Marcon International, Inc.

Ship Sales & Charters Consultants

August 2001

TUG MARKET REPORT Gentlemen: Following is a breakdown of available anchor handling coastal, ocean and harbor tugs. Separate reports available on inland river pushboats and anchor handling tug supply vessels.

Horsepower Under 1000 2000 3000 4000 5000 6000 7000 8000 9000 Unk. Total 1000 2000 3000 4000 5000 6000 7000 8000 9000 Plus

March 1996 199 163 59 65 18 7 8 7 4 4 16 550 January 1997 178 159 83 65 19 6 9 5 5 2 6 532 January 1998 139 142 72 46 14 9 6 6 5 2 2 432 January 1999 174 143 83 81 35 10 2 5 5 1 - 536 January 2000 161 145 72 62 27 15 3 4 7 2 - 498 June 2000 151 146 70 65 31 21 3 6 7 2 - 502 September 2000 142 134 80 73 31 21 5 7 7 2 - 502 January 2001 138 133 81 72 34 20 5 7 8 2 - 500 April 2001 139 135 83 68 36 23 1 7 8 4 - 504 August 2001 127 127 73 64 35 20 1 5 8 3 - 463 Average Age 1967 1967 1976 1977 1983 1982 1990 1980 1975 1978 - Average HP 530 1350 2400 3275 4325 5353 6600 7320 8219 11067

Of the 5,349 vessels (excluding barges) Marcon currently tracks, 2,076 are tugs with 463 currently officially on the market for sale. Of these tugs officially for sale, 46.7% of the foreign and 93.9% of the U.S. tugs are direct from Owners. In addition to the vessels officially on the market, we also have direct from Owners at least two dozen tugs which can be developed on a private and confidential basis. Market Overview Since January 2001, average asking prices adjusted for age for tugs worldwide listed by Marcon have fluctuated slightly with some horsepower ranges up slightly, others down slightly and a few unchanged. In general we would have to say that there has been little overall change. One Swedish operator just reported “Here the tug market is stable, but not good. The market is filled up with tugs, and the new buildings are few. Only port tugs has been built last 10 years”. This in many ways comes close to echoing the U.S. market. An executive from a U.S. company reflected “My only thoughts are that the "towing" tug market is very balanced. As new tugs are built to handle ship assist, their natural second life is as a towing vessel, or into something like anchor handling. Conversely, as demand for barges has increased, so too has demand for "towing" tugs. The difference between a long and short market is only one or two tugs. I'm speaking in the 3,000 - 4,000 BHP category. Also, as a matter of course, barges are in short supply, it isn't as though we can find a barge on the other coast, bring it around, and then look for a tug. To add an additional barge now means you probably have to build it -at best 1.25 years away. This cuts down on the immediate need, and so you can take your time to find one (a tug) and cut your best deal. One or two tugs either way makes the market. Secondly, the best deals are going to be in the odd engine category - Storks, Brons, Alco's, etc. If you're an adventurer, you could be a winner. Lastly, how do you justify a new build tug with a new build tank barge unless it's an ATB? You're looking at $7,000,000 and up for the new barge, which is at the edge of making economic sense already. Adding $5.0 million in additional tug costs takes it out of the market. At the end of the day, there is continued demand for towing tugs, used not new. But it is a very finely defined market with prices steady to higher.” Marcon agrees that the U.S. market is definitely tight. The main new construction we are seeing is for ITB's, ship docking or anchor handlers with very little being built for conventional ocean tows. Rates are still not up there high enough to build many conventional tugs and if the economy continues into a slump, they may not be there for a long period of time. We seem to keep just barely approaching the magical point where new construction makes sense, but never getting there. A few months back I said that we had reached a

