AMDP Investment Proposal Memo
BAR Technologies Investment Proposal
Reducing Carbon Emissions Through Wind Wings
To: Clark Hansen, CEO of AMDP Research
From: Christian Fulton, Research Analyst
Date: March 5, 2024
Subject: BAR Technologies
Introduction
This investment proposal will first describe the history of the WindWings project and the International Maritime Organization's goal to reduce maritime emissions by 50% in the coming decades. Next, we will understand the intuition behind Ben Ainslie Racing (BAR) Technology’s innovative strategy and the partners dedicated to combat climate change. Finally, it is important to understand the cost-benefit analysis behind green technologies. Other substitutes like hydrogen, biofuels, and ammonia are in their infancy. Understanding how WingWings can be more economical for maritime shippers is paramount to assessing BAR Technology's investment proposition.
Background
In 2016, BAR Technologies embarked on a noble mission to reduce carbon emissions in the commercial shipping industry. BAR is a British sailing team that competes in world-renowned regattas like the America's Cup. BAR Technologies, an offshoot of the racing parent, has adapted the technology behind their yachts' streamlined racing bodies to develop innovative solutions for large, ocean-going vessels. WindWings, a partnership between BAR and Cargill, uses massive carbon fiber sails, nearly 150 feet tall, to propel suitable ships across the seas. Their latest iteration has reduced maritime emissions by over 30% per trip. Cargill estimates that fuel savings translate to 1.5 tons per WindWing daily, saving $800/ton on heavy fuel oil. The company aims to supply global shippers with a cost-effective alternative to reduce fuel usage and meet IMO emission goals.
Expert Opinion
In “A Comeback of Wind Power in Shipping: An Economic and Operational Review on the Wind-Assisted Ship Propulsion Technology,” Chou et al. analyze the feasibility and economic impact of wind-propelled shipping. The researchers from Copenhagen Business School and Khüne Logistics University find that artificial sails bring fuel savings at an operational cost. After considering over ten ongoing wind-propelled projects, the team found that maritime cargo shippers can save anywhere from 10-30% on fuel expenditures. Maritime shipping represents nearly 3% of global carbon emissions and is rife for innovation. The fragmented market allows new entrants, like BAR Technologies, to compete with incumbents.
While fuel savings are significant, the research explains how 50m Wind Wings can present logistical hurdles. Unlike hydrocarbons, wind power cannot be reliably produced. According to Chou et al., the speed and direction of wind can create longer voyages for wind-propelled ships to harness the fuel savings. The WindWings create new maintenance and operational costs for operators on board and at port. Moreover, the technology is restricted to vessels carrying cargo below deck. Some vessels, like container ships and LNG transports do not have the deck space for wind-propulsion assets. Despite these considerations, Chou et al. describe wind propulsion as a promising frontier for maritime shipping, given the urgency of decarbonization.
Aurora Almendral, investigative journalist and technology writer, assessed wind propulsion in her New York Times climate series. Almendral interviewed key BAR Technologies contributors, including naval architect Simon Schofield and CEO John Cooper, to provide a unique look into the nascent wind-propulsion industry. Developed by Schofield and Cooper, BAR Technologies AI-assisted software guides seafarers on the most fuel-efficient route, considering the distance to port and wind patterns. Almendral noted that this technology alleviates some concerns associated with relying on an intermittent power source like wind. Like Chou et al., she found the reductions in emissions and fuel savings to be attractive assets for commercial shippers. Cooper told Almendral that a ship retrofitted with three WindWings could save up to $1.5 million on annual fuel costs while a large vessel fitted with five assets could top savings of $2.5 million.
Despite this, the industry is young, and the future is uncertain. WindWings is expected to add up to 10 million in shipbuilding fees, and if current oil costs stabilize, there is little incentive to invest in more expensive fuels. BAR Technologies is one of many new market entrants, wind-propelled competitors and green technology substitutes. Hydrogen power has yet to take off, but with significant investments in the sector, hydrogen could overcome safety and cost concerns.
