Page 41: of Maritime Reporter Magazine (May 2020)

OFFSHORE WIND he role of offshore wind in generating power will con- (also active in ports). tinue to grow in importance as the word pivots away To date in U.S. waters, one 30 mW project- Block Island from fossil fuels. With new installations comes demand Wind, is actually online. The project’s original developer,

T for vessels. Consultants Wood Mackenzie, specialists in Deepwater Wind, acquired by Ørsted for $500 million in 2018, offshore energy, opined in late March 2020 that, worldwide, was backed by hedge fund investor D.E. Shaw, reported to have total forecast wind additions for 2020 were now expected to invested equity of $70 million. Block Island Wind’s construc- be 73GW even after taking into account negative impacts from tion, with a non-Jones Act lifter performing the actual instal- the Coronavirus pandemic. Another consultant, Rystad Energy, lation of turbines, was also funded with $290 million of debt was taking a cautious look, suggesting that 2020 would see no from Societe Generale and KeyBank (active, through a differ- growth in offshore additions (compared with the 71 gW com- ent part of the bank, in commercial workboat vessel finance). missioned in 2019), with a 10% softening in 2021. For service vessels, there is a place for independent owners.

In the United States, estimates of projects set to come online, With the ramp up of offshore wind in U.S. waters, counts of principally along the mid- and north Atlantic coasts, range from needed service vessels flow from the estimated number of tur- 6 gW up to 10 gW, out into the 2020’s; or 600 to 1000 turbines bines to be installed and then serviced afterwards. Rough rules (with a notional 10 mW turbine). Service vessels supporting of thumb suggest that one service vessel might be required for construction and maintenance of turbines and cable arrays will 20 – 25 turbines; future U.S. demand could therefore encom- be an integral part of such projects. pass several dozen vessels. Some may be newbuilds, while

How will these vessels be financed? Recent developments others may be conversions of boats originally built to service in a different part of the energy sphere, LNG fueling for ves- dormant oil platforms and drilling rigs. To date, available lift- sels, may provide a template for financial structures that could ing and installation vessels are non-Jones Act compliant. emerge, with vessel ownership tied to a mix of project fi- On the finance side, there is a clear contrast between the nance, infrastructure funds, and hedge fund investments with smaller vessels, such as those used to transfer crews, and the a “green” tinge. larger vessels which transfer components from shore and, at

A recent LNG deal highlights the role of the big players with the job site, engage in lifting and positioning. VesselsValue, a financial heft. An investor group that included HighStar Capital U.K. based information provider, puts values on existing one- (part of Oaktree Capital, the private equity and infrastructure to three-year-old international flag PSVs at $13.7 million, crew funds provider) had joined forces with Clean Marine Energy, boats at $1.3 million; and for U.S. flagged vessels at nearly $24 a smaller entity but with deep connections into the maritime million and $4 million, respectively. business, to build Clean Jacksonville, a barge to deliver LNG These prices, bolstered to account for enhanced seakeep- to commercial shipping customers. It was delivered from Con- ing (including at reduced speeds to protect whales) are within rad Shipyard, in August, 2018. This is not a “one hit wonder” the purview of commercial banks with maritime specialties or as Northstar Midstream (the Oaktree Capital affiliate) has now groups catering to small businesses and high net worth indi- ordered a second LNG bunker barge, to be built at Bay Ship- viduals. Yet, risks, in the form of delayed projects, may push building, for service along the U.S. East Coast. In both cases, financing into the realm of deeper pocketed project developers the fuel comes from Jax LNG, a new facility, backed by South- and utilities. ern Company, a huge $120 billion (assets) utility serving the southeastern United States, underscoring the importance of an- Big PROjecTS RequiRe Big Balance SheeTS choring finance to deep pockets and heft balance sheets. On the more capital intensive lift boats, where newbuilds

Such arrangements will be a template for offshore wind fi- could easily cost $250 million, the financials of Bonheur ASA, nance, a province of big money; Oaktree, a participant in ves- the parent company of Fred Olsen Windcarriers (owners of the sel finance, managed some $125 billion for pension funds and Brave Tern, which was used for constructing Block Island Wind) others, at end 2019 . A majority stake in Oaktree is held by the and Blue Tern, provide insight. Its 2018 financials reveal that it even larger ($540 billion assets) Canadian infrastructure giant acquired 51% of the shareholding in the offshore transport and

Brookfield (the purchaser of Teekay Offshore). Vessels serv- jack-up installation vessel Blue Tern (ex Sea Fox 5, built 2012 at ing offshore wind energy could well be tied to larger funding Keppeland shown on the map working at Borkum Riffgrund 2 ) packages. Examples of mega-projects abound; in the North for the equivalent of $73.6 million, with the payment including

Sea, consider the 465 mW Borkum Riffgrund 2 offshore wind assumption of $10.8 million of loans still outstanding. In 2019, farm project in the German North Sea. The $1 billion+ project, a jack-up operation maintenance vessel, Jill, was added to the is backed by Global Infrastructure Partners (a well-known in- owned fleet (purchased from Falcon Offshore, after previously vestor in ports) and by the Danish behemoth Ørsted. Another being chartered in), with $2.2 million in startup costs alone. For

Ørsted project, Race Bank (570 mW, off Norfolk, UK) sees DEME (which will be deploying the LNG fueled service vessel an investment from leading infrastructure financier Macquarie ORION, with a 5,000 ton lift capacity) another metric, annual www.marinelink.com 41