Leasing in Shipbuilding

Russia has extensive river waterways. Using river transport for some kinds of cargo can be more cost effective than services of railroad or car transport, taking into account limited capacity of railroads and growing tariffs. Traditionally, the cost of river transportation is 25–30 % lower than that of railroad transportation. However, the potential of rivers is not fully used. There are several reasons: hydraulic engineering structures are technically outdated and obsolete, cargo fleet is worn out, very few new ships are built, the existing transport schemes fail due to broken production relations. As a result, mostly construction materials are transported by river, which makes river transport depend on the main consumer of the services, so any fluctuations in the building sphere inevitably reflect on the cargo turnover of river transport.

In addition to the stated problems, the industry is affected by low investment activity. The growth of prices for fuel reduces the cost effectiveness of inland water transportation and increases the payback period of projects. In such conditions it is very difficult to attract finances for building new ships.

The transport strategy of Russia till 2030 includes a number of measures on development of inland water transport, such as modernization and replacement of handling equipment in docks and introduction of new capacities for new cargo flows, creation of logistic centres and container terminals, reconstruction and development of access roads, reconstruction of inland waterways and hydraulic engineering structures, upgrading of technical fleet, introduction of satellite navigation and information support, development of transport fleet. These measures should enable growth of competitiveness of inland water transport in relation to other kinds of transport.

According to experts, minimal needs of the river industry of Russia till 2020 are estimated at 350 transport and 400 auxiliary vessels. State stimulation of fleet renewal provides for introduction of significant tax incentives for shipbuilding enterprises and shipping companies that order vessels at Russian shipyards.

Public support measures and increasing demand for river transportation have caused an increase in the number of shipbuilding orders in Russia. However, the problem of attracting finances is still relevant — the payback period for a ship is not less than 10 years, while the cost of ships is high.

An effective tool for financing shipbuilding is leasing. The advantages of leasing include a lower volume of advance payments (the rate recommended by VTB is 30 %, by Sberbank — 10–20 % of the contract price of the ship, “Yugra-Leasing” — of 10 % of the contract price of the ship); upon the end of the leasing term the right of ownership is transferred to the lessee, or the lessee buys out the property at the residual value. The term of leasing financing, as a rule, is about 10 years. Besides, leasing implements accelerated depreciation which enables reducing the total amount of the property tax, while the profit tax can be reduced by applying leasing payments to the production cost of services. Leasing enables optimizing financial accountability, through increasing liquidity of the enterprise by applying tangible assets to the balance of the leasing company. To compare, in case of financing with a bank loan the production cost includes only loan interests.

Use of leasing schemes as a tool of support and development of Russian shipbuilding is included in the program “Development of shipbuilding for 2013–2030”. It suggests creating special leasing companies, consolidating small orders of small and medium-size shipbuilding and fishing companies with the aim of optimizing and cheapening of construction. In addition to fulfilling certain goals set in the “Transport strategy of the Russian Federation till 2030”, development of leasing of ships built at Russian plants will provide orders for shipyards and work for qualified specialists.