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Scorpio Bulkers goes full throttle for offshore wind

Image: Scorpio Bulkers SALT_WTIV_IMAGE (003).jpg
The “pivot” of vessel owner Scorpio Bulkers from kamsarmaxes and ultramaxes to wind turbine installation vessels (WTIVs) is likely to be a sharper and more ferocious turn than market observers were anticipating previously.

That is the big picture take-away from Scorpio Bulker’s conference call, ostensibly to discuss Q3 results, which did not come up at all on the actual session with analysts and investors.

During the Summer months the dry bulk shipowner tied to Lauro interests, had announced that it would make a shift into the wind energy business, specifically that it was negotiating a contract, to be signed “Imminently”, after inking a letter of intent with Daewoo Shipbuilding & Marine Engineering (DSME) for construction a large WTIV with a price of $265 - $290m, with options in place for three more.  

Over the past few months, analysts were surprised to see announcements that sales had been agreed on three kamsarmaxes and five ultramaxes for $143.3m total (with roughly $92m of associated indebtedness), all in the range of $18m each.  Following these sales, bringing a loss of $19.6m in Q3 2020 and expected to bring a loss of approximately $45.2 m in Q4 2020, the company will still own or lease 43 vessels, with an additional five time-chartered in.

The transformation will come quickly; in response to a question about the rapid pace of vessel sales, Robert Bugbee, Scorpio Bulker’s president, said: “There are a number of benefits…we can completely focus” and that “future renewables shareholders can completely understand the commitment that this company is making to the [renewable energy] space…they don’t have to start worrying about what the dry cargo market is doing.”

He added that, “It shows the customer that you are committed,” emphasizing that the customers will not have to question: “whether we are really making a business, and whether we are going to become a long-term partner to them.”

Bugbee, well known in Wall Street circles, also commented on the money side, saying: “If we clear the dry bulk position, and we have all cash…the financing side is improving every day.” Citing numerous alternative capital sources, he added that it’s easier to get finance with “a clean balance sheet” and the absence of “non-core business risk”.

On timing the transformation, he said, “There are so many advantages to just ripping the bandage off, rather than pulling it off gently.” Scorpio Bulkers chairman Emanuele Lauro added: “There is interest for en bloc sales, as well as individual vessel sales.”

All projections see a huge demand for offshore wind along the US coastlines, especially the mid-Atlantic and Northeast.

In response to a question regarding possible newbuilds in US yards, Cameron Mackey, Scorpio Bulker’s coo, said: “We are evaluating quite carefully a Jones Act compliant solution for US customers and developers….we are already in initial discussions with some customers over here about providing them with what we think is a compelling solution to their needs here.” After acknowledging challenges, he said “There are a number of yards that can construct suitable vessels for the US market.”

Big plans are in the works here. Going forward, Scorpio Bulkers, with an internal management capability rather than outsourced, may look at other parts of the value chain beyond the WTIV’s, with the company hinting that it may look at other vessel types, as well.

The US market, expected to burgeon in the 2020’s as coastal states move towards wind power, is on the company’s radar, the Jones Act, which restricts much offshore energy activity to US built, owned and crewed assets notwithstanding.

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