Manulani Inaugural Voyage Press Conference
Presentation by
Jim Andrasick
President and CEO
Matson Navigation Company
June 28, 2005
While this is the third consecutive year we have had a press conference in
conjunction with the inaugural voyage of a new Matson containership, it is still
a cause for celebration as it marks yet another milestone in both Matson's fleet
replacement program and the future of Hawaii's shipping lifeline to and from the
U.S. Mainland. Today's presentation will focus primarily on the Matson fleet,
underscoring what our investment in four new containerships means for Hawaii,
how the vessels will be deployed in a new Hawaii-Guam-China service in 2006, and
why we plan to convert two of our largest vessels currently deployed in our Guam
service to combination ro-ro/containerships following their entry into the
Hawaii trade next year. In addition, we want to discuss briefly issues
pertaining to Hawaii's harbors and the new entity that has been formed to
address these issues. While Matson's service today encompasses far more than
merely port to port ocean transportation services, it is important that
businesses and consumers alike understand the value of Matson's investments in
new ships and added capacity in ensuring the state is served by modern, reliable
and efficient ocean transportation services - a theme that is part of a new ad
campaign that was launched this year, called "Brought to you by Matson."
Keeping Hawaii's Lifeline Modern, Reliable
First of all, the new MV Manulani - which is Hawaiian for `heavenly bird' -- is
the third of four new ships built for Matson by Kvaerner Philadelphia Shipyard,
Inc. (KPSI). In total, the new ships represent an investment of over $500
million, more than any other Jones Act carrier serving any market. With their
more fuel-efficient diesel engines, state-of-the art shipboard technology and a
number of "green" environmentally friendly design elements, these four new ships
will provide Hawaii with a strong, modern, reliable lifeline to and from the
U.S. Mainland. With the addition of the two newest vessels, the average age of
Matson's active containership fleet will be a relatively young 14 years. As
replacement vessels, the Manulani and its sisterships complement the versatile
Matson fleet, which includes containerships, combination container/ro-ro ships,
a dedicated ro-ro vessel and four specially designed barges for Hawaii's
Neighbor Islands and the Mid-Pacific. It is Matson's ongoing philosophy to
modify and enhance our fleet to meet the changing needs of our customers.
American-Built Vessels at a Good Value for Hawaii, U.S.
The four new KPSI ships are designed to carry the wide range of commodities
needed to support Hawaii's economy and has ample capacity for "big boxes," 40,
45 and even 53-foot containers. As U.S. Jones Act vessels, Matson's new ships
are beneficial to both Hawaii and the U.S. Merchant Marine. The Manulani joins
the U.S. Jones Act fleet of over 44,000 vessels serving U.S. domestic waterways.
As with similar laws that apply to domestic commerce, such as those for
airlines, railroads and trucking companies, the Jones Act ensures that the
country is served by a strong U.S. Merchant Marine that supports the nation both
economically and in times of national emergencies. The U.S. Jones Act fleet not
only provides important jobs for American shipyard workers and seafarers, it
ensures that U.S. domestic ocean carriers comply with U.S. law, including
environmental regulations and labor laws, and pay U.S. taxes. Another important
issue is national security--a concern that has become unfortunately very real to
each and every one of us in recent times. It is important to understand that all
Jones Act ships, containers, equipment, terminals, cargo tracking systems and
employees who operate these systems will be made available to the U.S. military
in times of emergency. It is vital that Americans control Hawaii's lifeline to
and from the Mainland - not foreign governments.
As while the price tag of American-built Jones Act vessels are higher than ships
built in international yards, Matson has been able to purchase these new ships
at a relatively low cost. The first two ship purchase at $107 million each was a
particularly good value as it was the first commercial contract for KPSI, with
Matson being rewarded for selecting a shipyard without a proven track record in
shipbuilding. The third and fourth vessels cost Matson approximately $315
million, making the four ship average cost at $132 million. While this is still
a significant cost per ship, it is very reasonable when compared to the $150
million cost of Matson's MV R. J. Pfeiffer in 1992. In addition, another Jones
Act carrier, TOTE, recently built two new ships for the Alaska trade at $175
million each.
New Guam-China Service Commencing in 2006
The addition of the Manulani to the Matson fleet, along with the remaining KPSI
vessel currently under construction, will allow Matson to launch a new Guam
replacement service in February 2006, when our existing 10 year agreement with
APL expires. The new five ship service will include all four of Matson's new
KPSI containerships and the MV R. J. Pfeiffer, utilizing the company's most
modern, fuel efficient vessels. The new service will begin in Long Beach and
will include stops in Hawaii, Guam, and two ports in China, from where it will
sail directly back to Long Beach.