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peak on second-hand tug prices. Now I have to admit that this peak seems to be more a plateau than a peak. There are definitely no “bargains” in the U.S. towing industry - unless maybe for those few fitted with foreign engines or past conversions of 50 - 60 year old original World War II tonnage such as ATA’s, YTM’s or LT’s which was very popular in the 80’s. I still think that some of these ex-military converted tugs are very fine vessels and a few well thought out conversions still likely to out-perform modern tonnage of the same horsepower, but it seems to take a special owner to include one of these in their fleet. Some single screw older vessels are now even being given more than a “second glance” with Marcon just closing on one single screw 2,200HP 60’s built 121’ boat the end of July. Four ex-U.S. Navy YTB Harbor Tugs were also just sold by sealed bid auction on the U.S. East Coast. These were 108’ x 29’, 2000HP single screw tugs built between 1961 and 1969. Winning bids ranged from a low of US $111,001 for the 1961 built YTB-758 “Paducah” to a high of US $437,335 for the 1969 built YTB-801 “Palatka”. All four buyers were East Coast operators with two boats going to Boston Towboat, one to Thames Towboat and one to McAllister. A fifth boat, YTM-399 is mothballed in Norfolk, Virginia and now up for inspection. This is a time though for a buyer to be cautious in purchasing and determining the price he can pay. Even though a dramatic fall in prices is not in sight at the moment, it could come and when it does, it could be quick. 25 – 35 year old boats could start to drop in value faster than the average 4% depreciation we normally figure in appraisals. Older foreign flag ocean and coastwise tugs are starting to come on the market in the 4 - 5000HP range at reasonable and slightly falling numbers. Some tugs which were priced at US$ 1.5 million two years ago are now being marketed at around US$ 1.25 million with recommendations to try at or even just below the US$ 1 million mark and a couple good 6000HP boats previously marketed at US$ 2.25 – 2.5 million are now below US$ 2 million. We have also seen one owner of a 7,000HP anchor handling tug which was laid up just raise his price about 20% as he considers either putting her back into service or an alternate disposal. For more information on the European tug market, please see the article “Tug & Barge Traffic In Europe” on our website. Marcon Tug Sales Clearwater Marine Towing of Pennsylvania purchased the U.S. flag, twin screw tug 'Marine Explorer' from Jore Corp. of Seattle, WA. The 107' x 26.5' x 14.9' tug was originally built by National Steel & Shipbuilding in 1954 for the U.S. government as a single screw boat. She was rebuilt and converted in 1981 to twin screw and subsequently worked on the US West Coast for many years towing coastwise. Main engines are twin GM16V149TI diesels producing approx. 2560 total BHP. Clearwater renamed the boat 'Courageous', and will employ her in general towing service on the East Coast. Marcon acted as sole broker in the transaction. Crowley Marine Service of Seattle, WA sold their 2,200BHP single screw tug “Sea Lion” to Alaska-Oregon Offshore of Coos Bay, OR. The 121’ x 32’ tug was built in 1965 by Paceco of Alameda, CA and used for many years by Crowley performing ocean and coastwise tows. Tug was lying in Jacksonville, Florida at the time of the purchase. This is the second single screw 2,000HP tug Alaska-Oregon Offshore purchased through Marcon and the

third tug of this class Marcon sold for Crowley. Marcon International, Inc. is also pleased to announce the recent sale to Fairfield Industries inc. of Houston, TX, of the former tug supplier, ‘Encounter Bay’, (ex-‘Sea Emerald) previously owned by the Seattle Maritime Academy, a part of Seattle Central Community College. The 188’ x 36’ vessel was built in Norway in 1973. In the late 1980’s the vessel was arrested by the U.S. Coast Guard off the Washington coast carrying the largest cargo of hashish ever seized by U.S. authorities. The U.S. Army was given ownership of the vessel and modified her for their use on the West coast; after a few years of light service the Army donated it to the college complete with freshly overhauled main engines and U.S. Registry. The college intended to utilize her for cadet training, unfortunately for the Academy and the cadets the U.S. Coast Guard disallowed this use for the vessel, and she remained idle dockside since 1992. New owner’s will re-activate the vessel and sail her around to Texas City, where she will be put through a major ship yard program to conversion to a seismic ship. The vessel is fitted with Becker rudders and controllable pitch propellers, two features which will enable her to navigate at very low speeds while towing arrays of seismic gear.

