Table of Contents

Filed Pursuant to Rule 424(b)(5)
Registration No. 333-251301

 

This preliminary prospectus supplement relates to an effective registration statement under the Securities Act of 1933, as amended, but is not complete and may be changed. This preliminary prospectus supplement and the accompanying base prospectus are not an offer to sell these securities in any jurisdiction where the offer or sale is not permitted and we are not soliciting an offer to buy these securities in any jurisdiction where the offer or sale is not permitted

 

SUBJECT TO COMPLETION, DATED NOVEMBER 8, 2021

 

PRELIMINARY PROSPECTUS SUPPLEMENT

(To Prospectus December 28, 2020)

 

Eneti Inc.

 

$200 Million of Common Shares

 

 

 

We are offering $200 million of our common shares, par value $0.01 per share, pursuant to this prospectus supplement. We have granted the underwriters in this offering an option for a period of 30 days to purchase up to                  additional common shares from us on the same terms and conditions as set forth herein. Scorpio Holdings Limited has indicated an interest to purchase at least $30 million of common shares at the public offering price.

 

Our common shares are listed on the New York Stock Exchange (the “NYSE”), under the symbol “NETI.” On November 5, 2021, the last reported sale price of our common shares on the NYSE was $14.21 per share.

 

 

 

Investing in our common shares involves risks. Before you make an investment in our common shares, you should carefully consider each of the factors described under “Risk Factors” beginning on page S-13 of this prospectus supplement, on page 9 of the accompanying base prospectus and in the documents incorporated by reference into this prospectus supplement and the accompanying base prospectus.

 

Neither the U.S. Securities and Exchange Commission (the “Commission”) nor any state securities commission has approved or disapproved of these securities, or determined if this prospectus supplement or the accompanying base prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

 

 

 

     Per Share      Total  

Public offering price

   $                        $                    

Underwriting discounts and commissions(1)(2)

     

Proceeds to the company, before expenses(2)

   $        $    

 

(1)   See “Underwriting” for a description of all underwriting compensation payable in connection with this supplement offering.
(2)   We have granted to the underwriters an option for a period of 30 days following the date of this prospectus to purchase up to a maximum of                  additional common shares from us on the same terms and conditions as set forth above. If the underwriters exercise the option in full, the total underwriting discounts will be $        , and the total proceeds to us, before expenses, will be $        .

 

The underwriters expect to deliver the common shares to purchasers on or about                     , 2021

 

 

 

Joint Book-Runners

 

Citigroup   DNB Markets    BTIG    Nomura

 

 

 

Co-Managers

 

Clarksons Platou Securities   Fearnley Securities          Kepler Cheuvreux  

 

 

 

The date of this prospectus supplement is November                     , 2021.


Table of Contents

TABLE OF CONTENTS

 

Prospectus Supplement

 

IMPORTANT NOTICE ABOUT INFORMATION IN THIS PROSPECTUS SUPPLEMENT

     S-i  

CAUTIONARY STATEMENT REGARDING FORWARD LOOKING STATEMENTS

     S-ii  

PROSPECTUS SUMMARY

     S-1  

THE OFFERING

     S-12  

RISK FACTORS

     S-13  

USE OF PROCEEDS

     S-35  

CAPITALIZATION

     S-36  

SELECTED SEAJACKS STAND-ALONE AND PRO FORMA FINANCIAL INFORMATION

     S-37  

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

     S-41  

REVIEW AND ANALYSIS OF SEAJACKS’ FINANCIAL INFORMATION

     S-53  

THE OFFSHORE WIND INDUSTRY

     S-58  

BUSINESS

     S-79  

MANAGEMENT

     S-100  

MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS

     S-105  

TAX CONSIDERATIONS

     S-108  

UNDERWRITING

     S-115  

EXPENSES

     S-123  

LEGAL MATTERS

     S-124  

EXPERTS

     S-124  

WHERE YOU CAN FIND ADDITIONAL INFORMATION

     S-125  

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS – ATLANTIS INVESTORCO LIMITED

     F-1  

 

Base Prospectus

 

     Page  

ABOUT THIS PROSPECTUS

     1  

PROSPECTUS SUMMARY

     2  

RISK FACTORS

     9  

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

     10  

USE OF PROCEEDS

     12  

CAPITALIZATION

     13  

SERVICE OF PROCESS AND ENFORCEMENT OF CIVIL LIABILITIES

     14  

PLAN OF DISTRIBUTION

     15  

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     18  

SELLING SHAREHOLDERS

     19  

DESCRIPTION OF CAPITAL STOCK

     20  

DESCRIPTION OF DEBT SECURITIES

     26  

DESCRIPTION OF WARRANTS

     33  

DESCRIPTION OF RIGHTS

     34  

DESCRIPTION OF PURCHASE CONTRACTS

     35  

DESCRIPTION OF UNITS

     36  

TAX CONSIDERATIONS

     37  

EXPENSES

     38  

SELECTED FINANCIAL DATA

     39  

LEGAL MATTERS

     40  

EXPERTS

     40  

WHERE YOU CAN FIND ADDITIONAL INFORMATION

     41  


Table of Contents

IMPORTANT NOTICE ABOUT INFORMATION IN THIS PROSPECTUS SUPPLEMENT

 

This document is in two parts. The first part is this prospectus supplement, which describes the specific terms of this offering of common shares and also adds to and updates information contained in the accompanying base prospectus and the documents incorporated by reference into this prospectus supplement and the base prospectus. The second part, the base prospectus, gives more general information about securities we may offer from time to time, some of which does not apply to this offering. Generally, when we refer only to the prospectus, we are referring to both parts combined, and when we refer to the accompanying prospectus, we are referring to the base prospectus.

 

If the description of this offering varies between this prospectus supplement and the accompanying base prospectus, you should rely on the information in this prospectus supplement. This prospectus supplement, the accompanying base prospectus and the documents incorporated into each by reference include important information about us, the common shares being offered and other information you should know before investing. You should read this prospectus supplement and the accompanying base prospectus together with additional information described under the heading “Where You Can Find Additional Information” before investing in our common shares. The information incorporated by reference is deemed to be part of this prospectus supplement, and information that we file with the Commission will automatically update and supersede the previously filed information. In the case of a conflict or inconsistency between information in this prospectus supplement and/or information incorporated by reference in this prospectus supplement, you should rely on the information contained in the document that was filed later.

 

We prepare our financial statements, including all of the financial statements incorporated by reference in this prospectus supplement, in U.S. dollars and in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). We have a fiscal year end of December 31. Unless the context otherwise requires, when used in this prospectus supplement, the terms “Company,” “we,” “our” and “us” refer to Eneti Inc. and its subsidiaries. Unless otherwise indicated, all references to “dollars” and “$” in this prospectus supplement are to, and amounts are presented in, United States dollars and the financial information presented in this prospectus supplement that is derived from financial statements incorporated herein by reference is prepared in accordance with U.S. GAAP. As used herein, the term “Jones Act” or “U.S. Jones Act” refers to the Merchant Marine Act of 1920.

 

You should rely on only the information contained or incorporated by reference in this prospectus supplement, the accompanying base prospectus and any free writing prospectus prepared by or on behalf of us or to which we have referred you. We have not, and the underwriters have not, authorized anyone to provide you with information that is different. We and the underwriters take no responsibility for, and can provide no assurance as to the reliability of, any information that others may give you. If anyone provides you with additional, different or inconsistent information, you should not rely on it. We are offering to sell, and seeking offers to buy, our common shares only in jurisdictions where offers and sales are permitted. The information contained in or incorporated by reference in this prospectus supplement or the accompanying base prospectus is accurate only as of their respective dates or the date or dates which are specified in such documents, regardless of the time of delivery of this prospectus supplement or any sale of our common shares. Our business, financial condition, results of operations or prospectus may have changed since such date or dates.

