COLUMN | Quick Updates: BP, Equinor, Edda, Wilhelmsen, Hornbeck, MAGE and Sevnor [Offshore Accounts]
For the last three weeks we have been distracted by the mania for offshore wind (here, here and here). So, too has BP’s visionary CEO Bernard Looney. He has announced that BP has agreed to buy a 50 per cent stake in two US offshore wind projects from Equinor for US$1.1 billion, both in the waters of the Atlantic.
“This is an important early step in the delivery of our new strategy,” Mr Looney told staff and investors on September 10, although BP won’t actually be the operator of the wind farms, that honour remaining with the Norwegians.
Looney come lately to offshore wind?
Early or too late, some might ask? The wind industry press reported here that Equinor paid just under US$180 million for the leases for the two sites: US$42.5 million for Empire Wind in December 2016, and US$135 million for Beacon Wind in December 2018.
So far, no actual turbines have been erected at either location. Although Equinor has done lots of studies and permitting, there remains another US$3 billion to spend to complete the projects, which are just empty plots of sea at the moment.
So, it looks like Equinor quintupled its money in just a few years – a sure sign of the massive interest in the offshore wind sector, which is fuelling the bubble in asset prices.
Equinor has also announced it has formed a consortium with the Japanese utility JERA and Japanese renewable energy company developer J-Power to submit bids in forthcoming offshore farm wind acreage auctions in Japan off the coast of Japan’s main island, Honshu. Japan will hold the auction “within months”, according to Equinor, with a view to announcing the winning bidders before the end of next year. Perhaps Equinor can repeat its trick of flipping stakes in its permits to Mr Looney who has a pile of money he is desperate to spend (I mean invest), as he tries to “re-invent” BP.
Edda Wind and Wilhelmsen tie up
After announcing a US$57 million profit for the second quarter of the year, and that it was sitting on a US$149 million cash pile (here) at the end of June, venerable Norwegian investment company, ship manager, and provider of agency, chemicals and ropes, Wilhelmsen has also jumped into wind. Wilhelmsen announced it would buy a quarter of Norwegian wind farm support vessel owner Edda Wind from Østensjø Rederi, with the option to buy a second quarter next year. What’s very frustrating is that, according to the press release here, “The parties have agreed not to disclose any details related to the financial transaction”.
Edda Wind owns and operates two existing diesel-electric service vessels supporting the maintenance work conducted during the commissioning and operation of offshore wind parks, Edda Mistral and Edda Passat, both 81 metres long, both built in 2018 in Spain, and both committed to long term charters with Ørsted. The ships are part of the new generation of DP wind farm maintenance vessels with 23 metres length heave-compensated “walk-to-work” gangways, what the builders described as “cutting edge 3D compensated” cranes, and crewboat landing systems with bunkering facilities. Specifications here.
Spanish new building portfolio with 15-year contract
The value of Edda’s Wind fleet lies not in these two vessels, however, but in four more under construction for delivery in 2022 in Spain. Again, these are European-built, diesel-electric, and high-specification vessels: two service operation vessels (SOVs) and two commissioning service operation vessels (CSOVs). Edda previously announced that long-term charter agreements are in place for two of the newbuilds ahead of delivery, with MHI Vestas and Ocean Breeze Energy.
The MHI Vestas charter of the first SOV is for 15 years and will commence in the second quarter of 2022. Ocean Breeze is the operator of the BARD 1 offshore wind farm in Germany and signed a charter with Edda for the one of the newbuild CSOVs for 11 years. Gordan and Balenciaga shipyards have reported that the CSOVs each have an LOA of 88.3 metres with accommodation for up to 120 persons, whilst the SOVs are 82.4 metres in LOA and have cabins for 60 passengers and crew in total.
Edda said the vessels will feature a battery hybrid propulsion system and would be prepared for the installation of future zero-emission hydrogen technology. So, it is not clear why Edda needed to sell the jewels in its future growth strategy…
Østensjø Rederi weighed down by the past
Until you realise that, like Vroon and Swire, two other early entrants into the windfarm sector, Edda is weighed down by an expensive and highly unsuccessful offshore division. On top of the two wind farm vessels, the company also has eight PSVs and light construction vessels, and one 600-passenger DP3 accommodation vessel, Edda Fides, which investment advisers in Oslo have already been advertising as for sale for over a year, after a long dry period when it was unemployed. So, essentially a chunk of the future growth of the company has been sold to pay for the mistakes of the past.
