Insight – JV is a sign of the times

News of an impending joint venture between Areva and Gamesa is a sign of further consolidation to come in European offshore wind, said the director of the new Recharge Insight analysis service.

Recharge Insight had already predicted in its “Ten Surprises for 2014”, published in January, that further consolidation in the offshore sector would be necessary – and today it emerged that the French and Spanish groups are set to announce their JV on Monday.

Insight believes that there are not currently sufficient unallocated megawatts in the offshore pipeline to make proceeding with manufacturing investments an economic decision for all existing incumbents.

Additionally not all the incumbents have sufficient balance sheet strength to support their ambitions in offshore, nor necessarily the financial capability to provide the appropriate warranty guarantees needed to secure orders.

“Based on our analysis of the offshore industry, the scene has been set for further partnerships and collaborations,” said Robert Clover, director of Recharge Insight.

“Obviously the precise details of the JV have yet to be announced, and the financial arrangements are, as ever critical to the success of any such JV,” added Clover.

“However, from a strategic and a cost perspective, there is no doubt that such a JV would strengthen the prospects for both companies, and will certainly make two Tier 2 players in the offshore market a more formidable presence, potentially enhancing their ability to jointly secure orders and importantly reduce costs to secure a profitable future for the combined entity.”

Clover noted that the offshore market is poised to be one of the key growth drivers in the European wind market out to 2020 with industry analysts predicting on average annual growth of 15-20% per annum over that period and between 20-25GW of installations.

This growth has attracted at least eight serious wind OEMs to the market each with their own turbine offerings, two of which merged their businesses in the MHI and Vestas deal.

R&D costs in the offshore market are significantly higher than onshore wind due to the complexities of the offshore environment and the large size of the turbines, said Clover.

Almost all new entrants into this fast-growing market are expected also to invest in new purpose-built manufacturing facilities to service this growing market.

Recharge Insight is a new analytical service that will be launched in early 2014.