SeaEnergy: Focus on New Year as company transforms itself

Offshore wind business SeaEnergy (LON:SEA) has seen plenty of changes since we first profiled the business at the start of January this year. Back then, the firm was attracting a lot of investor interest thanks to its participation, along with Portuguese partner EDP Renováveis, in the UK Crown Estate’s Round Three bidding process that would allocate 25GW of offshore wind projects in nine zones around the UK to successful bidders.

SeaEnergy, through its 80%-owned subsidiary SERL (SeaEnergy Renewables Limited) and EDP Renováveis was soon awarded acreage in the Moray Firth, Scotland, to develop initially develop offshore wind farms with capacity of around 1.3GW (enough to power 730,000 homes), though this has subsequently expanded to 1.5GW. SERL has a 25% interest in the scheme, so it was no surprise when SeaEnergy’s share price hit a peak of 82p on the day of the award.

However, since then SeaEnergy’s gameplan has changed. In June the firm announced it was seeking a private buyer for SERL due to the tough financing environment that the firm 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.

SeaEnergy is now focusing itself on servicing the 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 (ultimately using the jacket foundations for deep water installation just like those used for oil rigs), laying and connecting electricity cables, as well as maintaining the turbines once they are installed.

Over the past decade several companies have emerged with a specific intention 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, particularly if forecasts from The Offshore Valuation Group (a coalition of government and industry organisations) turn out to be correct. A report by the group earlier this year reckoned 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 the equivalent to one billion barrels of oil production (matching North Sea oil and gas production).

Already, SeaEnergy’s Marine Services business has made progress with the signing of two important agreements this 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 of works of offshore wind turbines and 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 that the integration of the X-Bow vessel and the Ampelmann platform system will help to maximize the time that wind farm developers can put technicians onto 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 to from £2m to £3.8m in September investors are eagerly awaiting news of the completion of its sale of SERL. SeaEnergy has targeted the end of the year for completion of the sale of the subsidiary.

SERL not only has a 25% interest in the Moray Firth development but also has 25% interests in two other Scottish offshore wind farms, Beatrice and Inch Cape, which means its net capacity in the UK is more than 781MW. Additionally, it has an agreement to develop offshore wind farms in Taiwan.

According to SeaEnergy, the sale process of SERL (being coordinated by Ernst & Young) is progressing well and Remp has let it be known that the firm has had an encouraging amount of interest for this asset, including from the Far East.

Once this sale is achieved SeaEnergy’s management will be able to focus its attention on the Marine Services business and its oil & 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.

Once again, the New Year looks like it could prove to be another interesting time for SeaEnergy.