Recommendation
At this time, BAR Technologies is not a viable investment. While innovative and interesting, the project should be considered a novelty rather than a reliable venture. With the lack of clear financials and a field of able competitors, WindWings must differentiate itself more. The commercial shipping industry is a conservative sector that was absent from the 2015 Paris Climate Accords. While wind propulsion can reduce fuel expenditures, fitting commercial vessels, operating the installations, and managing logistical challenges at the port are too resource-consuming for the average maritime operator. With massive investments in green hydrogen power plants and storage facilities, it is only a matter of time before the energy source becomes a viable alternative for shippers. Lastly, WindWings represents an offshoot of a larger corporation. The ultimate goal of BAR is to design racing vessels for the America’s Cup. Until WindWings can achieve scale and demonstrate its ability to turn wind into cost savings, BAR Technologies should be viewed as a curiosity and nothing more.
Definitions
Triple Bottom Line: A sustainability framework that measures a business's success in three key areas: profit, people, and the planet. Firms can use these categories to conceptualize their environmental responsibility and determine any negative social impacts to which they might be contributing (Miller).
Corporate Social Responsibility: the idea that a business has a responsibility to the society that exists around it. Firms that embrace CSR are typically organized in a manner that empowers them to act in a socially responsible way to positively impact the world. It’s a form of self-regulation that can be expressed in initiatives or strategies, depending on an organization’s goals. Many organizations communicate these efforts to external and internal stakeholders through corporate social responsibility reports (Stobierski).
Social Enterprise: refers to a business with certain social objectives as its primary goal while using a commercial structure to run the organization. Social enterprises usually attempt to make a strong societal impact while maximizing their profit as well, which is then used to fund their social programs. (Social Enterprise)
Carbon Footprint: amount of carbon dioxide (CO2) emissions associated with all the activities of a person or other entity (e.g., building, corporation, country, etc.). It includes direct emissions, such as those that result from fossil-fuel combustion in manufacturing, heating, and transportation, as well as emissions required to produce the electricity associated with goods and services consumed. In addition, the carbon footprint concept also often includes the emissions of other greenhouse gasses, such as methane, nitrous oxide, or chlorofluorocarbons (CFCs) (Carbon Footprint).
Works Cited
“Carbon Footprint.” Encyclopædia Britannica, Encyclopædia Britannica, inc., 15 Feb. 2024, www.britannica.com/science/carbon-footprint.
“Cargill and Bar Technologies’ Ground-Breaking Wind Technology Sets Sail, Chartering a New Lower-Carbon Path for the Maritime Industry.” Cargill, 21 Aug. 2023, www.cargill.com/2023/cargill-bar-technologies-wind-technology-sets-sail.
Chou, Todd, et al. “A Comeback of Wind Power in Shipping: An Economic And ...” Reasearch Gate, Feb. 2021, www.researchgate.net/publication/349189185_A_Comeback_of_Wind_Power_in_Shipping_An_Economic_and_Operational_Review_on_the_Wind-Assisted_Ship_Propulsion_Technology.
Miller, Kelsey. “The Triple Bottom Line: What It Is & Why It’s Important.” Business Insights Blog, 8 Dec. 2020, online.hbs.edu/blog/post/what-is-the-triple-bottom-line.
Neuman, Scott. “New Technology Uses Good Old-Fashioned Wind to Power Giant Cargo Vessels.” NPR, NPR, 5 Oct. 2023, www.npr.org/2023/10/05/1200788439/wind-power-cargo-ships-carbon-emissions.
“Social Enterprise.” Corporate Finance Institute, 7 Oct. 2023, corporatefinanceinstitute.com/resources/esg/social-enterprise/.
Stobierksi, Tim. “What Is Corporate Social Responsibility? 4 Types.” Business Insights Blog, 8 Apr. 2021, online.hbs.edu/blog/post/types-of-corporate-social-responsibility.
“Windwings.” BAR Technologies, 21 Aug. 2023, www.bartechnologies.uk/project/windwings/.
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