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Shipyard plan is on course for confusion

THE BALTIMORE SUN

The improbable plan to convert Baltimore's aging Sparrows Point shipyard into a booming factory for modern cruise vessels has taken an uncertain turn -- perhaps toward a new height of plausibility, or maybe a swift and certain death.

The head of the shipyard, while allowing that the deal might be revived, says he has abandoned the plan to build cruise ships in the former Bethlehem Steel yard. "We've basically determined that it's not going to work out," said David Cassidy, president of Baltimore Marine Industries. "We are no longer involved."

Yet the man behind the ambitious construction project insists that Cassidy is mistaken -- and claims to have $1.87 billion lined up to prove it.

"When everything falls into place the shipyard will be right there, with a firm contract," said Michael C. Darcy, head of the company proposing to build three 1,000-foot vessels in Sparrows Point. "We want to build these ships in Baltimore, and they want the business. Right now, they're just laying low."

It is a story, shipping industry analysts say, that typifies the complex and furtive churnings involved whenever businesses collaborate to make steel float. Either that, or it's all just a starry-eyed waste of time, from one of the industry's most enduring dreamers -- Mike Darcy.

"Shipbuilding is a complicated business, and this project is quite a bit more complicated than most because of its ambitious size," said Tim Colton, a maritime consultant in Biloxi, Miss.

"But there is one essential ingredient to a shipbuilding project, and that's a shipbuilder," Colton added. "He's not going to get it done without one of those, is he?"

When Darcy unveiled his plan in June to create a new American cruise line called Voyager Cruises, it met with a swarm of skeptics. At $1.87 billion, it ranked among the most expensive passenger vessel construction plans ever proposed. And in Baltimore Marine Industries he selected a shipyard that hadn't built a ship in nearly 20 years, a decision that invited still more disbelief.

But other partners in the Voyager project include some of the pacesetters of the American shipbuilding industry -- General Electric Co. to build the engines, Rolls Royce to make the thrusters and Annapolis-based Kvaerner Masa Marine to create the design.

In the company of those partners, participation made sense, Cassidy said. And besides, the deal would be a boon for Baltimore and the Sparrows Point yard, employing 1,200 or more people for six years and reinvigorating a storied local business that was once among the world's shipbuilding elite. Baltimore Marine Industries makes no secret that it is for sale -- a prospect that the yard agreed not to pursue while Darcy pieced together his cruise ship project.

Cassidy said he withdrew from the shipbuilding project last month after Darcy failed to meet a deadline for getting the federal government to guarantee a $1.64 billion construction loan. That guarantee is at the heart of the Voyager Cruises business plan. Without it, the ships cannot be built.

By withdrawing from the Voyager deal, the shipyard can continue to search for a buyer, Cassidy said. And it can pursue more repair work without the threat of a major shipyard conversion hanging over it.

"We had no reservations about the project," Cassidy said. "Rolls-Royce was involved, General Electric, Kvaerner. But he had a lot of people he needed to convince, and I guess he just wasn't able to do that."

But Darcy insists the deal is not dead. He is still pursuing his loan guarantee, and his application with the U.S. Maritime Administration still lists Baltimore Marine Industries as his chosen shipyard.

'We'd still be interested'

Cassidy won't rule out rejoining the project if it progresses. "We haven't slammed the door on him," he said. "We had to pursue other opportunities, but if they were to eventually come up with the funding, we'd still be interested."

If not for the sudden absence of a shipyard, the Voyager Cruises project might seem to be thriving. Kvaerner Masa Marine said last week that it has begun advanced design and engineering work, with a commitment of nearly $500,000.

Darcy is proposing to build three 1,000-foot vessels, two of them using an untested tri-hull design that would be capable of cruising at 45 knots or more. Besides offering high-speed pleasure cruises, the vessels could also be used by the military to transport troops and supplies in wartime.

A research group at California State University, Long Beach, financed by the Department of Defense, is paying for Kvaerner to turn the concept into a buildable plan, which Darcy could then take to the shipyard.

"The project has taken the next step -- a significant one," said John Avis, president of Kvaerner Masa Marine.

Also last week, Voyager announced a new financing deal with General Electric. The arrangement, confirmed by a GE spokesman, means Voyager will need a government guarantee for only 65 percent of its construction costs instead of 87.5 percent -- $1.2 billion, instead of $1.64 billion.

"I can't come up with 100 percent equity, so I have to get a government-supported loan, which is complicated and takes time," said Darcy. "But we're pulling it together, and we are coming to the table with a lot more than anyone expected."

Or not, Darcy's critics maintain. In the 17 years that Darcy has shopped around the maritime industry trying to enter the business -- sometimes to buy shipyards or freight lines, other times to buy or build cruise ships -- he has earned a reputation for proposing big deals, but not closing them.

While many industry officials recall deals he negotiated, they also recall the deals collapsing by the time money was supposed to change hands. Last December, a Philadelphia shipyard accused him of promoting a deal with the yard that didn't exist, and threatened legal action if he didn't stop.

"Apparently he's got a silver tongue and can talk up a storm, but his plans are just ludicrous," said Ande Abbott, legislative director for the International Brotherhood of Boilermakers. The union, with members who work in American shipyards, has opposed Darcy because of his attempts to bring foreign-built ships into domestic routes.

'Never had the money'

"You can't fly without wings, and you can't build ships without money," Abbott said. "He's never had the money, and he won't get it for this."

A spokeswoman for the Maritime Administration would not comment on Darcy's application for a loan guarantee, except to say that it is still pending and that the agency was "awaiting additional information from the applicant." She also said that no loan guarantees can be issued by the federal government unless the project has a signed contract with a shipyard.

And none of that deters Darcy, who said he plans to meet this week with administration officials to lay out his new financing plan.

"We're asking a government agency to sign off on a plan, which is never easy, but now we're coming in with a much larger block of equity, which really minimizes the government's risk," Darcy said.

"And is the yard there to do it? Of course they are. They want the business. And we want them to build our ships."

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