Bore review in the annual report 2008: Extensive docking programme and emphasis on the environment, quality and safety highlighted Bore’s year 2008

Bore, the shipping Business Area of the Rettig Group, owns and manages Roll-on Roll-off (Ro-Ro) vessels, car carriers, general cargo (GC) vessels and one bulk carrier.

The integration of the shore office activities showed progress, enabling a more stable mode of operation throughout the year, and Bore continues its efforts to build on the strength
of being a solid and long-term shipping partner.

The Bore offices are organised around functions in order to more efficiently service our clients and to support the fleet of 22 vessels. The Dutch-flag vessels are supported from our Rotterdam office, whereas the Finnish-flag vessels are supported from the offices in Turku and Mariehamn. For the full fleet the support on nautical matters, insurance, and quality and safety are located in Turku.

The Bore management team members are located in either Helsinki or Mariehamn. For the Dutch operations Bore has a Dutch/Finnish Board of Management.

The shipping market in 2008: a year of two halves

The general shipping market in 2008, in common with almost all businesses, could be described as having two contrasting halves: the first half of the year showed a high level of activity underpinned by high utilisation, but was hit by high bunker costs, driven by the heavy price increase of crude oil. In the second half of the year we saw a dramatic drop in cargo volumes, hitting first the bulk cargo market and subsequently all other modes of sea transport.

The decline in both Russian imports and exports from Finnish industry has severely impacted the trade in the Baltic Sea, and the recovery is still to come.

Fleet renewal programme for an improved service reliability

Continuous renewal and a rigorous preventive maintenance programme is necessary, since an ageing fleet will not stay competitive in the long term due to increased docking and
maintenance costs.

Bore’s fleet underwent an intensive docking programme in 2008, as 18 dockings were carried out during the year. On top of the necessary class requirements we also invested in technical upgrading of the fleet.

A special project to upgrade Bravaden, the bulker in the Bore fleet, was carried out at Öresundsvarvet in Landskrona in Sweden. Her tank top was renewed using SPS (Sandwich
Plate System) technology, and with steel-plate renewals in the cargo holds, fl at-bottom hull and water strake she passed the 30-year survey and is back in traffic with improved loading and unloading efficiency.

Emphasis on quality and safety for enhanced customer service

A revision of the Bore SQMS – Safety and Quality Management System – was introduced and implemented in 2008. All vessels and offices got their updated manual to be followed in operations. The Bore SQMS is to be read and understood by all employees both on-board and onshore. Continuous work is carried out to improve working conditions and
to ensure an attitude of “safety first”.

Customers – the cornerstone of our operations

CAR FEEDER SEGMENT
The car feeder segment, an increasingly important part of the business for Bore, showed a steep decline during the latter part of 2008, and our three car-carrier vessels chartered to United European Car Carriers (UECC) were redirected to serve new routes as part of the efficiency program started by UECC.

Estraden and Borden, chartered to Mann Lines Ltd, have also been serving the car feeder segment in parallel with their regular Ro-Ro cargo. At the end of the year Borden entered a
three-month relet to serve on a line between the Netherlands and West Africa.

RO-RO VESSELS
By the end of 2008, all the time charter contracts for 2009 were secured and to a great extent volumes for the GC fleet were set well into 2009.

With P&O Ferries, Norking, Norqueen, Norsky and Norstream have been sailing as before on their North Sea service between the ports of Europoort and Teesport or Zeebrugge and Teesport. During the latter part of the year Norking changed route to serve on a P&O route between Zeebrugge and Tilbury, an operation which requires fast turnarounds in the ports.

Seagard continued on the charter with Transfennica on the trade between Finland and the UK.

The two new Ro-Ro vessels that are being built at Flensburger Schiffbau-Gesellschaft mbH & Co KG got the final design on the cargo configuration based upon the requirements of our charterer, Mann Lines Ltd.

GENERAL CARGO VESSELS
Throughout the year 2008, southbound cargoes from both Finnforest and SCA employed the vessels Belgard, Nedgard and the “Compass Vessels” (Westgard, Ostgard, Nordgard and
Sydgard) to destinations in the UK and France from Finland and Sweden. Northbound cargoes were carried for various clients in addition to a large number of spot cargoes. During the first quarter of 2008 several storms hit both the North Sea and the Baltic, resulting in delays both at sea and in loading ports.

Swegard and Fingard, both acquired in late 2007, have been employed in the industrial shipping trade during 2008, including carrying scrap from the Baltic down to the Iberian
peninsula.

Trenden and Najaden were on charter to New Boliden for its traffi c from Kokkola to the Netherlands, and their charter contracts have been extended until the end of 2009.

Klenoden stayed with Hacklin servicing their German container trade into Hamburg and will continue doing so throughout 2009.

General shipping trends in Finland

The Finnish Government has kept to its commitment and has been engaged in improving the conditions of shipping under the Finnish flag. Within the framework of the EU guidelines there have been some improvements in support to shipowners; these changes came into force as of 1 January 2009. For Bore the improvement lies in the compensation of travelling costs
for crew changes on ships in cross trade, where 50 per cent of the costs will be reimbursed.

The main activity during the year, however, has been on the planned renewing of the Finnish Tonnage Tax regime, and progress has been made throughout the year towards a competitive system similar to the regulations already in place in Denmark, the UK, Norway and the Netherlands. The proof of the system will only be seen when shipowners really start using the regime. The schedule at present is to have a ratified tax regime in place during the first half of 2009.

The team supporting the Finnish shipowners in the efforts to achieve a cost-competitive shipping policy in Finland has been composed of representatives of the newly formed Finnish
Shipowners’ Association. This association started its operations on 1 June 2008, and now comprises 25 shipowners with a total fleet of 110 vessels.

