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The future of UK WFSV market

“Wild Spirit, which art moving everywhere;

Destroyer and preserver;”

Ode to the West Wind – Percy Bysshe Shelley

As an island facing the Atlantic squalls, the UK is particularly blessed in terms of its wind resource as we have all experienced here during this last winter!

According to RenewableUK, the UK has been the world leader in the offshore wind industry for the last eight years, with as much capacity already installed off the UK shores as the rest of the world combined. This extraordinary statistic is made more noteworthy by the fact that the installed capacity is due to nearly double by 2020 by which time there should be around 10GW installed and offshore wind will then supply between 8 and 10 per cent of the UK’s electricity annually. Therefore, together with onshore wind power, solar power, hydro and biomass, the UK should be well on its way to its renewables target of 30% of electricity production by 2020.

There had been some concern that the pace of development was slowing down. However, with announcements like the Hornsea Project One offshore wind farm receiving its final investment decision (which will become the world’s single largest offshore wind farm once completed with a capacity of 1.2 gigawatts), the industry is back on an expansionist path.

Photo courtesy of Abeking & Rasmussen, Commercial Vessels Division

This is also good news for the UK’s offshore marine businesses and especially perhaps those operating wind farm support vessels (“WFSVs”) which have become a common sight in UK ports. WFSVs tend to be catamarans (occasionally of the Small Waterplane Area Twin Hull or ”SWATH” variety) with either aluminium, carbon composite or GRP construction, of between 19 and 26 metres LOA, capable of speeds of around 25 knots and able to carry up to 12 construction or maintenance workers and often also with a small cargo capacity for maintenance spares for the turbines. The largest and most capable of these vessels are coded Category 1 by the Maritime & Coastguard Agency and capable of working up to 150 miles from a safe haven.

There are currently roughly 300 of these vessels operating in north west Europe (the vessels tend to migrate between UK, German, Dutch and Danish ports as work requires) and the industry had thought that the market was reaching satiety with charters for particularly smaller “first generation” WFSVs becoming harder to find. However, the new approved wind farms both in the UK and in north west Europe have changed the dynamic somewhat as it tends to be the case that a greater number of WFSVs are required during a wind farm’s build phase that than are required for the so-called O&M phase (Operations and Maintenance).

This in turn is good news for UK and European shipbuilders as while the construction of WFSV has commenced in Asia on the basis of cheaper labour rates, the cost of freighting the vessels to Europe limits the cost advantage.

It is also good news for some UK ports that have seen their conventional shipping business decline – an example would be Ramsgate which although having lost its ferry connection to Ostend now is utilised as the base for WFSVs servicing wind farms off Kent and the Thames estuary.

Given the credit strength of the charterers in this market (being subsidiaries of major power utilities) WFSVs have proven relatively easy to find finance for – so at a time when ship finance banks seem to be winding down their portfolios or exiting the market as quickly as they can, a group of smaller UK lenders is active in the WFSV market. The availability of finance and the fact that predominantly transactions involving the construction, purchase or financing of WFSVs are governed by English law in turn means that the UK shipping legal community has derived work from this industry.

Transactions in this sector do have their challenges though, one major one has been that the builders of these vessels are often small yards who lack the ability to offer refund guarantees for pre-delivery instalments and some novel ways have had to be found to give banks sufficient comfort to finance WFSVs in build.

It is also the case that WFSVs operating in UK waters are largely registered on the UK flag (partly as the MCA have developed a coding system for them) which has meant that those banks who have grown used to Liberian, Panamanian or Maltese mortgage security in the commercial shipping sector now have to re-engage with the somewhat different UK ship registration system.

The future may look different for WFSVs however – as wind farms are built further offshore the model of crew transfer from mainland ports may no longer be cost or time efficient and the floating hotel model may become more prevalent with maintenance crews spending months offshore and shuttling to the turbines on small vessels from the “flotel”. In which case the WFSV market might go full circle and the smaller vessels (sub 19m perhaps) could have the better future.

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