YACHTING & MARINASFINANCIAL TIMES SPECIAL REPORT | Thursday May 24 2012

www.ft.com/yachting-marinas-2012 | twitter.com/ftreports

Inside this issueInvestmentYachtmakersincludingFerretti,recentlypurchasedby aChinese company, havecaused problems for privateequity buyers Page 2

Taxation Soaking the richcan be counterproductiveas the overall benefits ofthe industry to the localeconomy must beconsidered Page 2

Middle East Fuel is cheapand speed is a must forsailors in the Arab world,where messing about inboats goes with theterritory Page 2

Eco-boatTheAcciona,due tocompete inthe 2012-13VendéeGlobe, haspowerful

batteries instead of fossilfuel Page 3

Design Owners want bettercost-efficiency butsometimes it can be amistake to evolve too faraway from the tried andtested approach Page 3

Sponsors Some backershave pulled out butcompanies and teams canstill do deals Page 4

Marinas A shortage ofmoorings is looming forsub-45 metre yachts in theMediterranean Page 4

ServicingOwnerssuch asRussia’sAndreiMelnichenko(whosefuturisticyacht ‘A’ is pictured) maybe rich but even thewealthy still like to savemoney filling up on fuelPage 4

Nearly four years afterthe collapse of Leh-man Brothers, the lux-ury yacht industry

continues to struggle with a per-sistent economic crisis in itscore European market and thetentative nature of the recoveryin the US.

The yacht sector is large andhighly diversified, and there aresome prominent bright patchesin the generally gloomy outlook– including strong demand forthe largest motoryachts fromvery wealthy Middle Easternand eastern European custom-ers, hopeful signs of growthfrom emerging markets such asChina, and some sailingachievements that cast a glowof good publicity over the wholemarine industry.

In general, however, while thefleet of superyachts grows inex-orably, profits do not – at leastnot for brokers struggling withcollapsing prices for second-hand yachts or marina opera-tors trying to amortise biginvestments. Banks that over-

exposed themselves to yachtbuyers before the crisis aretrying to offload repossessedvessels and further depressingsecond-hand prices.

According to The superyachtGroup (TSG), the fleet of super-yachts – pleasure vessels longerthan 30 metres – has risen four-fold since 1985 to reach 4,209 bylast year. But annual deliveriespeaked at 259 in 2008, and havefallen steadily since to 173 lastyear. The order book – thenumber of big yachts under con-struction – peaked in 2009 at 587and is now down to 415.

Martin Redmayne, TSG chair-man, says: “Europe and the US,the core markets of the yachtindustry, are still there and theclients are showing interest, buttheir appetite is being stalled bywhat’s happening domestically.”

In western Europe in particu-lar, this is an important indus-try. In an economic impactstudy published this year, Thesuperyacht Intelligence Agency,part of TSG, concluded thatmore than 6,000 companies wereinvolved in the sector and thatsuperyachts contributed up to€24bn in revenues to the globaleconomy in 2010, as well as pro-viding jobs for 33,000 crew andmore than 200,000 others inmanufacturing and services.

Yet the superyacht businessand the broader pleasure yachtsector are starting to undergo

some profound changes as aresult of the shift in global eco-nomic power from west to east.

In an emblematic manufactur-ing deal at the end of last year,Ferretti, the debt-laden Italianyachtmaker, was taken over byChina’s Shandong Heavy Indus-try Group for a fraction of itspre-crisis valuation of €1.7bn in2007.

And on the marinas side, First

Eastern, the investment groupof Hong Kong-based business-man Victor Chu, bought a stakein Camper & Nicholsons MarinaInvestments (CNMI), which istraded on London’s Aim andestablished a joint venture withit to develop luxury marina andproperty projects in Asia.

Nick Maris, CNMI chief execu-tive, says: “In the west, we havesome years to go in this kind of

rather uncertain [economic] cli-mate.

“In the east, it’s a totally dif-ferent picture . . . In Asia it’s anindependent market with itsown dynamics. The difference isthat it’s virgin territory and willbe very fast growing.”

Despite the hopes of eagerbrokers and yachtmakers,China’s growing pool of billion-aires and millionaires have yet

to take to the sea in a big way,partly because yachting is anunfamiliar pastime and partlybecause of the need for discre-tion in turbulent political times.

Chinese yacht owners, likethose in Brazil, Russia and Italy– and perhaps France now thatthe Socialist François Hollandehas been elected president – face

Asia takesthe helmin choppywatersThe shift in globaleconomic power ischanging the game forthe superyacht andpleasureboat industry,writes Victor Mallet

Classically trained: a crew gets to grips with the J Class Velsheda, built in 1933 at Gosport for the chairman of Woolworth’s.(Read Richard Donkin’s article on this summer’s planned J class regattas at: www.ft.com/yachting-marinas-2012) The J Class Association

Continued on Page 3

2 ★ FINANCIAL TIMES THURSDAY MAY 24 2012

Yachting & Marinas

V ladimir Putin, the Russianprime minister, sent a shiverdown the spines of the coun-try’s wealthy elite in Febru-

ary by announcing plans for a super-tax that would be levied on luxurygoods such as large yachts and sportscars.

In Italy too, superyacht ownersfound themselves on the fiscal radarin December, when the Italian govern-ment signalled plans for a mooringtax. After industry lobbying, the tax,which has yet to be enacted, has beenwatered down, so that the proposalnow is to levy it only on Italiannationals.

But, while both developments mighthave led to some unease amongsuperyacht owners, any fears of a

general trend towards soaking therich through taxation of their play-things are likely to be misplaced.

If anything, robust lobbying for aneasing of taxation among charteryachts in Spain could signal a moreenlightened approach to taxation inthe yacht industry, one which recog-nises the economic value of regularyacht use and chartering.

The Spanish yacht charter industryhas been all but destroyed by thematriculation tax, a tax on registra-tion of yachts over eight metres thatmust be paid in addition to VAT.