This milestone means that from having had three associations representing the Finnish shipowners, we now have one umbrella organisation for all shipowners in Finland and hence
a uniform body to deal with shipping-related issues, both on the national and international scenes. The shortage of competent flag-state crews is a worldwide concern for all shipowners. The global order book for vessels implies that several thousand new seafarers should enter this profession on top of the demand accelerated by the ageing population. All national associations are concerned about this trend, and a number of initiatives are underway to attract the younger generation to joining the industry.

Environmental issues high on the global agenda

In 2008, the International Maritime Organisation (IMO) agreed to introduce new regulations on SOx emissions in the form of new levels for sulphur in the fuels for ships.

The levels set will be a great challenge in the SECA area (Emission Controlled Area) of the Baltic Sea, the North Sea and the English Channel. As of January 2015 the maximum permissible level of sulphur in this area will be 0.1 per cent, whereas the global level from 2020 onwards (subject to availability review in 2018) or at the latest by 2025 will be 0.5 per cent.

The 2015 level in the SECA area cannot be achieved using existing heavy fuel, and the use of any other fuel will increase shipping costs considerably, endangering the generally accepted trend to reduce road traffic by the “Motorways of the Sea”. The fuel-cost increase will also jeopardise the cost competitiveness of the Finnish export industry, and serious
discussions are ongoing within the EU on this issue.

The greenhouse gas (GHG) issue has also developed rapidly within the shipping industry, as has the need for the shipping industry to contribute to a decrease in GHG emissions. Again the nature of the industry, its contribution to the efficiency of this mode of transport, and Finland’s geographical location with its unusual climatic conditions during winter, need to be addressed, and a lot of lobbying and education lies in the hands of the shipowners and bodies like the Finnish Shipowners’ Association.

Bore puts increased emphasis on the environment

Bore has decisively worked towards a more environmentally friendly way of working and has been doing so for more than ten years. Within its daily operations, Bore aims at continuous improvement in the area of environmental performance. The environmental work is proactively and systematically handled. A critical factor for Bore is that the environmental system and procedures for the shipping industry are regulated by maritime law. The driving force behind this work is the aim of minimizing environmental impact and dealing with environmental issues carefully and in a knowledgeable manner.

Bore is adopting the ISO 14001 environmental standard, and since the beginning of 2008 has been following up emissions. These emissions are monitored and then reported by ship type, enabling internal benchmarking and target setting and providing a good basis for analysis and corrective actions. The main emphasis of this work over the coming years will be reducing emissions to the atmosphere such as SOX, NOX and CO2.

During the autumn of 2008, tests were introduced on Seagard of a system for cleaning bilge and sludge water on-board the ship. The test run shows promising results, and the water discharged is actually drinkable. The new technique is built on the principle of evaporation below atmospheric pressure, followed by condensation. The system uses surplus energy from the main engines to evaporate the unclean water and normal cooling water for the condensation process, and therefore no extra energy is required. If the longer-term operational tests are equally successful Bore will consider installing this type of system on other vessels as well.

ICT grows in importance

Bore is investing in satellite communications on-board all vessels within the fleet.

During the summer of 2008, installation of a common satellite-communications platform started, and this is expected to be completed by May 2009. The objective for the solution
was to allow Bore seafarers to make phone calls, surf the Internet and watch satellite TV while on-board. Remote control of the on-board ICT system was also part of the solution.

The larger vessels have also seen the installation of Amos BS as the maintenance and purchasing system. On the smaller coaster vessels the Marad system is used for maintenance.

Business outlook for 2009

Bore has all the time charter contracts for the Ro-Ro vessels and the car carriers in place for the whole of 2009. The general cargo vessels are also covered by many contracts throughout
the year. The Baltic and the North Sea trade is, however, expected to be challenging due to declining volumes during 2009.

The shipping market worldwide is expecting 2009 to be a very challenging year, with ships laid up, mainly in the bulk and container segments, due to shortages in the cargo market and financial difficulties. We will also see a lot of cancellations of newbuilding contracts. As both second-hand and newbuilding prices will go down there may, however, also be new business opportunities. Uncertainty will be the name of the game within shipping in 2009.

Intensive maintenance work at dry dock

The year 2008 was a busy docking year for Bore, as an extensive maintenance and upgrading programme of 18 dockings was carried out. Kjell Gestranius is one of Bore’s five technical superintendents who were in charge of the dockings, planned them together with the respective crew and supervised the work at the shipyard. He has a broad maritime background in various positions and was responsible for the dockings of Belgard and Nedgard in addition to three other vessels.

After a round of offers, it was decided to take the vessels to the large graved dry dock of Turku Repair Yard Ltd in Naantali in Finland. Belgard arrived at the yard at the beginning of December; Nedgard arrived a week later and was docked stern-against-stern with her
sister vessel.

In accordance with the periodic class inspections, a full docking was due as well as the withdrawal of the propeller shaft and checking of the rudder on both vessels. The docking programme also included the checking of all ballast tanks.

The Classification Society also required the thickness of the tanks to be measured, and steel that was deficient had to be changed, which proved to include some 75 per cent of the tank top in the aft peak on Belgard. This required a lot of work as the floor in the fittings on top of the tank had to be bent up, i.e. three crew cabins, the sauna and washroom, the toilet and the officers’ mess room. All repairs on Nedgard could be made from the inside of the tank.

All work on Nedgard was completed by Christmas, whereas the redecoration of Belgard was finished at the beginning of January 2009. After a job well done at the shipyard, both vessels were ready to return to their service on routes from Scandinavia to the UK and France.

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