Scorpio Group-backed Eneti should be able to finance a $330m wind turbine installation vessel newbuilding without resorting to a sale of new shares, a leading analyst reckons.
Clarksons Securities wind energy specialist Turner Holm has taken the lead on coverage of the former Scorpio Bulkers 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 ship is to be delivered in in 2024.
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, Seajacks International of the UK, and its five existing WTIVs.
Seajacks was founded in 2006 and calls itself 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.
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," Holm wrote.
"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.
