ment to launch a new Guam and China service next February, when its 10-year agreement with American President Lines Ltd. expires. Matson and APL operate a weekly shipping service to Guam.

Under the agreement, APL operates a five-ship fleet to Guam, which includes two APL ships and three Matson vessels. The service to China will be a first for Matson.

OceanBlue had been in discussions with Kvaerner to purchase the two container ships, which are under construction. OceanBlue, a company formed last fall, is headed by former Matson executive C. Bradley Mulholland.

The company's public relations firm in Honolulu, Becker Communications, said OceanBlue officials were unavailable for comment.

Kvaerner also granted Matson a right of first refusal for up to four more ships scheduled for delivery before June 2010, Matson said.

Problems cited

Kvaerner officials yesterday said some problems occurred with OceanBlue.

"We started building these ships on speculation and worked for some time with startup company OceanBlue Express," Kvaerner shipyard president Dave Meehan said in a statement. "As it became apparent that OceanBlue Express was experiencing difficulties in removing contingencies relative to our preliminary agreement, we escalated our sales efforts. We are very happy that we have now concluded a contract with our old customer Matson."

OceanBlue Express was incorporated in Delaware in October and registered to do business in California in November. The company, which has not officially announced its plans, had posted job listings on the Yahoo! Web site last month for sales managers to handle "the transportation business of customers shipping between California and Hawai'i."

OceanBlue had expressed interest in starting a service here during preliminary discussions with state officials, state Department of Transportation spokesman Scott Ishikawa said. The company last spoke with state officials in late January, he said.

Growth opportunities

When asked if OceanBlue's plans factored into Matson's decision to purchase the ships, John Kelley, investor relations vice president for Matson parent company Alexander & Baldwin, Inc., said: "It simply had to do with replacing capacity in the Guam trade.

"We set out to come up with a new way to serve Guam," he said. "That was the problem or the issue at hand, and this turns out to be the way that when you put all the pieces together is financially attractive and offers some new growth opportunities we never had before."

Matson and Horizon Lines are the state's major shippers. Pasha Hawaii Transport Lines will begin a roll-on/roll-off service for vehicles and other heavy cargo between the West Coast and Hawai'i next month.

Matson's two new ships will be similar in capacity, speed and operating efficiency to the Manukai and Maunawili, which Matson bought from Kvaerner in 2002 for $220 million.

Kelley said the ships bought in 2002 were "exceedingly favorably priced" because the shipyard had received government subsidies at the time.

One of the new ships will be delivered and placed in service by July, and the other will be delivered by June 2006. The two new ships and three existing Matson diesel-powered container vessels will begin a weekly West CoastiHawai'i-Guam-China service by mid-2006. The planned route includes port calls at Long Beach, Honolulu, Guam, and two ports in China.

"These two new ships, coupled with our other two new KPSI (Kvaerner) vessels, will ensure that Matson continues to provide Hawai'i with efficient, dependable ocean transportation services for decades to come," said James Andrasick, Matson president and CEO.

A&B president and chief executive officer Allen Doane said: "This decision allows Matson to retain its competitive position in the Guam service, while simultaneously strengthening the Hawai'i service and adding a new growth opportunity with carriage of cargo from China.

"We can take advantage of this opportunity because the company has a strong balance sheet, has the use of a capital construction fund to provide tax-advantaged funding of ships and can employ the strong cash flow from its shipping business to fund the investments and related debt."