NASSCO to build LNG-Ready ConRo ships for Matson

Matson, Inc. (NYSE: MATX) today announced that its subsidiary, Matson Navigation Company, Inc.,has signed a contract with General Dynamics NASSCO, a wholly owned subsidiary of General Dynamics (NYSE: GD), to build two new combination container and roll-on/roll-off (ConRo) vessels for its Hawaii fleet at a contract price of $511 million for both vessels.

Construction of the first ship will begin in early 2018, with deliveries in 2019 and mid-2020, respectively. The ships will be constructed at the NASSCO shipyard in San Diego.

"We are very pleased to partner with Matson to build their next generation of shipping vessels," said Fred Harris, president of General Dynamics NASSCO and Bath Iron Works. "NASSCO has long played a leading role in revolutionizing the future of the American shipping industry. Our partnership with Matson builds upon NASSCO's successful track record of constructing high-quality, highly-efficient and on-time delivery for the Jones Act trade."

NASSCO is partnered with Daewoo Ship Engineering Company (DSEC) to provide its customers with state-of-the-art ship design and shipbuilding technologies. Since 2006, the partnership has produced four commercial ship designs for five separate Jones Act owners.

Matson is calling these vessels the Kanaloa Class in honor of the ocean deity revered in the native Hawaiian culture and will name each of the new vessels after predecessor ships from its 134-year history.

The first vessel will be named Lurline, the sixth Matson vessel to carry that name, while the second vessel will be its fifth named Matsonia.

The Kanaloa Class vessels will be built on a 3,500 TEU vessel platform, which is 265 meters long, 34.9 meters wide (beam), with a deep draft of 11.5 meters and enclosed garage space for up to 800 vehicles.

In addition, the new vessels will have state-of-the-art green technology features incorporating LNG-capable main and auxiliary engines, which are compliant with Tier III emission requirements. The design accommodates future installation of a LNG fuel gas system.

Other features include a fuel efficient hull design, environmentally safe double hull fuel tanks, fresh water ballast systems and dual-fuel engines, meaning that they will be able to operate at speeds up to 23 knots on either conventional fuel oils or liquefied natural gas (LNG) with some adaptation for LNG.

The two Kanaloa Class ships will replace three diesel powered vessels in active service, which will be moved to reserve status.

With delivery of the Kanaloa Class ships, along with its two new Aloha Class ships, Matson will have completed the renewal of its Hawaii fleet, allowing it to retire its seven older steamship vessels that will no longer comply with environmental regulations in 2020 without substantial modification.

The larger capacity of the Aloha Class and Kanaloa Class vessels will allow Matson to return to an optimal nine-ship fleet deployment in Hawaii, increasing efficiency and lowering operating costs.

The Kanaloa Class vessels are expected to be more fuel efficient than the ships they will replace and will add rolling stock carrying capacity while lowering operating, repair and maintenance, and dry-docking costs.

"This vessel order underscores Matson's long-standing commitment to serve Hawaii with the largest, most reliable, efficient and environmentally friendly fleet for the long-term," said Matt Cox, president and CEO. "The Kanaloa Class ships will be built specifically to meet Hawaii's freight demands while reducing our environmental impact and improving our efficiency for decades to come."

Matson expects to finance the Kanaloa Class vessels primarily through cash flows from operations, borrowing available under the company's unsecured revolving credit facility and additional debt financings, which could include U.S. Government guaranteed vessel finance bonds (Title XI).