North Star Shipping sets sail for profitable work in the renewable energy sector

North Star Shipping, which has made its fortune providing emergency and supply vessels to oil and gas companies in the North Sea, believes that most of its business over the next five years will “simply” be in the renewable energy sector.

The company, which has been owned by partner-led Basalt Infrastructure Partners since 2017, has reiterated its commitment to its “core” customers in the oil and gas sector.

The traditional company started in the fishing industry 135 years ago and currently looks after around 60 offshore systems.

But the recent win of a ten-year charter contract worth £ 270 million providing three newly built service vessels (SOVs) for the world’s largest offshore wind farm on Dogger Bank has turned its tanker for good.

The deal with the wind farm developers, a consortium that includes Equinor and SSE Renewables, not only gave North Star’s new renewable energy division more credibility in the industry, but also opened up new lines of finance.

Investors looking for renewable energy
As part of the Dogger Bank deal, North Star secured a £ 96 million credit facility from German asset manager Allianz Global Investors. The money will finance the construction of the new ships to fulfill the contract with Dogger Bank. North Star recently signed an initial contract with shipbuilder Alicat to build two of the world’s first hybrid-powered daughter ships in Great Yarmouth.

Matthew Gordon, North Star CEO, said moving into the offshore wind sector opened him up to a “much broader pool” of investors who are reluctant to invest in oil and gas.

© Provided by BIG Partnership
Matthew Gordon, North Star Shipping CEO.

He said, “A lot of people want to invest money in the renewable energy sector and you see that with us with this £ 96 million project finance facility with Allianz.

“Allianz hasn’t really invested a lot of money in maritime services in the past,” he added.

Recent reports from the ship operator reveal the challenges the offshore sector has faced under both the pandemic and lower oil and gas prices.

In the eight months to the end of December 2020, the company posted a loss of $ 19.7 million.

Nonetheless, the company was able to confirm that as of the New Year it was trading profitably with a number of its ships with secured long-term contracts, also backed up by a new $ 40 million credit facility.

Making renewable energies worthwhile
Offshore wind power doesn’t have the moneybags that oil and gas used to have, and Mr Gordon admits that margins aren’t as generous – though returns for shareholders add up.

“In terms of shareholder return requirements, they are slightly lower in the offshore wind market than in the oil and gas market,” he said.

“But that’s because you get a lower risk product in the longer term.

“The wind industry understands that one of the main reasons for improving the overall economic performance of the wind farm is to provide the supply chain with access to low-cost capital.

“To make this possible, strong contracts are awarded over long periods of time.

“It lets you go to the bank and borrow more money on more attractive terms, which means you can still give a shareholder a strong return without necessarily getting exactly the same margin as oil and gas, but you can still. “Achieve the same shareholder returns.”

Mr. Gordon ponders the growth prospects of the offshore wind sector, which is now focused on deeper water that is much further from the coast than current wind farms.

Positioned for the transition

Owner Basalt has doubled the need for larger vessels to service deeper waters, such as the SOVs that North Star operates. It also acquired Boston Putford of Lowestoft, a family-owned company with a similar history and culture to North Star. Together, the companies are part of the North Star Group and have a strong position to compete in the UK offshore wind operation and maintenance market.

“In terms of the rate of growth in this market, you are talking about 25 to 30 opportunities to bid in the UK over the next five years,” said Gordon.

“There will be wind farms all over the east and north coast of Great Britain.

“What you are seeing right now is that the wind farms are moving further away from the shore. The nearshore things are done. The further you go, the more you need an SOV.

“That is exactly what North Star has been doing for 40 years.

“It’s about staying there, it’s about being reliable, and that’s why we made this transition.”

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