Recent News – U.S.

The Crowley tug “Invader” performed a rescue tow of the 33,000dwt chemical tanker “Arar” off the Coast of Louisiana. The vessel had suffered propeller shaft damage. The tanker was towed to Houston for discharge at two facilities, then towed to New Orleans for repairs. Crowley completed transportation of tendons and topsides for the TLP “Brutus” platform in the Gulf of Mexico. The platform was installed by Heerema Marine Contractors in 2,976’ of water for Shell Oil. The Crowley tug “Cavalier”, after undergoing substantial modifications including the installation of a tower control station, enhanced fendering and enhanced pushing capabilities, departed Jacksonville for New Orleans last month. “Cavalier” will be operating with the 508’ x 90’, 254,000BBL clean product barge “New York”. Crowley is time chartering the tug and barge on a 3-year term to Petco, a division of Moran Towing Corporation and will be in service primarily on the U.S. East Coast and Gulf of Mexico. The 5,000HP tug “Sea Swift” and 400’ x 100’ ocean deck barge “Atka” are enroute to St. Croix for delivery of more modules for the HOVENSA delayed coker project. The barge loaded modules at Z&P and the Petro Lago facilities in Lake Maracaibo, Venezuela. Crowley's West Coast Marine Services group signed a contract with Smit Americas to transport critical equipment to be used in the recovery and relocation of the sunken Japanese fisheries training vessel “Ehime Maru”. The equipment, consisting of ROVs and underwater lifting gear designed to be used by Smit when lifting the ship from a depth of 2,000’, will be loaded in Port Hueneme, California, onboard the “Barge 250-6 ‘. The loading was scheduled to be completed on July 7, at which time the tug “Sea Viking” and 250’ x 76’ barge “250-6” will departed for Pearl Harbor. The equipment will be unloaded in Pearl Harbor and transferred to the 322’ x 59’ “Rockwater II”, an offshore construction support vessel chartered by Smit. The “Rockwater II” will lift the “Ehime Maru” clear of the bottom and move it to shallower water. The 400’ barge “CMC 450-10” will then be used as a diving platform above “Ehime Maru” during the recovery operations. When the recovery is completed, “CMC 450-10” will lift “Ehime Maru” clear of the bottom and move it offshore to its final resting place in over 6,000 feet of water. Hornbeck-Leevac Marine Services, acquired the Spentonbush/Red Star Group marine transportation fleet for $28 million in cash from, and has entered into a strategic alliance with, Amerada Hess Corporation in the Northeast U.S. market. The vessels include nine ocean-going tugs and nine ocean-going tank barges. Christian Vaccari, the Company's Chief Executive Officer commented, ``A key component of our long-term corporate strategy has been to selectively grow our tug and tank barge business while expanding our offshore supply vessel business through new construction. This acquisition will enable us to achieve critical mass and significantly expand our presence in one of our core geographic areas of operation, the Northeast U.S. marine transportation market. When added to our existing fleet of tugs and tank barges in the region, we are now one of the largest operators in this high-demand area. Upon completion of construction of five more new offshore supply vessels to be delivered to the deepwater Gulf of Mexico early next year, we will own a company-wide fleet of 42 vessels, with 13 and 29 vessels, respectively, serving the oilfield service and petroleum transportation segments of the energy industry.'' In addition to acquiring the Hess fleet, Hornbeck-Leevac entered into a long-term contract with Amerada Hess to be its exclusive marine logistics provider and transporter of petroleum products in the Northeast U.S. These vessels will be utilized primarily in the transportation of gasoline, distillates and residual fuel oil between refineries, distribution terminals and ships lightering along the Eastern Seaboard. The transaction also includes the right to acquire Amerada Hess's marine facility in Brooklyn where Hornbeck-Leevac's regional operations will now be based. Hornbeck-Leevac has additional tugs and tank barges operating in the Caribbean, its other core geographic market for petroleum transportation services. Todd Hornbeck, President of Hornbeck-Leevac added, ``Hess contacted us in late-August 2000 and asked if we were interested in pursuing this opportunity as Hess had decided to divest itself of certain non-strategic assets, including its marine fleet in the Northeast U.S., in order to better focus on its core E&P and downstream businesses. Amerada Hess, headquartered in New York, is a global integrated energy company engaged

