When Eneti began its transition from the former Scorpio Bulkers to an owner of a wind turbine installation vessel (WTIV) newbuilding, it led to a few key questions.
What would the New York-listed shipowner have to show shareholders during the period between the sale of its last bulker and the delivery of its first WTIV newbuilding?
And how would the newcomer build a management team to succeed in a vastly different sector?
The recently announced agreement to take over Seajacks in a $600m takeover deal answered both questions.
Eneti, led by chief executive Emanuele Lauro, is set to combine with a company that already has five WTIVs on the water, so when the deal closes it will already have been an active operator in the sector well before its $330m newbuilding arrives.
And it joins up with a company that has already installed 470 wind turbine generators and 450 foundation structures with an experienced management team.
"It’s like Eneti’s first birthday and Christmas all rolled up in one," company president Robert Bugbee said in a conference call with analysts when asked about that management team.
The deal also comes with a stocking stuffer. In its takeover of Seajacks, Eneti gets a ticket nearer to the front of the queue in the race to build a WTIV in the US, where its merger partner has already been involved.
That move comes at a time when the US offshore wind market is expected to see significant growth, and after legislative and regulatory moves in Washington over the last several months have charted a clearer path for meeting these new projects' vessel needs where previously uncertainty reigned.
At the time of the Seajacks deal, Eneti was already in what executives described as “late-stage” talks with shipyards to build a WTIV that would qualify for the Jones Act — the law that requires US-built tonnage for domestic trades.
There are still no ships on the water that meet that requirement, and there is only one under construction — Dominion Energy's Charybdis. Keppel AmFELS in Brownsville, Texas, is building that $450m WTIV, and Seajacks is involved in overseeing construction.
Clarksons Platou Securities head of research Turner Holm has told TradeWinds reporter Joe Brady that Eneti could pursue an equity stake in the Charybdis.
As a Monaco-registered company, Eneti would need to structure any deal carefully to be involved in the Jones Act market, where the law also requires that a vessel is US-controlled. But it would not be the first foreign shipowner to do so. American Shipping Co, after all, is Norwegian and is involved in this sector by bareboat chartering all of its tankers to Florida-based Overseas Shipholding Group.
There are reasons for Eneti, and some of the traditional players such as US owner Crowley Maritime, to be drawn to the Jones Act wind vessel market.
Eneti has told investors of 26 GW of projects along the east coast of the US. President Joe Biden wants more, setting a target of 30 GW by 2030.
Global growth
This comes as Clarksons Research estimates that some 131 GW of offshore wind capacity could go online around the world by 2027, up from 34 GW today plus 7.5 GW in grid-connected projects.
Classification society ABS has estimated that the US market could need six to eight WTIVs, in addition to 18 to 30 service operation vessels.
And there is likely to be a leg up to having Jones Act tonnage in US waters.
In December last year, US Congressman John Garamendi won a passage of legislation that ensured the Jones Act applies to US wind development. The then outgoing president, Donald Trump, did not stand in its way, and subsequent regulations provided regulatory certainty over how Jones Act and foreign-flag vessels operate on wind projects.
Jones Act proponents will now be monitoring foreign-flag vessels to make sure they do not do any work guaranteed to US-built ships. They have even deployed a ship to do so.
But risks remain.
Across the global wind energy space, permitting for projects is a key risk to vessel demand. In the US, what remains unclear is whether Biden will be able to reach his wind energy goals — and how quickly.
Clarksons Research estimates that the US will build 7.8 GW of capacity by 2027 — 8% of global growth.
With a Jones Act vessel costing somewhat more than a ship built outside of the US, it will take some confidence in the long view.
