World’s First Vessel Retrofit Pay-As-You-Save Fund Closes At USD 35 Million

The Global Centre for Maritime Decarbonisation (GCMD), AIM Horizon Investments and their partners announced the successful closing of the Fund for Energy Efficiency Technologies (FEET), securing total commitments of up to USD 35M, exceeding its initial target.

As the world’s first fund for vessel retrofits leveraging a pay-as-you-save repayment mechanism, FEET directly addresses the long-standing financial barriers hindering the sector’s uptake of vessel retrofits. This fund has drawn strong interest from across the maritime value chain, including equipment manufacturers, shipowners, and investors.

GCMD provides catalytic equity and is FEET’s appointed decarbonisation advisor. FEET is managed by AIM Horizon Investments. Formerly known as FPG AIM Capital, AIM Horizon Investments is a Singapore-based fund manager specialising in maritime and aviation funds for institutional and accredited investors. Shareholders of AIM Horizon Investments hold the fund’s commercial equity position, while the Development Bank of Japan Inc. (DBJ) holds the preferred equity position. DBS Bank and ING (which acted as Coordinating Bank) have in principle agreed to provide senior debt financing.

Scaling EET adoption to reduce emissions

Improving energy efficiency remains one of the most effective strategies to reduce emissions and fuel costs. Energy Efficiency Technologies (EETs), such as wind-assisted propulsion systems (WAPS)[1] and air lubrication systems (ALS)[2], can deliver immediate fuel savings, assisting shipowners to stay competitive amid tightening regional carbon regulations. However, even with a retrofit market valued at over USD 20B, uncertainties around EET performance and access to financing continue to limit uptake.

A primary difficulty restricting adoption is the inherently variable fuel savings from EET retrofits, which depend on operational and environmental factors, such as routing and weather conditions. The lack of standardised methodologies to accurately measure fuel savings further challenges uptake.

This uncertainty has made the return on investment period difficult to predict and has exacerbated the split-incentive issue, where shipowners are expected to invest in retrofits whereas charterers realise savings.

Verified savings at the core of pay-as-you-save

A pay-as-you-save repayment mechanism addresses payback uncertainty with EETs by directly linking repayment to quantified and verified fuel and regulatory savings. Deploying this mechanism requires robust data collection and analysis to isolate the retrofit’s contribution to overall fuel savings.

To this end, GCMD has undertaken EET performance pilots, equipping vessels with additional sensors to acquire high-precision, high-resolution data and applying rigorous data analytics to quantify fuel savings with statistical confidence. As more data is collected across diverse operating and environmental conditions, these datasets can be used to model and predict savings under varying scenarios.

Unsecured financing solution to accelerate EET uptake

Commercial vessels are typically financed through loans which have a first priority mortgage over the vessel. As the cost of EETs is small relative to the vessel’s value, it is not practical for shipowners or the existing secured financiers to provide vessel security to prospective retrofit financiers. Consequently, unsecured financing solutions are needed to accelerate the uptake of EETs.

FEET decouples retrofit financing from vessel mortgages by offering unsecured leases. Under this structure, FEET provides up to 100% financing for the equipment and associated installation and sensorisation costs, and leases the hardware to shipowners. In return, shipowners make repayments linked directly to verified fuel and regulatory savings. At the end of the lease, ownership of the EET is transferred to the shipowner for a nominal fee.

Blended financing and project diversification to manage risks

A blend of catalytic capital, commercial and preferred equities, as well as senior debt, allows FEET to balance financial risk while keeping financing costs competitive. By investing in a diverse portfolio of projects across technologies, manufacturers, vessel owners and types, FEET spreads investment exposure across its portfolio and enhances fund resilience.

Several projects have already been identified and have progressed to the final investment decision stage, reflecting strong industry interest and confidence. The fund remains open to shipowners and ship operators seeking support for adopting EETs.

Poised for scale

FEET is designed to scale beyond this initial closing, recognising the vast market size and shipping sector’s pressing decarbonisation needs. GCMD and AIM Horizon Investments are targeting to scale the fund to USD 500M by 2030, capable of supporting around 200 ships.

Scaling FEET will create a virtuous cycle: as the fund grows in size and its projects diversify, financing costs will decrease, and richer performance data on EET will be generated. This, in turn, will spur further innovation and deliver greater benefits for shipping companies, investors and EET manufacturers.

Professor Lynn Loo, CEO, GCMD, said, “Bringing FEET to life has taken persistence and a willingness from everyone involved to step into the unknown. There was no playbook; our teams were learning as we went. This is exactly the kind of collaborative, problem-solving mindset needed to move the needle on maritime decarbonisation. My hope is that FEET will accelerate the uptake of shipboard energy efficiency solutions and help unlock the scale of action needed to turn the industry’s decarbonisation ambition into tangible progress.”

Michiel Muller, Partner AIM Horizon & FPG AIM, said, “We are proud to work in this partnership and bring an innovative financial product for maritime decarbonisation. It has taken a huge collective effort to create a solution that immediately reduces carbon emissions and has competitive economics that will enable it to really scale. In GCMD we have found a like-minded partner whose professional and scientific approach impressed us since the start, and it was an opportunity to further expand our long-standing relationships with DBJ, ING and DBS Bank.”

Corporate Finance Department, Division 4, DBJ, said, “We believe that the adoption of EETs is an effective solution for maritime decarbonisation. FEET provides a platform to support this, and DBJ has decided to invest in the fund. We are proud to be involved in such an international and ambitious initiative, and we sincerely hope that FEET’s efforts will expand and contribute to the decarbonisation of the maritime industry.”

Stephen Fewster, Global Head of Shipping, ING, said, “At ING we aim to put sustainability at the heart of what we do. We are therefore delighted and honoured to have collaborated with GCMD and our partners to drive the adoption of energy efficiency retrofits which are key for shipping’s decarbonisation. We look forward to further cooperation with GCMD and scaling this innovative solution to accelerate the industry’s transition to Net Zero.”

Max Lim, Managing Director and Group Head, Shipping, Aviation, Logistics & Transportation, DBS, said, “Shipping is the lifeblood of global trade – moving about 80% of all goods across the world. At the same time, the sector accounts for about 3% of global greenhouse gas emissions. Decarbonising this industry represents both a major challenge and a compelling opportunity. The FEET initiative not only supports the adoption of technologies for energy efficiency, but also seeks to help shipowners manage financial and climate risks. DBS is proud to be a partner in this pioneering effort that endeavours to make the transition to cleaner shipping both commercially viable and scalable.”

Press Release

Source: Maritime Shipping News