 

S-i


Table of Contents

CAUTIONARY STATEMENT REGARDING FORWARD LOOKING STATEMENTS

 

We desire to take advantage of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and are including this cautionary statement in connection therewith. This document and any other written or oral statements made by the Company or on its behalf may include forward-looking statements, which reflect its current views with respect to future events and financial performance. The Private Securities Litigation Reform Act of 1995 provides safe harbor protections for forward-looking statements in order to encourage companies to provide prospective information about their business. Forward-looking statements include statements concerning plans, objectives, goals, strategies, future events or performance, and underlying assumptions and other statements, which are other than statements of historical facts. This document includes assumptions, expectations, projections, intentions and beliefs about future events. These statements are intended as “forward-looking statements.” We caution that assumptions, expectations, projections, intentions and beliefs about future events may and often do vary from actual results and the differences can be material. When used in this document, the words “believe,” “expect,” “anticipate,” “estimate,” “intend,” “plan,” “targets,” “projects,” “likely,” “would,” “could” and similar expressions or phrases may identify forward-looking statements.

 

These forward-looking statements are not guarantees of future performance, conditions or results, and involve a number of known and unknown risks, uncertainties, assumptions and other important factors, many of which are outside our management’s control, that could cause actual results or outcomes to differ materially from those discussed in the forward-looking statements. These forward-looking statements are based on information available as of the date hereof, and current expectations, forecasts and assumptions, and involve a number of judgments, risks and uncertainties. Accordingly, forward-looking statements should not be relied upon as representing our views as of any subsequent date.

 

We cannot guarantee the accuracy of the forward-looking statements, and you should be aware that results and events could differ materially and adversely from those contained in the forward-looking statements due to a number of factors including, but not limited to:

 

    our future operating or financial results;

 

    changes in demand for WTIV capacity;

 

    the strength of world economies and currencies;

 

    the length and severity of the recent novel coronavirus (COVID-19) outbreak, including its effects on demand for WTIVs and the installation of offshore windfarms;

 

    our ability to successfully employ our existing and newbuilding WTIVs and the availability and suitability of our vessels for customer projects;

 

    our ability to determine a successful plan for achieving Jones Act Compliance and securing Jones Act vessels;

 

    our ability to compete successfully for future chartering and newbuilding opportunities;

 

    our continued ability to employ our vessels;

 

    fluctuations in interest rates and foreign exchange rates;

 

    early termination of customer contracts, our failure to secure new contracts for our vessels or the failure of counterparties to fully perform their contracts with us;

 

    our ability to successfully identify, consummate, integrate and realize the expected benefits from acquisitions and changes to our business strategy;

 

    our ability to successfully operate in new markets;

 

    changes in our operating expenses, including bunker prices, drydocking and insurance costs;

 

    compliance with, and our liabilities under, governmental, tax, environmental and safety laws and regulations;

 

S-ii


Table of Contents
    changes in governmental rules and regulations or actions taken by regulatory authorities;

 

    potential liability from pending or future litigation;

 

    general domestic and international political conditions;

 

    potential disruption of shipping routes due to accidents or political events;

 

    our ability to procure or have access to financing, our liquidity and the adequacy of cash flows for our operations;

 

    our continued borrowing availability under our debt agreements and compliance with the covenants contained therein;

 

    fluctuations in the value of our vessels and investments;

 

    our ability to fund future capital expenditures and investments in the construction, acquisition and refurbishment of our vessels (including the amount and nature thereof and the timing of completion thereof, the delivery and commencement of operations dates, expected downtime and lost revenue);

 

    potential exposure or loss from investment in derivative instruments or other equity investments in which we invest;

 

    potential conflicts of interest involving members of our Board and senior management and our significant shareholders; and

 

    our expectations regarding the availability of vessel acquisitions and our ability to complete acquisition transactions planned.

 

We have based these statements on assumptions and analyses formed by applying our experience and perception of historical trends, current conditions, expected future developments and other factors we believe are appropriate in the circumstances. All future written and verbal forward-looking statements attributable to us or any person acting on our behalf are expressly qualified in their entirety by the cautionary statements contained in or referred to in this section. We undertake no obligation, and specifically decline any obligation, except as required by law, to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. In light of these risks, uncertainties and assumptions, the forward-looking events discussed in this prospectus supplement, the accompanying base prospectus, and the documents incorporated into each by reference might not occur.

 

Please see the section entitled “Risk Factors” in this prospectus supplement, the accompanying base prospectus and the documents incorporated by reference for a more complete discussion of these risks and uncertainties and for other risks and uncertainties. These factors and the other risk factors described in this prospectus supplement, the accompanying base prospectus, and the documents incorporated into each by reference are not necessarily all of the important factors that could cause actual results or developments to differ materially from those expressed in any of our forward-looking statements. Other unknown or unpredictable factors also could harm our results. Consequently, there can be no assurance that actual results or developments anticipated by us will be realized or, even if substantially realized, that they will have the expected consequences to, or effects on, us. Given these uncertainties, prospective investors are cautioned not to place undue reliance on such forward-looking statements.

 

S-iii


Table of Contents

PROSPECTUS SUMMARY

 

This section summarizes some of the key information that is contained or incorporated by reference in this prospectus supplement or the accompanying base prospectus. Because this is only a summary, it may not contain all of the information that may be important to you in making an investment decision, and is qualified in its entirety by the more detailed information and financial statements included or incorporated by reference in this prospectus supplement and the accompanying base prospectus. Before investing in our common shares, you should carefully review this entire prospectus supplement and the accompanying base prospectus, any free writing prospectus that may be provided to you in connection with this offering of our common shares and the information incorporated by reference in this prospectus supplement. Unless otherwise indicated, all information in this prospectus supplement assumes that the underwriters do not exercise their option to purchase additional common shares.

 

Our Company

 

We are a company focused on serving the offshore wind and marine-based renewable energy industry through our operation of wind turbine installation vessels (“WTIVs”). WTIVs are vessels specifically designed for the transport and installation of offshore wind turbines, which are power generating devices driven by the kinetic energy of the wind near-shore or further offshore on coastlines for commercial electricity generation, onto pre-prepared foundations.

 

Our current fleet consists of five WTIVs that are currently on-the-water. Certain WTIVs in our current fleet are also employed in the maintenance of existing offshore wind turbines and are also suitable to employment servicing offshore oil and gas installations. In addition, we have one contract with Daewoo Shipbuilding and Marine Engineering (“Daewoo”) for the construction of a newbuilding WTIV that we expect to take delivery of during the third quarter of 2024 (the “Newbuilding WTIV”) and an option, that we intend to exercise using a portion of the net proceeds of this offering, with Daewoo for the construction of an additional WTIV with similar design specifications as the newbuilding WTIV (the “Optional WTIV”) that we expect to take delivery of during the second quarter of 2025. We are also in late stage negotiations with Keppel Amfels shipyard in Texas, United States for the construction of a U.S. Jones Act-compliant WTIV that, based on our current contractual expectations, we would expect to take delivery of by the end of 2024 (the “Proposed Jones Act WTIV”). We collectively refer to the Newbuilding WTIV, Optional WTIV and Proposed Jones Act WTIV as our newbuilding program.

 

We were formed by the Scorpio group of companies, with an affiliate of the Scorpio group remaining one of our principal shareholders, and completed our initial public offering and commenced trading on the NYSE in 2013. From March 2013 through July 2021, we were an international shipping company that owned and operated dry bulk carriers. Over the past year, we have shifted our focus from the dry bulk commodity transportation business to focus on serving the offshore wind and marine-based renewable energy industry, through the acquisition and operation of WTIVs. In July 2021, we completed our exit from the business of dry bulk commodity transportation by selling the last of the 49 vessels that were previously in our fleet. In August 2021, we completed the transformational Seajacks Transaction described below, through which we acquired our current fleet of five WTIVs, becoming the only NYSE-listed company that exclusively owns and operates WTIVs.

 

In addition to the ownership and operation of our fleet, we, through one of our wholly-owned subsidiaries, serve in a technical advisory role to Dominion Energy, the owner of the first WTIV being constructed in the United States under the U.S. Jones Act.

