![COLUMN | Something fishy at Pelagic Partners, whilst GC Rieber, Edda Wind, Cadeler, Prysmian and Cecon order big [Offshore Accounts]](http://media.assettype.com/bairdmaritime%2Fimport%2Fwp-content%2Fuploads%2F221128-Offshore-Accounts1.jpg?w=480&auto=format%2Ccompress&fit=max)
It has been a frenzied few weeks in the wind and subsea markets, with newbuild orders piling up. The last month has seen over one billion US dollars committed to vessels for the offshore wind industry. This was also the month that Ocean Infinity's two new builds finally sailed (here), with crew and under the Singapore flag, from Vietnam to the UK, for refitting for remote controlled operations. Hurray!
One of the biggest orders was by Pelagic Partners, a company with large ambitions, but some fishy connections, which we will explore below. As we saw with the tragic case of the attack on the tanker Brilliante Virtuouso off Yemen (see here), murky shipowners can continue to command the attention of the industry, shipping's PR channels and compliant journalists, with no reference to past history. Shipping is a business where memories are short, and selective amnesia has many benefits.
But first we'll review the swathe of orders from Northern Europe before we head to Cyprus.
Having sold the light construction vessel Polar Onyx to Taiwanese owner Dong Fang Offshore in December last year for windfarm work in East Asia, Norwegian owner GC Rieber Shipper launched a blistering comeback in the segment.
Rieber has announced it is ordering two innovative WindKeeper Service Operation Vessels (SOVs), which are based on small waterplane area twin hull (SWATH) methodology and design. The first vessel is set for delivery from Turkey in the first three months of 2025, and the order includes options for an additional pair of vessels at the same yard (here).
The WindKeeper is designed to deliver improved operability, ultra-low fuel consumption, and the option of fully electric operations in field, its owner claims. The company says that it has been working on the SWATH project since 2016 putting "vast resources" into the design and concept testing.
Rieber says that the first two newbuilds are fully funded, and that it has established a stand-alone company also called WindKeeper to own the vessels, which will cost approximately US$110 million in total for the first two. Sparebanken Vest and Eksfin have provided long-term loan facilities to Windkeeper – despite the fact that neither vessel has a contract – promising to lend a minimum of US$51 million at current euro exchange rates.
Whilst Rieber is a new entrant to the sector, industry pioneer Edda Wind announced (here) that it was building a tenth vessel, a larger commissioning service operation vessel (CSOV), for its windfarm support fleet. The CSOV will be built at Gondan Shipbuilders in Spain, making it the sixth in the series the company has built at the yard, beginning with Edda Passat and Edda Mistral in 2018.
As usual, Edda says that the new vessel will be prepared for installation of zero-emission technology in the same way as for her sisters, based on support from Enova, the Norwegian state fund investing in green technology. The newbuild will be of Salt 0474 design, which is a further development of the Salt 0217 design, and the newly ordered CSOV will be delivered in April 2025. In addition, Edda has an option with the yard for one more sister vessel.
Edda Wind has been operating in the wind segment since 2015. Six of the company's wind CSOVs and SOVs are already contracted with key clients in Northern Europe including Ørsted, Vestas, Ocean Breeze, SSE and Siemens Gamesa.
The Gondan order came after political and economic instability in Sri Lanka led Edda Wind to terminate the newbuilding contracts for two CSOVs at Colombo Dockyard in June this year. Edda Wind had not paid any pre-delivery instalments to Colombo Dockyard when it cancelled the contract, a decision that followed a currency crisis in Sri Lanka but ahead of a mob storming the presidential palace, which led to the president fleeing into exile in Singapore and resigning (Reuters coverage here).
On the construction side of the windfarm sector, the hockey stick graph of new global offshore wind turbine installations has led Cadeler to confirm its fourth newbuild order, this time for the second of its "F" class foundation jackup wind turbine installation vessels (WTIV).
Cadeler expects the new F-class vessel to be delivered in the second half of 2026. Like the company's existing "F" class foundation vessel and its two "X" class newbuilding WTIVs, which are already under construction, the newly announced WTIV will be built by COSCO Heavy Industries in Qidong, China, and will sail under the Danish flag.
