A ship retrofit may pay for itself within just a few years — but that does not necessarily mean the party that financed the work will recover its investment within the same period.

This long-standing conflict between shipowners and time charterers is precisely what BIMCO’s new contractual mechanism is designed to address.

On October 8, 2026, BIMCO’s Documentary Committee adopted the Energy Saving Device Retrofit Addendum 2026, a dedicated contractual framework for energy-saving equipment installed on vessels operating under time charter.

The underlying problem is well known across the shipping industry.

Under a traditional time charter, the ship belongs to the owner, while the charterer generally pays for the fuel.

If the shipowner invests millions of dollars in a new propeller, bow modification or other equipment that reduces fuel consumption, the immediate financial benefit from lower bunker costs is primarily enjoyed by the charterer.

If the charterer pays for the retrofit instead, the equipment normally remains installed on somebody else’s ship after the charter ends.

This creates a simple paradox: the retrofit may pay back for the vessel before it pays back for the investor.

A useful example appears in DNV’s Maritime Forecast to 2050.

DNV examined a 15-year-old container vessel with a capacity of approximately 5,000 TEU.

A hydrodynamic retrofit package was considered, including a bow modification, a new propeller and a Propeller Boss Cap Fin — PBCF.

The total cost of the package was estimated at approximately $2.35 million.

According to DNV’s calculations, the modifications could reduce fuel consumption by around 16%.

Depending on fuel prices, the estimated payback period ranged from approximately 1.4 to 4.2 years.

These calculations did not even include potential additional benefits arising from the EU ETS, FuelEU Maritime and other emissions-related regulatory mechanisms.

But this is where the commercial problem begins.

Consider a simplified example.

Suppose a vessel consumes 10,000 tonnes of fuel per year, with fuel priced at $600 per tonne.

Annual bunker expenditure would amount to $6 million.

If the retrofit reduces consumption by 16%, the vessel saves around 1,600 tonnes of fuel, worth approximately $960,000 per year.

With a retrofit cost of $2.35 million, the project’s simple payback period is approximately 2.45 years.

From the vessel’s perspective, the investment looks attractive.

However, if the owner finances the entire retrofit and receives only half of the resulting savings under a commercial agreement, the owner’s benefit would amount to approximately $480,000 per year.

In that case, the owner’s simple payback period increases to around 4.9 years.

If the time charter lasts only three years, the retrofit would generate approximately $2.88 million in total fuel savings during the charter period.

That is already more than the original cost of the equipment.

Yet under an illustrative 50/50 benefit-sharing arrangement, the owner would receive only $1.44 million.

By the end of the charter, approximately $910,000 of the owner’s initial investment would still remain unrecovered.

The 50/50 split is only an example — BIMCO does not prescribe such a ratio and allows the parties to determine their own commercial model.

This is exactly the type of situation the new Energy Saving Device Retrofit Addendum 2026 is intended to address.

The document allows owners and charterers to agree in advance on who finances the equipment, who pays for installation, how fuel savings are shared and who receives other financial benefits created by the retrofit.

BIMCO’s framework also enables the parties to determine how the time required for installation will be treated.

This is important because a vessel may have to spend time at a shipyard while new equipment is installed, raising questions over whether the vessel remains on hire and which party bears the costs associated with the downtime.

The BIMCO addendum does not impose a single financing model.

One retrofit may be financed entirely by the owner, another by the charterer, while a third may be funded jointly.

The key objective is to establish clear rules for allocating costs and benefits before the work begins.

There is another challenge: how do the parties prove how much fuel the retrofit has actually saved?

Simply comparing annual fuel consumption before and after installation is not sufficient.

Fuel consumption is influenced by vessel speed, draught, hull condition, cargo load, weather, route, sea state and numerous other factors.

The parties therefore need to establish a baseline — an estimate of how much fuel the vessel would have consumed if the retrofit had never been installed.

BIMCO’s new addendum allows the parties to agree on a dedicated Performance Assessment Protocol.

This can define the methodology used to measure efficiency, establish baseline performance and determine how the results will be verified.

An independent expert may also be appointed where necessary.

Similar approaches are already being tested on actual vessels.

DP World Shipping Solutions and MPC Container Ships jointly invested in several energy-efficiency upgrades on a vessel owned by MPC and chartered by DP World.

The parties amended the charter agreement so that both the installation costs and the resulting fuel-saving benefits could be shared.

Vessel Performance Solutions — VPS was used to monitor the vessel’s actual performance improvements.

An even larger programme has been undertaken by Maersk.

In October 2025, the company described a retrofit programme covering approximately 200 vessels in its time-chartered fleet, owned by around 50 different shipowners.

At that point, more than 1,500 individual retrofit projects had already been completed, with approximately 1,000 additional projects planned through 2027.

Maersk shares investment costs for these projects with vessel owners.

Common modifications include new propellers, pre-swirl devices and changes to bulbous bows.

Many container vessels were originally designed during a period when ships operated at considerably higher speeds.

As slow steaming became more widespread, their original hydrodynamic configuration often became less efficient for the new operating profile.

A redesigned bulbous bow or propeller optimised for lower speeds can therefore significantly reduce resistance and fuel consumption.

In July 2026, Seaspan and Maersk also announced a retrofit programme covering 18 vessels operating under long-term charter.

Completed and planned investments under the programme were valued at approximately $75 million.

A particularly extensive retrofit package is being implemented on four container vessels with capacities of around 13,000 TEU.

The package includes a shaft generator, main engine optimisation, a new high-efficiency propeller, a pre-swirl device and other modifications.

But the value of an energy-efficiency retrofit is no longer limited to the bunker bill.

When a vessel operates under the EU ETS, lower fuel consumption also means lower CO₂ emissions.

Under BIMCO’s standard ETS clause for time charters, the charterer generally provides and pays for the allowances corresponding to the vessel’s emissions during the charter period.

Therefore, if a retrofit reduces fuel consumption and emissions, it can also reduce the number of emission allowances required.

The Energy Saving Device Retrofit Addendum 2026 allows parties to allocate operational and environmental benefits separately.

This means the same piece of equipment can create economic value in several areas at once — through lower bunker consumption, reduced emissions and lower regulatory costs.

BIMCO’s work is part of a wider industry effort to standardise these arrangements.

In March 2026, the Mærsk Mc-Kinney Møller Center for Zero Carbon Shipping published procedures for measuring and verifying the actual savings generated by energy-efficiency retrofits.

In June, the Center followed with a framework for sharing retrofit costs and benefits between shipowners and charterers.

Then, in October, BIMCO introduced a standard contractual form to support such agreements.

Shipping already knows how to save part of its fuel bill.

The more difficult question is increasingly:

not how much fuel a vessel can save, but who ultimately receives the value of those savings.