The new service will reaffirm Matson's commitment to serving Guam for decades to
come. Matson will provide Guam with day of the week service and will maximize
reliability by deploying our newest vessels to the U.S.'s western-most
territory. In addition to Guam, Matson has extended its expertise in supporting
island economies to the neighboring islands of Saipan, Tinian, Rota, Yap, Chuuk,
Pohnpei, Kosrae and Palau. Beyond working with customers on day-to-day business
activities, Matson has endured typhoons and supertyphoons with the Guam
community, and done our best to demonstrate resiliency and responsiveness during
times of crisis. As is also true in Hawaii, Matson has done its part to give
back to the people of Guam through community service efforts. Virtually all of
Matson's employees in Guam are involved in a wide range of community efforts.
Last year, we were proud to have a leadership role in supporting the First Lady'
Joann Camacho's effort to return Guam's Bookmobile to service as part of her
reading advocacy program. We are equally proud that Governor Felix Camacho and
the First Lady were honored guests at the Manulani's recent christening in
Philadelphia, where, as the vessel's sponsor, Mrs. Camacho successfully broke
the traditional bottle of champagne against the ship's hull on her first swing.
In addition to benefiting Hawaii and Guam, these new ships provide Matson with
an opportunity to expand its service offerings to China, beginning in February
2006. Matson's five most modern, fuel efficient vessels will be deployed in the
weekly service, which will include two port calls in China, Ningbo and Shanghai.
It's an exciting new venture for Matson and unusual for a Jones Act carrier.
Matson will be unique in that it will carry U.S. Jones Act cargo westbound and
export cargo from China to the U.S. Mainland eastbound. We anticipate moving
approximately 50,000 containers from China annually with revenue in the $100
million range. Matson will offer premium service with competitive transit times
in the China/Long Beach market. Matson's dedicated terminal facility in Long
Beach will provide customers with fast, efficient gate and yard operations,
avoiding many port congestion issues experienced by large, multi-user
international container terminals. Matson will offer customized service
distinguished by industry leading customer service capabilities. In addition,
the Matson subsidiary, Matson Integrated Logistics, can help expedite shipments
to virtually any inland U.S. destination. While the new service is a fresh
undertaking for the company, it marks a return of sorts. In the late 1960s,
Matson introduced containerization to the Far East, particularly Japan. We are
confident that this latest undertaking will have an equally proud place in
Matson's history.
A&B President and CEO Allen Doane and I recently returned from a Hawaii trade
mission to China, led by Governor Linda Lingle. While the experience was
memorable and the mission was successful in a number of areas, we were
especially pleased to realize that there is a lot of "aloha" for Hawaii in
China. It was very clear that the Chinese feel very positively about Hawaii and
Matson's long history with the Islands.
Integration of C-9 Vessels into Hawaii Service/Adding Ro-Ro Capacity
With the start up of Matson's new Guam-China service, Matson's three C-9s that
are currently deployed in our Guam alliance service with APL will be integrated
into our Hawaii service fleet. Our current plan is to convert two of the ships
to combination ro-ro/containerships. The C-9s provide Matson with a unique
opportunity, as they are the largest vessels in our fleet and are
diesel-powered, making them more fuel efficient. By adding garage capacity, the
combination vessels will provide the most economical method of shipping
vehicles, with one vessel transporting the equivalent capacity of two ships in
our service today.
Matson currently has two combination ro-ro/containerships, the SSs Matsonia and
Lurline, and charters one dedicated ro-ro vessel, S.S. Great Land. With the
conversions, each of the C-9s will have ro-ro capacity equal to the Great Land,
approximately 1,000 vehicles. In addition, the ship's container capacity will be
comparable to Matson's C-8s or the R. J. Pfeiffer, approximately 2,200 TEUs.
The plan is part of multi-phase program that began in 2003 is designed to
provide our auto customers with the two service features they prefer: frequency
of service and ro-ro capacity. When we launched the program in January 2003,
Matson's Hawaii service fleet had an annual ro-ro capacity for 16,000 vehicles.
By chartering the Great Land and adding an above deck garage on the Lurline that
capacity increased to 52,000. When the C-9 conversions are complete, Matson will
have ro-ro capacity for over 80,000 vehicles. This additional ro-ro capacity,
along with our competitor's new car carrier, will be able to accommodate all the
vehicles presently shipped to and from Hawaii in the industry-preferred ro-ro
method.
