Evolution of Personnel in Romanian Shipbuilding Industry

MINISTRY OF ECONOMY AND FINANCE

THE CHANGING STRUCTURE OF THE WORLD SHIPBUILDING INDUSTRY

PARIS 4-4-55 DECEMBER 2008

SHIPBUILDING INDUSTRY IN ROMANIA – CONTINUITY AND COMPETITIVENESS –

Mr. VICTOR SCHMIDT Mr. MARIN DAN DEPUTY GENERAL DIRECTOR A.N.C.O.N.A.V. SEVERNAV S.A. SHIPYARD

ADDRESS: 204, Timisoarei Str., 220242, Drobeta Turnu Severin - ROMANIA Phone: (40) 252 314270 Fax: (40) 252 314675 E-mail:[email protected], http/www.severnav.ro SEVERNAV S.A. SHIPYARD

Yard area: 219.146,53 sqm

-On the assembling berth from the First factory, equipped with cranes of 50 tf and 16tf can be mounted in the same time 8 vessels. -The outfitting quay from the First Factory has an available working area of 450 sq.m, with double berth and a basin with an (surface) area of 6.240 sq.m , the depth of water is 5,75m. -The production halls are equipped with cranes and travelling cranes of 100, 50, 16, 12, 10 and 5 to.

1 HULL BUILDING SHOP 9 MEDICAL DISPENSARY AND OFFICES 17 SHIP RIGGING BASIN 2 WAREHOUSE FOR ROLLED MATERIALS 10 HEAD-OFFICE, COMPUTER CENTRE, OFFICES 18 SHIP RIGGING WHARF 3 STEEL PLATES AND PROFILES SHOT BLASTING SHOP 11 PAINT AND LUBRICANT STORE 19 BUILDING WAYS AND SLIPWAY 4 SOCIAL-TECHNICAL APPENDAGE 12 ELECTRIC AND CARPENTRY SHOPS 20 BLASTING AND PAINTING SHOP 5 ENGINE PRESERVATION HALL 13 MECHANICAL AND PIPING SHOP 21 OUTFITTING AND TESTING PIER 6 CENTRAL WAREHOUSE 14 LOCKSMITH’S SHOP 7 MAINTENANCE SHOP 15 COMPRESSOR STATION 8 CANTEEN/MESSROOM/OFFICES 16 SHIP RIGGING WHARF AND PLATFORM SHIPBUILDING INDUSTRY IN ROMANIA CONTINUITY AND COMPETITIVENESS

VECTORS OF EVOLUTION INSIDE SECTOR

REVISED LISBON STRATEGY FOR ENLARGED EUROPE (2007-2013) ACTION PLAN REGARDING SUSTAINABLE INDUSTRIAL POLICY (JULY 2008) Leader SHIP 2015 PROGRESS REPORT 2007 THE PROGRAM OF ROMANIAN GOVERNMENT

PRIORITIES OF THE SECTOR

• Establishing a Level Playing Field in World Shipbuilding • Improving Research, Development and Innovation Investment • Developing Advanced Financing and Guarantee Schemes • Promoting Safer and More Environment - Friendly Ships • A European Approach to Naval Shipbuilding Needs • Protection of Intellectual Property Rights (IPR) • Securing the Access to a Skilled Workforce • Building a Sustainable Industry Structure SHIPBUILDING INDUSTRY IN ROMANIA CONTINUITY AND COMPETITIVENESS

STRUCTURE OF SHIPBUILDING SECTOR IN ROMANIA

SHIPYARDS SHIP DESIGN COMPANIES STX RO Offshore Tulcea Ship Design Group Galati STX RO Offshore Braila Dutch Marine Trading Galati Damen Shipyards Galati ICEPRONAV Galati Constanta Shipyard Only SRL Galati Daewoo Mangalia Heavy NASDIS Galati Industries SHIP REGISTER COMPANIES 2x1 Holding Cape Midia Shipyard Germanischer Lloyd Romania Severnav Drobeta Turnu Severin Bureau Veritas Romania Control Orsova Shipyard International Giurgiu ATG Shipyard Det Norske Veritas Romania