Cadeler said (here) that it had been able to achieve, "a very competitive price due to a strong collaboration that the company has built with COSCO Heavy Industries, synergies from building several similar designed jackups and negotiating the option for a second F-class seven months ago."
As a result, and surprisingly for a listed company, it was agreed between the owner and the yard not to disclose the final price of the contract due to these special circumstances. We would guess that the build price will be somewhere over US$300 million. In October, Cadeler reported that the company had raised an additional US$95 million in new capital from shareholders, headed by the BW Group. Even so, my estimates suggest that when the sixth vessel enters service, the company will likely be loaded with over US$1 billion in debt.
Italian cable manufacturer Prysmian also announced a newbuilding vessel for the booming cable lay sector, hooking up offshore windfarms to the grid and laying subsea interconnection cables between national networks. Prysmian states that it will invest approximately US$200 million in the new cable lay vessel, which will be built at Fincantieri's Vard shipyard in Norway, plus it will buy cable adjustment equipment worth approximately US$40 million. The Vard press release is here.
Prysmian says that new vessel will be fully operational by early 2025 and will help bolster its project execution capabilities. The ship ordered is similar to Prysmian's Leonardo da Vinci, which was delivered in 2021 and exceeded all expectations in its first year of operations, Prysmian claimed.
Like Leonardo da Vinci, the new cable layer will feature deepwater installation capabilities for depths of more than 3,000 metres as well as the highest cable loading capacity in the market.
The long and twisting history of Norwegian owner Cecon Contracting could provide material for a small book, as is the case with so many of the companies we cover. Now Cecon has contracted Sefine Shipyard in Turkey for the construction of a methanol dual-fuel cable-lay vessel. No value has been placed on the order.
The vessel, which was designed by NSK Ship Design together with Cecon's engineering team, will be delivered in the first quarter of 2025.
"One of the main design objectives has been to develop a modern environmentally friendly cable ship without compromising on vessel capacities," the company said on social media here.
As well as the dual-fuel system, the ship will also be fitted with a battery pack for hybrid energy storage, yielding a "significant reduction in harmful emissions compared to existing conventional tonnage," Cecon claimed.
This new order only serves as a reminder how far behind former cable lay leader Global Marine Systems (GMS) has fallen, as both the cable manufacturers and the integrated offshore construction companies erode what was once GMS' market leadership position. We highlighted here how years of private equity ownership by a trio of short-term owners one after another has left the Global Marine Group starved of investment and strategically dead in the water.
Finally, to Pelagic Partners, which sounds like a dating agency for fish but is actually one of the new entrants into the CSOV market.
This month, the Cyprus-based investment company announced a US$352 million newbuild contract at Cochin Shipyard in India for two firm and four optional CSOVs to be delivered from 2025 onwards. All the usual bells and whistles were promised, including a significantly increased DP capability, highly efficient methanol-ready gensets to power the diesel electric vessel, and a fully electric, autonomous Uptime heave compensated gangway.
Pelagic Partners said that the newbuilds will "allow us to make a huge step towards our overall aim to become the leading provider of sustainable services for the renewables sector with a zero-emission footprint from A to Z." You can read the full press release here.
Pelagic Partners marks a triumphant return to the offshore arena for veteran German shipowner Dr Niels Hartmann and his right-hand man Andre Groeneveld, who is managing director of Pelagic Wind Services, which will operate the vessel.
"It is exciting for us to enter into this new segment of cutting-edge, truly green offshore wind supply vessels," Dr Hartmann, one of the founding members of Pelagic Partners, said of the newbuilding contract. "We are convinced to enter this market at a good time and to be able to position ourselves as a key player and trusted partner for the offshore wind industry."
In jumping on board the CSOV bandwagon, Dr Hartmann is a year behind shipping legends John Fredriksen of Frontline and Idan Ofer in becoming an "influencer" in the wind industry, touting new investments in new wind tonnage as a minority shareholder, rather than touting diet tea, as we highlighted here.