 

S-1


Table of Contents

Competitive Strengths

 

We believe we are well-positioned to execute our business strategies and deliver on our long-term growth objectives based on our competitive strengths:

 

Leading Owner and Operator of WTIVs with a High-Specification Diversified Asset Base.    We are one of the largest owners of purpose-built, self-propelled WTIVs with the capacity to carry turbines of approximately 10 MW and above (including the two Daewoo-constructed newbuilding WTIVs contracted for or for which the option is expected to be exercised). We believe that our current fleet of five WTIVs, together with the one we have contracted for, and the two prospective newbuilding WTIVs that we intend to enter into construction contracts for, including one which is expected to be U.S. Jones Act-compliant, are well-suited to serve the rapidly evolving offshore wind landscape. Our flagship vessel, the Seajacks Scylla, was delivered in 2015 and is designed to be able to install 12-14MW turbines, which, we believe, makes it one of the most capable WTIV on the water today, inclusive of recent newbuilding announcements in our industry. Our contracted newbuilding NG16000X WTIV, together with the additional NG16000X newbuildings that we intend to contract for, including one that we expect to be Jones Act-compliant, are designed to be able to install next generation 15-20MW turbines globally. Our contracted and anticipated newbuilding WTIVs are expected to be delivered to us between the third quarter of 2024 and the second quarter of 2025. Each of our current and potential newbuilding vessels have been designed to operate at sites with challenging seabed conditions. Our fleet includes vessels with large cargo area and high capacity deck loading capabilities to enable the vessels to offer the flexibility required in the transportation and installation of wind turbines and their foundations. Additionally, we have a demonstrated operational history in Europe dating back to 2009 through our NG2500X vessels, with those vessels commercially suited for work both in offshore wind and the oil and gas industry.

 

Established Track Record with Developed and Scalable Global Platform.    In August 2021, we acquired Seajacks, an offshore wind focused operating company, with a track record in the industry going back to 2009, making it a first mover. Since its inception, Seajacks’ WTIVs have installed nearly 500 wind turbine generators (representing over 2.5 GW of capacity), 450 foundation structures (monopiles, transition pieces and jackets), and three foundations for electrical substations. Through the acquisition of Seajacks, we have gained significant operational expertise and customer relationships, which include Original Equipment Manufacturers (“OEMs”) and developers. As we seek to further expand our asset base through our current and anticipated newbuilding program, we believe we will benefit from our management’s experience from our relationship with the Scorpio group which has managed over 180 newbuild projects over its 60 year history. We expect that there will be additional opportunities for us to leverage our leading platform to pursue additional organic and acquisition growth.

 

Global Presence in All Core Offshore Wind End Markets, including the U.S.    We believe we are the only WTIV operator currently serving Asia and Europe and we expect to serve the United States market following the delivery of the Proposed Jones Act WTIV that we are currently in late stage negotiations with Keppel Amfels shipyard in Texas to contract and that we expect to be delivered by the end of 2024. We are today engaged in the United States as well through our technical advisory role to Dominion Energy relating to the first WTIV being constructed in the United States under the U.S. Jones Act and our plans to serve the U.S. market through the delivery of the Proposed Jones Act WTIV for which we are in advanced discussions for a delivery by the end of 2024. Our Japanese flagged vessel, the Seajacks Zaratan, positions us to serve the Japanese market, with its capacity for installations of up to 9.5 MW turbines, which is the anticipated average size of future wind projects in the region. We have experience with projects in Taiwan and China, and our three WTIVs of NG2500X design (the Seajacks Hydra, Seajacks Leviathan, and Seajacks Kraken) have a long history of employment in Europe and the North Sea. We believe we have a first-mover advantage as the only NYSE-listed company currently focusing on the WTIV sector and that expects to contract for a Jones Act-compliant newbuilding WTIV.

 

S-2


Table of Contents

First Mover Advantage and Significant Opportunity in the Growing U.S. Offshore Wind Market.    We serve in a technical advisory role to Dominion Energy, the owner of the first WTIV being constructed in the United States under the Jones Act. Additionally, we are currently in late stage negotiations with Keppel Amfels shipyard in Texas (which is the same shipyard constructing the Dominion Energy WTIV) to contract for the Proposed Jones Act WTIV that we expect to be delivered by the end of 2024. In compliance with the U.S. Jones Act, the WTIV will seek a partnership with a U.S. based industry stakeholder who will have a majority interest in the vessel. We believe that we would be able to ultimately have a 25.0 to 49.9% ownership in this vessel, and are investigating ownership structures in which we are able to retain as close to a 49.9% interest is the vessel as is permitted under the Jones Act. We believe that based on current capacity and technical expertise of existing U.S. shipyards, the delivery of an additional Jones Act-compliant WTIV prior to 2025 (except for the Dominion Energy WTIV for which we provide technical advisory services and the Proposed Jones Act WTIV) is not likely.

 

Financial Flexibility and Access to Capital.    We believe our conservative leverage level of 19% Net Debt / Capitalization (based on pro forma quarter ended June 30, 2021) provides us with flexibility as we pursue additional growth. We are the only NYSE listed company focused on global offshore wind marine services, and the net proceeds from this equity offering, combined with our existing liquidity, will cover the expected equity portion financing for the two NG16000X WTIVs that we have either contracted for or intend to contract for using a portion of the net proceeds of this offering.

 

Strong Commitment to Environmental and Social Stewardship Through Responsible Energy Generation and Social and Corporate Governance Practices.    Offshore wind farms have an increasingly important role in the “green energy” transition. Wind, as an energy source, produces minimal carbon emissions when compared to gas-fired plants and significantly reduces the marginal impact of energy consumption on the climate. We are equally focused on social and corporate governance principles including ensuring the safety and well-being of our land-based and seaborne employees. Our newbuilding WTIVs are designed to have significantly lower emissions than the Seajacks Scylla, our most modern WTIV, consisting of anticipated approximately 30% lower CO2 and SOx emissions and 85% lower NOX emissions. In addition, our Newbuilding WTIV is designed and being constructed to have the class notation “Gas ready ammonia (D, P)”, meaning that it can be modified to consume ammonia instead of conventional fuel for a majority of its propulsion. If the Newbuilding WTIV undergoes this modification, CO2 and SOx emissions would be reduced by 72% relative to the Seajacks Scylla, and NOx would be reduced by 85%. We currently expect the Optional WTIV and the Proposed Jones Act WTIV would have the same features and class notation.

 

Business Strategies

 

Our primary objective is to deliver long-term stakeholder value as an owner and operator of WTIVs, principally focused on providing wind turbine installation services. Our vessels are also suitable to, and have been employed for, services relating to the maintenance of existing windfarm installations as well as the provision of services to offshore oil and gas installations. We intend to achieve this objective by implementing the following strategies:

 

Capitalize on Growing Demand for Offshore Wind Services.    We intend to leverage our track record and our diverse, high-specification fleet to continue to offer economically compelling installation services for offshore wind operators to facilitate the global transition to clean energy. We expect to further expand our asset base through our contracted and prospective newbuilding program. We also expect to utilize our vessels to provide for the maintenance and servicing of the offshore wind industry and to continue to employ opportunistically certain of our assets in the offshore oil and gas sector.

 

Maintain Relatively Low Levels of Leverage.    We intend to pursue a strategy of maintaining conservative financial positions and relatively low debt levels, and are committed to maintaining a net debt to adjusted

 

S-3


Table of Contents

EBITDA of less than 3 to 1. We anticipate targeting for our newbuildings a secured leverage ratio of 55 to 65% for the Newbuilding WTIV and Optional WTIV and 70 to 80% for our Proposed Jones Act WTIV.

 

Pursue Additional Contracted Forward Coverage for our Assets.    We are focused on discussions with customers for providing our services for projects through the end of 2024. In securing future business, we will continue to focus on maximizing asset utilization and returns to shareholders.

 

Continue to Provide our Customers with Reliable Service while Operating Efficiently and Safely.    We believe that our track record of service to our customers, combined with our focus on maintaining a well-suited asset base, positions us well to continue to grow our business. We intend to adhere to the highest standards of operational excellence, on-time performance and safety as we continue to grow our asset base.

 

Industry Opportunities for Wind Turbine Installation Vessels

 

The following industry information has been provided by 4C Offshore Ltd. (“4C Offshore”). Please see the section of this prospectus supplement entitled “The Offshore Wind Industry” for further information.

