Remarkable turnaround at Davie shipyard
New British owners have worked tirelessly to turn fortunes around
LÉVIS Four years ago, most people wouldn’t have paid a plug nickel for the Davie shipyard.
Awash in red ink, manned by a skeleton crew and adrift after a failed and controversial bid to land some of the $35 billion in federal contracts awarded under the National Shipbuilding Procurement Strategy, the once-proud yard appeared headed for the businessworld equivalent of Davy Jones’s Locker.
But a troika of brash British entrepreneurs saw opportunity in the pending financial shipwreck on the east end of this small city on the south shore of the St-Lawrence River, directly opposite Quebec City.
“We needed a base for our operations,” said Alex Vicefield, CEO and one of three partners in Inocea Group, a London- and Monacobased business that specializes in the management and/or conversion of distressed and credit-intensive marine assets. “Davie was exactly what we were looking for.”
Since buying the bedevilled yard in November 2012, the new owners have worked tirelessly to turn the fortunes of the Davie ship around.
Their efforts have energized, revolutionized and even scandalized the traditionally staid Canadian shipbuilding industry.
It began with a modernization of equipment and management at the massive Davie site, which is one of the biggest shipyards on the eastern seaboard and four times the size of any Canadian rival.
They then secured the international financing and manpower needed to complete or build several ships left unfinished from previous owners.
Among them were two high-tech car ferries for the Quebec government that are now at the centre of a dispute over construction costs.
Davie’s new owners have also been relentless in their pursuit of federal shipbuilding contracts.
They notably sold the former Conservative government on a novel ship-leasing proposal after a 2014 fire wrecked the half-century-old HMCS Protecteur, the last supply ship in the Royal Canadian Navy.
Canada has had to rely since then on NATO allies like Spain and Portugal to replenish our ships at sea.
Signed last fall and approved by the new Liberal government in January, the so-called Resolve project revolves around the Daviepaid conversion of a fuel tanker it bought for $20 million in Europe into a $450-million sea oiler replenishment ship for the RCN.
If and when it is delivered on schedule by the end of 2017, Davie and OMERS-owned project partner V. Ships, the world’s largest ship management company with an office in downtown Montreal, will also provide a 40-man crew to operate the non-combat vessel.
In return, the RCN will pay Davie $70 million a year for five years, with an option to buy the ship at the end of the contract for a price that Vicefield said still needs to be determined.
“This agreement is revolutionary for us and the government,” the 37-year-old told the Montreal Gazette during a sit-down interview in the Davie shipyard’s low-rise office building.
A marine industry expert who, like his partners James Davie and Alan Bowen, learned the capitalintensive shipbuilding business working for sector-connected companies based in London, the world’s maritime capital, Vicefield called the agreement with Ottawa a hybrid commercial and defence deal.
“We took a standard international marine commercial shipping contract and tailored it to meet the RCN’s needs,” he said.
It is perhaps an example of his brashness that Vicefield calls the Resolve project a private-public partnership, or 3P, even though Public Services and Procurement Canada, which is responsible for federal ship purchases, defines it as "a provision of services contract.”
“It’s just semantics,” Vicefield said. "This deal fits the definition of a 3P. But (PSPC) refuse to call it that.”
Vicefield said about 1,000 workers are involved with the conversion project, which is being carried out in the biggest of the Davie yard’s two huge dry docks.
“We’re 45 per cent through and 7 per cent ahead of schedule,” he said. “The project is being driven more by speed of delivery than cost.”
Financed by a Canadian fund he refused to identify, saying only that it specializes in infrastructure and asset lending, Vicefield said the Resolve project is helping Davie pump millions of dollars into the Quebec economy through jobs and purchases from nearly 600 suppliers, 113 of them in Montreal.
He hopes to add to that by landing some of the remaining $2 billion the federal government has said it intends to spend on the construction of as many as 100 smaller support and patrol vessels for the RCN, the Canadian Coast Guard, and the Department of Fisheries and Oceans.
Earlier this year, Davie publicly proposed the conversion of a 2012 polar-class ice breaker owned by Royal Dutch Shell that was earmarked for a now-iced offshore drilling project in the American Arctic into a replacement vessel for the 1967-built CCGS Louis StLaurent, which is due for decommissioning next year.
“Canada faces a potential 10-year gap in polar icebreaker capability,” said Vicefield. “We can deliver a ship within 18 months for a third of the estimated cost of building a new one.”
Ottawa has downplayed the offer, saying it doesn’t accept unsolicited proposals.
However, Vicefield said he’s heard through the Resolve project grapevine that Ottawa may be considering the idea. “We’re in the tent now,” he said. That contract may be just the tip of the iceberg, since several other CCG icebreakers used in coastal and inland waterways are also in need of replacement.
“Our organization has been advocating for a renewal of the CCG’s icebreaking fleet for 10 years,” said Michael Broad, general manager of the Montreal-based Shipping Federation of Canada, which represents the owners, operators and agents of ocean-going ships that carry Canadian exports and imports to market.
According to Broad, the CCG’s ships are old and in constant need of maintenance and repair.
“The Coast Guard has done an excellent job with the assets they have, but time is running out,” said Broad.
“Canada needs at least six new icebreakers for Eastern Canada and the Arctic to allow commercial shipping and ferry services to operate year round for the foreseeable future.
“It’s not our role to comment on the Canadian shipbuilding industry; however, we encourage the Canadian government to look at all the various options when it comes to building new ships.”
Davie’s aggressiveness and success are driving its two main Canadian rivals — Halifax’s Irving and Vancouver’s Seaspan — to distraction.
Despite being contracted to build up to 40 vessels worth $38 billion over 30 years, the two yards are feeling the heat from public criticism of cost overruns and construction delays in the much-maligned federal ship procurement program.
Vicefield, a former British junior fencing champion who was ranked among the world’s Top 50 in men’s foil in the late 1990s, has sharply criticized the shipbuilding knowhow of both yards, but Seaspan in particular.
Davie has also hired away some top talent from Irving, sparking a war of words and also some lawsuits.
However Irving followed Davie’s lead in May, when it made an unsolicited bid to build a $300-million ship within a year that would be specifically designed to aid in a humanitarian crisis or with refugee relief.
“I think they’re running scared,” said Davie’s chief operational officer, Laurie LeRue.
A 37-year shipbuilding industry veteran who was director of naval refits at Irving’s Halifax shipyard when he left three years ago to join Davie, LeRue said the Lévis yard has the wind in its sails thanks to the energy and expertise of its British owners.
“There’s a lot of buzz in the industry about what’s going on here in Lévis,” he said.
“There’s a lot of passion and the work being done is second to none.”