Vigor Industrial: A Rising Star in Shipbuilding in the Pacific Northwest & Alaska Arctic

By Raina Clark
Wednesday, July 25, 2012
Vigor Industrial’s CEO, Frank Foti (Photo courtesy Vigor Industrial)

“There is a resurgence of the marine industry in the Pacific Northwest we haven’t seen for 20 to 30 years now,” said Vince Piscitello, Vice President of Business Development for Vigor Industrial LLC. “The oil and gas industry is really new to our area,” he said, although he expects to see it grow significantly with Shell’s exploration of the Chukchi and Beaufort Seas off Alaska’s northern coast. State run ferry operations in Washington and Alaska are at a point where they must renew fleets built in the 50s and 60s. What’s more, Piscitello said, Pacific Northwest fisheries have been well managed and the fishing business is doing well. He anticipates continued demand for newbuilds, re-builds and conversions of vessels capable of dealing with tough northern waters. “Our challenge is going to be capacity and workforce.”
To meet the challenge, Vigor has been aggressively building its capital assets and investing in workforce development. The shipbuilder and industrial fabricator sees itself as well placed to take advantage of opportunities arising in construction and repair of Arctic fleets, Pacific Northwest ferries and commercial vessels.

Building Capacity
Vigor Industrial CEO, Frank Foti, began in the maritime industry when he purchased Cascade General, a ship repair contractor based on the old Port of Portland, Ore. in 1995. Prior to that Foti was a business owner and general manager of a construction company. “My roots are in running industrial companies with industrial workers,” Foti said.
In 1998 Foti also purchased Washington Marine Repair of Port Angeles, Wash. and in 2000 the Vigor Industrial name officially began. Vigor acquired a few more vessel building and repair assets after that, including U.S. Barge of Oregon and Marine Industries Northwest of Washington State.
In 2011, Vigor Industrial made its largest purchase to date when it bought Todd Pacific Shipyards on Harbor Island in Seattle, Wash. The $130m purchase more than doubled Vigor’s workforce and included Todd Pacific’s Everett and Bremerton yards. Vigor attained backing from Endeavour Capital LLC whose sister fund, Endeavour SEAM, became a mezzanine lender in Vigor’s acquisition of Todd Shipyard Corporation. Vigor raised $75m in private equity from Endeavour Capital which acquired a minority interest in the company to fund continued growth through acquisitions and additional investments.
“Our business on average hasn’t declined in the last four to five years,” Foti said. In fact, “it’s grown slightly. The reason for making acquisitions was to have a level of critical mass. Having additional facilities gives us the opportunities to have opposing chunks,” he said, referring to the diverse types of projects Vigor can undertake to alleviate the boom and bust cycles of shipbuilding.
Beyond shipbuilding and repair, Vigor subsidiary US Fab takes on other industrial work such as alternative energy projects including wind, wave and tidal projects. Piscitello described these markets as “nascent, but they will include tending and support and we’re ideally situated to help that industry grow.”
Shipbuilding’s traditional boom and bust cycles also “make it really hard for any industry to maintain a trained and loyal workforce,” Piscitello said. To help deal with this Vigor provides space at its Portland yard for the Swan Island Training Center, a joint venture with Portland Community College to train welders. In addition, said Foti, “We have really good wages and benefits for our workforce.”
In keeping with Vigor’s focus on people, Foti’s Seattle office has no images of ships on the walls, but rows and rows of photos of Vigor trades people at work in the yards. “Industrial jobs do matter” said Foti. “It is so critical that our economy is balanced. There has to be something in the region besides working at Starbucks or in an office building.”
Vigor’s most recent acquisition was Alaska Ship & Drydock in the spring of 2012, increasing the company’s shipbuilding capacity and access to vessels working off Alaska. The yard’s new 70,000 square foot assembly hall is designed to build ships up to 500-ft and features an adjacent five-story production center. Inside the production center raw materials are assembled into components such as pipe spools, electrical panels and various types of equipment which are then pushed onto gangways reaching the ship. This system was designed to increase efficiency by minimizing material flow.
Vigor’s headquarters remain in Portland, Ore. on the Willamette River, site of the original Cascade General and the old Port of Portland. The company's annual revenue is just over $400m and it employs about 2,200 people. Vigor is comprised of nine subsidiaries, offering everything from shipbuilding to blasting and coating to precision machining. The company now operates seven facilities located in Portland, Ore.; Ketchikan, Alaska; and Seattle, Tacoma, Everett, Bremerton, and Port Angeles in Washington State. All told, Vigor has 112-acres of yard space, 700,000 square feet of covered shop area and 10 drydocks.
“We have loads of capacity,” Piscitello said, pointing out that among Vigor’s 50 cranes, the Portland facility’s 600T gantry crane is one of the largest on the West Coast.
In addition to Vigor’s government shipbuilding and repair work the company continues to expand into new commercial markets. “We have an ever growing presence in the commercial shipbuilding market working with customers like Alaska Longline Company in Ketchikan and Georgia Pacific and Harley Marine in Portland,” said Grant Fosheim of Vigor Industrial’s marketing department. Vigor also plans to release a design for the next generation of the Coast Guard’s offshore patrol cutters later this summer.
“Frank is very entrepreneurial,” said Piscitello, “it’s unlike what you see in the rest of the marine industry. I would expect to see Vigor Industrial double in size in the next five years.”

