Financing and insuring tower cranes

CONSTRUCTING
THE EUROPE
O F
T O M O R R O W
CONSTRUCTING
THE EUROPE
O F
T O M O R R O W
Financing
and insuring
tower cranes
CECE aisbl
Bd. A Reyers 80
B-1030 Brussels (Belgium)
Tel: +32 2 706 82 26
[email protected]
www.cece.eu
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> INTRODUCTION
and purpose of the
document
The current lack of financial support from banks and insurance companies
is refraining potential tower crane customers from buying this type of
construction equipment.
Historically, tower cranes have been a very profitable product, because of their
long life and their fast return of investment.
However, since the economic crisis, it is very difficult for companies to find
financing for such an important investment.
Recently banks and insurance companies became very hesitant to finance and
insure tower cranes any longer because of:
• The lack of knowledge of this product.
• The problem in identifying and tracking the assets.
• The difficulties in measuring the return of investments.
In addition, according to recently adopted regulations applying to the banking
sector (as per Basel III), banks are more reluctant than they were in the past to
finance construction equipment in general.
Finally, due to the recent general decrease of renting rates, investing in tower
cranes became less interesting from an economical perspective than it was
before the financial crisis.
The purpose of this document is to provide banks and insurance
companies with an accurate idea of what is a tower crane; why
this equipment should be financed; what is the value of such an
asset; how to track a tower crane and how to ensure a return of
investment.
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1. What is a TOWER
CRANE?
A Tower Crane is a type of construction machinery used to lift, lower and move
materials around a jobsite. Its work is based on a balance: the counter jib
carries a counterweight which allows the jib to lift a load.
THE TYPICAL APPLICATIONS OF A TOWER CRANES
ARE THE FOLLOWING:
• Residential and commercial buildings: housing projects
• Power plants: cooling tower construction, nuclear reactors building etc
• High-rise building construction
• Infrastructure projects (e.g dams, bridges, harbor docks, viaducts…)
• Wind turbines
• Shipyards and industrial yards (moving loads)
• Quarries & mines: maintenance use/ service cranes
• Plant projects (steel plants, refineries, petrochemical plants …)
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TYPES OF TOWER CRANES:
• Luffing jib cranes
• Saddle jib cranes
• Self erecting cranes
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STRUCTURE OF TOWER CRANES:
Structurally, tower cranes are composed of different parts:
- The crane base (anchors, cross frames, stationary or travelling
undercarriages, portals, crawlers, self-propelled chassis)
- The Mast, composed of mast sections
- The Slewing part:
• Counterjib
• Cat-head
• Jib
• Cabin & control systems
• Drive mechanisms (hoists, slewing and trolleying or luffing gears)
- Options: climbing equipment (allowing cranes to achieve the required heights)
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The modular nature of cranes should be seen as an advantage, since tower
cranes are ones of the very few products which can be sold/shipped/used
globally.
In addition, all tower cranes that are compliant with European directives (CE
marked) are equipped with appropriate safety devices, which are integrated to
prevent accidents at the construction sites, e.g load limiters, limit switches,
auditory warnings, emergency stops.
Tower cranes also have different sizes, depending on their load capacity (from 1
to 100 t) and jib length (from 20 to 90 m).
Height can also vary from 20 to 60m (free-standing). Such a height can be
increased up to 300m or more (e.g fixed to the structure).
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2. INVESTING in a
tower crane: what
does it mean?
HOW LONG IS THE LIFE OF A TOWER CRANE?
The life duration of a tower crane depends on its design, use and maintenance.
A correct design and an appropriate choice of materials might ensure a very
long life to tower cranes.
In case the crane is used as intended, correctly stored, regularly inspected
and properly maintained (in accordance with the manufacturers’ manuals) its
average life can easily exceed 20 years.
A TOWER CRANE IS A LONG TERM INVESTMENT
The long lifetime of tower cranes enables the investor to create cash flows
for a long period. Therefore, the investment in a tower crane can also be
economically interesting even if the payback period takes more than 5-7 years.
The rental business model earns its money in the long term and has proven
to provide very stable returns with a small manageable overhead structure
and adjustable fix costs. In addition, the value of the asset remains high at the
moment of reselling the tower crane.
In order to ensure the success of this business for the lender and the borrower
it is obvious that long-term investments require long-term financing.
The high quality of this product and its long life makes it also interesting for the
second hand market. Normally tower cranes change their owners several times
in their life. Investing in a used tower crane can also generate profit, provided it
is fully functional.
Since most crane manufacturers are able to guarantee services and spare parts
for their products for more than 15 years, the investment in used equipment is
highly attractive.
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HOW TO KEEP TRACK OF YOUR INVESTMENT?
Identifying and tracking the tower cranes and their parts is nowadays 100%
WHICH PARAMETERS INFLUENCE
THE RETURN ON INVESTMENT?
possible. Most of European manufacturers, including the drafters of this
Although depending very much on the market conditions , a tower crane
document, feature a tracking process deriving from being ISO 9001 certified.
has a return on investment time which is much shorter than its life. As a
This does not only allow the financing institutes to identify their assets but also
consequence, a tower crane can be easily repaid several times in its whole life.
to avoid having assets counterfeited.
The residual value of a crane relies on various factors:
For banks and insurance companies it is therefore very important to ensure that
- Brand reputation
the cranes are equipped with tracking tools.
- Model size (mt)
There are different types of tracking systems added to each section and parts of
- Model type (e.g luffing, horizontal jib, self erecting)
the crane. These include:
- Year of manufacturing
• Serial Numbers
- Level of technology (kind of drives, control system, safety features, other
• Barcodes
options)
• RFID (radio frequency identification data)
- General conditions of intended use
The chart below illustrates a business case based on reasonable assumptions.
The case shows the residual values of tower cranes in comparison with their
costs amortization.
Crane deprecia+on/ Costs amor+za+on in percentage 100% 100% 90% 90% 80% 90% 80% 70% 72% 70% 60% The tracking of a tower crane may include all types of maintenance activities
such as repairs, maintenance checks, inspections, equipment modifications
100% 100% These information
are
recorded in:
90% 90% 80% • Inspection books,
70% 72% 60% 60% 90% 0% 54% and at any time
40% (e.g. by means of GPS).
18% Costs 40% 35% 30% 30% 30% 30% 30% 30% 30% 30% 30% 30% 30% 30% 18% 45% 1 2 3 4 5 6 Cranes deprecia7on value in % the location 50% of the machine all over the50% world
20% 36% 20% Moreover there is the possibility to identify
36% Crane
45% 10% 70% 30% 50% 30% 80% • Machine data recorders,
50% Crane deprecia+on/ Costs amor+za+on in percentage 40% (approved by the manufacturers).
• Maintenance books,
60% 54% Costs amoritza7on % 40% 35% 30% 30% 30% 30% 30% 30% 30% 30% 30% 30% 30% 30% 7 8 9 10 11 12 13 14 15 16 17 18 19 20 17
> CONCLUSION:
The information outlined in this document provides a clear picture of the type of
investment Tower Cranes may represent.
Such equipment represents a very reliable and safe investment, due to its
characteristics, the technology behind it and its life duration.
The CECE tower cranes manufacturers who have drafted this document have
also put in place all necessary instruments to fight against the presence of noncompliance and/or counterfeited tower cranes and their parts.
Those measures should guarantee to credit institutes and insurance companies
they will always be able to keep track of their investment.