With its ‘Pumps for Free’ concept, DESMI has removed a key barrier for ship owners adopting cleaner, greener technologies, and making energy savings: the up-front investment.
Bold Business Case
If you know of a better business case than this, then we’d like to hear about it. Industrial pump manufacturer DESMI’s ‘Pumps for Free’ payment model is set to take the maritime world by storm, offering to eliminate the up-front investment normally required for new, energy-saving pumps and asking for payment out of the ship owner’s demonstrated savings instead.
Take DESMI OptiSave™ for example. It is the company’s flagship offering in marine energy-saving systems, and earns its way by providing intelligent control of a vessel’s cooling water system. OptiSave™ uses what it learns to regulate the vessel’s energy consumption according to actual cooling requirements in the moment. Typical savings are of the order of 50 percent for cooling pumps operating in regions where sea temperature hovers around 82°F – and since a vessel’s pumps are a major operating cost, that’s a significant upside.
For some ship owners, however, such savings may still not be quite attractive enough to reach for their wallets. Or perhaps they’re convinced it’s a good idea, but don’t have the finances available to make the up-front investment in the near. That’s where Pumps For Free comes in.
Pumps For Free is a recently developed payment model designed to help DESMI’s customers get over one of the biggest barriers to installing energy-saving technologies. And the innovative pricing model makes opting for OptiSave™ – or a number of DESMI’s other products – a no-brainer.
100% neutral cash flow investment
Palle Grankvist, Manager of DESMI’s Automation department, explains how the model works:
“Pumps For Free can be used for new builds or retrofit applications. Together with DESMI, the ship owner determines where an onboard energy saving can be made. The estimated saving is calculated by comparing the energy load of a vessel’s existing or specified (for new builds) pumping system, against the reduced expected load of a solution such as OptiSave™ – based on DESMI’s experience with over 300 similar installations. The estimated fuel savings of the new system are then written into a contract between DESMI and the ship owner, under which equipment can be installed and commissioned without any money changing hands. As savings are realized, the ship owner beings to pay for the new system with the money saved – usually over a 14 to 19 month period.”
Pumps for Free, then, is a completely neutral cash flow investment. The numbers that underlie the model are tightly controlled, with a monthly performance report provided to the ship owner based on OptiSave’s data log.
“Of course, there are a number of factors that come into play” says Palle, “For example. We can’t control where in the world the vessel sails, which has an effect on fuel consumption due to sea water temperature differences, and we can’t control the speed of the vessel. Necessarily, each contract is also based on an oil price that is pegged at the beginning and remains set at that level for the duration of the contract.”
It is hardly news that today’s oil prices are subject to wild swings. And for one shipowner that signed up for Pumps For Free when prices were relatively high, payback time could be expected to have stretched several years into the future as barrel prices bottomed out. This however, wasn’t the case.
“Even though oil dropped massively, our Optisave™ system performed extremely well in cold waters for the customer,” says Palle Grankvist. “So the fuel prices made little difference when dropping, and will provide even faster repayment as they rise again.”
DESMI’s characteristic flexibility, however, means the company is ready to adjust a Pumps For Free contract if an important factor should significantly deviate – for example, if oil prices radically alter or the vessel is laid up for half a year.
The case of Lighthouse Shipping
One shipowner who chose to install OptiSave™ systems under the Pumps For Free payment model is Norway-based Lighthouse Shipholding AS. In 2015, Lighthouse was building a series of bulk carriers at a Chinese shipyard alongside DESMI customer Spar Shipping. The Spar Shipping newbuilds were specified with OptiSave™ systems and the project’s supervisor brought the energy-saving possibilities to the attention of Lighthouse Shipholding CEO Frode Bjørklund.
Frode continues the story:
“I joined the company in January 2015. The shipbuilding contract for our five new vessels had been inked in 2013, and OptiSave™ wasn’t in the Scope of Supply. Fleet Management in Hong Kong were doing the supervision for us and for Spar Shipping, and they mentioned the solution to us as one of three alternatives for improving the vessels’ spec beyond the original agreement.”
As a newly started CEO, Frode already had his plate full. After an initial look at the idea, he lacked sufficient time to take things further, and the proposal languished on his desk.
“It was a very busy period, but when I did get a moment, I visited the DESMI website, spoke with the company, and decided the Pumps For Free concept looked very interesting indeed.”
By then, Fleet Management had performed early tests of OptiSave™ on one of the Spar Shipping vessels and made a more solid recommendation to Lighthouse Shipholding.
“Like any financially driven ship owning company, we needed a strong business case with a horizon well within the lifespan of the vessel. Pumps For Free seemed to be a very compelling case, so we started talking to DESMI about payback time, looked at oil price trends, and worked out the likely ROI for our vessels. In general, the financing aspect of the deal – its cash neutrality – got our investors on board and we decided to include OptiSave™ on the four vessels remaining to be built. For the first vessel we will consider a retrofit as it is only marginally more expensive. In fact, going for the concept was almost a ‘no-brainer’!”
No corners cut
Frode Bjørklund is highly positive about his experience with both DESMI and OptiSave™.
“We met with DESMI in Shanghai at the yard and have been working closely both in Scandinavia and at the local level. I’ve found the company to be open-minded and easy to talk to. And they have good ship owner customers on their reference list, too, including one widely considered to be the industry’s technology leader.”
“DESMI has cut no corners on building a great system. Even though we have been running the vessels mostly in warmer water temperatures, which means we would have expected lower savings, it has still delivered according to schedule. And in a trans-Atlantic scenario, we would see even more savings.”
Greenfields concept for a greener world
In principle, the Pumps For Free payment model can be used on any application, including pump replacements, engine room fans and LED lighting, where an energy saving can be reliably measured. And DESMI is constantly working to refine the concept and add new products and features to the Pumps For Free portfolio.
Palle Grankvist: “Today, we can offer ship owners the option to get on line with their OptiSave™ system via our servers. So they can see the performance of the system, and generate reports. Being connected in this way also enables us to trim the ship owner’s system for even higher savings.”
Pumps For Free
DESMI offers a wide range of energy-saving products under it’s ‘Pump-for-free’ program, which enables ship-owners to energy-optimize their vessels with an ROI under 2 years. Click here to Learn more.