in the exploration for and the production, purchase, transportation and sale of crude oil and natural gas, the refining of crude oil and the sale of refined petroleum products. Hornbeck-Leevac Marine Services, Inc. is a diversified blue-water marine services company serving the petroleum industry with state-of the-art offshore supply vessels in the deepwater Gulf of Mexico and with ocean-going tugs and tank barges in the Caribbean and U.S. Eastern Seaboard. Western Towboat Company of Seattle, WA recently launched “Gulf Titan”, the newest edtion to their fleet which was built at their facility. At over 120’ in length and 4600 available horsepower the new boat is their largest yet. Tug is intended to tow a 420’ rail car barge between Seattle and Whittier, AK.

Following a detailed six-month study assessing contract towing requirements, Trailer Bridge, Inc. (TBC) signed separate long-term agreements to mate tugs with the company's vessel barges. In March 2001 Trailer Bridge finalized a long-term agreement with Moran Towing Corporation to exclusively utilize Moran's “Heidi” class 4,350 horsepower tugs to pull all four of the TBC's currently deployed by Trailer Bridge. This decision followed the results produced through the use of two “Heidi” class tugs. The Company's barges are utilized for weekly services between Jacksonville, FL and San Juan, Puerto Rico, as well as Newark, NJ and San Juan, Puerto Rico. Ed Morley, Trailer Bridge's VP of Marine Ops, stated, "The ‘Heidi’ class tugs have performed flawlessly for us since March. We have experienced 100% on time arrivals with the “Heidi” class tug and TBC combination." Trailer Bridge's TBC barges are the first barges built for the U.S./Puerto Rico trade in over 15 years and are specifically designed to exclusively carry 53’ high cube containers. Trailer Bridge also recently announced that it has finalized a long-term agreement with Crowley Marine Services to provide two “Invader” class 7,200 hp tugs to pull Trailer Bridge's two Triple Deck RoRo barges between Jacksonville and San Juan. “The ‘Invader’ class tugs were specifically designed and built to efficiently tow very large Roll On/Roll Off vessels. Our vessels are 736’ long and over three stories tall, and the extraordinary bollard pull of the “Invader” class tugs, as well as excellent crew experience in long haul liner tows, will serve us and our customers well," explained Mr. Morley. The first “Invader” class tug began service on July 20th from Jacksonville, towing the “San Juan Jax Bridge”. A week later, the second “Invader” class tug entered service with the “Jax San Juan Bridge”. "These new tugs will continue to improve on our schedule integrity. In addition to benefiting our customers and us, both the Moran “Heidi” class and Crowley “Invader” class tugs burn a cleaner distillate fuel that benefits the environments in which we operate. We are committed to providing Puerto Rico with an efficient, safe and environmentally superior service," stated John D. McCown, Trailer Bridge's Chairman and CEO. New research indicates that Puerto Rico freight moved on vessels that utilize the cleaner distillate fuel results, on a per unit basis, in up to 14 times less particulate matter emissions than freight moved on vessels utilizing dirty residual fuel. Trailer Bridge believes vessel emissions are an important and growing issue. Underscoring their commitment to the environment, Trailer Bridge joined the U.S. EPA's Climate Wise program in March 2000, the only marine carrier to have done so.

