Vessel construction process

Development in vessel construction
Aker Philadelphia Shipyard has delivered four container vessels and is currently working on completing construction of twelve product tankers. In addition to these vessels, there are an additional nine vessels on the order book occupying the yard until 2011 and options which could occupy the yard until 2015.

Product tankers design & production concept
The Veteran Class MT-46 design is based on the well proven as-built Athenian Class 46,000 dwt product tanker from HMD. The ship has a capacity of 338,365 bbl and a speed of about 15 knots at 90% Maximum Continuous Rating (“MCR”) and 15% sea margin. The standard design was changed to conform to the building methodologies and practices of Aker Philadelphia Shipyard. Each vessel will be eligible for U.S. registry for both U.S. coastwise and international trade.

Aker Philadelphia Shipyard takes direct responsibility for hull construction through production and assembly of steel blocks, for assembly and integration of the ship modules and final outfitting as well as testing and commissioning. The cooperation with HMD and the modularized production concept provides significant benefits to APSI in the production of the product tankers, and allows APSI to focus on its core competencies within steel production and handling of grand blocks. APSI is signatory to the exclusivity agreement with HMD for product tanker and container vessel designs.

Supervision and inspection of the construction on behalf of the owner and end user is performed by OSG Ship Management, Inc. using staff from their worldwide operations. Under this arrangement, AMSC and OSG share the costs of inspection and APSI benefits from fewer parties carrying out surveys and inspections.

HMD scope
Under an exclusive agreement with HMD, APSI is provided with a complete technical package including the basic design package for the vessels, the production drawings, test procedures, turnkey support etc., as well as support for delivery of a major part of the material and equipment needed. HMD takes responsibility for the concept, design and detailed engineering and acts as an agent on behalf of APSI in order for APSI to procure materials and equipment at the best possible prices through the bundling of our orders with their orders for the same tanker materials and equipment. To be eligible to trade in the Jones Act market, all major steel structures must be fabricated in the U.S. and thus are constructed by APSI and U.S. suppliers.

In February 2007, APSI and HMD agreed to extend their cooperation to include containerships and APSI has the exclusive right to build HMD designed containerships for the Jones Act market. HMD has three containership designs currently under construction; 2,800 teu, 3,500 teu, and 4,300 teu. These sizes are well suited for the domestic trades. Horizon Lines operates five HMD built 2,800 teu containerships in their US Flag, non-Jones Act Pacific trade.

OSG
The product tankers under construction at APSI for AMSC will be bareboat chartered by affiliates of OSG for initial terms of not less than 5 years on a “hell or high water” basis. OSG will in turn time charter these vessels to an end user and operate them on their behalf transporting petroleum products (or in the case of the shuttle tankers, crude oil) in the Jones Act trade. OSG, a leading shipping company with a fleet of 107 vessels, operates in both the domestic and international trades. They are highly regarded for the technical operation of their vessels and have new building projects underway in 5 shipyards in the US, China, and Korea