Analysis: GeoSea and Van Oord on acquisition trail

EUROPE: There have been a number of divestments in the offshore wind sector in 2014, most recently Ballast Nedam to Van Oord, and Hochtief to GeoSea.

The Ballast Needham acquisition includes the Svanen installation vessel
The Ballast Needham acquisition includes the Svanen installation vessel

At first glance this could look like consolidation brought on by lower targets — Germany has revised its offshore wind target down to 6.5GW instead of 10GW by 2020 — and several abandoned offshore projects in the UK.

But closer scrutiny shows the parent companies have sold off their profitable niche offshore businesses for other reasons. The general outlook for offshore wind looks positive. In the UK, consolidation seems a long way off as more players could come into the market.

On 28 October Ballast Nedam announced its intention to divest "at short notice" its Ballast Nedam Offshore assets; the staff of the engineering, procurement, construction and installation (EPCI) services division; and its heavy-lift vessel Svanen. The asset management activities for operational wind farms was not included in the transaction.

Speed being evidently of the essence, less than a month later, the sale agreement of Ballast Nedam Offshore, EPCI services, the Svanen and the previously not mentioned contract for the Westermeerwind offshore project in Germany (currently in progress), to van Oord was agreed.

Losses in other divisions

The driving force seems to have been company losses. In October's Q3 results, Ballast Nedam said these continued to rise in the third quarter of 2014, mainly in connection with considerable additional cost overruns on the Dutch A15 motorway project, in which it has a 40% stake.

In particular, the company said its €100 million loss is to be "pre-financed pending the outcome of the contractual dispute settlement proceedings". With pressure on to find the funds to pre-finance, the plan to divest the offshore wind activities was speedily announced only five days later. The move was an addition to the disposals programme that Ballast Nedam announced in February.

Before the offshore divestment Ballast Nedam had characterised 2014 as a difficult year and given no concrete forecasts. But including a " substantial book profit resulting from the sale of Ballast Nedam Offshore's assets, it forecast an operating loss of €35-45 million for the whole of 2014, on 27 November 2014.

Van Oord has acquired a going concern. "Since Ballast Nedam Offshore was involved in the design and build of the first Dutch offshore wind farm, Egmond aan Zee, in 2006 it has yielded positive results," Ballast Nedam had said on 23 October.

Similarly, loss-making Hochtief Europe announced the sale of its offshore assets — including all jack-up vessels and work pontoons, and its heavy-lift jack-up vessel Innovation — to marine contractor and long-term partner GeoSea, part of the Belgian DEME group, on 16 October.

The transaction will lead to a positive book gain for Hochtief, the German company said. This came shortly after Hochtief's Europe division losses had deepened in Q3 2014. Hochtief Europe posted a net loss of €12.7 million in Q3 2014, a sharp drop on the plus €0.9 million in Q3 2013, even though the first nine months of 2014 had seen the net loss shrink somewhat to €24.3 million compared with minus €27.5 million in the equivalent 2013 period.

"The company's focus has recently been shifted," was the dry comment on the divestment made on 16 October by Marcelino Fernández Verdes, CEO of the Hochtief group and also responsible for Hochtief Europe.

But here, too, far from being triggered by the state of the offshore wind market, the move is ascribed as part of Hochtief's "advancing process in recent months of focusing on its core business of construction".

After an acrimonious takeover battle in which Spanish construction and services group ACS took a majority in Hochtief in 2011, Verdes had announced in February 2013 the company was to be restructured to focus on energy, transportation, social and urban infrastructures and contract mining.

Offshore investment

"The offshore wind branch expects new investment decisions next year leading to an expansion of the market. The trend is positive," said Sebastian Sahm, press spokesman for the German offshore wind energy foundation, Stiftung Offshore Windenergie. " In Germany, the new Renewable Energy Act 2014 has created more security for planning, which facilitates investment decisions," he noted.

This view is underpinned by developments that include the new Steelwind-Nordenham monopile factory, which delivered its first monopiles in June, and the announcement by the city of Bremen in November that spatial planning and tendering for the Bremerhaven offshore terminal on the river Weser estuary should be completed by mid-2015. Construction should then take around two years.

In the UK, positive signals include MHI-Vestas' plans to use Vestas' production facilities on the Isle of Wight to produce blades. But current UK market conditions need to be altered to become more encouraging and attract more players. For instance, developers and tier-one suppliers should consider, where appropriate, ways of breaking their orders into "bite-sized" multiple contracts.

Other positive signals include Senvion's installation of its new offshore prototype Senvion 6.2M152 at Neuenwalde near Cuxhaven, Germany in December, EnBW's heralded opening of a service station at Rostock for its Baltic 1 and Baltic 2 projects in spring 2015, and the start of work in October on the HVDC converter platform DolWin Gamma, destined to serve German North Sea offshore wind projects, at Nordic Yards in Warnemünde near Stralsund on the German Baltic Sea coast.

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