 

Offshore Wind to Play a Major Role in Global Energy Transition.    The outlook for renewable energy continues to improve as the world transitions to cleaner sources of energy. Offshore wind is expected to be one of the world’s fastest growing energy sources and play a major role in the green energy transition.

 

Rapid Growth in Offshore Wind.    The acceleration in the global growth of offshore wind is, not only due to ambitious national targets and supportive government policy frameworks, but also technological improvements translating to declining costs and improving economies of scale. The global offshore wind market is projected to grow 18% (based on megawatt capacity) per year from 2021 through 2026.

 

Turbines have Continued to Increase in Size.    Rapid technological improvements in turbine capacity have led to increases in the size and output of offshore wind turbines. For example, in Europe, the average installed turbine size has more than doubled from 4MW in 2014 to 8-10MW in 2021. Improvements in technology have resulted in increases in the size of wind turbines, larger wind farms further from shore and in deeper waters. Further increases in turbine sizes are expected, with 15MW turbines being planned for installation in 2026.

 

Lack of Capable Installation Vessels in a Growing Market.    The installation market is experiencing increasing volumes of turbines to be installed as well as growing physical dimensions of new turbines. Not only has the demand grown due to the number of turbines, the demand for WTIVs is driven by the growing number of turbines that need to be installed as offshore wind projects increase as well as new projects. As the demand for large offshore wind turbines grows so does the demand for highly specialized vessels capable of installing these larger components. However, the current WTIV fleet on the water was not designed with capabilities to install larger turbines.

 

Favorable Supply/Demand Outlook.    Most of the current WTIV fleet is unable to install turbines greater than 10MW and there are currently no vessels capable of installing 15MW turbines. Despite newbuilding orders and planned upgrades to existing vessels, the WTIV fleet capable of installing 12-15MW turbines will not be able to meet the demand in 2025-2026. 4C Offshore anticipates demand in 2025 for 17 installation vessels capable of 12MW+ projects, relative to their expectation of supply of 12 vessels when considering newbuilding assets.

 

Our Fleet

 

The following is a description of our current fleet:

 

Seajacks Scylla.    The Seajacks Scylla has the largest deck space, leg length and lifting capacity of our fleet, with the capability of carrying and installing turbines of up to 12-14 MW. The Seajacks Scylla has

 

S-4


Table of Contents

been specifically designed for deep water and large wind farm components. We are presently evaluating the possibility of upgrading the crane, which would allow Seajacks Scylla to carry up to 15 MW turbines.

 

Seajacks Zaratan.    The Seajacks Zaratan is purpose-built to service the offshore wind farm installation market and is capable of carrying turbines and installing turbines of up to 9.5 MW. In 2021, we changed the flag of the vessel to Japan to qualify for offshore wind installation in Japanese waters. The specifications of the Seajacks Zaratan are also well suited to provide services to the oil and gas industry in the harsh operating environment of the Southern North Sea.

 

Seajacks Hydra.    The Seajacks Hydra is designed to be fully adaptable for work in both the offshore wind and oil and gas industries. The Seajacks Hydra’s accommodation capacity of up to 100 crew members and makes the Seajacks Hydra also well-suited for projects related to the commissioning and decommissioning of offshore oil and gas platforms.

 

Seajacks Kraken.    The Seajacks Kraken is designed specifically to operate in harsh environments such as the North Sea and is capable of operating in compliance with the most stringent regulations and in accordance with standard procedures required to operate in the hydrocarbon industry. The Seajacks Kraken is equipped with dynamic positioning 2 (“DP2”) capability, which allows for fast, safe and cost-efficient transit and positioning between locations and facilitates the efficient installation and maintenance of offshore wind farms. This vessel has accommodation capacity for up to 90 crew members, which makes the Seajacks Kraken also well-suited for projects related to the commissioning and decommissioning of offshore oil and gas platforms.

 

Seajacks Leviathan.    The Seajacks Leviathan, a sister-ship of the Seajacks Kraken, is also equipped with DP2 capability which allows for fast, safe and cost-efficient transit and positioning between locations and facilitates efficient installation and maintenance of offshore wind farms and has an accommodation capacity of up to 120 crew members, making the Seajacks Leviathan also well-suited for projects related to the commissioning and decommissioning of offshore oil and gas platforms.

 

In addition, the Seajacks Hydra, the Seajacks Kraken, and the Seajacks Leviathan (our NG 2500X-design WTIVs) are well suited for operation and maintenance, specifically in Europe, of offshore wind farms where the average turbine capacity is less than 4 MW. While newer and larger turbines are being installed today, existing offshore wind farms still need operation and maintenance work completed. This work typically consists of preventative and unscheduled maintenance. Preventative maintenance involves the replacement of problematic parts that are detected through condition monitoring of the offshore wind farm and are replaced to improve long-term yield and avoid future failures. Unscheduled maintenance is due to unexpected or undetected turbine component failures.

 

Contracted and Planned Newbuilding WTIVs

 

Additionally, we have or intend to contract for the construction of the following NG16000X design vessels to be included in our fleet:

 

    Newbuilding WTIV under contract. On May 11, 2021, we entered into a binding agreement with Daewoo for the construction of the Newbuilding WTIV, which we expect to be delivered to us in the third quarter of 2024. The vessel is a NG16000X design by Gusto MSC (a subsidiary of NOV Inc.), will include 2,600 ton leg encircling cranes from Huisman Equipment B.V. of the Netherlands, and designed to provide strong-eco-credentials, hybrid-battery power and to be fuel-cell ready, and to be capable of installing up to 20 Megawatt turbines at depths of up to 65 meters of water. It is also designed for adaptability to operate on alternate fuels (ammonia). The contract price for this vessel is $330 million, with capital expenditure to be made in multiple installment payments, which are to total $33.0 million in 2021, $33.0 million in 2022, $66.0 million in 2023, and $198.0 million in 2024.

 

S-5


Table of Contents
    Optional WTIV. We have an option with Daewoo, which expires on November 11, 2021, for the construction of an additional WTIV, which would have similar design specifications and purchase price as the Newbuilding WTIV, which, net of currency exchange rate adjustments as of November 1, 2021, is expected to be slightly less than $330 million. The Optional WTIV would have expected delivery in the second quarter of 2025. We intend to exercise this option using a portion of the net proceeds of this offering. Payments would be made in multiple installments, which are expected to total $8.25 million 2022, $57.75 million in 2023, $66.0 million in 2024, and $198.0 million in 2024 (before adjusting for the currency exchange rate).

 

    Jones Act Initiative. In August 2021, we announced that we are in advanced discussions with a U.S. shipyard for the construction of the Proposed Jones Act WTIV to address the American demand for offshore wind development. The Jones Act is a U.S. law that applies to port-to-port shipments within the continental U.S. and between the continental U.S. and Hawaii, Alaska, Puerto Rico, and Guam, and restricts such shipments to being U.S. Flag Vessels that are built in the United States and that are owned by a U.S. company that is more than 75% owned and controlled by U.S. citizens, set forth in 46 U.S.C. Sections 50501 and 55101. Additionally, the Clean Economy Jobs and Innovation Act of 2020 (H.R. 4447) effectively enforced Jones Act requirements for all vessels in support of offshore renewable energy production.

 

We are finalizing the terms with Keppel Amfels in the United States for a contract for the construction of the Proposed Jones Act WTIV in Texas that, based on our current contractual expectations, we would expect to take delivery of by the end of 2024. This vessel would be constructed, financed, and operated by American citizens in compliance with the Jones Act, in order to address the increasing demand for transportation and installation capacity on the Continental Shelf of the United States. We believe that we would be able to ultimately have a 25.0 to 49.9% ownership in this vessel. The anticipated growth of the offshore wind industry on the U.S. Continental Shelf has created a growing demand for Jones Act WITVs. We are currently evaluating various strategies to meet ownership requirements of the Jones Act but we cannot assure you that we will be able to successfully own and operate a Jones Act vessel.