HIGH EDUCATION AND TRAINING INSTITUTIONS - University “Dunarea de Jos” Galati - University Ovidius Constanta – Faculty of Mechanical Industrial and Maritime Engineering - Naval Academy “Mircea cel Batran” - Maritime University of Constanta SHIPBUILDING INDUSTRY IN ROMANIA CONTINUITY AND COMPETITIVENESS

SHIPBUILDING SECTOR MARKET SHARE IN CGT

2003 2007 Weight of Shipbuilding sector in GDP % 0,76 0,82 Productivity of Shipbuilding Sector CGT/CAPITA 4,93 15,42 SHIPBUILDING SECTOR MARKET SHARE IN CGT YEAR NUMBER BUILT EXPORT TOTAL VALUE EXPORT (CGT) ( CGT) THOU EURO THOU EURO

2002 12 148,587 148,587 272 272

2003 9 98,605 98,605 151 151

2004 9 93,865 93,865 134 134`

2005 18 246,915 246,915 331 331

2006 71 574,456 447,704 580 461

2007 27 282,476 282,476 410 410 Shipyards Turnover-2007 Shipyards ‘Employers-2007 Turnover – 410 mil EURO Total = 10,800 Shiprepair~54 mil EURO Ship repair = 900 Merchant New building ~400 mil Euro Merchant New building = 9,700 Naval ~ 10 mil Euro Naval =200 The ship export represents 94% of the total production of the Romanian shipyards, thus shipbuilding improves the export/import balance. Products -Merchant Vessels (Tankers, Bulk Carriers, Container Feeders, LPG, Barges, etc.) -Offshore &Specialized Vessels (AHTS,PSV, Dredgers, Tugs, Yachts, etc) -Ship repairs &ship conversions -Naval Vessels Containers 4860TEU – already delivered Crude Oil Tanker 69K DWT – already delivered

New Building Commercial Ships : 180,000 DWT BULKCARRIER & 11,000 TEU CONTAINERSHIP (8 Vessels / Year)

Containers 5560 TEU – delivered Containers 5560 TEU – under progress in different stages Capesize Bulk Carrier 180k DWT – start (biggest container build in Black Sea area) building SANTIERUL NAVAL CONSTANTA S.A CONSTANTA SHIPYARD Docking , Mechanical & Blasting & Painting Electrical Works REPAIRS & CONVERSION WORKS

Steel Works Pipe Works Conversions Projects:

A – Buoyancy Barge into to a Desalination Plant

B – Single Hull to Double Hull Tankers

C – Single Hull Aframax to Post Panamax Bulkcarrier

Conversion Project A Conversion Project BConversion Project C SANTIERUL NAVAL CONSTANTA S.A CONSTANTA SHIPYARD TECHNICAL PROGRESS through TECHNOLOGY Design & Engineering DELIVERY NEWBUILDING Production Flow

Modern and Efficient Ship Designs Planning Sea trials Promotion in the market – Building large series

SNC PC-41- 41 000 dwt - Oil Product & Chemical IMO 3 Tanker SNC PC-50 - 50.000 dwt - Oil Product & Chemical IMO 2 Tanker Materials Supply SNC BK- 60 - 60 000 dwt - SUPRAMAX Bulk carrier Outfitting SNC TK-115 - 115 000 dwt - AFRAMAX Crude Oil Tanker

Assembly & Blasting & Erection Shop ––primingpriming Steel cutting Indoor outfitting Painting in the dry dock DAMEN SHIPYARDS GALATI

Heavy Lift vessel Patrol vessel

Platform Supply vessel Tug vessel Advanced & Outfitted Hulls for off-shore industry completed inside the group Complete vessels built in STX RO Offshore Braila • Hulls with a high outfitting PRODUCT MIX DESCRIPTION degree : • Specialized vessels for the offshore industry; • Multipurpose supply vessels; • Anchor handling vessels; • Other specialized vessels for the offshore industry; • Factory-freezer trawlers; • Medium size ferries. SEVERNAV S.A. SHIPYARD

