September 19, 2003

Royal Caribbean and Star place cruise newbuild orders
Suddenly, the cruise ship newbuilding market has come back to life. Royal Caribbean announced that it was formalizing the deal first announced in June to build an Ultravoyager class ship at Finland's Kvaerner Masa Yards. At the same time, it announced that it would not be taking up its options to build two Radiance class vessels at Germany's Meyer Werft.

Enter Star Cruises. There had been speculation that it would take up the Radiance options at Meyer should Royal Caribbean back out. That's not exactly what happened, but today Star said that it had finalized orders earlier this week with Meyer for two new Freestyle Cruising ships for its Norwegian Cruise Line (NCL) brand for delivery in Fall 2005 and Spring 2006.

"Star Cruises is committed to the North American market and to completely renewing the NCL fleet by adding at least one new ship a year," said Tan Sri Lim Kok Thay, Chairman and CEO of Star Cruises Group. "In just three and a half short years, we have committed almost $2.5 billion to new ships for NCL with half of that investment already being in service and the other half under construction. With the introduction of these latest two ships in 2005 and 2006, we will have increased NCL’s capacity by nearly 13,500 berths since 2000, all on new, state-of-the-art ships."

The two vessels, known currently as hull S.667 and S.668, will be based in large part on the highly successful Norwegian Dawn/Norwegian Star design, with modifications in both technical and passenger areas. Both ships will be capable of the same high 24-25 knot speeds as their recent sister ships. Gross tonnage will be slightly higher than Norwegian Dawn at an estimated 93,000 GRT and the passenger capacity of each will be 2,400 lower berths.

The first contract is in dollars and the second in Euros. The two ships together will cost approximately Euro 703 million or $790 million at today’s exchange rates, including allowances for owner-supplied items.

"Freestyle Cruising and our break with traditional cruise ship design have clearly changed the face of cruising," said Colin Veitch, President and CEO of NCL, "and at an estimated all-in cost of less than $170,000 per berth these additional 4,800 berths will be a huge boost to the financial success we are already having with our new Freestyle Cruising ships. These ships will be the largest we have ever built, and will enable us to continue the expansion of our popular Homeland Cruising deployment around the coast of North America."

Construction will commence on the first ship at the end of this month and Meyer Werft expects to deliver the first vessel in a record 22 months from contract signing. Commenting on the order, Bernard Meyer, CEO of Meyer Werft, said: "We are extremely pleased to have reached this agreement with NCL and are proud that our previous two ships for Star/NCL have had such a revolutionary impact on the U.S. market that our customer has come back to us for more ships."

"We have been refining the design and negotiating the contracts on these ships continuously since the delivery of Norwegian Dawn last year," Veitch said. "The new design is truly an advance on what we have already done with Meyer Werft, and reflects the excellent working relationship we have with this yard where creativity and mold-breaking ideas can be turned into attractive and commercially realistic ship designs."

ENTER THE ULTRA VOYAGER

Roughly 15 percent larger than Voyager, Royal Caribbean's Ultra Voyager will be 126 feet by 1,112 feet, and will stand 18 stories high while cruising at approximately 22 knots. At 100 percent occupancy, it will carry 3,600 guests and 1,400 crew.

"The Voyager-class ships clearly changed the face of cruising," said Chairman and CEO Richard D. Fain. "The Ultra Voyager will extend that success and, with a lower per berth capital and operating costs, provides even better economies of scale." "We are pleased that the partnership and tradition with continues," said Jorma Eloranta, president and chief executive officer at Kvaerner Masa-Yards. "The Ultra Voyager will reflect this legacy of trust and support."

The yard and cruise line signed a preliminary agreement last June, outlining the design and specifications of the new ship. Today's contract formalizes that agreement and results in a Royal Caribbean capacity growth of about 3 percent in each of 2006 and 2007. The company estimates total all-in costs to be just over $200,000 per guest berth. The yard also granted the company an option for a second Ultra Voyager, with a 2007 delivery date.

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