Scorpio Bulkers is Selling Off its Fleet and Shifting to Offshore Wind
The NYSE-listed bulker owner Scorpio Bulkers is selling off its fleet and moving into the business of wind farm installation. It has been gradually disposing of its dry bulk vessels for several months, and it is closing in on a contract with DSME for the construction of its first wind turbine installation vessel (WTIV).
"The wind turbine installation vessel contract signing is now imminent, only days away. And shortly after that, we will be able to give more clarity on how fast we will be exiting the dry cargo business," said chairman and CEO Emanuele Lauro in an earnings call Tuesday.
The reason for the massive transition is market-driven, he said. The EU plans to spend $750 billion on post-COVID recovery, with a focus on green energy. The UK wants to install offshore wind at the rate of one turbine per day between now and 2030. And the U.S. market is primed to take off, though the timing is widely seen as contingent upon the outcome of the November election.
The next generation of offshore wind turbines will be far bigger, and a new generation of wind turbine installation vessels (WTIVs) will be required to build out future projects. That means a business opportunity for new market entrants with access to capital and maritime operations experience. "With this in mind, we decided to focus on installation and build those assets which are going to be required by the market starting 2024, maybe end 2023," Lauro said.
The wind business is attractive to Scorpio for traditional reasons - shareholder value and return on investment. The project pipeline is known; the government commitment is largely in place; and the financing is available. Compared to a dozen-odd Kamsarmax bulkers, one high value WTIV is expected to bring "more predictable, higher and better-quality returns over multiple years . . . at comparatively low levels of leverage," according to managing director David Morant.
Scorpio's first new WTIV is planned for delivery in the first quarter of 2024, and its new business line would launch in parallel with the wind industry's accelerating expansion. This means that the first revenue from wind is three years away, and Scorpio is selling off its bulker fleet now. The reason for the early liquidation is signalling, the firm's management team said: it is sending a clear message to all stakeholders that Scorpio wants to do wind, and only wind. "It's not quite as extreme as Cortes burning his boats when he arrived in America, but it's somewhere along that theme," said president and director Robert Bugbee.
Bugbee sees the nascent American market as a natural development for U.S.-based Scorpio, and he expects that it "could well kick off very hard and fast depending on what happens in the U.S. election in a few days' time." If that does occurs, Scorpio could have an advantage as a pure-play wind vessel operator with the U.S. East Coast market in its backyard. "We won't go into detail about Jones Act compliant [solutions] except to say that we're fully confident that we will comply," said chief operating officer Cameron Mackey.