With Spanish VAT at 18 per centand matriculation tax at 12 per centthis means buyers of moderate tolarge Spanish yachts face a surchargeof nearly a third of the retail price.

A recent report for the NationalNautical Business Association inSpain estimated that in the BalearicIslands alone last year, income fromthe tax amounted to €1.5m.

But in collecting the tax, it said, theBalearics lost out on a potentialincome of €600m through extra traffic,marina revenue, and shop, restaurantand other retail spending that would

have been generated by visitors oncharter boats that have been deterredfrom operating in Spanish waters.

Patricia Bullock, director of yacht-ing at Altius, a Spanish shippinggroup, says the Spanish Governmentis shooting itself in the foot by persist-ing with a “negative tax”.

She adds: “They have effectively

plugged what would otherwise be afountain of income for the Spanisheconomy.”

Much of the economic damage couldbe reduced, Ms Bullock argues, byintroducing a blanket exemption fromthe tax for charter boats.

“Boats of less than eight metresdon’t have to pay the tax and charterboats up to 15 metres can claim

exemption from the tax. All we’re ask-ing for is that the 15-metre limit isremoved, so that all charter boats canclaim exemption from the tax.

“We don’t want to do rich peoplefavours. We want rich people to cometo Spain, spend their money andinject it in to the economy.

“Every day, I get three or fourinquiries about this tax from charterowners. If the Government could turnthe key on this tax situation it wouldopen a floodgate of upmarket tourismin Spain. Marinas, shipyards andrelated industries would all benefit.”

Spain’s loss has been France’s gainin the charter industry. France allowsa full commercial exemption fromVAT for charter boats that start theircharters in France.

James Lawson, a superyacht lawyerat Hill Dickinson, a maritime lawfirm, says: “This means that manyMediterranean yacht charters begin inFrance. So that’s flights, hotels, vict-ualling, fuel – all that spend going toFrance.

“It’s been said that the benefit ofthis to the French economy is 30times higher than the VAT income it

would have earned had it continuedto charge VAT. So France has cor-nered the charter market as a result.”

Since VAT is by far the most signifi-cant tax facing superyacht owners inEurope, some owners may beattracted to various leasing schemesoperated in certain countries that canlead to a net reduction in the VATbill. But most European owners areadvised to pay VAT.

Ms Bullock says: “Yachting is recre-ation and people want peace of mindand they want to enjoy their yachts.They don’t want to have to worry allthe time about legal and tax set-ups.”

However, there are important VATexemptions available in the EU forforeign users of yachts that are regis-tered and flagged outside the EU.

Non-EU residents and their yachtscan benefit from an 18-month dispen-sation from VAT called temporaryadmittance. But there are pitfalls.

Ms Bullock explains: “If you’re anArab, Russian, Chinese or American,say, you can bring in your boatflagged in Grand Cayman or some-where outside the EU but it must beused by non-EU people. If half a dozen

Brits, for example, are having a jollyon your yacht and it hasn’t paid tax,then you could have serious problemssince yachts are inspected. Ownerswho have been badly advised can becaught out that way.”

When non-European owned boatshave come to the end of the 18-monthdispensation period, they need toleave the EU and visit a non-EU portin order to continue with their VAT-free status. When they return, the 18-month period starts again.

So skippers take their boat from theBalearics to a small port such asBejaia on the North Algerian coast,moor up for a while, get their papersstamped, then sail straight back to anEU destination to begin their 18-month dispensation all over again.

The lesson for governments fromsuperyacht taxation, therefore, is totread carefully, taking in to considera-tion the overall economic benefit ofthe superyacht industry. The lessonfor owners in Europe at least, is totake VAT on the chin and pay up.

“Whatever the size of your yacht,the old days of tax-free sailing are atan end,” says Ms Bullock.

Soaking the rich can be counterproductiveTaxationThe overall economicbenefit of the industrymust be considered,says Richard Donkin

When Star Capital, a UKprivate equity firm, sealed adeal to take over Thyssen-Krupp’s superyacht divisionin December, its chief exec-utive steered clear of gloat-ing about becoming aplayer in the glamorousworld of yachting.

“We are pleased to haveacquired a world classGerman engineering busi-ness,” Tony Mallin saidafter securing Blohm +Voss, one of the most

august names in shipbuild-ing.

It was as if Star Capitalhad acquired a ball bear-ings factory outside Stutt-gart, rather than thebuilder of such floating pal-aces as Roman Abramov-ich’s 163-metre luxurymotor yacht Eclipse.

Mr Mallin’s reluctance toget sucked into the glitzyuniverse of yachting isgrounded in a dispassionateanalysis of past privateequity deals in the sector.

Buying companies thatmake boats is often asexpensive as owning theboats themselves.

“Luxury yachts are a bitof a graveyard for privateequity. It’s like buying agolf course; you want to bethe third person to own it,”he quips.

In Blohm + Voss’s case,

the claim that it should notbe categorised with themakers of smaller boats iseasy to back up.

The price tags of theboats it makes, at$400m-$500m, and the four-year design-and-build proc-ess means it is more akin toa high-end contractor.

As well as non-leisurecontracts with the Germannavy, Star also picked up ahigh-end repairs and partsbusiness. Overall revenueswere said to be €400m ayear at the time of the deal.

But look beyond the rare-fied world of superyachts,and the record of privateequity ownership is lessthan stellar.

Ferretti, the Italian ownerof the Riva, Bertram andPershing brands amongothers, has served as a salu-tary warning for wannabe

leveraged buyout candi-dates.

It was once a poster com-pany for private equitygroups piling into the sec-tor. A forerunner to Per-mira, the London-basedfirm, made more than 50times its original stake bybuying the business off thefounding family in 1998 andlisting it three years later ina deal valuing Ferretti at€400m including debt.

Permira then bought itback, bolting on rivalbrands to the parent com-pany before flipping it toCandover in 2006 for €1.7bn.

The buyouts were fol-lowed by serial restructur-ings after Candover – sincevanished from the privateequity scene – saw its ownplans to float the businessfor up to €3bn scuppered bymarket turmoil.