Main Particulars PASSENGER - CARGO VESSELS Length o. a. 116,00 m Length b. p.p. 105,00 m Breadth mld. 17,60 m Depth to main deck 9,90 m Design Draft 5,50 m Deadweight abt. 3800 T Main Engine Output abt. 3840 Kw D.G. - 2 pcs. Output 1.250 KVA D.G. - 1 pc. Output 400 KVA E.D.G..- 1 pc. Output 270 KVA Shaft Gen. Output 625 KVA Bowtrusther Engine Output 300 Kw Service speed 15,0 km No.of passengers 220 passengers - 27 ship crew - 36 Hotel/Restaurant personnel Classification: BV, I 3/3 E + PASSENGER SHIP/F; DEEP SEA + MACH +AUT - MS

ETHYLENE GAS CARRIER 8.600 cbm Main Particulars Length over all 129,00 m Breadth 17,80 m Draught 8,60 m Classification: GERMANISCHER LLOYD 100 A4 E1 Liquefied gas tanker MC E1 AUT Inert Main Engine: Main Engine output (MCR): abt. 6000 KW Service speed: abt. 16,5 Knots Cargo System: Is consisting of: 3 independent cargo tanks, type C (bilobal tanks); cargo piping system; cargo pump plant; cargo hold ventilation system; cargo reliquefaction plant; inert gas plant; one hose handling crane electric-hydraulically is provided. SEVERNAV S.A. SHIPYARD

Designing and building inland and marine vessels up to 10.000 dwt. Specialized in steel constructions, naval equipment and ship repair works. Aluminum, GRP and steel craft building. Export-import activity, goods shipping and technical assistance. LABOUR FORCE – Abt. 1550. ARCHIVED EVENTS two RORO Tanker vessels of 2.400dwt for a Greek company. new design and worldwide innovation. two luxury Motor yachts of 63 and 75 ft for a Dutch company. PLANNED EVENTS intensive modernization program intended to improve the working technologies, to comply with the highest standards. invest to improve the quality of its products, in the following priority objectives: - integrated informational system; - shut blasting, blasting and painting equipment; - equipment for improving of life and working conditions of its employees; - environment protection. SHIPBUILDING INDUSTRY IN ROMANIA CONTINUITY AND COMPETITIVENESS

EVOLUTION OF PERSONNEL IN ROMANIAN SHIPBUILDING INDUSTRY

35000

28756 30000

25000 20407 20500 20400 20000 17285 17303 17260 16600 16580 15000 10800 10000

5000

0 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 SHIPBUILDING INDUSTRY IN ROMANIA CONTINUITY AND COMPETITIVENESS

SHIPREPAIR SUB-SECTOR

SHIPYARD SHIPREPAIR

ACTIVITY FACILITIES STX RO Offshore Braila Minor activity Combined yard Constanta Shipyard Repair and building Combined yard Damen Shipyards Galatz Minor activity Combined yard Daewoo Mangalia Heavy Repair and building Combined yard Industries 2x1 Holding Cape Midia Repair yard Repair yard Shipyard Mangalia Shipyard (Navy) Repair and building Combined yard ORSOVA Shipyard Minor activity Combined yard SEVERNAV Drobeta Turnu Repair and building Separate repair facility Severin STX RO Offshore Tulcea Minor activity Combined yard

The yards highlighted in bold print in the above table are considered to have ship-repair as either the sole or significant activity whereas the other yards are considered to operate currently as predominantly shipbuilding yards. SHIPBUILDING INDUSTRY IN ROMANIA CONTINUITY AND COMPETITIVENESS

ANALYSIS OF SECTORS

STRONG POINTS WEAK POINTS Skilled labor force at a low cost Under used of existing capacities Good facilities – dry docks, slipways or Low productivity – within 15.42 cgt / capita synchrolift Lack of cash and rather high debts for the small Good quality of the products companies A long tradition Sometime Delays in delivery time Good geographical position: Black Sea Coast – 1000 km on Rotterdam - Constantza Waterway