 

Based on our current expectations for this project which is in advanced negotiations, we expect the contract price for this vessel on a 100% basis would be approximately $525 million. Payments would be made in multiple installments, which are expected to total $52.5 million in the second half of 2021, $136.5 million in 2022, $168.0 million in 2023, and $168.0 million in 2024. We would only be responsible for our proportional share of these capital expenditures.

 

S-6


Table of Contents

The following tables set forth certain summary information regarding our WTIV Fleet, including our contracted and prospective newbuild as of November 8, 2021.

 

Vessel

  Seajacks
Scylla
  Seajacks
Zaratan
  Seajacks
Hydra
  Seajacks
Leviathan
  Seajacks
Kraken
  Newbuilding WTIV
and Optional WTIV /
Proposed Jones Act
WTIV

Design

  NG14000X   NG5500C   NG2500X   NG2500X   NG2500X   NG16000X

Delivery

  Nov 2015   May 2012   June 2014   June 2009   March 2009   Q3 2024 – Q2 2025

Yard

  Samsung

Heavy
Industries

  Lamprell
Energy
Limited
  Lamprell
Energy
Limited
  Lamprell
Energy
Limited
  Lamprell
Energy
Limited
  Daewoo / Keppel

Flag

  Panama   Japan   Panama   Panama   Panama   Marshall Islands /
United States

Length overall (m)

  139   109   75   75   75   148/144

Width (m)

  50   41   36   36   36   56

Main crane capacity (t)

  1,540   800   400   400   300   2,600/2200

Boom length (m)

  105   92   73   78   70   149/136

Main deck area (m2)

  4,600   2,000   900   900   900   5400

Pre-load per leg (t/leg)

  14,000   5,500   2,700   2,700   2,700   16,800

Max jacking load (t/leg)

  7,680   3,200   1,475   1,475   1,475   9,312

Turbine carrying capacity

  12-14MW

+class

  9.5MW
class
  4MW
class
  4MW
class
  4MW class   4-6 x 15-20 MW
class

DP system

  DP2   DP2   DP2   DP2   DP2   DP2 plus/DP2

Max POB (pax)

  130   90   100   120   90   130/119

Leg length (m)

  105   85   85   85   85   109

Water depth (m)

  65   55   48   48   48   65

Thrusters

  3 x
3,000kW +
3 x aft
  2 x
2,000kW
+ 3 x
1,500kW
  4 x
1,500kW
  4 x
1,500kW
  4 x
1,500kW
  4x3500kW
aft+3x3500kW
fwd/4x3200kW
aft+3x3700kW
fwd

 

Chartering Strategy and Employment of our Fleet

 

We seek to employ our vessels on short-term time charters of between three to twelve months, and may employ our vessels on multi-year charters for larger windfarm installation projects. We charter our vessels on a dayrate basis for short-term charters, and for a fixed project fee for multi-year charters. Our charters are with a number of different charterers and expire on different dates over a period of time. Our vessels are primarily employed to install offshore wind turbines and provide operational support and maintenance services to the offshore oil and gas industry. We believe that our chartering strategy allows us to maximize charter coverage and minimize downtime between charters.

 

Current and Upcoming Projects

 

We have contracted to perform assignments for 2022, representing contracted revenue of $104.3 million as of November 8, 2021. Contracted revenue for chartering is calculated at the contract dayrate multiplied by the number of days remaining on the contract, assuming full utilization (but excluding any contract extensions). Contracted revenue also includes revenues derived from specific services or actions in relation to the completion of the respective project such as, sea fastening, mobilization, demobilization, transit and reservation fees. The

 

S-7


Table of Contents

amount of actual revenues earned and the actual periods during which revenues are earned will be different from the contracted revenue projections due to various factors. Downtime, caused by unscheduled repairs, maintenance, weather and other operating factors, may result in lower applicable dayrates than the full contractual operating dayrate. In addition, we have options under these contracts which, if exercised by the charterers, could result in additional revenue of up to $17.5 million.

 

Our current and upcoming projects include:

 

    We currently have a time charter contract with a wind farm project to operate the Seajacks Scylla to provide transportation, management and installation services for certain wind turbine generators for an offshore wind farm project in China, which is expected to last until December 2021. Contracted revenue during the fourth quarter of 2021 for this project is $10.1 million, which, in addition to contracted revenue for chartering, includes demobilization fees from this project.

 

    We currently have a time charter for the Seajacks Hydra to perform maintenance on a gas production platform. Contracted revenue during the fourth quarter of 2021 for this project is $2.0 million.

 

    We have a time charter contract with a group of offshore wind farm project companies to operate the Seajacks Zaratan to provide transportation, management and installation services over a five month period for wind turbine generators for an offshore wind farm project off the coast of Japan that is expected to commence in 2022. Contracted revenue for this project is $35.7 million, which, in addition to contracted revenue for chartering, includes mobilization and demobilization fees and payments for sea fasteners; and

 

    We have a time charter contract with an offshore wind farm project company to operate the Seajacks Scylla to provide loading, transportation, crane operation and installation services for certain wind turbine generators for an offshore wind farm project in Taiwan, commencing in February 2022 and expected to last for eight months. Contracted revenue for this project is $68.6 million which, in addition to contracted revenue for chartering, includes mobilization and demobilization fees and payments for sea fasteners.

 

Management of our Vessels

 

Commercial and Technical Management

 

We perform the technical and commercial management of our fleet in-house. Our commercial management personnel secure employment for our vessels. Our technical management personnel have experience in the complexities of oceangoing vessel operations, including the supervision of maintenance, repairs, drydocking, and crewing, purchasing supplies, spare parts, and monitoring regulatory and classification society compliance and customer standards. We and our operating subsidiaries currently have 108 land-based employees and we have 300 seaborne employees.

 

Administrative Services

 

Effective September 21, 2021, we entered into the Amendment No. 1 to Administrative Services Agreement with Scorpio Services Holding Company Ltd. (“SSH”), a related party, for the provision of administrative staff, office space and accounting, legal compliance, financial and information technology services for which we reimburse SSH for the direct and indirect expenses incurred while providing such services. The services provided to us by SSH may be sub-contracted to other entities.

 

In addition, SSH has agreed with us not to own any vessels engaged in seabed preparation, transportation, installation, operation and maintenance activities related to offshore wind turbines so long as the Amended Administrative Services Agreement is in full force and effect. The agreement may be terminated by either party upon 3 months’ prior notice.

 

S-8


Table of Contents

Technical Support Agreement

 

On October 20, 2021, we, through our wholly-owned subsidiary, entered into a technical support agreement with Scorpio Ship Management S.A.M. (“SSM”), a related party, pursuant to which SSM provides technical advice and services to us in connection with the construction of our newbuilding WTIV at Daewoo. In consideration for these services, we paid SSM a fee of $671,200, and thereafter, will pay a monthly fee in the amount of $41,667.

 

Recent and Other Developments

 

Earnings Guidance for the Third Quarter of 2021

 

Presented below is certain estimated preliminary unaudited financial information as of and for the nine months ended September 30, 2021, which is based on the information available to us as of the date of this Prospectus Supplement. These are forward-looking statements and may differ from actual results. We have provided estimated ranges, rather than specific amounts for certain information, in light of the preliminary nature of the information, which is subject to change. As such, our actual results as of and for the nine months ended September 30, 2021 may vary from the information set out below as we complete our normal quarter-end accounting procedures following the closing of this offering. The information provided below reflects management’s best estimate of the impact of events during the quarter. However, you should not place undue reliance on the preliminary unaudited financial information.

 

The estimated preliminary unaudited financial information should be read in conjunction with the “Review and Analysis of Seajacks’ Financial Information” and “Risk Factors” sections and Seajacks consolidated financial statements, including the notes thereto, included herein.

 

The preliminary financial information as of and for the nine months ended September 30, 2021 has been prepared by, and is our responsibility. Our independent registered public accounting firm has not audited, reviewed, compiled or performed any procedures with respect to the preliminary financial information. Accordingly, our independent registered public accounting firm does not express an opinion or any other form of assurance with respect thereto.

 

As of September 30, 2021, we had $64.9 million of cash and $198.3 million of debt.