Lenders who took overthe equity when the busi-ness faltered sold out toChina’s state-owned Shan-dong Heavy IndustryGroup-Weichai Group.

Numerous other yacht-makers have come in andout of trouble following pri-vate equity takeovers: BainCapital’s 2007 investment inBavaria Yachtbau souredtwo years later; Dehler, aGerman sailing boat maker,was bailed out by the gov-ernment after having beentaken over by BuchananCapital.

The same downturn thathurt so many yachtmakershas perhaps helped inves-tors in the sector improvethe returns on their invest-ment as valuations for com-panies have fallen.

Sunseeker International,based in Dorset, was pur-chased for £25m plus debtfinancing in 2010 by FLPartners, an Irish privateequity group. It has sincereported healthy trading.

And last year, JonMoulton’s Better Capitalspoke of “an opportunisticdeal” to take over the Fair-line Group, which special-ises in 38 to 80-foot boats,together with RBS. Thevalue of Fairline had beenwritten down to zero by itsprevious owner, 3i, anotherprivate equity investor.

Ultimately, returns forinvestors will come notfrom snapping up distressedassets at discount prices,but from better trading atthe acquired companies.

For Blohm + Voss, thatmeans expanding sales toemerging markets, wheremost new billionaires arebeing minted. For now,

sales to the Bric economiesare mixed: for all the newwealth in China, the localyachting scene there ishampered by the lack ofmarinas on the military-controlled coastline.

Brazil has introduced

import tariffs to protect itsdomestic manufacturers.

Even more promisingly,billionaires who buy yachtsmight also be interested inbuying yachtmakers, somein the industry are hoping.

Blohm + Voss’s new

owner, Mr Mallin, said anemerging market buyer isone potential exit for StarCapital – before emphasis-ing again that the shipyardis really more of an engi-neering concern than ayachtmaker.

No plain sailing for private equityInvestmentReturns will comenot from snappingup distressed assetsbut better trading,says Stanley Pignal

Clean lines: a yacht built under pristine conditions at Ferretti, now Chinese-owned

Yachts in the Gulf are usedfor very different reasons tothose typical in the west.

This reflects the region’smaritime history. In thedays before oil was discov-ered, the local populationlived in small communitiesclose to the sea.

Fishing, pearl trading,and dhow owning wereimportant sources of localwealth. Seafaring wasingrained into the culture.

As a consequence, peoplelike boats, they love beingat sea and enjoy being onthe water.

Boating in the region is amale-dominated activity. Itis fathers and their sonswho go boating while wivesand daughters tend to stayashore.

Craig Barnett, editor-in-chief of Yachts Emiratesmagazine, says: “Fast openboats are very popular withthose who like to go fishing.

“Here they do so, notwith rods or nets, butinstead favour the use ofhand lines and will spendhours at the sport.

“They like to go well off-shore and these customers

favour boats in the eight to11-metre range. Typically,these are narrow-beamedwith a deep V-shaped hullthat does well in the shortchop that Gulf waters arefamous for.

“Power generally comesfrom two or even at timesthree big, maybe even huge[300hp] engines bolted onthe back. In short, fuel ischeap and speed impera-tive.”

Boats of more than 15metres purchased foruse locally aretypically fittedwith fly-bridges.

F o r t yper centof all15m-plusboats areowned byexpatriatebusiness -men origi-nating fromcountries suchas India, Syria,Jordan, Oman andLebanon.

Westerners who occupymanagerial positions tendtoward smaller cabin cruis-ers.

Both these groups usetheir boats in a more Euro-pean fashion and will oftenventure further away fromtheir home port and live onboard for days at a time.

The estimated value ofthe leisure fleet (boats over5 metres) is about $4.2bn. Of

those, the cruiser market(boats over 15 metres)accounts for $1.6bn.

There are roughly 46,850leisure boats (5 metres andabove) in the six countriesthat make up the Gulf Co-operation Council.

Gulf Craft, the Dubai-based boat builder and theregion’s most prolific pro-ducer of craft, accounts formore than 20 per cent of themarket, having built about9,000 boats.

Twenty years ago,there were

between 15and 20 boat

b u i l d e r sproducingy a c h t sover 10m e t r e sin ther e g i o n .T o d a y ,

there areless than a

handful.This leaves

Gulf Craft thedominant manufac-

turer, producing largeryachts from 10 metres andabove. There are about 30builders of boats smallerthan 10 metres in theregion.

In the United Arab Emir-ates, builders include: AlMarakeb, Al Shaali, AquaTech, Dubai Marine and

Gulf Craft. Samawy Marineis another locally basedcompany selling into thelocal market, but currentproduction is based in Thai-land.

In Bahrain, Al Dhaen stillbuilds boats up to 15metres, producing 75 to 100units each year, but produc-tion is half what it was twoyears ago.

Having recently sold a 41-metre new-build superyachtinto the Middle East mar-ket, Erwin Bamps, chiefoperating officer of GulfCraft, believes that his com-pany will survive the globaldownturn because of itsflexibility.

“We are not a productionboat company. Despite thefact we have built 9,000-plusboats, every one is a one-off.No two boats are exactlythe same. Each one is a cus-tom build,” he says.

Proving there remains agreat future for yachting inthe Middle East, the 20thDubai International BoatShow held in March washailed a success soon afterthe doors closed on the five-day event. This was a resultof strong visitor numbersand the increased size ofboats on display.

Helal Saeed Almarri,chief executive of DubaiWorld Trade Centre, theevent organisers, says theshow has become “the sin-gle most significant driverof the leisure marine indus-try in the region today”.

Fuel is cheap and speed is amust for sailors in Arab worldMiddle EastMessing about inboats goes with theterritory, writeFrances andMichael Howorth

Small request:Patricia Bullock ofAltius shippingwants the Spanishgovernment tolay off thecharteredyacht industry

Flexible friend: Erwin Bamps(above), chief operatingofficer of Gulf Craft

FINANCIAL TIMES THURSDAY MAY 24 2012 ★ 3

hull design to create a newbreed of motor yacht.

