Matson spends
$220 million on ships

It signs a deal for two
diesel-powered ships to replace
less-efficient steam-driven vessels

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By Dave Segal
dsegal@starbulletin.com

Matson Navigation Co., seeking to upgrade its West Coast-Hawaii container fleet, said today it has signed a contract with Kvaerner Philadelphia Shipyard Inc. to purchase two diesel-powered ships already under construction for a combined $220 million.

The first new vessel is due to be put into service in late 2003, with the second following sometime in 2004. They will replace two less-efficient steam-powered ships that were built in 1970.

"We had been negotiating with several shipyards over the past six to nine months and had let the financial community know that the Kvaerner shipyard was the lead horse," said James Andrasick, Alexander & Baldwin Inc. chief financial officer. "Now we've actually signed a contract."

Matson, the ocean transportation subsidiary of A&B, said it will finance the purchase by using its existing capital construction fund of $170 million and borrowing approximately $50 million. Matson, which reduced its Hawaii service by one ship in January amid a slumping economy, has seven ships in its West Coast-Hawaii fleet.

"The new vessels will further enhance customer service -- with improved speed, capacity and reliability," A&B President and Chief Executive Allen Doane said in a statement.

Doane said the investment will be dilutive to A&B's earnings immediately after delivery but will improve overall financial performance in the long term.

"We were able to secure a very good price for the ships," Doane said.

The new ships, which have a capacity of 2,600 containers (20-foot equivalent units) each, will be equipped with a number of features specifically designed to meet Hawaii's current and projected market requirements, particularly bigger container sizes for both refrigerated and dry containers. This will allow Matson to accommodate a diversified mix of cargo.

"These two new ships will help ensure that Matson continues to provide Hawaii with efficient, dependable ocean transportation services of superior quality and value," Matson President and CEO C. Bradley Mulholland said. "The vessels are similar in size and speed to Matson's flagship MV R. J. Pfeiffer, the fastest and biggest container ship currently operating in the U.S. domestic offshore trades."

The Kvaerner Philadelphia Shipyard was built to provide U.S. ship owners with ships at realistic prices for the dedicated trades of the U.S. Jones Act. The two ship construction project has been under way since 1999 and is part of an overall plan by Aker Kvaerner Yards, the Philadelphia Shipyard Development Corp., the Delaware River Port Authority, the Commonwealth of Pennsylvania and the City of Philadelphia to rebuild the former Philadelphia Naval Yard as a world class commercial shipyard.

"We are pleased to be working with Matson Navigation on its fleet renewal program, and we are proud to have the historic name of Matson on the side of the first ships built at Kvaerner Philadelphia Shipyard," Kvaerner President and CEO Ron McAlear said.