Recent News - Europe Mergers and globalization still continue and the big keep getting bigger. With the continuing spate of acquisitions, there are fewer competitors out there following Adsteam’s purchase of Howard Smith, who had previously gobbled up others such notable companies as The Alexandra Towing Co. Ltd. and Humber Tugs to name a few. Wijsmuller

Groep Holding B.V. of Ijmuiden, Netherlands announced that an agreement had been reached for the sale of 100% of its shares to A/S Em. Z. Svitzer, a subsidiary of the A.P. Moeller group, based in Copenhagen, Denmark. Reported price is region US$ 240 million. Closing of the transaction is conditional upon limited confirmatory due diligence and certain regulatory approvals such as from the Nederlandse Mededingingsautoriteit or Netherlands Competition Authority. Wijsmuller Group operates a fleet of over 150 vessels in 21 countries employing more than 1,000 people. In 2000, Wijsmuller reported a turnover of NLG 261.9 million. Svitzer group currently operates 72 vessels and employs 620 people providing towage and salvage services in Denmark and Sweden; bulk transportation (tug and barge) throughout Northern Europe; standby safety vessels and survey vessels primarily in the North Sea. Within the Svitzer / A.P. Moeller Group, Wijsmuller will remain as the focus for future development of international towage and salvage activities within the enlarged organization. A/S Em. Z. Svitzer was originally established in 1833 and has been involved in towing and salvage operations and the transportation of heavy goods and bulk cargoes plus offshore

activities as hydrographic and geophysical survey, precision positioning and underwater services including the employment of submarine vessels. Svitzer, who was already part-owner in several other harbor towage companies, was acquired by A.P. Moeller during 1979 has been expanding over the last few years with newer tonnage such as their 4,900HP “Frigga”, “Freja” and “Fenja” built in 1998 in Klaipeda, Lithuania. Wijsmuller Groep, started by Capt. Jan Wijsmuller in 1906 with a small steam tug, over the last century grew to one of the major towage, port services and salvage companies in the world with operations not only in Europe, but South America, West Africa, mid-East, Australia and Asia. At one time, prospects at Wijsmuller were bleak, but after a major

restructuring in the late 1980’s the company’s fortunes were definitely looking positive culminating with the $134 million acquisition of century plus old Cory Towage who themselves were expanding into towage services overseas. While there has been a lot of talk about the take-over of Wijsmuller’s traditional ocean towing and salvage operations, we would not be surprised if the key attraction for Svitzer / A.P. Moeller was instead worldwide network of harbor and terminal operations. Regretfully the salvage and deepwater ocean towing side of the industry for the last decade for many companies has been the “step-child” with terminal operations and services, escort work and the “oil patch” receiving most the the attention and monies flowing into newbuildings. This would be a good time to strengthen even further Wijsmuller’s ocean towing and salvage ops with one or two newbuilding dedicated high-horsepower ocean salvage tugs. Hopefully this side of the market will not be put on the back-burner. The European Commission decided mid July to open a formal investigation of the maritime transport aid granted to Dutch tugboat operations on inland waterways and ports. This aid apparently does not fall into the 1997 Community Guidelines on State Aid to Maritime Transport and is therefore considered as potentially incompatible with the single market of the European Union. Following intensive consultation with all Member States, the Commission adopted in 1997 its Community Guidelines and Dutch authorities agreed to adapt their existing maritime transport aid schemes to the guidelines with any uncleared maritime transport aid granted thereafter considered new aid which may be formally investigated. Since the guidelines did not cover inland waterways nor ports, the Commission is examining whether maritime transport aid granted to Dutch tug boat operations in such areas is compatible with the single market. In view of limiting potential damage to competitors, the Commission requested the Netherlands to suspend the aid payments until clearance of the matter by the Commission. Recent News - Mid-East