Branded Vitruvius andbuilt by the Picchiotti yardowned by Perini Navi, theItalian superyacht builder,these sleek motor boats areproving they can cut fuelcosts by more than 30 percent compared with those ofsimilar length with wider

beams. Employing a hulldesign that he has bothstretched and optimised, MrBriand has created a moreefficient hull shape.

“Each yacht has an effi-cient ratio of superstructureto hull; built out of steeland aluminium, they are asa result lightweight, con-sume less fuel and have

Yachting & Marinas

onerous taxes on their luxu-ries and close scrutiny fromtheir fellow citizens.

The statistics and theanecdotal evidence never-theless show that the ultra-wealthy continue to buyever larger yachts, even ifthe merely prosperous arehaving to tighten theirbelts.

Barry Gilmour, executivechairman of Royale Oce-anic, which supervises con-struction and managementfor yacht owners, says: “Idon’t see green shoots inany particular sector, withthe exception possibly ofthe larger yachts.”

Demand for yachts of60-70 metres or moreremains strong and theaverage yacht ordered istherefore increasing inlength. Fewer superyachtsare being built, and fewershipyards are in business,but the total length and sizeof what they are buildinghas increased since 2010because of demand fromGulf sheikhs and Russiantycoons.

“Above, say, 60 metres,there seems to be a hugeamount of activity, whichmeans that there are 50 or60 people sourcing boats,”says TSG’s Mr Redmayne.

These large yachts, somecosting €200m and above,are more like ships thanordinary pleasure boats.

Superyachts.com, the lux-ury yachting web portal,says 11 new vessels, somethe size of cruise liners, arejoining its annual top 100ranking this year, up fromnine new entries last year.

The largest is Topaz, a147-metre vessel built by

Germany’s Lürssen Yachtsfor a client thought to befrom Abu Dhabi’s ruling AlNahyan family.

For a few owners, thedesire to avoid unfashion-able ostentation in a time ofausterity has spawned a“serious” yachting trend,with owners seeking toshow that they care aboutthe environment and wantto contribute to scientificresearch in the oceans.

Pegaso, the 73-metreyacht of Alejandro BurilloAzcárraga, a Mexicantycoon, is billed as exactlythis kind of yacht.

“Social enterprise is a bigtopic,” says Mr Redmayne.“The idea is that it’s nogood just looking like a richbastard – your yacht has tohave a bit of a pur-pose . . . It’s not just putting$100m into a boat and goingoff around the world, it’ssaying that there is some-thing good coming out ofthis boat.”

In practice, some of thememorable feats of recentyears have been achieved in

much smaller vessels, usu-ally sailing boats. This yearsaw the publication of Cam-eron Dueck’s book The NewNorthwest Passage: A Voy-age to the Front Line of Cli-mate Change, in which theone-time FT journalistdescribes the 8,000 nauticalmile voyage of the 12-metreSilent Sound yacht aroundthe icy north of Canada.

In January, French sailorLoïck Peyron and his crewof 13 broke the world recordfor circumnavigating theglobe nonstop under sail,when their trimaranBanque Populaire V com-pleted the 29,000-mile jour-ney in just over 45 days –an average speed of morethan 26 knots, faster thanmany diesel-powered boats.

It is in sailing that manynew technologies from theaerospace, motor andrenewable energy indus-tries are taken to their mar-itime extremes. Witness thehigh-tech and very fastwing-sail catamarans com-peting in the new version ofthe America’s Cup backed

by Larry Ellison, the Oraclesoftware tycoon and cur-rent cup holder.

Then there is Acciona, anentry for the Vendée Globesingle-handed round theworld sailing race startingin November (see storyabove). Financed by theSpanish infrastructure andenergy company of thesame name and skipperedby Javier “Bubi” Sansó, itis designed to compete (andwin) without using a dropof fossil fuel, even for gen-erating electricity, becauseit will make its powerentirely from the sun, thewind and the water.

Design of large motoryachts is also evolving rap-idly in terms of materials,electronics, engines andinterior decoration. Onetrend, says Mr Gilmour, isto use the extra space avail-able on larger superyachtsto create suites akin tothose found in hotels onland rather than consigningguests to (relatively) mod-est cabins.

Yet the basic premise ofthe luxury yacht remainsunchanged. “I know certainyacht owners who are veryinterested in and have con-cerns about ecology and theseas,” says Mr Gilmour.“It’s something they will allsign up to. But the mainpurpose of a yacht is to sitoff Portofino [on the ItalianRiviera] and enjoy the timewith your guests.”

The problem for somesuperyacht manufacturersand service providers isthat not enough hedge fundmanagers or industrialistsare prepared to take theplunge and order a newboat until economic confi-dence returns to the west.

Asia takes the helm in choppy waters

PhilippeBriand hascreated anew breed oflightweightmotor yacht

Continued from Page 1

A mbitious ownerswith deep pocketsand innovativedesigners and

naval architects eager totransfer technology arecombining to put yachtinginto the front line of designtrends.

As the cost of fuel rises,designers of motor boatsare copying the underwaterhull attributes of sailingyachts and investigatinglightweight materials toimprove efficiency.

With the demand forsuperyacht speed rising, sothe price of fuel propelsitself into cost calculations.

Ever aware of greenissues and the need to cutostentatious fossil fuel use,owners are trying to buildyachts that are more cost-effective.

One solution is to reducethe weight of the boat. Dan-ish Yachts in Skagen, Den-mark, has met this diffi-culty head on by convertinghull production away fromtraditional materials suchas steel, aluminium andfibreglass and masteringthe science of building incarbon fibre.

Spurred on by Carlos Per-alta, the Mexican million-aire, and using EspenOeino, the Norwegiandesigner, Danish Yachtsbuilt Moon Goddess usingcarbon fibre.

The high-speed yacht hascabins, designed to regu-larly sprint from Portofinoto Sardinia.