The Pelagic Wind Fund says that it aims to add further second-hand assets to the fleet to become a "key player" in the growing offshore wind industry. Pelagic Partners owns (through its investment funds) and manages a rather eclectic fleet outside the CSOV space, including one Handysize bulk carrier built in the year 2000, a quintet of aged gas carriers, a 1997-built car carrier, and some 50,000DWT product tankers. The full fleet listing is here.
Like many of the older players one might find online dating, of course there's history with Pelagic, however. Swipe right down to find out more!
Dr Hartmann's last offshore venture was a similarly bold newbuilding foray into a fast-expanding field. In 2007, his investment vehicle Hartmann Logistik announced a newbuilding programme at Fincantieri in Italy to construct twelve Moss 424 design 12,000kW, 200-tonne bollard pull, DP2, Fifi2 anchor handlers, which the industry press valued at over US$750 million at the time. These ships were delivered in 2009 and 2010, and were marketed and operated by United Offshore Services (UOS), the managing director of which was none other than Andre Groeneveld.
Unfortunately, the offshore market plunged into recession in 2014 as the oil price crashed, and Hartmann Logistik was soon losing money. In 2017, the fleet was sold to UK-based private equity companies Hayfin and Breakwater Capital, which boasted that the fleet was acquired in distress for cents on the dollar. In 2018, the ship management arm UOS was also taken over by the same "alternative asset management firms" and Howard Woodcock was appointed CEO.
Auf Wiedersehen Offshore, Herr Doktor, und Willkommen bei Wind.
Two of Pelagic Partners' senior management are Atef Abou Merhi, Managing Director of the firm, and Ahmad Abou Merhi, who is titled Executive Director. Both the Abou Merhis are described on the Pelagic website as "second generation ship owners" through their family-owned Abou Merhi Group, which Pelagic says is "a diverse shipping group with a history of over 30 years." Atef's Linkedin page indeed describes him as serving as Director of Abou Merhi Lines S.A.L in Lebanon between January 2013 and December 2019.
A third member of the Abou Mehri Group's management working at Pelagic Partners and its associated companies is the Head of Shipping Technical Operations, Captain Roger Ziadeh. Before joining Pelagic Partners, he was the port captain of Abou Merhi Lines for almost 15 years, the company's website states.
"Diverse" is an interesting adjective to use to describe the Abou Merhi Group. We can think of others.
French daily L'Orient provided a little more depth to the ship owning heritage of the Abou Merhi family in an interesting article entitled "How a Lebanese company's role in shipping Turkish arms to Libya landed it in the crosshairs of the EU." This referred to the involvement of Atef's cousin Samir Al-Bizri in smuggling arms to Libya using a ship formerly owned by Atef's father.
Unfortunately, when we Googled the Abou Merhi Group, the first link we found was to the Global Fight Against Terrorism website (here).
I hate to break it to Dr Hartmann and Mr Groeneveld, but this is a not a good look for their fund.
Nor is it a good look for Cyprus, where Pelagic Partners is based, and where Atef Abou Merhi is the director of six different companies (here). Ahmad Abou Merhi is also listed as the director of Cypriot firm Clapotis Marine (here). We have banged on over and over how flags of convenience are simply failing to uphold standards of transparency (here).
It is a fact that, for many years, Cyprus has acted as a conduit for corrupt cash from Russia entering the EU. Indeed, Cyprus even issued a passport to the mastermind of the multi-billion dollar 1MDB investment fraud in Malaysia, Jho Lo, who is now on the run for colluding in the theft of billions from the Malaysian state (here).
"Although Cyprus' financial system is vulnerable to money laundering by domestic and foreign criminals," the US State Department announced in 2020, "proceeds generated by illicit activity abroad pose a greater threat" (Cyprus Mail report here).
You can read the full article in L'Orient here. It sets out how, in October 2015, the United States government:
"Designated Lebanese businessman Merhi Abou Merhi, several of his relatives and his portfolio of business holdings for alleged money laundering on behalf of a drug trafficker. Targeted in the sanctions, which were later lifted, was a vessel named the City of Misurata, later to change its name to Sham 1 and then finally to Bana. The US Department of Justice accused Abou Merhi of using the vessel to provide vehicle transportation services for Ayman Joumaa, an alleged Lebanese-Colombian drug kingpin."