Ice-classing Experts Ready for the Arctic
Not only are Vigor’s facilities geographically accessible to Alaska Arctic waters, Piscitello said, Vigor is an ice-classing expert. Its subsidiaries have been supporting Arctic and near Arctic fleets for the past century from fishing vessels to Coast Guard icebreakers. Shell’s exploratory operations off the north coast of Alaska have presented a new opportunity for Vigor to use its expertise. Vigor has serviced both of the two rigs at the heart of Shell’s project and nearly half of the 21 support vessels involved.
“Shell has been an unbelievably good partner to work with,” said Piscitello, “from the engineers to division presidents.”
Recently Vigor completed work on the Kulluk, a 266-ft by 230-ft ice-classed semi-submersible drill rig, and the Noble Discoverer, a 512-ft ice-classed drill ship. Both vessels left Vigor’s Seattle facility bound for the Arctic’s Beaufort and Chukchi Seas in late June. The work included extensive environmental and safety upgrades. The Kulluk now operates with zero discharge and the Discoverer complies with the strictest air standards in the world. Vigor installed six EPODS on the Discoverer, one on each engine, which are essentially large catalytic converters removing harmful emissions.
“We deployed 500 people to work on the Discover project alone,” said Fosheim. “We were able to perform six months of work in ten weeks.”
Other vessels Vigor serviced for Shell’s Arctic exploratory project include the Klamath, which Vigor converted from a tanker barge to an ice-classed oil spill response vessel, and the Arctic Challenger which Vigor is converting from a deck barge to a containment system vessel. In the Portland yard, Vigor serviced the Fennica and Nordica, two ice-classed offshore support vessels owned by Arctia Offshore which will be joining Shell’s flotilla.
“Ten to 15 percent of revenues over the past year have been derived from Arctic work,” said Piscitello. There was a big push to prepare for work in the Arctic this year and last, he explained, so that percentage may drop in the next year. However, “looking into the future we expect significant growth in this area.”
Vigor is also a large part of the effort to maintain U.S. icebreaking capabilities in the Arctic. When Vigor purchased Todd Pacific Shipyards it took over the yard’s contract to service the Coast Guard's only operational icebreaker, USCGC Healy, as well as the repair and modernization of one of the Coast Guard’s two inoperable heavy icebreakers, the Polar Star. A $56m overhaul of the Polar Star is now underway at the Seattle facility in order to return it to service in 2013.
The agency’s other heavy icebreaker, the Polar Sea, has been out of service since an engine failure in 2010. Vigor Industrial gave testimony to Congress at the end of 2011, saying that the Polar Sea could be restored to fully functioning status for a decade or more for about one percent of the cost of a new ice-breaker. Vigor estimated that it would take two years and $11m to replace the Polar Sea's power plant and bring it back to operational status. This is compared to an estimated ten years and $800m to $1b required to build a new heavy icebreaker.
Plans to scrap the Polar Sea were very narrowly avoided late last June when the Coast Guard agreed not to begin dismantling the ship for at least the rest of the year while other funding is sought.

West Coast Ferries
With the acquisition of Todd Pacific Shipyards and Alaska Ship & Drydock (ASD), Vigor inherited a number of projects, but Foti said, “There are also new opportunities. The exploration of the Chukchi and Beaufort seas is very good for our business and ferries have also been a significant opportunity for Vigor.”
Todd Pacific was already working on the 64-car ferry contract with Washington State Ferries (WSF) when it was purchased by Vigor Industrial. In fall 2011 Vigor delivered the final 64-car ferry three months ahead of schedule and $7m under budget. Vigor’s newbuild and fabrication subsidiary, US Fab, is now at work in the Seattle facility on another contract with WSF, the first of up to four 144-car ferries. Washington State legislature recently funded a second 144-car ferry with construction scheduled to begin in December. The construction cost for both vessels is $225m and it’s estimated that the contracts will produce more than 500 family-wage jobs at shipyards in the region. WSF’s contract with US Fab is for up to four 144-car ferries, contingent on funding.
In April 2012 ASD signed a contract to partner with the State of Alaska on a design for the new Alaska class ferry, a project for which the state has appropriated $120m. The contract designates the shipyard as the construction manager and general contractor for the design phase of the project. It doesn’t guarantee that the shipyard will build the ferry, however ASD will be able to make a guaranteed maximum price proposal for the construction contract as the design nears completion.
According to Foti, “Alaska is set to start building ferries in the next two years.”

(Published in the July 2012 edition of Maritime  Reporter & Engineering News - www.marinelink.com)
 

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