The shipyard, hoping tofind a buyer for a completedyacht, decided to buildanother, bigger, better andmore multifunctional craftout of the same material,again designed by MrOeino.

Today the 38-metre Shoot-ing Star is, at 48 knots,probably the fastest, fullyequipped twin engine motoryacht in the world of itssize.

For sale at €18.5m, theboat is blazing a trail forthe builders, who are dem-onstrating that their exper-tise has real practical appli-cation.

In the effort to produceefficient speed, the alterna-tive to weight cutting is toalter the underwater pro-file.

Philippe Briand, theFrench designer, has astring of high-speed racingyacht designs to his nameand has recently used hisexperience with fast sailing

lower carbon dioxide emis-sions than other boats of asimilar design,” says MrBriand.

“Each hull is designed formaximum hydrodynamicefficiency to reduce waterresistance and increase thelength at the waterline.The optimisation of volumeand weight distributionallows for lower fuelconsumption and thereforea more environmentally-friendly long-range yacht.”

Paul Aston, editor ofSuperYacht World, summedup the need for super slip-pery hulls, saying: “Ownersand designers are drivingthe development of high-performance hulls, notbecause they want moreout-and-out speed, butbecause hulls like theseburn less fuel.

“It’s a win-win situation;both running costs and car-bon footprint are reduced,and the yacht is able tocruise much further afield

so is no longer tied toexpensive and increasinglyoversubscribed superyachtmarinas.”

Michael Leach Designs(MLD) has won industryawards for the design ofboth the exterior and inte-rior of its latest launch, the96-metre Palladium.

Mr Leach says manyexperienced owners have awealth of knowledge cou-pled with the desire to cre-ate their own dream yacht.But they often need help.

“We have a client want-ing to include the very lat-est in technologies and effi-ciencies in his new 70-metremotor yacht, but we have tobe very careful about howmuch of this has been triedand tested.

“Imaginary efficiencies innarrow sleek hulls can leadto stability issues, raisingthe fuel burn on the genera-tors to run stabilisers, thishas other knock-on effectstoo,” says Mr Leach.

Mark Smith, businesspartner at MLD, says own-ers sometimes get ledastray by green issues,believing that their yachtsmust be super efficient atall costs.

“They forget that thecharacteristics of the seathey sail in have notchanged in centuries, sothat trying to evolve toofar away from the tried andtested hull designs can, at

times, be a pointless exer-cise.” He adds: “Sailing intoheavy weather aboard someyachts with super fast slip-pery hulls is akin to drivinga Formula One race caracross a ploughed field.”

The downside of lightweight efficiencyDesignSometimes ownersget led astray bygreen issues, writeFrances andMichael Howorth

Sea-change The Acciona prepares to compete in the Vendée Globe without using a drop of fossil fuelSailors like to distinguishthemselves from powerboatersand pretend that theirs is anenvironmentally friendly sportusing only the power of the wind.But the reality has always beenrather dirtier.Cruising yachts, especially in

the fickle weather of theMediterranean, often use theirdiesel engines to move from oneplace to another. Even racers,forbidden to use anything butsails in a competition, burn dieselin generators or main engines tocharge the batteries needed forelectrical and electronicequipment.A sea-change, however, is finally

under way. Javier “Bubi” Sansó,Majorca-based skipper of thenewly built Acciona 60ft racingyacht, plans to compete in the2012-13 Vendée Globe, the single-handed race around the world,without using a drop of fossil fuel.“This is a very special boat,

with a lot of research anddevelopment,” he says, showingoff the renewable energy systemsof the red-and-white yacht at thedock in Palma.They include high-tech

photovoltaic solar panelsembedded in the deck, two windgenerators and two hydro-generators that can be loweredinto the water when the boat ismoving fast enough for theirpropellers to have no appreciableimpact on the yacht’s speedthrough the water.Mr Sansó teamed up with

Acciona, the Spanish energy andinfrastructure group, three yearsago when he asked the companyabout financing a Vendée Globeentry. It no doubt helped thatJosé Manuel Entrecanales,executive chairman, is a keensailor.“Acciona said ‘yes’, but there

was one condition,” says Mr

Sansó. “They said ‘we want tomake not just a racing boat but aspecial racing boat, without theuse of fossil fuel’. They said itwas 100 per cent ‘ecopower’ ornothing.”There was one snag: the rules

of the race, which runs every fouryears from the port of Les Sablesd’Olonne and is a big sportingevent for French and Britishenthusiasts in particular, requiredentrants to have a 40-horsepowerdiesel engine for emergencies.

That has been changed to keepup with technological advances,and instead the organisers nowrequire the boats to demonstratethat they can work under power,whether for themselves or to towanother competitor out of trouble.For the development team, the

toughest test has been to showthat they can motor for five hoursat five knots with their small butpower-hungry electric motor.Instead of adding more

batteries – and therefore much

more weight – they opted to adda hydrogen-powered fuel cell thatcan be used to charge thebatteries and so extend the rangeof the electric propulsion systemfrom about three hours to morethan five.Weight is all-important in

modern racing yachts, but MrSansó argues that eschewingfossil fuels will not give him muchadvantage over the whole race,since he will start a little lighterthan most of his competitors

(who will be carrying about 250litres of fuel and a heavy dieselengine), and finish a little heavier(because of his extra batteriesand the fuel cell).The trend towards the use of

renewable energy and towardsgreater efficiency, however, isunmistakable among all thecompetitors, just as it in otherraces and among cruising sailorsthe world over, who are usuallykeen to adopt technology fromaerospace or the motor industry

to save weight and save diesel.For most of its energy systems,Acciona has bought advancedproducts off the shelf andintegrated them – with a lot ofhard work – into the design ofthe boat. The engine for example,is made up of two electric motorsfor fork-lift machines.Mr Sansó believes that one

advantage of the project is thatits achievements can be appliedelsewhere, including to homes onland. He also notes that theenergy efficiency even of diesel-powered boats has increasedhugely in the past decade. In the2004 Vendée, competitors took400 litres of diesel, 150 litresmore than expected this time.“These things would have been

unthinkable five or six years ago[because of the weight ofrenewable energy systems],” hesays. “There is a curve, and it’sgoing up, and it will be a lot moreefficient in two years’ time.Batteries are starting to be better,and the electric motors havesuddenly had a quality increase.”Officially, the aim is to prove

that a modern sailing boat cancircle the world without fossil fuel,but the Acciona entry – built bySouthern Ocean Marine in NewZealand to the specifications ofOwen Clarke Designs – featuresother innovations and could proveto be a very fast competitor.“It’s very exciting, especially

from a design point of view,” saysMr Sansó, an experienced long-distance sailor who had toabandon the 2000-01 Vendéeafter breaking one of his rudderson a small iceberg in the southernocean.“It’s been three years thinking

about it. We have come from thePowerPoints to the actual sailing.And I’m a sailor, not an engineer.”

