09.11.2023 | Case | Nordic SME | Shipping | China
The shipping industry produces about 3% of global CO2 emissions, and forecasts predict that the emissions will continue to rise. Finnish innovators Norsepower is tackling this problem with its product Norsepower Rotor Sails™. The product can reduce fuel consumption and emissions by 5–25% or even more in the right conditions. Norsepower used funding from Nefco – the Nordic Green Bank – to set up a factory in China and fuel its international growth.
Driving down the emissions of the shipping industry
The massive shipping industry guarantees the flow of goods that keeps the global economy going. However, large vessels like tankers, bulkers and passenger cruise ships consume enormous amounts of fossil fuels.
The shipping industry produces up to 3% of global CO2 emissions. The fuels used in large vessels also create other emissions harmful to delicate sea environments, like sulphur and nitrogen oxides. While expensive alternative fuels are on the horizon, Finnish cleantech company Norsepower has turned an old seafaring tradition into a modern product using its rotor sails to reduce fuel consumption.
The shipping industry produces up to 3% of global CO2 emissions. The fuels used in large vessels also create other emissions harmful to marine environment.
Timing is key to achieving growth
Norsepower is already the world leader in providing mechanical sails for large cargo vessels. The Norsepower Rotor Sails™ reduce fuel consumption by 5–25%, and even up to 70% in the right conditions. Its international expansion was well on its way when the COVID-19 crisis shook the markets in 2020 and reduced the demand for oil.
“COVID-19 caused global oil prices to plummet. Shipping companies were suddenly reluctant to invest in technology that reduced their fuel consumption, as the economic incentives diminished and there was little visibility of what the future of the industry would look like,” says Tuomas Riski, CEO and Partner at Norsepower.
Expecting oil prices to normalise and reduce payback times, Norsepower went ahead with its expansion plan. “We knew our product was perfect and the team brilliant, even when the business environment was challenging. The savings potentials are significant,” says Riski.
The company built a factory in China to cater for the lucrative Asian market. The factory assembles new Norsepower Rotor Sails™ from parts created by subcontractors. Finding subcontractors, setting up the supply chain and establishing the facility required considerable resources, so the company needed additional funding.
Norsepower’s previous backers were already familiar with it and suggested cooperation. Norsepower’s Asian subsidiary had previously received funding for a feasibility study from Nopef, which provides financial support for Nordic small and medium-sized companies’ (SMEs) internationalisation efforts.
According to Riski, Nefco was an obvious solution for funding its ambitious goals. “Nefco’s whole concept matches Norsepower’s mission and what we want to achieve with our product.”
Norsepower Rotor Sails environmental benefits:
- Reduction of emissions in the shipping industry.
Its rotors reduce fuel consumption by 5–25%, and even up to 70% in the right conditions
- Plastic waste recycling.
A typical sail rotor contains 300,000 recycled PET bottles
- Long lasting product life.
A rotor can last at least up to 25 years
A loan from Nefco secures growth
Norsepower was a good match for Nefco, as Norsepower is a Nordic SME that can significantly reduce global CO2 emissions. Its growth plan carries risk, but the potential upsides for the environment and the seas and oceans are massive – just the type of project suitable for Nefco’s loans or equity investments.
“The loan helped us grow our Asian business and secured our operations in a challenging business environment. Now that fuel prices have bounced back from their slump, new orders are flowing in again. Our China factory is up and running, and we’ve been able to strengthen our marketing and sales,” says Riski.
Having an organisation with a good reputation, like Nefco, behind you can help in later funding rounds.Tuomas Riski, CEO and Partner, Norsepower
Rising fuel prices are not the only driver behind Norsepower’s growth. Maritime emissions trading will also create a strong incentive to reduce CO2 emissions. Environmental regulation is tightening around the globe. Shipping companies are increasingly adopting ESG (Environmental, Social, Governance) frameworks in their reporting. Funding Norsepower’s growth plans is a reliable way to reduce fossil fuel emissions globally, as the company’s potential is huge.
In Riski’s opinion, the application process went smoothly: “We researched many funding application processes. Nefco’s application process is very customer friendly and flexible. Support is readily available, and there’s no need to hire external consultants to help with the application.”
Support to reach biodiversity goals
Norsepower joined Nefco’s pioneering Biodiversity Pilot Programme in December 2022. The programme aims to test and develop concrete biodiversity solutions in collaboration with the participating companies. During the programme, Nefco has helped Norsepower map out its impact on biodiversity and shared applicable processes and circular economy concepts from the wind power industry. The wind power industry has many similarities with Norsepower’s business. However, Norsepower’s product is not a power source but uses the ship’s electricity in combination with wind to create thrust.
According to Riski, Norsepower is already developing its component production and material use to minimise the potentially harmful impact. “For example, we use a raw material based on recycled PET plastic bottles in our Rotor Sails. A typical sail can contain 300,000 recycled PET bottles, giving them a new life for at least 25 years.”
Nefco’s Biodiversity Pilot Programme
has helped Norsepower map out its impact on biodiversity and shared applicable processes and circular economy concepts from the wind power industry.
Smooth sailing ahead for Norsepower
Having completed its factory in China, Norsepower is ready to serve the vast Asian market. “After selling €10 million worth of Norsepower Rotor Sails™ last year, we are breaking records again, and orders are flying in. Tightening regulation and interest in ESG consistently creates demand for our product. It looks like we are in the right place at the right time,” says Riski.
Nefco’s whole concept matches Norsepower’s mission and what we want to achieve with our product.Tuomas Riski, CEO and Partner, Norsepower
Riski recommends that businesses apply for funding early rather than too late: “Fast-growing businesses should consider getting additional funding well before the situation is critical. The terms are usually better when your back isn’t against the wall. Having an organisation with a good reputation, like Nefco, behind you can also help in later funding rounds.”
In fact, the company recently secured an additional €28 million funding round to progress its mission to decarbonise the shipping industry.
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