Wilhelmsen’s artfully worded press release makes it clear that its cash will be the driver for growth of Edda Wind in future:
“The Wilhelmsen group’s strategy is very clear, to further expand into renewables, by working together with partners, and leveraging our expertise and assets. So, finding an opportunity like this to work with Østensjø and invest in Edda Wind, a growing company, rapidly expanding its fleet with future-focused emission free vessel technologies is ideal,” boasted Thomas Wilhelmsen, CEO of the Wilhelmsen group.
Commenting on potential synergies, he added, “With our unrivalled global network, decades of in-depth logistical and operational expertise, and experience in the renewable space, through our NorSea and Elevon interests, Wilhelmsen is uniquely equipped to help unlock Edda Wind’s enormous potential.”.
Hornbeck assembles dream team of directors
Hornbeck Offshore Services is one company which is much less burdened by the past, as it emerged from Chapter Eleven bankruptcy protection on September 11 after its balance sheet restructuring was approved by the Honorable David R. Jones, the same district of Southern Texas bankruptcy judge who oversaw the restructuring of McDermott. The former shareholders were wiped out and got nothing in the new company, whilst all the company’s bonds and notes were converted to new equity, in the usual scenario that we have seen at Tidewater and McDermott earlier.
Surprisingly, Todd Hornbeck remains the CEO, despite leading the company into bankruptcy in the first place. Even more surprising was the choice of directors Mr Hornbeck unveiled to propel Hornbeck and its fleet of over 70 DP PSVs to a glorious new future. They include:
- His own father as “emeritus chairman.
- Bobby Jindal, the former Governor of Louisiana.
- A retired US Navy admiral.
- A former director of Seacor who runs a fund, which he states, “invests in public and private companies where distress, resource constraints, or challenged positioning leads to ‘value gaps.'” So, it sounds like he is in the right job.
- A current director of Six Flags Entertainment, a chain of roller coaster and theme parks, who also directs a American cement company, for synergy, presumably.
- One of the old directors who was previously on Hornbeck’s board for nine years from 2011.
- John Rynd, the former CEO of Tidewater and Hercules Drilling (which entered chapter eleven twice on his watch and was sadly liquidated under his CEOship), who was also a previous director of Hornbeck.
Let’s see how well Hornbeck does at closing the “value gap”. The company closed on an issue of new stock, which resulted in a US$100 million cash infusion, so its balance sheet is well buttressed. This should concern Tidewater, Seacor, Choust and Harvey Gulf, which have benefitted from Hornbeck’s financial travails over the last five years, as the company’s debt mountain pulled it into insolvency.
“Post-emergence, we have clear alignment with a strong and well capitalized group of lead shareholders on a shared vision for the company’s future,” continued Mr. Hornbeck in the release here. The Gulf of Mexico and Caribbean PSV markets just got a whole lot more competitive.
To Russia with Love, via Sevnor
Gore Vidal wrote that. “The four most beautiful words in our common language” were “I told you so”. So, it comes as no surprise to see the former UT722LX large anchor handler Bourbon Surf, which Cypriot owner and manager Sevnor bought in February out of lay-up, has now been reactivated, renamed, and reflagged to Russia as Finval.
The vessel promptly mobilised to Kaliningrad in the Russian Baltic, conveniently close to the Nordstream 2 pipeline, which will likely be completed by a purely Russian spread, after Swiss-Dutch contractor Allseas was prevented from completing the final section of the gas line by American sanctions, just as we predicted here.
Sister vessel Kazanin Explorer, the former Bourbon Borgstein, has also been Russian-flagged, reactivated from lay-up and mobilised to the Arctic for Sevnor’s close and repeat charterer MAGE – the Marine Arctic Geological Exploration joint stock company, controlled by the Russian government.
Finally, Danish Irony at Maersk Supply
Denmark truly is a country with a rich sense of humour (here). First, we had Ørsted’s departing CEO lecturing us on the evils of racism from his all white board room (here). Now, we have Maersk Supply Services telling us on social media that, “One of our values at Maersk Supply Service is our employees,” as the company touted its participation in executive education (here).
This being the same Maersk Supply Services which reduced its shore costs by 30 per cent in May and laid off fifty-five people. So very drôle.