RWE selling jack-up vessel duo

RWE Innogy is in the process of selling its two offshore wind installation vessels – the Friedrich Ernestine and Victoria Mathias – reflecting changes in the market and parent company RWE’s financial challenges.

Both vessels – costing €100m ($137m) each – were delivered last year from Daewoo shipyard in South Korea, and are among the few jack-up barges in operation capable of lifting 6MW turbines.

The move comes amid a significant belt-tightening programme at Germany's RWE, whose pain is being shared by Innogy, its renewables division. RWE, like many European utilities, faces huge financial challenges amid a fast-changing EU power market.

Innogy is in the process of divesting its large-biomass business, and intends to lower its stakes in future offshore wind projects.

RWE decided to buy the Friedrich Ernestine and Victoria Mathias around the time it reached the final investment decision on its Gwynt y Mor and Nordsee Ost offshore wind farms, both currently under construction.

The decision was prompted by the problems faced at the 90MW Rhyl Flats project, off the coast of North Wales, when the KS Tita 1 jack-up barge was lost at sea while being transported from the US.

“It became totally obvious to us that at that time there was a massive problem for the offshore wind industry in terms of access to jack-up vessels,” says Paul Coffey, chief operating officer at RWE Innogy.

The picture has not yet changed dramatically. “The market’s built some more but they’re still quite a scarce commodity,” Coffey says of the vessels.

But three factors – a steady pipeline of new vessels set to enter the market in the coming years; the realisation that Innogy will probably only build one offshore wind project at any given time in the future; and the financial constraints faced by parent company RWE – have led Innogy to put Friedrich Ernestine and Victoria Mathias on the auction block.

“The utility sector’s fallen on difficult times,” Coffey says.

“We’ve got a choice. We can have our capital tied up in non-core assets like installation vessels. Or we can release that capital to then reinvest in our core activities” of the future, consisting of on- and offshore wind and hydro.

“We think we bought pretty much at the perfect point in the market – right at the bottom,” Coffey says of the vessels’ combined €200m price tag.

Such vessels would cost 30%-50% more were they ordered today, he estimates.

Ultimately “the market will decide what they’re worth”, he says. “But we don’t expect to be a seller at anything less than what we paid.”

The Friedrich Ernestine is currently deployed at Gwynt y Mor while the Victoria Mathias is working at Nordsee Ost.

Innogy has already seen interest among private-equity buyers. Other potential buyers include existing marine operators and other offshore wind developers interested in boosting their own installation capacity.

Despite Innogy’s recent warning that offshore wind in the UK – including its own Galloper project – will struggle if the government does not boost financial support, Coffey insists that the vessels' sale represents a separate issue.

A recent review undertaken at RWE concluded that “it wasn’t strategically critical for us to own these vessels ourselves.

“We’re convinced the capacity will be in the market” when Innogy needs it.

Also, given RWE’s bruised balance sheet, Innogy has moved from a strategy “in which we’d originally sized our offshore wind business to be building two major projects at a time, to a world where actually we can’t see we’d have the financial capability to do more than one at a time”.