By Mark Cardwell
The recent baptism of the first newbuild ship in a generation at the much-scuttled Davie yard inLévis, Quebec, is being widely hailed as a veritable tour de force by stakeholders in both the company and Canada’s maritime community. “This is a great day for Davie,” Alan Bowen, Davie’s Chief Executive Officer, said at the naming ceremony of Cecon Pride in the shipyard on Oct. 25. The advanced, multipurpose subsea construction vessel is the 717th ship launched at the yard in its 185 year history.
It is the first newbuild at the newly christened Chantier Davie Canada Inc. since the late 1980s, when a ferry that plied the 110-km-wide Cabot Strait between Cape Breton Island and Newfoundland was built for Marine Atlantic. According to Bowen, only a handful of shipyards around the world – most of them in Europe – are capable of building a 130-metre vessel like the Cecon Pride, which is specifically designed to operate in harsh conditions like those facing North Sea oilfields. “Our high quality vessel construction capabilities and low cost base means we are the only North American shipbuilder competing internationally, exporting vessels to European shipowners, something Davie has done for over a century,” he said.
The first of the three-ship VS4220 design series being built for Norway’s Cecon ASA (www.cecon.no), the Cecon Pride, notably features diesel-electric power generation that feeds six electric thrusters. It is also equipped with dynamic positioning to help hold the ship’s position while performing high-seas operations such as subsea construction, pipe laying, diving, well intervention, and support of remotely operated underwater vehicles – or ROVs.
The new ship was floated a week before the naming ceremony in Davie’s Champlain dry dock, where it has been sitting unfinished since construction work first began in 2008. Kiley Sampson, Cecon Pride’s Project Director, said work on the vessel is about 95 percent complete. “We’ll get the rest of it done over the next 60 days,” he told Canadian Sailings at the naming ceremony. The vessel, added Sampson, will then undergo sea-trials before being delivered to the client in Feb. 2014.
A native of Cape Breton who has spent more than a quarter century working as a project manager and engineer in vessel construction and conversion of vessels for the oil and gas industries, Sampson said there are some 5,000 high-tech subsea construction vessels like the Cecon Pride in operation around the world today. Though far fewer in number than the roughly 80,000 cargo ships that currently ply the world’s oceans, he said the complex ships are tailor-made for a Canadian yard like Davie.
“They’re not like the cookie cutter ships built in China, but (we) can very easily build (them) because they’re not easily duplicated,” said Sampson. “They’re small and we can make them.”
The CEO of Davie’s parent company, Inocea Group, agrees. According to Alex Vicefield, the costs of new ships are roughly 60 per cent materials, 40 per cent labour. “You can’t do much about material costs,” Vicefield said in a CBC Radio interview a day before the naming ceremony. “But labour costs – that’s where the competitive edge lies.” He noted that specialized vessels like the Cecon ships are normally built in Europe, where unionized wage rates are far higher than the ones paid at Davie. “I can tell you that compared to yards in, say, Norway, (Davie wages are) about half,” said Vicefield. He added, however, that the quality of workmanship at Davie is second to none. “The labour force is excellent and the facilities are extremely good,” Vicefield said. “There has been a lot of money invested here over the past 20 years.”
He added that Davie has received formal inquiries for about $1.2 billion worth of newbuild projects, notably for ferries and offshore vessels like the Cecon Pride. In addition to bidding on those jobs and finishing five vessels already in the yard – the three Cecon vessels, and two car ferries for the Société des Traversiers du Québec – he said Davie is also interested in getting federal shipbuilding work.
Davie recently hired several senior managers from the two 2011 winners of the $33-billion national shipbuilding strategy bid process – Halifax’s Irving and Vancouver’s Seaspan. One of them – Jared Newcombe, who was hired as Davie’s Chief Operating Officer after quitting as senior project manager at the Irving-owned Halifax Shipyard in April – is being sued by Irving, which alleges he purloined NSPS-related documents before leaving.
Though Davie finished a distant third in the NSPS bidding – becoming insolvent and going out of operation for 18 months until its purchase by the current owners a year ago – Vicefield is confident that the revived yard has a chance to land some of the remaining $2 billion that the federal government plans to spend on the construction of more than 100 smaller support and patrol vessels for the Canadian Coast Guard and the Navy.
“They absolutely interest us,” said Vicefield. “What we can do at Davie is create a production line which creates efficiencies that will result in cost savings.” He also hinted that Davie would be “capable and ready” to take on work from the first bidding process in the event that Irving and/or Seaspan don’t have the capacity to deliver.