¾Developments in shipbuilding The order book of the Romanian shipyards is expected to record about 494,824 cgt at the end of 2008. Within 2006-2007, 5,800 workers left Romanian shipyards for jobs in EU and USA shipyards. The workforce shortage seriously affected the vessel deliveries, therefore the financial figures for 2007. The engineering design recorded a significant number of orders. Education and training will be enhanced in order to cover the effects of personnel loss. ¾Evolution of ship maintenance, repair & conversion The total turnover related to the ship repair & conversion activity decreased in 2007 with 21% in comparison with 2006. SHIPBUILDING INDUSTRY IN ROMANIA CONTINUITY AND COMPETITIVENESS GOVERNMENT INITIATIVES The Government finalized the privatization program of the companies in this sector. The privatization methods were: - Selling the State owned shares package to strategic investors (SN Constanta, Damen Galati, STX RO Offshore Braila, STX RO Offshore Tulcea) - Capital gains ( joint – venture) (Daewoo Mangalia Heavy Industries, Severnav Drobeta Turnu Severin, Navy Yard Mngalia) During the privatization process a program of support measures for the shipyards was applied (2004-2006), amounting 23,316,232 EURO. These support measures were generated for the restructuring purposes and for privatization and export promotion. Stage of support measures granted to the shipyards between 2004 and 2006, in accordance to the classification of OECD Questionnaires C/WP6 (2007)8

Type of aid/Company 2004 2005 2006 TOTAL 2004-2006 A. Direct transfer of funds from Government/ 65,368.7 3,530 - 68897,7 Mangalia Shipyard D. Loan’ guarantees / Constanta Shipyard - 7,054,595 - 7,054,595 E. Export credit facilities/Contanta Shipyard, DMHI, 11,137,747 6,958,709.6 6,427,003 24,523,459 STX RO Offshore Tulcea, Braila, Navol Oltenita, Severnav, Mangalia Shipyard, Orsova Shipyard F. Take over of debts by Government or debt 9,795,089 3,202,920 - 11,998,009 reliefs for industry/Constanta Shipyard G. Conversion of the debts into shares/ Constanta 11,109,638 31,909,550 - 43,019,188 Shipyard H..Government revenue that is foregone or not 359,792 83,500 220,240 663,532 collected/Constanta Shipyard, DMHI I. Rehabilitation of infrastructure / Severnav 343,023 343,023 (Rehabilitation Danube’s bank) TOTAL – Lei(romanian currency) 31,810,657 49,212,804 6,647,243 87,670,704 Average exchange rate LEI/EURO 4.0532 3.6234 3.5245 Total-EURO 7,848,282 13,581,940 1,886,010 23,316,232 SHIPBUILDING INDUSTRY IN ROMANIA CONTINUITY AND COMPETITIVENESS

CONCLUSIONS (1)

• Since 1990, during the restructuring period no new production capacities were built. • No such investments are envisaged in the future. • The restructuring of ownership was completed, except two shipyards. • Improving competitiveness of yards is necessary, in order to allow them to compete globally without a special support regime: • Quality systems according with ISO standards and certification by well known classification companies; • Sustaining of innovation activity, in order to promote the most performing technology • Promotion of legislation concerning the industrial parks and clusters (especially in the areas Galatzi-Braila and Constantza – Mangalia) • Restructuring and adjustment of existing capacities • Continuous training of the labor force SHIPBUILDING INDUSTRY IN ROMANIA CONTINUITY AND COMPETITIVENESS

CONCLUSIONS (2)

• Development of marine equipment industry complementary with EU countries • The poor domestic demand will keep Romanian shipbuilding an export oriented industry for the next years • Our strategy will pay attention to the international legal framework. • An important role in the restructuring process of the Romanian shipbuilding industry played the Romanian Shipbuilder’s Association (ANCONAV), set up in 1994. • Since 2004 ANCONAV was accepted as member of CESA. • Romania was invited for full membership in OECD’s Council Working Party on Shipbuilding • Romania fully supports the principles of the Agreement Respecting Normal Competitive Conditions in the Commercial Shipbuilding and repair Industry and is convinced that its coming into force, as soon as possible, could offer long term and improved stability for shipbuilding industry. SHIPBUILDING INDUSTRY IN ROMANIA CONTINUITY AND COMPETITIVENESS

THANK YOU VERY MUCH FOR YOUR KIND ATTENTION!

Mr. VICTOR SCHMIDT Mr. MARIN DAN DEPUTY GENERAL DIRECTOR MANAGER -ANCONAV Tel: + 4021.305.52.004021.305.52.00Tel: 02417530241753340/1249340/1249 Fax: + 4021.3112434 Mobile: 0722697218 [email protected] [email protected]