 

Our results for the third quarter of 2021 will include the impact of Seajacks’ earnings during the period from August 12, 2021 (the date we acquired Seajacks) through September 30, 2021 and is not reflective of a full quarter of Seajacks’ operations. Throughout the entire quarter, the Seajacks Zaratan was fully utilized installing foundations at the Akita AOW, the Seajacks Scylla provided transportation, management and installation services for certain wind turbine generators for an offshore wind farm project in China, and the Seajacks Hydra provided offshore wind turbine maintenance, as well as maintenance on an offshore gas production platform. The Seajack Leviathan and Seajack Kraken were both idle during the quarter.

 

Operating expenses, specifically general and administrative costs, for the third quarter of 2021 included substantial acquisition costs, consisting primarily of compensation and consulting fees. Based upon our preliminary fair value estimates, other income is expected to include a gain on bargain purchase of Seajacks which is yet to be finalized. We expect to report a net loss for the quarter before considering the impact of the Seajacks related bargain purchase gain.

 

Seajacks Transaction

 

On August 12, 2021, one of our wholly-owned direct subsidiaries acquired from Marubeni Corporation, INCJ Ltd. and Mitsui O.S.K. Lines, Ltd. (together, the “Sellers”) 100% of Atlantis Investorco Limited, the parent

 

S-9


Table of Contents

of Seajacks International Limited (“Seajacks”), for consideration of 7,892,679 shares (as further described below), $302.0 million of assumed net debt, $70.7 million of newly-issued redeemable notes, and $12 million of cash, which we refer to as the “Seajacks Transaction.” Upon closing of the Seajacks Transaction, 7,000,000 common shares and 700,000 Class A preferred shares were issued to the Sellers, and the remaining 192,679 common shares are expected to be issued to the Sellers on a pro rata basis on November 11, 2021.

 

The Class A preferred shares have no voting rights but are entitled to participate in distributions made to our common shareholders, including dividends. The holder has the right (and shall use reasonable endeavors) to convert the Class A preferred shares into common shares on a one-for-one basis, provided that such conversion would not result in the holder thereof (together with its affiliates) holding 20.0% or more of our then total issued and outstanding common shares.

 

ING Bank N.V. Credit Facility

 

In connection with the Seajacks Transaction, we entered into a senior secured non-amortizing revolving credit facility with ING Bank N.V. for up to $60 million (the “ING Credit Facility”). The credit facility, which includes sub-limits for performance bonds, has a final maturity of August 2022 and bears interest at LIBOR plus a margin of 2.45% per annum. As of August 2021, $40.0 million was drawn down under this credit facility.

 

$175,000,000 Senior Secured Green Term Loan and Revolving Credit Facility

 

Seajacks International Limited has received a commitment from DNB Capital LLC, a subsidiary of DNB Bank ASA, for a senior secured Green Term Loan and Revolving Credit Facility (the “DNB Credit Facility”) of up to the aggregate of $175.0 million, including a $25,000,000 sublimit of uncommitted performance bonds issued by one or more of the lenders (the “Performance Bonds”). The DNB Credit Facility is expected to have a term of five years and bear interest at LIBOR plus a margin of 3.15%, which upon our receipt of a third party certification that the loan fulfills certain criteria and is accredited as a “Green Loan”, a discount to the margin of .10% is expected to be applied to the Green Term Loan. The DNB Credit Facility is expected to be secured by, among other things, Seajacks Scylla and Seajacks Zaratan, together with a parent guarantee by Eneti. Proceeds from the DNB Credit Facility are expected to be used to repay certain of our existing indebtedness and for general corporate purposes. The terms, conditions, and financial covenants of the DNB Credit Facility are expected to be standard for loans of this type. The DNB Credit Facility is subject to syndication, negotiation and execution of definitive documentation and for us to have raised a minimum of $175 million of equity as part of this equity offering. There is no assurance that we will enter into the DNB Credit Facility on the terms described above (which may be subject to change, including the condition as to a minimum equity raise) or at all.

 

Reloading of the 2013 Equity Incentive Plan

 

On October 8, 2021, our Board of Directors (the “Board”) approved the reloading of our 2013 Equity Incentive Plan and reserved an additional 836,302 of our common shares, par value $0.01 per share, for issuance thereunder, which, together with 23,580 common shares that were available for issuance under the Plan prior to the reloading, resulted in an aggregate of 859,882 of our common shares available for issuance thereunder. Subsequently, in October 2021, we issued an aggregate of 858,000 common shares pursuant to the Plan, and thereafter, there remains available 1,882 common shares available for issuance thereunder.

 

Increase in Authorized Shares

 

At a special meeting of shareholders held on September 24, 2021, our shareholders approved an amendment to our Amended and Restated Articles of Incorporation, as amended, to increase the aggregate number of shares

 

S-10


Table of Contents

of capital stock that we are authorized to issue to 131,875,000, consisting of 81,875,000 common shares, par value $0.01 per share, and 50,000,000 preferred shares, par value $0.01 per share. The increase in authorized share capital became effective on September 27, 2021.

 

Appointment of New Directors

 

On August 12, 2021, we increased the size of our Board from eight to ten members, and to fill the newly created vacancies, appointed Peter Niklai, and Hiroshi Tachigami to serve as Class C and Class A Directors respectively, effective as of the same date. Our Board has determined that Mr. Niklai and Mr. Tachigami are “independent directors” as such term is defined under the Securities Exchange Act of 1934, as amended, and the New York Stock Exchange Listing Manual.

 

Corporate Information

 

Effective February 8, 2021, we changed our name to Eneti Inc. from Scorpio Bulkers Inc., following receipt of the approval of our shareholders at a special meeting held on February 3, 2021. We were incorporated in the Republic of the Marshall Islands on March 20, 2013. Our common shares have traded on the NYSE under the symbol “SALT” since December 12, 2013. Effective February 8, 2021, our common shares began trading on the NYSE under the symbol “NETI”. Our principal executive offices are located at 9, Boulevard Charles III, MC 98000 Monaco. Our telephone number at that address is +377-9798-5715. We also maintain an office at 150 East 58th Street, New York, NY 10155 and our telephone number at that address is (646) 432-1675. Our website address is www.eneti-inc.com. The information contained on, or that can be accessed through our website is not a part of this prospectus supplement. We have included our website address in this prospectus supplement solely as an inactive textual reference.

 

S-11


Table of Contents

THE OFFERING

 

The Issuer

Eneti Inc., a Marshall Islands corporation

 

Common Shares Presently Outstanding

19,091,604 common shares(1)

 

Common Shares Offered

             common shares (or                  common shares, assuming full exercise of the underwriters’ option to purchase additional common shares).

 

Common Shares Outstanding Immediately After This Offering

             common shares (or                 common shares, assuming full exercise of the underwriters’ option to purchase additional common shares).

 

Use of Proceeds

We estimate that we will receive net proceeds of approximately $         million from this offering (or approximately $         million if the underwriters’ option to purchase additional common shares is exercised in full), in each case after deducting underwriting discounts and estimated offering expenses payable by us.

 

  We intend to use all of the net proceeds of this offering of our common shares for general corporate purposes, including the funding of our newbuilding program, which includes our Newbuilding WTIV, Optional WTIV and Proposed Jones Act WTIV.

 

Listing

Our common shares are currently listed on the NYSE under the symbol “NETI”

 

Risk Factors

Investing in our common shares involves risks. You should carefully consider the risks discussed in the section entitled “Risk Factors” beginning on page S-13 of this prospectus supplement and in the section entitled “Risk Factors” or any similar section in the documents that we subsequently file with the Commission that are incorporated or deemed to be incorporated by reference in this prospectus supplement and the accompanying base prospectus, and in any free writing prospectus that you may be provided in connection with the offering of common shares pursuant to this prospectus supplement and the accompanying base prospectus.

 

(1)   As of October 31, 2021, and excludes (i) 700,000 Class A preferred shares that the holder has the right (and shall use reasonable endeavors) to convert into common shares on a one-for-one basis, provided that such conversion would not result in the holder thereof (together with its affiliates) holding 20.0% or more of our then total issued and outstanding common shares, which we expect will occur following the completion of this offering, (ii) 192,679 common shares that are expected to be issued on November 11, 2021 to the Sellers on a pro rata basis in connection with the exercise of a warrant issued to the Sellers at closing of the Seajacks Transaction, and (iii) 312,477 common shares that are expected to be issued on November 11, 2021 to the Sellers in connection with the Scylla Earnout, each as further described herein.