He was referring to a report earlier this year from federal spending watchdog Kevin Page, who questioned the ability of Seaspan in particular to fulfill its $8-billion part of the contract to build seven or eight combat and non-combat vessels. “Seaspan’s experience has been in the field of barges, ferries (and) smaller commercial ships,” the parliamentary budget officer wrote in his report, which was released in February.
“The company has very little experience in the class of ships that will be produced (and) the workforce, while potentially experienced generally, will have less direct shipbuilding experience than would be desirable.”
Vicefield said Cecon Pride, together with Davie’s storied past in making warships, provides tangible proof that his yard has the ability to handle the engineering complexities of the federal shipbuilding program. “We’re now building five ships and we’re operating at only 30 per cent capacity,” he said. “And (the naming) shows what we’re now capable of doing.”
That confidence was palpable among the roughly 1,200 people who attended the naming ceremony, including most of the 740 workers who have been recalled to the yard over the past several months. They notably cheered when James Dinan, founder and CEO of York Capital Management announced from the podium that his Manhattan-based hedge fund will provide financing for the construction of the second Cecon vessel in 2014, like it did for the Cecon Pride.
“It’s great to see,” said André Vermette, a long-retired ship’s manager who spent 35 years at Davie, many of them as the top blue-collar worker on site, directing work on new-build ships. Pointing to his late grandmother’s house, which still sits next to the shipyard’s main entrance, Vermette said Davie was like a small town in its heydays in the 1960s and 70s, when as many as 5,000 workers built some of the largest vessels ever constructed in Canada. Things changed, however, when orders slowed and workers became more militant.
“It got to the point where the union was more in charge than the bosses were,” recalled Vermette. He recalled one notable incident in the late 1970s when Paul Desmarais visited the yard, which was then a subsidiary of his Canada Steamship Line, with former prime minister and then-cabinet minister Jean Chrétien. “The workers burned Desmarais in effigy from the top of the highest crane on the yard,” Vermette recalled. “Desmarais sold the place (to former Prime Minister Paul Martin) not long after that.”
The yard then began a slow descent into a financial abyss that lasted until the mid-1990s, when former owner Dominion Bridge declared bankruptcy. Davie spent a decade in receivership and was about to be liquidated in a dockside auction when a Norwegian company – Teco ASA – bought it in 2008. Oslo-based subsea installation contractor Cecon ASA then ordered its three vessels. Despite $200 million in loan guarantees from the Canadian government, the new owners filed for creditor protection in Quebec Superior Court in Feb. 2010. As a result, the three ships sat unfinished in the Davie yard.
A year ago, however, London-based Zafiro Marine (now part of Inocea Group) bought the yard with the stated goal of finishing the Cecon vessels. Cecon secured $280 million in financing from York Capital Management, and repaid the outstanding Export Development Canada facility of $107.5 million in February. Cecon announced in April that “ownership of (our) vessels under construction in Canada” now belongs to a new subsidiary called Rever Offshore AS.
Cecon and York Capital respectively own 85 per cent and 15 per cent of shares in Rever Offshore, which is supplying funds to Inocea Group and Davie to complete the three vessels, which are legally identified as hulls 717, 718 and 719.
“I’ve seen some high and very low tides here over the years,” Steven Blaney, MP for Lévis-Bellechasse, said from a raised podium next to the blue-and-white Cecon Pride as the sun broke through the clouds on what was a bitterly cold fall day. “But today is the beginning of a new direction for Davie.” Retired Vice-Admiral Peter Cairns, President of the Shipbuilding Association of Canada, shares that hope – and not just for Davie. “I think this is a very important day for the shipbuilding industry in Canada as a whole,” he said as he attended the naming ceremony. “Davie has gone through some really tough times and (the new British owners) are following up on what they said they would do when they bought the yard earlier this year.” According to Cairns, building sophisticated ships like the Cecon series could prove to be a profitable niche for international markets. “We can’t make those great big cookie cutters like China can,” said the former Canadian Navy Vice-Admiral. “But these ships we can.”
For Stephen Gordon, a Université Laval economics professor who writes an internationally popular blog on Canadian economic matters, the ship-naming ceremony was cause for celebration – to a point. “The fact that (the new owners) were able to attract and rebuild a skilled labour force in this region is a major accomplishment, a real tour de force,” said Gordon. “The unemployment rate in Quebec City is the lowest of any city east of Saskatchewan. We’re on a par with Calgary.” He added, however, that once the hoopla from the Cecon Pride naming ceremony dies down, Davie will be faced with the harsh realities of the shipbuilding industry. “It’s a real accomplishment for the new owners, but it is not an indication of its long term viability,” said Gordon. “It takes huge investments to be profitable in a business like shipbuilding. It takes a lot of time and money to do that – only time will tell if they have the wherewithal to do that.”