FINNISH engineering firm Wärtsilä has potentially taken the trend for outsourced engine maintenance contracts to a new level with the recently announced deal with Carnival Cruises.
For the company this is the first time it has made a contract, or at least announced a contract, where revenues will depend on performance.
It is no small contract either. The base value of the contract is €900m, with €150m for the first two years being written onto the Helsinki-listed company’s books already.
The contract is an extension of a maintenance agreement the two business already have, but is now based around an agreed benchmark performance for 400 engines on 79 Carnival vessels (This it seems represents around 80% of the Carnival fleet). There are agreed financial incentives should fuel consumption performance be improved and overhauls and other time consuming or expensive maintenance be reduced.
There are huge potential savings according to Wärtsilä in this kind of agreement. “We have to meet targets and if we exceed, then we get rewarded,” explains Wärtsilä Senior Vice President and Deputy Chief Eecutive Pierpaolo Barbone to Fathom News.
Another new angle for both companies is the creation of a joint entity/co-operation that will work on activities covered under the contract. Essentially both Wärtsilä and Carnival will second technical teams into a collaborative “war room” as Mr Barbone calls it.
“Both sides need to have the competence, the combines skills and work to reach common goals, according to Mr Barbone. Only with this collaboration can this war room work to continually focus on performance, reduce fuel consumption and reduce maintenance cost.
This does not mean that Wärtsilä will have permanent staff on Carnival’s cruise ships explains Mr Barbone, though there will no doubt be regular riding-crews touring round the 79 vessels.
There are however potential limitations to this contract. The arrangement is only in relation to vessels with Wärtsilä prime movers, or main engines, and it does not cover other equipment in the engine room that may influence performance.
Wärtsilä recognises this and it is reflected in the contract says Mr Barbone. Each engine covered by the contract is performance benchmarked, with the ship data ‘sterilised’ to ensure non-prime mover influences are removed giving a clear view of each engine.
Mr Barbone sees this as just the start. He thinks other major owners with complex vessels will look to emulate this initial contract and build performance into future deals.
Additionally, Wärtsilä sees a future where the company can access more than just data from sensors in its own equipment, but offer an agnostic but holistic service to owners to enable a much higher level of performance.
Fathom News
editor@fathom-mi.com