 

S-12


Table of Contents

RISK FACTORS

 

An investment in our common shares involves risk. Before making an investment in our common shares, you should carefully consider the risk factors and all of the other information included in this prospectus supplement, the accompanying base prospectus and the documents incorporated into each by reference, including those in “Item 3. Key Information—D. Risk Factors” in our Annual Report on Form 20-F for the year ended December 31, 2020, and as updated by annual, quarterly and other reports and documents we file with the Commission after the date of this prospectus supplement and that are incorporated by reference herein. Please see the section of this prospectus supplement entitled “Where You Can Find Additional Information—Information Incorporated by Reference.” The occurrence of one or more of these risk factors could adversely impact our business, financial condition or results of operations.

 

Risks Related to Our Business and Industry

 

Lower prices for other energy sources may reduce the demand for wind energy development, which could have a material adverse effect on us.

 

The wind energy market is affected by the price and availability of other energy sources, including nuclear, coal, natural gas and oil, as well as other sources of renewable energy. To the extent renewable energy, particularly wind energy, becomes less cost-competitive due to reduced government targets, increases in the cost of wind energy, as a result of new regulations or incentives that favor alternative renewable energy, cheaper alternatives or otherwise, demand for wind energy and other forms of renewable energy could decrease. Slow growth or a long-term reduction in the demand for wind energy could reduce the demand for our services and have a material adverse effect on our business, financial condition and operating results.

 

We may be unable to keep pace with rapidly changing technology in wind turbine and other industrial component manufacturing.

 

The global markets for wind turbines and other manufactured industrial components are rapidly evolving technologically. Our WTIVs may not be suited for future generations of products being developed by wind turbine companies. As turbines grow in size, particularly to support the development of offshore windfarms, tower manufacturing becomes more complicated and may require investments in new manufacturing equipment. Currently, three of our five WTIVs have a turbine carrying capacity of 4MW (NG2500X), which, while suitable for maintenance work on certain classes of wind turbine currently in use, are no longer suitable for wind turbine installations because the wind turbine sizes have increased significantly. If wind turbine sizes further increase significantly in the future, demand for our WTIVs, including our larger capacity WTIVs, the Seajacks Scylla, the Seajacks Zaratan, and our newbuilding WTIVS, may decline, and may also result in a lower useful life than currently anticipated. To maintain a successful business in our field, we must keep pace with technological developments and the changing standards of our customers and potential customers and meet their constantly evolving demands. If we fail to adequately respond to the technological changes in our industry, make the necessary capital investments or are not suited to provide components for new types of wind turbines, our business, financial condition and operating results may be adversely affected. Please also see, “We currently have only five WTIV vessels and are vulnerable should any of such vessels remain idle or lose contracted revenue.”

 

The U.S. wind energy industry is significantly impacted by tax and other economic incentives. A significant change in these incentives could significantly impact our results of operations and growth

 

The U.S. wind energy industry is significantly impacted by federal tax incentives and state Renewable Portfolio Standards (“RPSs”). Despite recent reductions in the cost of wind energy, due to variability in wind quality and consistency, and other regional differences, wind energy may not be economically viable in certain parts of the country absent such incentives. These programs have provided material incentives to develop wind energy generation facilities and thereby impact the demand for our products. The increased demand for our products that generally results from the credits and incentives could be impacted by the expiration or curtailment of these programs.

 

S-13


Table of Contents

One such federal government program, the production tax credit (“PTC”), provides a supplemental payment based on electricity produced from each qualifying wind turbine. Legislative support for the PTC has been intermittent since its introduction in 1992, which has caused volatility in the demand for new wind energy projects. In 2015, the PTC was extended for a five-year period, with a time-based phase-out depending on the year the wind project is commenced. The phase-out schedule legislated in 2015 provided for: 100% extension of the credit for projects commenced before the end of 2016, 80% extension of the credit for projects commenced in 2017, 60% extension of the credit for projects commenced in 2018 and 40% extension of the credit for projects commenced in 2019. As part of a year-end tax extenders bill in 2019, the PTC was extended for an additional year, allowing for a 60% extension of the credit for projects commenced before the end of 2020.

 

On December 27, 2020, the Consolidated Appropriations Act of 2021 was signed into law, which included appropriations to provide relief for the COVID-19 pandemic (“COVID IV”). As part of COVID IV, the PTC was extended for an additional year, allowing for a 60% credit for projects that start construction by the end of 2021. In order to benefit from the PTC, qualifying projects must either be completed within four years from their start of construction, or the developer must demonstrate that its projects are in continuous construction between start of construction and completion. As a result of COVID IV, the PTC will subsidize wind projects commenced as late as 2021 and completed by 2025, or later if continuous construction can be demonstrated. The PTC tax benefits are available for the first ten years of operation of a wind energy facility, and also applies to significant redevelopment of existing wind energy facilities. Included in COVID IV is the addition of a new 30% ITC created for offshore wind projects that start construction by the end of 2025. The provision will be retroactively applied to projects that started production in 2016.

 

RPSs generally require or encourage state regulated electric utilities to supply a certain proportion of electricity from renewable energy sources or to devote a certain portion of their plant capacity to renewable energy generation. Typically, utilities comply with such standards by qualifying for renewable energy credits evidencing the share of electricity that was produced from renewable sources. Under many state standards, these renewable energy credits can be unbundled from their associated energy and traded in a market system, allowing generators with insufficient credits to meet their applicable state mandate. These standards have spurred significant growth in the wind energy industry and a corresponding increase in the demand for our services. Currently, the majority of states have RPSs in place and certain states have voluntary utility commitments to supply a specific percentage of their electricity from renewable sources. The enactment of RPSs in additional states or any changes to existing RPSs (including changes due to the failure to extend or renew the federal incentives described above), or the enactment of a federal RPS or imposition of other greenhouse gas regulations, may impact the demand for our services. We cannot assure that government support for renewable energy will continue. The elimination of, or reduction in, state or federal government policies that support renewable energy could have a material adverse impact on our business, results of operations, financial performance and future development efforts.

 

We face competition from industry participants who may have greater resources than we do.

 

Our business is subject to risks associated with competition from new or existing industry participants who may have more resources and better access to capital. Certain of our competitors and potential competitors may have substantially greater financial resources, customer support, technical and marketing resources, larger customer bases, longer operating histories, greater name recognition and more established relationships in the industry than we do. Among other things, these industry participants compete with us based upon price, quality, location and available capacity. We cannot be sure that we will have the resources or expertise to compete successfully in the future. We also cannot be sure that we will be able to match cost reductions by our competitors or that we will be able to succeed in the face of current or future competition.

 

S-14


Table of Contents

We are dependent on the employment of our vessels and the backlog of contracts may not materialize.

 

Our revenue is dependent on short-term time charters of between three to twelve months, with potential deployment of vessels on multi-year charters for larger windfarm installation projects. In the ordinary course of business, we seek to enter into new contracts for the employment of our vessels.

 

Such charters, and revenues derived therefrom, are subject to various terms and conditions including cancellation events. In addition, such contracts could be subject to termination, amendments and/or delays resulting in revenues being more limited, occurring at different time periods or not occurring at all. Our current customer contracts include express cancellation rights on the part of the customers. Under the customer contracts, we may also become liable to the customers for liquidated damages if there are delays in delivering a vessel or for delays that arise during the operation of our vessels under the contracts.