His Highness Sheikh Maktoum bin Rashid Al Maktoum, Vice-President and Prime Minister of the United Arab Emirates and Ruler of Dubai, yesterday issued a cabinet decision banning ships flying flags of 10 countries from entering UAE ports or territorial waters as part of the country's efforts to prevent maritime pollution. The 10 countries are: Albania, Belize, Honduras, Georgia, Saint Vincent and Grenadines, Mauritius, Cambodia, Maldives, Comoro Islands and Bolivia. The decision states that ships flying flags of these countries are banned from entering UAE ports, anchorage areas, territorial waters and economic zone unless they carry valid classification certificates issued by the International Association of Classification Societies. It said that ships not covered by the ban and having licenses issued by the Ministry of Communications would continue to operate until the expiry of their contracts with relevant authorities. However, such contracts will not be renewed after their expiry. The decision authorizes relevant government authorities to seize ships violating the ban and to take appropriate action against them. The decision ordered that all registration companies belonging to the countries covered by the ban be closed and no such companies should be allowed to be opened. Ships seized under the decision will be auctioned and the buyer will have to dismantle them and into scrap. The cabinet decision orders strict control to be applied to prevent entry of such ships in UAE's territorial waters. Recent News - Asia The past few months have been relatively quiet in the South China Sea, although we expect more tug activity with the onset of the typhoon season. Hongkong Salvage & Towage tugs were busy providing assistance to cable ships during a recent upsurge in cable laying activity, although this will tail off as the typhoons start to track across the area. Their 115’ 4000BHP multipurpose azimuthing tug 'Yam O' was mobilized from the Arabian Gulf in April to assist with the Malampaya installation project in the Philippines, and from there she headed to a charter in Australia, where she is expected to remain for some time. 4000HP azimuthing tugs 'Mai Po' and 'Ngan Chau' remain on the spot market in the Arabian Gulf, with 'Sung Kong' similarly employed in the Caribbean. 'Taikoo' and the two newest seagoing tugs, 'Peng Chau' and 'Chek Chau', continue to operate out of Hong Kong.

Featured Tugs

TG32104 Twin Screw Tug 104.3’ / 91.84’ x 31.5’ x 13.6’ depth. Built July 2000. Vanuatu flag, but U.S. owned. G/NRT 297/89. Classed Bureau Veritas +1 3/3 Tug (Deep Sea). FO 104m3. FW 21m3. Electric / hydraulic 50 ton brake windlass / bow tow winch forward. Electric / hydraulic 80 ton brake tow winch aft. Remote control in wheel house. 2 x Cummins KTA50M2 total 3,200BHP @ 1,800 RPM. Reintjes WAF 663 gears. Fixed pitch props in korts. Bollard pull abt. 40+ tons ahead. Service / Economic speed abt. 11.5kn / 10.0kn on abt. 15.9 / 8.5 tons MGO per day at 100% / 50% MCR. 2-85kW / CAT 3304B 415v 3Ph 50Hz generators. External Fire fighting. 1-240m³/hr @ 120m diesel fire pump and 2 foam / water monitors. Full navaids including radar, standard magnetic compass, SSB, fathometer, VHF, GPS, 2 Portable VHF’s, Radar Transponder, Navtex, Weatherfax, Electric horn and EPIRB. Electric/hydraulic steering. Sale basis ‘as is, where is’ with inspection / delivery West Coast No. America by arrangement, but with immediate availability for inspection and delivery. Marcon sold to present Owners. Tug is available only due to change in contract. Although we seldom get into handling the “bits and pieces”, one U.S. Northwest Coast tug Owner for whom we have sold a number of barges currently has the following surplus and available for sale: two 2 x EMD12-645 (naturals) with Reintjes (5:1) reduction gears, 2 x EMD16-645 (naturals - no reduction gears) and 2 x EMD16-645 (Turboed) with FALK reduction gears. We look forward to receiving your company’s press releases and news.

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