Literally, WTF?! Amongst the family members targeted was Atef Abou Merhi, whom the Lebanese press confirmed is Merhi Abou Merhi's son (here).
You can see the US Treasury Department's graphic of the individuals and entities caught up in the Merhi Abou Merhi sanctions here, and Atef's face matches his profile on the Pelagic Partners website.
"The Office of Foreign Assets Control (OFAC) of the US Department of the Treasury administers and enforces economic and trade sanctions based on US foreign policy and national security goals against targeted foreign countries and regimes, terrorists, international narcotics traffickers, those engaged in activities related to the proliferation of weapons of mass destruction, and other threats to the national security, foreign policy or economy of the United States," the agency said in its own words.
This is serious stuff.
The Department of Treasury sanctioned Merhi Abou Merhi pursuant to the Kingpin Act and added him and the named family members to the OFAC's Specially Designated Nationals (SDN) list in 2015.
The listing on the SDN froze the financial assets of the Abou Merhis involved, and eleven companies held in banks under US jurisdiction, and it blocked them from accessing the international financial system. Getting off the OFAC list is an arduous process requiring those listed to sever business and personal relationships and provide financial records, which the Abou Merhis had done by 2017.
"I had problems with the Americans and then I was acquitted," Mr Merhi Abou Merhi is quoted by L'Orient as saying. "During this time, I sold Bana and other ships too."
His nephew has stated that Merhi Abou Merhi was not involved in arms smuggling of which Mr Al-Bizri was accused, although he did once own the ship involved.
A Google search confirms that, in May 2017, the names of Merhi Abou Merhi and those of his son and daughter, and his companies, were removed from the OFAC sanctions list (here) and (here). The Wall Street Journal confirmed that they had been taken off the list because they had completely severed their ties to Iranian-linked terrorist group Hezbollah and to alleged drug smuggler Ayman Joumaa (here).
We should be clear that we are not accusing any individual at Pelagic Partners of any current wrongdoing. We all have family members who err from time to time, and nobody should be guilty for problems that others instigated. However, I would hope that few of us have relatives sanctioned by the United States government, though we stress that this is an issue that is now resolved for the Abou Merhis, thankfully.
Nonetheless, when we see a fund pumping millions of dollars into vessel newbuildings in a hot sector like offshore wind, it is legitimate for us to ask 1) who is involved with the fund and 2) what their background is, especially if the fund is backed by a major name from the German ship-owning industry like Dr Hartmann. Scrutiny becomes more important if the fund itself touts the experience of its management in a shipping company that was formerly subject to OFAC sanctions.
Readers might ask wider questions on whether the Abou Merhis are fit and proper people to run a shipping fund like Pelagic Partners, but these are questions we cannot answer, nor can we comment on the Cypriot authorities' diligence in assessing the source of funds invested in entities registered in the country.
Ahmad Abou Mehri himself undoubtedly would welcome the questions we have asked. When interviewed by his business school (here), he stated that one should "never hesitate when it comes to asking questions. I truly believe that the person who asks a question appears as a fool for two minutes, yet the person who does not ask remains a fool for a lifetime."
Pelagic Partners is not an internet dating site, but the relationships of Dr Hartmann to his Lebanese-born business partners and colleagues are a valid area for inquiry. Transparency, as ever, is the best disinfectant. We'll keep asking questions.
Meantime, you may want to swipe left.
Background Reading
More information about the Abu Merou Group is in the Offshore Leaks database here (Of course it is!).
Atef Abou Merhi's video application to the prestigious IE business school in Madrid is here. It's an excellent summary of Lebanese culture and history.
The Council of Europe reported here in 2020: "The Council of Europe's anti-money laundering body MONEYVAL calls on the Cypriot authorities to pursue more aggressively money laundering from criminal proceeds generated outside of Cyprus, and take a more proactive approach to the freezing and confiscation of foreign proceeds".
