Ambitious Monaco-headquartered maritime contractor Eneti should be able to finance construction of its lead-off $330m wind turbine installation vessel (WTIV) newbuild without resorting to a sale of new shares, a leading analyst reckons.
Clarksons Securities wind sector specialist Turner Holm has taken the lead on coverage of the former Scorpio Bulkers , which rebranded to Eneti earlier this year, from shipping analyst Omar Nokta, initiating coverage with a “buy” rating and a price target $8 higher than Eneti’s current level around $18.
One of Holm's takeaways is that Eneti should have ample resources to pay for the high-specification newbuilding at South Korea's Daewoo Shipbuilding & Marine Engineering (DSME) without the need for an equity raise. The unit is to be delivered in in 2024 for first assignments in the US Atlantic.
The construction price should be covered by operational cash flow and 55% bank debt on the unit, Holm said in a client note. The WTIV is scheduled for delivery in the third quarter of 2024.
“Based on our estimates, no further equity is required to fund the newbuild, assuming 55% leverage upon delivery in 2024,” Holm wrote.
Eneti's cash liquidity pending delivery on the newbuilding has been boosted by its $521m acquisition of one of the most experienced players in the wind installation business, the UK’s Seajacks International, and its five existing WTIVs.
Seajacks, founded in 2006, its the largest owner of purpose-built, self-propelled WTIVs in the world, with a pedigree for installing wind turbines and foundations dating back to 2009.
“The combined company has a solid operating fleet, including one of the best vessels in the market today, and organic growth through a newbuild built to install the next-generation of turbines that are lowering energy costs and making offshore wind a core technology of the energy transition,” Holm wrote in a flash note.
The analyst said Eneti’s current trading level of $18 per share prices in rates at or below recent fixtures and well below Clarksons Platou's estimates for future contracts.
“We anticipate a tightening WTIV supply and demand balance as installation more than doubles in the next three years and the fleet fails to keep pace,” said Holm.
“Eneti also holds a grab-bag of strategic options, in our view, including another newbuild or a venture into the US market with a Jones Act vessel, based on its involvement with the only US- compliant vessel under construction today.”
In establishing his buy rating and price target, Holm said Eneti’s shares offer “asymmetric risk-to-reward” at its current valuation on the New York Stock Exchange.
The fast-track scale-up of offshore wind turbines to the supersize 15MW models now in development has been shown to be “outpacing” construction of the WTIV fleet needed to erect the giant machines at sea, with an approaching bottleneck that will call for billions of dollars in investment in newbuilds in the next five years to get past, according to recent report from IHS Markit.