In addition, by having four combination ro-ro/containerships in our fleet,
Matson will be able to offer twice weekly ro-ro service from all West Coast
ports. The Matsonia and Lurline will also continue to make direct calls to Maui
and the Big Island and the ro-ro barge Waialeale will continue to complement
those calls with its dedicated Neighbor Island ro-ro service.
With our fleet of active Hawaii service vessels, as well as reserve ships,
Matson is fully capable of ensuring reliability for all of our customers,
including the auto market. If a Matson ship needs to be temporarily taken out of
service, we have enough reserve capacity to prevent any disruption or delay in
our scheduled service. Thus, we are able to offer the most premium service in
the Hawaii trade, offering full ro-ro capacity, frequency, and reliability.
Continued support of virtually all of major auto manufacturers
While a new competitor has entered Hawaii's auto market this year, Matson is
particularly gratified that it has continued to receive the support of virtually
all of the major auto manufacturers. Matson recently reached new multi-year
agreements with Ford Motor Company and General Motors for the carriage of their
vehicles to Hawaii. While the specifics of the agreements are confidential, they
encompass service to all of Hawaii, including the Neighbor Islands. The Ford
agreement includes Volvo Cars, Jaguar and Land Rover. In addition to these
agreements, Matson has multi-year agreements with Dollar Thrifty Group, BMW,
Mercedes Benz, Toyota and Nissan.
We are also proud of the fact that our efforts have been formally recognized by
these valued customers. In 2004, Ford honored Matson with its prestigious Q1
award. This past April, Toyota presented Matson with its 2004 Toyota Logistics
Partners Excellence Award for marine services on-time performance.
We are also continuing to invest in new auto tracking technology and improving
our web based services for this important customer base. Our web site has a
special section for individuals shipping vehicles called "Ship Matson for the
Wheels You Love." The web site has been designed for the average consumer with
easy 1-2-3-4 steps in booking a vehicle. We also have remained price competitive
in this market.
Hawaii Harbors Issues
[Pending]
Ka Ipu `Aina Passes Milestone of 100 Cleanups in Hawaii
Earlier this year, Matson's environmental program, Ka Ipu `Aina, passed the
milestone of 100 cleanup events throughout the state of Hawaii. Launched in May
2001, the program offers Hawaii's non-profit organizations incentives for
conducting environmental cleanup efforts. Matson donates the use of a container
for the cleanups, provides trucking drayage services to and from the site, pays
any costs associated with disposal and makes a $1,000 donation to the respective
non-profit when the cleanup initiative has been successfully completed.
In the past four years, a total of 106 cleanups have been conducted throughout
the state, with Matson donating $106,000 to various non-profits. Examples of
organizations that have participated in the program are Malama O Puna, Recycle
Hawaii, Camp Mokuleia, Kahekili Soccer Club, Kalihi YMCA, American Lung
Association of Hawaii, Lihue Pop Warner Little Scholars, Inc. and Mokihana
Aquatics. Regions that have benefited from an environmental perspective from the
program include Kalihi Valley/Stream, Manoa Stream/Park, Kalaeloa Campground,
Kawainui Marsh, Sandy Beach, Kewalo Basin, He'eia Kea Boat Launch/Park and Pearl
Harbor Bike Way.
New Ad Campaign on Hawaii's Airwaves: "Brought to you by Matson"
And finally, I would to close today's presentation with a look our current ad
campaign. For the first time in nearly 25 years, Matson has launched a TV
advertising campaign that highlights the committed service Matson provides to
Hawaii businesses and consumers alike. Entitled, "Brought to you by Matson,"
this integrated campaign, which includes radio and print media, aims to extend
our brand reach, remind our customers and the public of the strong value that
Matson brings to Hawaii, and present a friendlier image of our company. The
series shows a number of examples of commodities Matson ships and includes a
reminder that Matson is "Hawaii's Shipping Expert." The pencilmation approach
illustrates in a relatively fun, light manner the range of goods Matson ships -
providing a broader awareness in the Islands of the role ocean transportation
has in delivering virtually everything that is needed to support the state's
economy. The two examples I will show today feature an elephant in the Honolulu
Zoo and Peter Piper's personal vehicle. [Show two TV commercials]
I would now like to open the floor to any questions. I will also be available
for any one on one interviews for the next half hour.
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