DEME Group: Aiming at full presence in offshore wind

Although the offshore wind industry has not necessarily grown as fast as Belgium’s DEME Group originally expected, the sector is now responsible for 10% of its business. The company is continuing to eye targets for possible acquisitions and weighing up fleet expansion possibilities in the offshore wind sector. Alongside this, DEME is striving to seek further cuts in Capital Expenditure (CAPEX) in order to ensure that wind energy is fully able to compete with other energy sources.

With 150 years of contracting experience, the dredging, environmental and marine engineering group has a broad range of activities and also specialises in hydraulic engineering, offshore, building of artificial islands and land reclamation, environmental remediation, services to oil and gas companies, to the installation of offshore wind farms or blue energy projects (waves and tidal).

In terms of offshore wind, the Zwijndrecht-based company is active across the industry. One of its most well known subsidiaries GeoSea is involved in complex offshore marine engineering projects across the globe. GeoSea has participated in the construction of large-scale offshore wind farms including alpha ventus, EnBW Baltic 2, Trianel Borkum West, Walney, Ormonde farm, and C-Power off the Belgian coast.

Offshore wind activity really started for DEME around a decade ago when Luc Vandenbulcke, Managing Director of GeoSea, joined the company. Mr Vandenbulcke’s very first assignment was to manage a construction contract for one of Sweden’s first offshore wind farms Utgrunden 1.

DEME Chief Executive Officer Alain Bernard says: “This was the start of a business that is still somewhat of a niche for us but one that has been growing steadily through the years.”

DEME’s strategy in the market is to have a company for every specialism, as well as a multipurpose fleet able to serve the many areas in which DEME works.

Flexible fleet

“We want to have as much flexibility as possible which means having a true multipurpose fleet and being able to offer clients every service connected to offshore wind, whether this means cable laying, foundation works, turbine installation or a full EPC contract.”

“For every speciality we have a company. Scaldis is our heavy lift arm so it can be involved in the installation of HDVC structures, Tideway installs cables, GeoSea has the jack up vessels such as Innovation, and Offshore & Wind Assistance carries out the servicing and maintenance for turbines manufacturers and developers.”

DEME has had the jack up vessels it uses in the offshore wind industry for more than 20 years. They were originally built having a multipurpose function in mind in line with the group’s philosophy. “They could be involved in soil investigation, jetty construction, soil compaction. Offshore wind activities could include piling work, foundations, cabling etc. We can carry out many different things with the same vessel.”

This multi-specialisation, multipurpose fleet approach enables DEME to tailor its solution to the needs of the customer. “We can offer a full EPC solution or just a part of it. This depends entirely on the customer,” Mr Bernard points out. “Some wind farm developers are happy with multi-contracting, others prefer it to be limited,” he adds. He highlights the recently completed C-Power offshore wind farm off Thornton Bank in the North Sea, which was developed using non-recourse financing. “C-Power began 13 years ago and at the time this was a high risk project. 

C-Power did not want a multi-contract deal, the consortium and the banks wanted limited interfaces for the EPC and maintenance contract. The strategy was to have three major contracts; one for turbines, for electricity and one for marine contracting. These were all coordinated by C-Power and coordinated very well.”

C-Power financing

There has been a real evolution in the market when it comes to financing, he says. “Canadian investors are now investing in the Netherlands and Japanese investors in Europe. C-Power is a very good example of how you can structure financing in a safe way for both banks and investors. This project has been successfully executed and provides a very good reference as to how to further finance these projects in the future.”

Mr Vandenbulcke comments that although DEME has been awarded several offshore wind projects recently and has some 30 to 40 projects under its belt, development overall has been at a much slower pace than the company expected. “A lot of projects mooted over the last five years are still not there. Some are materialising but there are still delays. However, on the positive side, hardly any of them have been cancelled.”

The two executives put the slow pace down to the lack of regulatory framework and the problems with the German grid connection. “We need the grid connection and plug issue in Belgium sorted out.”

The uncertainties make it difficult to say how the industry will develop in the future, stresses Mr Vandenbulcke. “The regulatory framework needs to be confirmed in Germany, the UK and Belgium. This would allow the supply chain to get organised and this gives the financial security needed, so people are comfortable to invest.”

