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AKER PHILADELPHIA SHIPYARDAker Philadelphia Shipyard (Oslo: AKPS) is thesecond-largest commercial shipbuilder in theUnited States, having built more than one-half ofthe large ocean-going vessels in the US marketsince 2003. The key word in all of that is “commercial.” AkerPhiladelphia is a Jones Act builder, and was hit hard in thewake of the recent financial crisis. At the nadir of the marketcrisis, the company was forced to make more than 700 layoffs.In February 2011, Pennsylvania and Philadelphia taxpayerstook a significant gamble, infusing $42 million into thecompany to build two oceangoing petroleum product tankerson spec. The gamble – Aker prefers to call it ‘market vision’– paid off handsomely in August 2012 when Aker sold thetwo ships to Crowley. Since then, it’s been fair winds and followingseas for the Philadelphia-based shipyard. Figuring outwhat comes next requires a look back. How Aker (it rhymeswith “soccer”) went from merely surviving to its current conditionof thriving is therefore one of the more interesting maritimestories of this year; if not the entire decade.First time visitors to Aker’s Philadelphia operation immediatelynotice the massive, modern 660 metric tonne, 64 meter(210 feet) tall Goliath crane. Only slightly less impressive isthe gleaming infrastructure, reflecting a shipyard that has beencompletely refurbished and in some places, rebuilt from theground up. Established first in 1801 – with a rich history withNavy work at its heart – the yard waseventually was closed in 1996. Withseveral starts and stops and hiccupsalong the way, the location is now, likemany other American yards, a thrivingbeehive of activity. In late November,MarPro traveled to Pennsylvania for afirsthand look at this pure commercial,Jones Act builder.Market ConditionsA booming shale crude oil industryhas created high demand for US-flaggedships for the coastwise transport of oil,gasoline and chemicals. Since the successfulsale of the spec ships, AkerPhiladelphia has landed contracts fortwo petroleum tankers for Exxon Mobilaffiliate Sea River, as well as a $500million agreement to build and share inthe operation of up to eight additionalproduct tankers for Crowley. And inNovember, Aker also inked a deal withMatson for two 3600-teu Jones Act containerships– the largest ever to be builtin the United States. The contract priceMy AdviceKristian RokkePresident & CEO, AkerQuality“Pleased, but never satisfied.”Government/Navy Work“We offer value to our customers by focusing100% on commercial projects.”Foreign flag newbuild bids“Our attention is directed toward the Jones Act,but; never say never.”Repair Work“We have been approached, and there is potential,but our current focus is on newbuildings.”was reportedly $418 million for the pair, with deliveries quotedfor the 3rd and 4th quarters of 2018.With four of the Crowley tankers firmly contracted and bothparties looking hard at the additional four options, these areheady times for Aker. The shipyard’s solid backlog and strongcash position have pushed its stock price up more than 30times its market low in mid-2012. Despite the large run-upin market capitalization, the company’s debt load and TotalEnterprise Value (TEV) to EBITDA ratio both seem to be reasonable,as compared with its peers. That said; major risksinclude cancelled contracts and changes to the Jones Act, neitherof which seem to be likely in the current political andeconomic environment.Steering the ShipJust 30 years old, Kristian Rokke joined Aker PhiladelphiaShipyard in 2007. Prior to that, the Aker CEO held various roles,including SVP Operations and Senior Shop Manager within theshipyard and has experience from offshore service and shipbuildingfrom several companies in the Aker group. A BoardMember of TRG Holding AS, which owns 66.7% of Aker ASA,Rokke is currently completing his MBA at The Wharton Schooland has also studied economics and mathematics at Colby College,London School of Economics, and Political Science at theNorwegian School of Management (BI).Joining Rokke is Scott Clapham, SVPProjects and Business Improvementsand Jeffrey Theisen, the firm’s ChiefFinancial Officer. Together, they havehelped engineer the shipbuilding giant’sremarkable turnaround, and they havedone so in an arguably unconventionalstyle. As a management team, the trio isremarkably closemouthed, but Rokke,in his own quiet, understated manner,summed up some key metrics in the boxto the left.The Aker Way: Lucky or Prescient?Kristian Rokke eagerly looks ahead towhat will come next. He told MarPro inNovember, “Our order backlog gives usa golden opportunity to strengthen thecommercial edge of our shipyard andputs us in good position for whatevercomes next.” According to Aker’s CEO,the shipyard’s success in recent yearshas as much to do with Aker’s attitudeas anything else. He insists, “We believedin the product tanker market andput our own money behind that belief.”34 Maritime Professional I 4Q 2013