Victor Mallet

Sea-change: the eco-friendly Acciona has a hydrogen-powered fuel cell that can be used to charge the batteries

Frances and MichaelHoworth are specialist travelwriters and superyachtexperts who write forSuperyacht Magazines.

Their website iswww.thehoworths.com

In build Deliveries

Superyachts*

Source: Superyacht Intelligence* Pleasure vessels above 30m in length

0

100

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2000 01 02 03 04 05 06 07 08 09 10 11 12

4 ★ FINANCIAL TIMES THURSDAY MAY 24 2012

Yachting & Marinas

A big boost for com-petitive sailingcame in Februaryafter four dismal

years in which a number ofhigh-profile backers hadabandoned the sport.

This was the announce-ment that Alpari, the onlineforeign exchange dealingcompany, had been securedas sponsor for the WorldMatch Racing Tour.

Perhaps the biggest shockwas the decision in Decem-ber to suspend the MedCupin 2012 after it failed tosecure the funding itneeded from Audi, its titlesponsor, to continue theevent.

Other factors were adwindling field of entrantsand financial constraints onlocal authorities that mighthave bid to host regattas.

Companies such as BT,Aviva, Ecover and iShareshave all pulled out of spon-soring sailing competitionsand individual yachts in thepast few years.

Most of the fallout can beput down to belt-tighteningin the recession. Nonethe-less, in spite of tighter mar-keting budgets, companiessuch as Volvo, Hugo Bossand Artemis continue tomaintain a strong presencein the sport, while LouisVuitton has been luredback into the fold to spon-sor the challenger series forthe 34th America’s Cup in2013.

Richard Moore, chiefexecutive of Capitalize, apublic relations companythat specialises in sportssponsorship and brand com-munications, says sailing ismore reliant on sponsorshipfor revenue than manyother sports.

“In spectator sports, suchas football, there are thegate receipts, mediarights and merchan-dising, whichtogether may accountfor 75 per cent of therevenues.

“Sailing, on theother hand, reliesto a much greaterdegree on the cor-porate pound insponsorship,” hesays.

This meansthat event organ-isers and individ-ual sailors seek-ing sponsorshipmust be increas-ingly strategicin their think-ing, both in tar-geting a pro-spective spon-sor and shap-ing a deal that

will prove an attractiveproposition.

Matthew Strachan, salesdirector at World MatchRacing Tour, says: “I lookedat a number of industry sec-tors for potential sponsorsand tried to align them withthe brand fit that I felt thetour was offering.”

He also looked at sectorsprofiting in the recession.One was foreign exchangetrading, which thrives fromvolatile currency move-ments in turbulent markets.

“We could see synergiesbetween sailing and forex,”says Mr Strachan. “Theforex market is based onanalysing trends, research,insight and strategic risk-taking. These are allattributes that make for asuccessful match racer, whomust look at weather trendsand gauge the best time togain an advantage.

“If you look at a lot ofsponsorship approaches,they are tailored to whatthe event requires ratherthan what it will deliver for

the brand. Our approachwas completely the otherway, saying to a potentialsponsor: ‘You tell us whatyou want and we’ll tell youif we can deliver that.’ ”

David Stuart, Alpari’schief operating officer, sayshe appreciates an approachthat allows the business todiscuss its objectives in pro-moting the brand over thefive-year duration of thecontract. The size of thedeal has not been disclosedbut is understood to be inthe region of £5m.

Mr Stuart says “We’relooking to associate our-selves with a prestigiousevent. We see the tour asfitting that aim. Its audi-ence profile suits the profile

of our business on theinternational stage.”

Finding the rightmatch between spon-sor and event isbecoming a sophis-ticated processand Capitalizehas created a

division that is dedicated tobringing sponsors andevents together.

Andrew Pindar, teamprincipal at the GAC Pindarteam that includes Ian Wil-liams the Alpari WorldMatch Racing Tour cham-pion, in its stable of yachtsand competitors, believesthat sponsors and competi-tors can find rich seams ofnew business if they areprepared to innovate.

One of its customers isthe Extreme 40 racing tourthat has become the sailingequivalent of Formula Onemotor racing, runningclose-to-shore stadiumevents around the world.

GAC Pindar handles theshipping of boats in con-tainers to different venues(see story, right).

“It’s important that peo-ple understand the differ-ence between sponsorshipand patronage. Sponsorshipisn’t philanthropy; it’s donefor commercial businessreasons,” says Mr Pindar.

Stuart Hosford, managingdirector of 5West, the com-pany that looks after theHugo Boss sail racing teamof Alex Thomson, the long-distance sailor, agrees thatrace teams must lookclosely at what they aredelivering for sponsors.

“We’re always looking towin but we’re also lookingat ways to ensure a returnon investment for HugoBoss so we take the market-ing side very seriously,” hesays.

The Hugo Boss team hasa reputation for ambushmarketing and promotionalstunts.

“We’re always trying tocome up with new ideas topromote the team and thesponsor,” says Mr Hosford.

He believes, however,that sailing has becomeoverly complex with toomany events to thrive with-out some industry contrac-tion.

“We’re heading towards atime when there needs to bea rationalisation of eventsand classes.,” he says.