CAPEX reduction

As far as development in the current market goes, there are two major areas where DEME would like to see improvements: the further reduction in CAPEX and improvements in the safety levels of the offshore wind industry.

Perhaps surprisingly, the DEME executives welcome further competition in the market and believe it will lead to more CAPEX reductions, which are vital for the sector to be viable in the future. “Our business is pretty much mature in terms of the evolution in numbers of competitors and new vessels. There is a ‘limited’ supply chain established but we are now seeing that there is more and more competition coming along.”

Mr Bernard says DEME welcomes competition because it serves to get CAPEX down. “We are seeing new turbines of 6 to 7MW and new types of equipment, so CAPEX is decreasing. Competition is only good. The next step is lowering the Operational Expenditure (OPEX).”

DEME continues to consider how it can bring more efficiency to the industry. The company is currently looking at various alternatives for its fleet development. “We are considering our technical specifications, new builds and existing vessels, and which companies are possible targets.”

However, they stress they are always looking at multipurpose rather than highly specialised vessels. “It may be suitable for rock dumping, but the same vessel can also be used for cable laying. Jack ups can be used for wind, for marine constructions like jetties, in the oil & gas industries; they are very flexible,” adds Mr Bernard.

Close safety gap

Another major area where the company is keen to see further improvements is safety.

“Safety is a gap that needs to be closed. The oil & gas industry is a step ahead of wind,” emphasises Mr Vandenbulcke. “Safety has to be improved in the complete logistics chain. We are working 100km offshore in the oil & gas industries, but just because a wind farm is only 20km offshore, it is still offshore! It cannot be viewed in the same way as a shore-based plant. It is an offshore industry, not a civil engineering industry,” stresses Mr Bernard.

“Standards – from the start of engineering to the production of the jacket in the shipyard to delivery – need to improve. Safety seems to be less than that of the oil & gas industry. We need ships of the highest standards with DP2, yet some wind farms are still using traditional construction vessels, tugs and pontoons.”

DEME adopts the same procedures as it does for the Oil & Gas industry, he adds. It is not a case of changing the legislation but more a case of changing the mentality of working. “We must have the highest levels of quality and safety.”

“We operate in highly demanding markets and should have the same standards everywhere and as a leading company give a good example,” Mr Vandenbulcke comments.

Skills shortage

Another area of concern is lack of personnel. “We need more people with different trades and skills as an industry and they are hard to find. For maintenance we need people that combine everything we need, not being seasick, working at heights; they have to be prepared to live on board jack ups and stay weeks offshore. It is sometimes like trying to find sheep with five legs as we say here!”

Belgium is not a maritime country, says Mr Bernard, so it is working with other countries and with various industry organisations to attract enough people from universities and high schools. DEME also has its own training institute and simulators. “We need people across the board, for cranes and maintenance, we need many skills.”

Going forward, DEME has plenty more offshore wind projects in its sights. Along with its Otary N.V. partners, DEME is keen to play a role in three projects in Belgium, Rentel, Seastar and Mermaid. This is via the ‘DEME Concessions’ arm.

However, these three projects will depend on the government mechanism supporting them, he stresses and this is currently being updated. The grid connection and the new offshore plug to connect to the grid all have to be in place and of course, this is dependant on politics, he comments.

Big opportunities

Despite these hurdles, Mr Bernard believes that the 2020 targets are achievable and DEME has confidence in the future. “We created DEME Concessions N.V. to show we believe in the industry as an investor and a contractor.”

“Every day as a marine contractor we see the impact of rising sea levels; the world cannot stand by and do nothing about it. I hope that Europe will stick to its policy to have an energy mix. The UK is showing the way and in Germany and Belgium we have elections, France is tendering the 2nd Offshore Round…”

“Additionally, there is a big opportunity for European exports in the Far East and to the US, we have built up a great deal of knowledge. President Obama is looking at offshore renewables and we need a smart mix of energy resources.”Renewable energy has to reduce its cost price and that is happening now,” he adds. “Many think CAPEX will go down 30 to 40% by 2020, so it can be very competitive compared with other kinds of energy. Offshore wind has to be competitive compared to new nuclear, shale gas, etc.”

“I am realistic not optimistic. We should not put our eggs in one basket, the world will need more and more energy and we also have to reduce energy consumption. There are big opportunities out there.”

Helen Hill