This paper proposes a novel electric propulsion system for naval ships, which consists of Active Front End (AFE) converters directly connected to battery Energy Storage Modules (ESMs). Employing the proposed AFE converters with ESMs in the power systems of naval ships can enhance the reliability and quality of the electric power. Furthermore, the fuel-efficiency of the generator can be improved by a higher loading factor of the generator and its prime movers. The proposed AFE configuration does not require an additional dedicated DC/AC converter for the ESMs. Instead of that, the AFE converter itself can control the DC link voltage and the discharging and/or charging of the ESMs. A control scheme to achieve these control objectives is also presented in this paper. The overall power system, including the generators and electrical loads of a naval ship, is implemented by a small scaled Power Hardware-In-the-Loop (PHIL) simulator. Through this experimental setup, the proposed system configuration and the power control strategies are verified. It is shown that the fuel-efficiency and transient dynamics can be improved in the normal and contingency operation modes.