FSG assumes all design, construction and delivery risk
Guarantees are in place for vessel completion dates
Favourable payment terms with 80 per cent payment upon vessel completion
Fixed price contracts with potential savings for steel price decreases
Vessel performance guarantees related to speed, carrying capacity, manoeuvrability and fuel consumption
Warranties above industry standard
Penalties for late delivery
Contract Terms
Delivery of the Vessel
Flensburger Schiffbau - Gesellschaft (FSG) is responsible for delivering the vessels to Victoria. Title transfer will occur in B.C. Guaranteed production milestones and delivery dates are specified in the contracts.
Design and Construction
FSG assumes full design and construction risk associated with each vessel.
Regulatory Requirements
FSG is responsible for building vessels that comply with all Transport Canada regulations, as well as classification (international shipbuilding standards) and environmental regulations.
Payment Terms
The total cost of the three vessels is €206.4 million Euros or approximately $325 million Canadian (based on current exchange rates). Four payments of 5 per cent per vessel are payable during the construction period, with the remaining 80 per cent payable upon completion of each vessel.
Delivery Dates to Victoria
Vessel #1 - December 2007
Vessel #3 - June 2008
Vessel #2 - March 2008
AAA Bank Guarantee
An AAA bank refund guarantee will be in place to provide security in the event the shipyard does not meet its production or delivery dates, or performance specification.
FSG guarantees the delivery and the performance of the vessels; specifically speed, fuel consumption, weight and freight capacity, acceleration time and rate of turn. Increasing financial penalties, up to the point of contract cancellation with a full refund, will be levied if the performance of the vessel does not meet the contract specifications.
For example, if the vessels are late for delivery, a penalty of approximately $40,000 Canadian (€25,000 Euros) per day will be levied after the first 30 days to a maximum of approximately $6 million Canadian (€3.75 million Euros). After 180 days, BC Ferries can rescind the contract for a full refund.
Another example is speed. If the vessels are more than 1/10 of a knot below specification, a penalty of approximately $160,000 Canadian (€100,000 Euros) will be levied for each 1/10 of a knot up to 1 knot. If the vessels are more than one knot less than the guaranteed speed, BC Ferries can rescind the contract for a full refund.
Corporate Guarantee
FSG will also provide a corporate guarantee from its parent company, Egon Oldendorff oHG, as security for the performance of all of FSG's obligations under the contracts.
Builder's Warranty
An extended builder's warranty of 24 months from delivery will apply to materials, construction, design and workmanship. This is 12 months longer than the standard terms of warranty for the shipbuilding industry. In addition, the contract terms specify a 10-year warranty on all engines.
Steel De-escalator
In the event of steel price decreases, 75 per cent of the cost savings will be paid to BC Ferries. The shipyard cannot increase the cost of the ships in the event of steel price increases.
Noise and Vibration
Flensburger guarantees that the vessels will be built to the highest shipbuilding standards for noise and vibration. If they are not, BC Ferries has the right to reject the vessels for a full refund.
Title to Design, Plans and Drawings
BC Ferries will acquire the title to the vessels' design, plans and drawings upon delivery at no additional cost to BC Ferries. This will be a unique benefit for BC Ferries. BC Ferries doesn't own the design, plans or drawings for the Spirit-class vessels.