The strain is alreadyshowing, with a number ofwell-known sailors strug-gling to find sponsorshipfor this year’s VendéeGlobe. Only three Britishsailors have managed tofind firm backers.

Mr Moore at Capitalizeagrees that sailing needsmore clarity if it is todeliver a sustainable busi-ness proposition for spon-sors, but he also points outthat new sponsors are beingdrawn in by entrepreneur-ial promoters who havebeen prepared to make thesport more accessible.

“When you look at thenew-age brands, such asPuma, Red Bull, Prada,Hugo Boss and Alpari,which have come into thesport in the past few years –a lot of sports would love tohave that stable of brands.”

As backers pullout, strategictack is neededSponsorsCompanies andcompetitors canstill do deals, saysRichard Donkin

Murray Bishop thought heunderstood all the complex-ities of superyacht refuel-ling – until a captainexplained to him the needto keep his vessel’s tanks atleast 40 per cent full.

“Part of the reason is toensure there is always suffi-cient range to reach thedestination.

“If you run out of fuel onthe motorway, you swearand curse and walk to thenearest services, but if ithappens in mid-Atlanticyou have a big problem,”says Mr Bishop, yacht fuelstrading manager at GACGroup, a shipping and logis-tics company.

The captain went on tosay he also needed plenty offuel to act as ballast, so thatguests didn’t notice the rolland the swell of the sea.

Mr Bishop says: “The richand the famous don’t like tobe thrown about the place.They like to play the partbut feel like they’re on dryland.”

Atlantic crossings are anessential part of the seasonfor those who like their

yachts to spend the summerin the Mediterranean andwinter in the Caribbean, asmany owners do.

One option for smalleryachts is to have themfreighted on top of a cargodeck or on a purpose-builtsail-on-sail-off ship.

The first of these ships,Yacht Express, operated byDockwise Yacht Transport,is semi-submersible and canlower itself in the water,allowing its yacht cargo tobe sailed on board.

Yacht transport relievescrews and owners of facingthe rigours and uncertain-ties of an ocean crossing,and the pain of fuelling atrip that can cost tens ofthousands of pounds.

For the biggest yachts of80 metres and more a fill-upmight run to several hun-dred thousand litres.

The futuristic superyacht“A” of Andrei Melnichenko,a Russian billionaire, has afuel capacity of 757,000litres and a cruising rangeof 6,500 nautical miles.

A round trip from itshome port in the Caribbeanto the Mediterranean costsmillions of pounds in fuel,spares and staffing over-heads.

For this reason, logisticsare a crucial part of yachtmanagement and fuelling isa specialist business initself, since fuel is oftenpurchased on the spot mar-ket and delivered by truck

to a pre-arranged rendez-vous or pumped straightfrom storage.

“There are so many con-siderations on quality thatare not always appreci-ated,” says Mr Bishop. Oneof these, he says, is theflashpoint of the product.

The Safety of Life at Sea(Solas) directive of theInternational MaritimeOrganisation states thatany fuel for a superyachtwith a flashpoint of lessthan 60C must be classed as

dangerous cargo and thiswould invalidate yachtinsurance policies.

“The diesel that goes in toyour car has a minimumflashpoint of 55C,” says MrBishop. “A lot of placesaround the Med sell thiskind of diesel. So ownersneed to check the fuel speci-fications before buying.”

Another concern foryacht engineers is fuel qual-ity. Unlike motor fuels, thekind of fuels used in yachtscan vary enormously.

“Sulphur content isimportant,” says Mr Bishop.“Yachts like to have low

sulphur fuel for aestheticreasons. Big clouds ofsmoke trailing behind themdon’t look very pretty whenthey sail out of port.

“It’s a fine balancing actfor the yacht because youneed sulphur in the fuel tohelp lubricate the engine.We aim for the lowest possi-ble sulphur.”

While truck deliveries arecommon across the northMediterranean coast, insome ports, such as Gibral-tar, fuel is often pumpedstraight from storage tanks.

The British overseas terri-tory is a popular refuellingport, because of its duty-free status. It is part of theEuropean Union but notpart of the EU VAT area.

Barnaby Skipwith, direc-tor of Yacht Fuel Services,a division of World FuelServices, stresses the needto develop a rapport withyacht customers.

His company handles thefuel accounts for some 300superyachts worldwide.“It’s important to know ourcustomers and their needs,”says Mr Skipwith.

“I get the perception thatsome people, looking at thecost of a superyacht andnothing else, think thatfuelling is exactly thesame as driving into anygarage forecourt, putting anozzle in the car, assumingthe fuel is going to be goodquality and all the samewherever they go. It’s

not like that,” he says.“If a customer is sailing

to Thailand or around theworld, we talk to themabout their routing, fuelquality, costs and availabil-ity. Captains plan theirroutes carefully to takeadvantage of prevailingwinds and currents.”

The need for detailedplanning in sailing and thesuperyacht market isattracting increasing inter-est from marine logisticscompanies.

GAC has created a busi-ness dedicated to super-yacht and sail racing logis-tics as part of its GACPindar sail racing team.

“We’re offering a one-stopshop for freighting, spares,fuelling, including transitsthrough the Panama andSuez canals,” says MrBishop.

MIQ Logistics, is compet-ing in the same area.

“We don’t just want to bea name. We want to beinvolved,” says JamesClark, MIQ’s director of glo-bal marine logistics.

He negotiated a sponsor-ship arrangement with theJ/80 World Championshipand says that the companyis now seeking more spon-sorship deals.

“For a company such asours it makes so muchsense,” he says.

“But I should say we’revery picky. It has to beright for us.”

Fuel at heart of supply challengesServicingOwners may bewealthy but stilllike to save moneyfilling up, writesRichard Donkin

‘Owners like lowsulphur fuel. Cloudsof smoke behinddo not look pretty’

Murray Bishop

Built like a tank: billionaire businessman Andrei Melnichenko’s futuristic vessel ‘A’, seen here taking on supplies, carries up to 757,000 litres of diesel

Sail on: theOpen 60 of

the HugoBoss yacht

team

It is a blight of many citiesthat while you can more orless drive around, it isalmost impossible to find aplace to park. Now, some-thing similar is happeningat sea.

