Posted on December 1, 2022
At least 100 million euros is the damage that the Dutch government has incurred in supporting the beleaguered shipbuilder Royal IHC. The damage could be at least 67 million euros higher.
This is evident from the 2021 Export Credit Insurance Monitor published by the Ministry of Finance earlier this month. The Financieele Dagblad was the first to write about it on Monday.
The report states that the government must pay 100 million euros in damages incurred by Royal IHC in recent years, partly because the yard had experienced significant delays in the construction of a number of dredging and offshore vessels. For 67 million euros there is also ‘non-definitive damage’ in the books.
An ‘export credit insurance’ is financial aid that the government gives companies for high-risk assignments abroad. In 2021, the state paid out a total of 209 million euros in export credits. Of this, 167 million went to Royal IHC.
Competition South Korea, China
The damage worth millions fits in with the picture that the shipbuilder from Kinderdijk in South Holland has been showing for years. Royal IHC, whose predecessors have been active in shipbuilding since the seventeenth century, has been ailing for much longer. Due to the great competition from South Korean and Chinese shipyards, the corona crisis and more recently the war in Ukraine, Royal IHC has great difficulty in winning new orders.
Royal IHC is having great difficulty winning new orders
In 2019, the maritime company suffered a loss of 227 million euros on a turnover of 1.1 billion. A year later, the loss was 300 million on a turnover of 738 million. The results for 2021 have not yet been published.
In mid-2020 bankruptcy threatened for the shipbuilder. But the Dutch government came to the rescue together with a consortium of Dutch and Belgian dredging and offshore companies. The government supported the shipbuilder with a package of 400 million euros in benefits, guarantees and credits. For example, the state wanted to prevent the loss of 395 million euros in previously granted export credits.
In November 2020, the Court of Audit expressed strong criticism of this rescue of IHC. According to the regulator, then-minister Eric Wiebes (Economic Affairs, VVD) had informed parliament “inadequately”. The Court stated that the
Amazon and Spartacus
The construction of these two complex vessels has caused many headaches at IHC in recent years. In September, the yard delivered the huge Amazon pipe-laying vessel for the American company McDermott International. The renovated ship can handle a total of 10,000 tons of pipeline. The Amazon will lay pipelines in very deep waters off the coast of West Africa. The deeper, the more complex. “Completing the Amazon was sometimes a challenge,” said CEO Jan-Pieter Klaver. For example, the company designed a new advanced computer system that requires less staff to oversee the work.
In August 2021, IHC finally completed the Spartacus. The construction of the world’s largest cutter suction dredger, which can dredge in very hard seabed thanks to the cutter head, took four years instead of two. This was partly due to construction problems. The ship that sails on the more sustainable liquefied natural gas (LNG) was “one of the most challenging projects Royal IHC has ever undertaken”, according to the company. The Belgian dredging company DEME is currently using the Spartacus for the expansion of the Egyptian port complex Abu Qir. In mid-November, Egyptian President Al-Sissi fantasized aloud about even bigger expansions of the project. New Abu Qir should be an artificial island off the coast of the city of Alexandria, like the artificial islands off the coast of the Gulf states.
But in the meantime, Royal IHC is looking at a fairly empty order book. The company has to deal with “disappointing market developments”, the shipbuilder recently reported. To make the company “more agile”, IHC announced layoffs again at the end of September. 250 jobs were cut. In addition, the shipyard in Krimpen aan den IJssel will be temporarily closed. The yard is going into sleep mode, the company said.
A year earlier, Royal IHC had already dismissed three hundred employees in the Netherlands and three hundred abroad (United Kingdom, Dubai). The contracts of seven hundred temporary employees were not renewed. Where IHC still had more than 3,000 employees in 2019, the company is now shrinking to 1,900 employees.
The group may become even smaller. Royal IHC is considering selling its profitable subsidiary IQIP. Among other things, that company builds equipment to build foundations for wind turbines at sea. The sale could possibly be completed before the end of this year. In 2020, IQIP achieved a turnover of 122.8 million euros and a profit of 27.1 million.
