Edda Wind's first two new-design newbuildings will be set back by months at a cost of millions because of delays in building specialised equipment for delivery to two Spanish shipyards.
But the Norwegian company is not worried, and is weighing up rights of first refusal to two to four more wind vessel slots in Spain, which must be exercised by year's end.
The delivery delay issue is not down to the Astilleros Gondan and Balenciaga yards, where Edda is building six ships by Norway's Salt Ship Design — soon to be eight or 10, if options at Gondan are exercised.
Rather, it comes from production and design of an essential component of wind farm service operation vessels (SOVs) and commissioning service operation vessels (CSOVs) — a new-design gangway system that allows them to deliver technical commissioning crews to projects in hostile environments.
The delays — along with prospects for adding substantially to Edda Wind's six-ship newbuilding programme before year's end — were disclosed to investors ahead of the company's 16 November initial public offering.
Investors showed scant signs of discouragement in the offering, which raised $116m.
As TradeWinds reported, bookbuilding closed in minutes, bringing in John Fredriksen and Idan Ofer as shareholders with stakes of nearly 10% each. Founders Ostensjo Wind and Wilhelmsen New Energy retain majority control, each with a sliver over 25%.
Oslo Stock Exchange rules require a free float of at least 25% of shares in the hands of investors holding less than 5% each. A chunk of shares bought by Scandinavian bank Nordea comes in under the 5% threshold.
On the expected delivery delays, Edda chief executive Kenneth Walland said the installation systems are all being built by the same Norway-based company, with production in Poland.
Problem solved?
He declined to name the supplier, with which he said Edda is "dependent on having a fruitful dialogue". But previous contract announcements by Cargotec subsidiary MacGregor link the leading cargo equipment manufacturer to all Edda's motion-compensated gangways and cranes.
A MacGregor official did not immediately respond to requests for comment.
The first delayed Edda ship, the initial CSOV of four current identical units from Gondan, was to have come out in March 2022 at a price of €46.8m ($52.9m). But the date depended on a September delivery of the gangway, which has been deferred until February or March. Edda now hopes to get the first Gondan CSOV in May.
The first of two identical SOVs from Balenciaga was to have been delivered to Edda Wind in April 2022 at a price of €42.4m. Edda now hopes to get it in July.
Walland believes two months' delay in delivering the vessels to charterers could cost €2m to €3m in the worst case. Contract terms protect the builders from liability.
Edda Wind has two wind farm service operation vessels (SOVs) on order at Balenciaga and four wind farm commissioning service operation vessels (CSOVs) plus options at Astilleros Gondan:
Delivery date | Owning entity | Hull number | Price | Notes | |
SOV #1 | 2022 July | Edda Wind III | C-415 | €42.4m | delayed gangway |
SOV #2 | 2023 Q1 | Edda Wind IV | C-416 | €42.4m | |
CSOV #1 | 2022 May | Edda Wind I | C-489 | €46.8m | delayed gangway |
CSOV #2 | 2023 Q1 | Edda Wind II | C-490 | €50m | €47.5m before upgrades |
CSOV #3 | 2023 Aug | Edda Wind V | C-491 | €47.3m | |
CSOV #4 | 2024 April | Edda Wind VI | C-492 | €47.3m | |
CSOV #5? | 2024 | n.a. | n.a. | firm | declare by 31 Dec 2021 |
CSOV #6? | 2024 | n.a. | n.a. | firm | declare by 31 Dec 2021 |
CSOV #7? | 2025 | n.a. | n.a. | subjects | |
CSOV #8? | 2025 | n.a. | n.a. | subjects |
Prices are Edda Wind's price, net of builder revenues covered by a Spanish tax lease scheme. Other yards are in talks to build alternative ships for the optional CSOVs at Gondan.
"These are permissible delays that were agreed upon for some of the suppliers that were identified by us before contract signing," he told TradeWinds.
Longer equipment delays would have more severe outcomes. Under charterparty terms, a six-month delay would give charterers Ocean Breeze Energy and Vestas Offshore Wind cancellation rights for their German and Scottish wind farms.
Shorter delays would also entail penalties for the "forerunner vessels" that will perform work before the newbuildings are in service.
But Walland rules out such an outcome.
He believes the supplier has overcome the problems of designing and building the two initial units — "highly advanced software and hardware, a new system from their maker". The succeeding ships will use identical gear, and he believes the production and design problems have been solved now.
"Lessons have been learned," he said. "The gangways and cranes are now physically under assembly. I wouldn't expect further delay, but you know how these prospectuses have to be written, identifying all possible risk factors."
On the rights of first refusal for further CSOVs at Gondan, Wallander described them as tantamount to options.
Edda has negotiated two such slots at an undisclosed firm price that Walland said is higher than the €47.3m at which ships three and four were contracted in March, but still "attractive". Two more slots are priced subject to conditions.
Edda Wind is negotiating with other yards for alternatives to the two to four extra Gondan CSOVs, according to financial filings.