More and more yachts arethronging Mediterraneanwaters, but the number ofmoorings is not keeping up.

Some 2,900 superyachts(over 30 metres) are basedin the Mediterranean, whilethe 175 superyacht-capablemarinas that can accommo-date them offer only 2,500berths.

There is thus a shortfallof 400 berths. What is more,the has been an increase ofonly 400 since 2008.

Worldwide, the figuresare slightly better, as thereare 6,500 berths for 6,500superyachts in 600 marinasthat can handle them.

For investors contemplat-ing marina construction,

the trick is to calculate isthe number of yachts thereare likely to be a decadefrom now.

Jeff Houlgrave, a Marinaexpert, works closely withMarina Projects, a specialistconsultancy group with cli-ents around the world,which is based in Gosport,on The Solent in southernEngland.

His sums indicate that in10 years’ time the numberof superyachts will haveincreased and those seekingmarina-based dockage willhave grown accordingly,although 75 per cent ofthem will be less than 45metres.

“In the Med, there hasbeen a cycle of lack ofberths followed by anotherwhen there were toomany,” he says. “Now thatcycle is beginning to swingtowards a shortage again.”

The market for berths,however, lies not in dock-age for monster yachts of 75metres and above but in thesub-45 metre bracket.

“The market for verylarge yacht berths, whileperceived to be large, is infact quite small,” says MrHoulgrave. “There is a limitto the size of yacht that can

be run by individuals andmost of those are alreadyhome-ported somewhereand are unlikely to move.”

So there has to be anexpansion in the number ofsub-45-metre berths availa-ble over the next 10 yearsor there will be a shortage.

In commercial terms, theshortage of superyachtberths is a double-edgedsword, says Dennis O’Neil,editor of SuperYacht Busi-ness magazine

“To some extent it is cer-tainly deterring new-builddemand, but it also flags upthe business opportunitiesand potentially huge profitsthat exist for investors boldand creative enough tobuild high-end marinascapable of accommodatingsuperyachts.”

New infrastructure devel-opments are continuingly

opening in emerging territo-ries, most notably in theBaltic, China, elsewhere inAsia, and in the Pacific.

In fact, even the most far-flung regions of the planet –such as remote atolls andthe polar regions – arestarting to discover the eco-nomic benefits associatedwith visits by superyachts.

This is largely due to theincreased popularity ofexpedition-style super-yachts among adventurousowners and charter clients,who are keen to use theirextreme wealth to enjoyunique travel experiences.

Yet scarcity can be a mat-ter of perception. There willprobably always be a glut ofberths in areas were ownersdo not want to leave theiryachts and a shortage ofberths where they want touse them most.

With a growing waitinglist for berths, and an everincreasing demand forshort-term summer rental,Porto Montenegro on theBay of Kotor Tivat, Mon-tenegro, plans to increaseits marina’s capacity from185 berths to 485 for yachtsup to 125 metres overall.

More than 80 berths willbe for vessels above 40

metres, with a further 130for yachts above 30 metres.Work is expected to beginin October and to be com-pleted in spring 2014.

Oliver Corlette, managingdirector, says: “We havefirmly established ourselvesas one of the leadingsuperyacht home ports onthe Mediterranean, andhave opened up the Adri-atic as the new Cote d’Azur,but without the crowds andoverdevelopment.”

In addition to the marinaexpansion, the developersare finalising plans on thecreation of a superyachtrefit and maintenance facil-ity to be developed in twostages. It will be in partner-ship with the Adriatic Ship-yard at nearby Bijela.

The financial case forchoosing Montenegro asboth a place to visit and useas a home port is powerful.

Apart from the beauty ofthe area, there is a definitefinancial incentive in stay-ing in a country where VATis capped at 7 per cent onmarine-related and touristservices, while there is amaximum of 9 per centVAT on capital gains,income and company tax.

Nearby Croatia is also

appealing, with VAT of 10per cent when related totourism.

Elsewhere in the Mediter-ranean, developers arepushing ahead with the cre-ation of new berths.

Cyprus has marinas beingbuilt at Karpaz Gate in thenorthern breakaway stateand Limassol in the south,creating dockage on bothsides of the divided island.

Meanwhile, in Malta,Kurt Fraser, sales directorof Camper & Nicholsons

Marinas, plans to increasethe cost of buying super-yacht dockage.

He believes berths thereoffer exceptional value com-pared with elsewhere in thearea.

With a limited numberof berths available at manysizes and an increase insuperyacht visits and occu-pancy, Grand HarbourMarina will increaseberth purchase prices asof July 1, 2013 by at least15 per cent.

ContributorsVictor MalletMadrid Bureau Chief

Stanley PignalPrivate EquityCorrespondent

Richard DonkinFrances HoworthMichael HoworthFT Contributors

Andrew BaxterCommissioning Editor

Steven BirdDesigner

Andy MearsPicture Editor

For advertising details,contact:Ian EdwardsPhone +44 020 7873 3272Fax +44 020 7873 4336Email: Ian.Edwards@ft.comor your usualrepresentative

All FT Reports areavailable on FT.com. Goto: www.ft.com/reportsFollow us on twitter atwww.twitter.com/ftreportsAll editorial content in thissupplement is producedby the FT.Our advertisers have noinfluence over, or priorsight of, the articles oronline material.

More moorings mooted for MedMarinasA shortage ofberths is looming,write Frances andMichael Howorth

There has to bean expansion inthe number ofsub 45-metreberths over thenext 10 years

Porto Montenegro plans to raise capacity to 485 moorings

Brands like anapproach allowingthem to discusstheir objectives forthe promotion

FINANCIAL TIMES THURSDAY MAY 24 2012 ★ 5

6 ★ FINANCIAL TIMES THURSDAY MAY 24 2012