How has the COVID-19 pandemic impacted Karpowership's operations, and what measures have you taken to ensure safety onboard your vessels?
Karpowership needs to maintain 100% reliability and availability to our customers because the electricity generated on our ships represents the baseload electricity capacity in our markets. Thus, we took several measures to ensure reliability and availability as the pandemic persists. The normal rotational period for employees on a Karpowership vessel is from one to three months. Thus, the moment we heard about the global spread of COVID-19, we relocated our teams that were well-rested to ships so that we could complete the rotation before the virus spread too far. These new and rested teams would not be rotated for the next three months. That was our first action. The second action we took was to completely stop the ins and outs from the ships. We were able to do that because our ships are fully contained living facilities. There are entertainment facilities on our ships such as Playstations or basketball courts, and they have full accommodation, showers, water treatment, on-board cooks, high-speed internet, and everything else to make them comfortable. For any very crucial activity that needed someone to board or disembark, we would first take their temperature, do a COVID-19 test, and then accept them onboard.
How has the COVID-19 pandemic impacted demand for Karpowership's power generation capabilities?
I can approach this from three different angles—the sharp fall in tourism, lower fuel prices, and access to electricity. In saturated markets where electricity supply already meets full demand, the impact of a drop in tourism naturally lowered demand. However, where we see lower energy prices for natural gas or fuel, it has made it cheaper to buy electricity from the powerships, which has had the reverse impact on demand for electricity from our ships. This is the story for countries that have tourism as the major source of revenue, such as Cuba and Lebanon. For the less-touristy countries where we operate, such as Mozambique, Sierra Leone, and Gambia, we cannot actually meet the full demand with our current supply anyway. So when demand dropped, the supply was already here. Overall, none of our ships have reduced capacity. Customers are consuming 100% of whatever we can provide, even if their contract capacity is less than that of our ship. They want to benefit from this low-cost fuel environment, which may be short-lived.
Karpowership has its largest presence in the African market. What are your ambitions for the African continent as it develops both its indigenous energy supply and greater traditional electricity generation capacity?
Our vision is to use their indigenous natural resources. For example, we want to be able to use Sengalese gas in Senegal, Mauritanian gas in Mauritania, Mozambican gas in Mozambique, and so on. Until then, we want to provide the cheapest electricity possible. Those indigenous gas exploration projects may say they'll be operable in two to three years, in African conditions that could mean five to six years, if not more. You cannot leave a nation starved for power for that long and not expect it to have a major opportunity cost of growth. In order to be able to bridge from today until then, we want to be able to supply electricity for example via LNG, which is more environmentally friendly and cheaper. However, the future of Africa lies in natural gas.
What market characteristics are most suitable for Karpowership?
Almost all markets in Africa make perfect sense for different reasons. Many countries in Latin America and Asia are also suitable for us. A number of different market conditions can result in a need for solutions such as ours. For example, if a country has hydro capabilities, the major differences in many African countries between dry and wet seasons results in a need for backup generation for dry seasons. If they do not have hydro capabilities, they still may need baseload electricity because renewables currently do not generate enough electricity to be baseloads. Once battery solutions become efficient and feasible enough, they can be coupled with renewables and act as the baseload power source. Until that time, space- and cost-efficient baseload generation is key. With such a self-contained space, we are able to generate the full capacity required for a county. It is often easier to build a 500-MW powership in Yalova, Istanbul, in a shipyard versus building a traditional power plant in Africa with limited access to infrastructure such as roads, permits, logistics, transportation, and customers.
What techniques do your ships employ to keep electricity affordable?
There are two main thermal power technologies: turbines and engines. Our ships use engines that are interchangeable between gas and fuel oil, which allows us to use the cheaper alternative, based on price and availability in a given market. Turbines and engines have distinct characteristics that make them suitable for different markets. Turbines work well with extremely stable grids with no load fluctuations or supply interruptions. Engines, on the other hand, are far more durable and are not affected by load curves, frequency fluctuations, or hot temperatures. Africa needs engines, but unfortunately the lack of information about this means it has been spoon-fed turbines instead of engines for decades and decades. Our engine technology—which is hardly novel—still has the highest efficiency in the market and is the right solution for Africa. That is why we can make it so affordable.
Can you give an overview of the vessel classes you are building in Istanbul now and the generation techniques you will employing?
When we first started our powership fleet, we only had one class—which designates size and generation capacity—of ship. That was between 100-200MW. As we have expanded operations, there are many countries in Africa whose complete country-wide generation is just 40MW. In order to be able to provide a solution for them, we introduced a smaller-sized ship called the Seal class. There are also countries with shallow draft requirements that cannot accommodate a ship with a depth of 6m. We made a mid-sized class called the Mermaid class that has a 3-m draft and 80MW capacity. Some countries in Southeast Asia, however, like Indonesia, require 500MW. Ghana is the same, with a huge industrial economy that needs bulk power injection from one location. Thus, we build a vessel with the capacity to generate nearly 500MW, so we created the Khan class, which is now the largest vessel of its type in the world. The 20 vessels we have in the pipeline are from all of those classes.
What main challenges will you face in the coming year, and what are your primary objectives?
We have a strong balance sheet as a company, though third-party risks represent a challenge for us, especially considering the global economic troubles ahead. There may be suppliers with financial trouble or customers with currency problems. Our most important objective is to keep our employees safe. If we can achieve that, it will make it easier to maintain full reliability and availability for our customers.