First published in the Quoted Cleantech newsletter, January 2011. Copyright Cleantech Investor 2011

Focus on offshore services

by Jon Mainwaring

Since we first profiled SeaEnergy in March 2010, the company has undergone a change in its strategic focus. In January last year, shares in the firm received a significant boost thanks to the positive sentiment generated after the firm and its partner EDP Renováveis won acreage off the coast of Scotland from the UK’s Crown Estate to develop offshore wind farms with a capacity of approximately 1.3GW (since increased to 1.5GW).

Since then, however, Alternative Investment Market-quoted SeaEnergy announced that it was seeking a private buyer for SeaEnergy Renewables Limited (SERL), its 80%-owned subsidiary with a 25% stake in the Moray Firth offshore wind scheme. The firm explained in June that the sale was necessary because of the tough financing environment it faced in attempting to raise the capital SERL would need to help fund the development of its offshore projects. “In an equity market which does not yet appreciate the huge opportunities afforded by offshore wind, we have chosen to create our own equity for future investments in the sector by crystallising the value we have created in our SERL subsidiary,” Steven Bertram, SeaEnergy’s managing director, said at the time.

Instead of developing offshore wind schemes, SeaEnergy now wants to service the UK’s burgeoning offshore wind industry.  “We believe the supply chain and service industry for offshore wind farms will be a rapidly growing and profitable sector,” says Steve Remp, executive chairman of SeaEnergy. “We now look toward generating orders, and ultimately cash flow, by providing the solution to what we believe is a key issue for offshore wind constructors and operators.”

The work involved in servicing the expansion of offshore wind in the UK includes not only turbine assembly and installation, but also the building of foundations for turbines, laying and connecting electricity cables, as well as maintenance of the turbines once they are installed.

Over the past decade several companies have emerged with a specific intent to play a role in servicing the UK’s offshore wind industry. These include businesses like MPI Offshore, whose 14,000 gross tonnage MPI Resolution is the world’s first purpose-built vessel for installing offshore wind turbines and foundations, and North Sea Logistics, an operator of specialist vessels that transfer personnel and equipment to and from offshore wind turbines.

There should be plenty of room for SeaEnergy too, according to The Offshore Valuation Group (a coalition of government and industry organisations). A recent report by the group forecast that 145,000 new jobs would be created in the UK if only a third of the total available offshore resource could be exploited, while the electricity generated would be equivalent to that produced by one billion barrels of oil (matching North Sea oil and gas production).

Already, SeaEnergy’s Marine Services business has made progress with the signing of two important agreements during last summer.

The first of these was a letter of intent signed in June with Ulstein Group, a Norwegian designer and builder of specialist ships. SeaEnergy is planning vessels to perform both the commissioning and maintenance works of offshore wind turbines. Two vessel designs are currently being developed based on Ulstein’s proven X-Bow ship design that allows high transit speed in adverse weather conditions.

Then, in August, SeaEnergy signed an exclusivity agreement with Ampelmann, a high-tech offshore access specialist, to secure use of Ampelmann’s ship-based self-stabilising platforms. SeaEnergy plans to use the Ampelmann platforms aboard Ulstein’s X-Bow vessels to provide greater levels of access and cost efficiencies to offshore wind turbine developers and operators than are currently available to them.

Specifically, the company says the integration of the X-Bow vessel and the Ampelmann platform system will help to maximise the time that wind farm developers can put technicians on to offshore turbines, so reducing the periods when turbines are not producing electricity and maximising revenues. SeaEnergy also says that enhanced access to offshore turbines will also allow construction and commissioning phases to be shortened so that offshore wind farms can start generating earlier. A number of contracts to provide services to offshore wind energy projects are expected to be put out to tender over the next few months and SeaEnergy is working hard to secure some of these, with the knowledge that suitable vessels are currently available to the firm on a back-to-back charter basis. However, after the firm’s short term borrowing facility with LC Capital Master Fund was increased from £2 million to £3.8 million in September investors are eagerly awaiting news of the completion of its sale of SERL.

At the end of December SeaEnergy announced that negotiations for the disposal of the subsidiary were “at an advanced stage”. Previously the firm had indicated it had had an encouraging amount of interest for SERL, including from the Far East. SERL not only has a 25% interest in the Moray Firth development, but it also has 25% interests in two other Scottish offshore wind farms, Beatrice and Inch Cape. This means its net capacity in the UK is more than 781MW. The company also has an agreement to develop offshore wind farms in Taiwan.

Once the sale is achieved SeaEnergy’s management will be able to focus its attention on the Marine Services business and its oil and gas interests. These latter assets, a legacy of the firm’s previous incarnation as Ramco Energy, include: a 29.87% stake in Lansdowne Oil & Gas, which this year successfully secured extensions to three of its Irish licences and expects to see increased activity in the Celtic Sea; and a 32.67% holding in Mesopotamia Petroleum Company, a business that is currently in discussion with a Middle Eastern group to acquire a comprehensive package of drilling assets.