 

We also identify potential charters we may be able to secure, but there is no guarantee that contractual commitments of future revenue will result from these prospects. There is a risk that it may be difficult for us to obtain future employment for our vessels and utilisation may drop. Windfarm installation projects are also sanctioned at irregular intervals and installation projects in some locations are seasonal. Consequently, our vessels may need to be deployed on lower-yielding work or remain idle for periods without any compensation to us. Some of our vessels are opportunistically deployed on projects in the oil and gas sector to the extent not contracted for windfarm installation or maintenance work. However, we can provide no assurance that such work will be available during the relevant periods, on favorable terms or at all. There can also be off-hire periods as a consequence of accidents, technical breakdown and non-performance. The cancellation, amendments to or postponement of one or more contracts can have a material adverse impact on our earnings and may thus affect the pricing of our common shares. As we currently have five vessels in our fleet, our financial condition, business and prospects could be materially impacted if one or more of our vessels became disabled or otherwise unable to operate for an extended period. We are thus exposed to our vessels not getting contracts and vessel charters compared to other companies in the offshore wind industry that have several windfarm installation vessels and/or similar vessels in operation.

 

We may not be able to renew or replace expiring contracts for our vessels.

 

Our ability to renew or replace expiring contracts or obtain new contracts, and the terms of any such contracts, will depend on various factors, including market conditions and the specific needs of our customers. Given the highly competitive and historically cyclical nature of the industry, we may not be able to renew or replace expiring contracts or we may be required to renew or replace expiring contracts or obtain new contracts at rates that are below, and potentially substantially below, existing day rates, or that have terms that are less favorable to us than existing contracts, or we may be unable to secure contracts for our vessels. In particular, the Seajacks Scylla and Seajacks Zaratan accounted for a large majority of our revenue in the last two years and if we are not able to renew or replace expiring contracts for the Seajacks Scylla or Seajacks Zaratan, this could materially impact our business, prospects and financial results and condition, including our ability to be compliant with the financial covenants pursuant to our financing arrangements.

 

The early termination of contracts on our vessels could have a material adverse effect on our operations.

 

We cannot ensure investors that our customers would not choose to exercise their termination rights in spite of any remedies available to us or the threat of litigation with us. Until replacement of such business with other customers, any termination could temporarily disrupt our business or otherwise adversely affect our financial condition and results of operations, in particular if the Seajacks Scylla or Seajacks Zaratan customer contracts would be terminated as the Seajacks Scylla and Seajacks Zaratan accounted for a large majority of the revenue in our fleet. If any contracts are terminated, we might not be able to replace such business on economically equivalent terms. In addition, during an economic downturn, customers may request contractual concessions even though such concessions are contrary to existing contractual terms. While we may not be legally required to

 

S-15


Table of Contents

give concessions, commercial considerations may dictate that it do so. If we are unable to collect amounts owed to us or contracts for our vessels are terminated and our vessels are not sufficiently utilized, this could have a material adverse effect on our business, financial position, results of operations, cash flows and prospects.

 

Failure to secure new charters for our vessels may result in some or all of our vessels remaining idle. While idle, our vessels nonetheless present significant costs relating to maintenance, security, mooring fees and staffing, which could negatively impact our cash flows and results of operations should any vessel remain idle for a significant period.

 

Our fleet operations may be subject to seasonal factors.

 

Demand for our offshore support services is directly affected by the levels of construction and maintenance activity for our wind farm customers. Budgets of many of our customers are based upon a calendar year, and demand for our services may be stronger in the second and third calendar quarters when allocated budgets are expended by customers and weather conditions are more favorable for offshore activities. Adverse events relating to our vessels or business operations during peak demand periods could have a significant adverse effect on our business, financial position, results of operations, cash flows and prospects. In addition, seasonal volatility can create unpredictability in activity and utilization rates, which could have a material adverse effect on our business, financial position, results of operations, cash flows and prospects.

 

We currently are not Jones Act compliant and are still in the process of determining a successful plan for achieving Jones Act Compliance.

 

We expect to become an owner and operator of vessels that comply with the Jones Act regulations (“Jones Act Fleet”). In August 2021, we announced that we are in advanced discussions with a U.S. shipyard for the construction of the Proposed Jones Act WTIV to address the American demand for offshore wind development. We are finalizing the terms with Keppel Amfels in the United States for a contract for the construction of the Proposed Jones Act WTIV in Texas that, based on our current contractual expectations, we would expect to take delivery of by the end of 2024. We have not owned or operated a Jones Act fleet and are in the process of evaluating strategies to determine how we can comply with the requirements of the Jones Act, including the Jones Act Ownership Threshold (as defined below). If we succeed in complying with the Jones Act regulations, there are several new risks that we will be exposed to in owning and operating a Jones Act Fleet. Additionally, there will be significant new costs to us in connection with owning and operating a Jones Act Fleet, including increased construction costs, wage rates and operating costs. Furthermore, compliance with the Jones Act will expose us to a greater risk of being sued under certain relief provisions offered to workers under the Jones Act and with our increased presence operating within the United States. We are also exposed to potential regulatory scrutiny and oversight from the United States government related to our compliance with the Jones Act. We cannot assure you that we will be able to successfully become compliant with the requirements of the Jones Act and own and operate a Jones Act Fleet.

 

Current shareholders may experience dilution in connection with our compliance with Jones Act ownership requirements.

 

We are responsible for monitoring the foreign ownership of our common shares and other interests to ensure compliance with the Jones Act. In order to own and vessels under the Jones Act, at least 75% of the outstanding shares of each class or series of our capital stock must be owned and controlled by U.S. citizens within the meaning of the Jones Act (the “Jones Act Ownership Threshold”). Failure to comply with the Jones Act could result in us being deemed to have violated other United States federal laws that prohibit a foreign transfer of United States documented vessels without government approval, resulting in severe penalties, including permanent loss of United States coastwise trading privileges or forfeiture of the vessels deemed transferred, and fines. Currently, we do not meet the Jones Act Ownership Threshold requirements. We are evaluating strategies to meet such requirements, including entering into joint ventures with United States entities that would reduce

 

S-16


Table of Contents

our ownership in our Jones Act Fleet to less than 100%. Accordingly, in pursuing these strategies, our current shareholders may experience dilution, either in their ownership of the Company or in their ownership in the Jones Act Fleet, indirectly as shareholders of the Company.

 

We are exposed to hazards that are inherent to offshore operations.

 

We operate in the offshore industry and are thus subject to inherent hazards, such as breakdowns, technical problems, harsh weather conditions, environmental pollution, force majeure situations (nationwide strikes etc.), collisions and groundings. These hazards can cause personal injury or loss of life, severe damage to or destruction of property and equipment, pollution or environmental damage, claims by third parties or customers and suspension of operations. Windfarm installation vessels, including our vessels, will also be subject to hazards inherent in marine operations, either while on-site or during mobilization, such as capsizing, sinking, grounding, collision, damage from severe weather and marine life infestations. Operations may also be suspended because of machinery breakdowns, abnormal operating conditions, failure of subcontractors to perform or supply goods or services or personnel shortages. We are covered by industry standard hull and machinery and P&I insurance. Standard P&I insurance for vessel owners provides limited cover for damage to project property during windfarm installation operations, as such damage is expected to be covered by the construction all risks insurance procured by our customers. However, in recent years, the industry has seen more contracts imposing liability for property damage to contractors such as us. Such risks are difficult to adequately insure under standard P&I insurance for vessel owners. We have also obtained insurance for loss-of-hire of our vessels are unable to perform under their charters.

 

Our insurance coverage may be inadequate to protect us from the liabilities that could arise in our business.

 

Although we maintain insurance coverage against the risks related to our business, risks may arise for which we may not be insured. Claims covered by insurance are subject to deductibles, the aggregate amount of which could be material, and certain policies impose caps on coverage. Insurance policies are also subject to compliance with certain conditions, the failure of which could lead to a denial of coverage as to a particular claim or the voiding of a particular insurance policy. There also can be no assurance that existing insurance coverage can be renewed at commercially reasonable rates or that available coverage will be adequate to cover future claims. If a loss occurs that is partially or completely uninsured, or the carrier is unable or unwilling to cover the claim, we could be exposed to substantial liability. Further, to the extent the proceeds from insurance are not sufficient to repair or replace a damaged asset, we would be required to expend funds to supplement the insurance and in certain circumstances may decide that such expenditures are not justified, which, in either case, could adversely affect our business, financial position, results of operations, cash flows and prospects.

 

We are subject to complex laws and regulations, including environmental regulations that can adversely affect the cost, manner or feasibility of doing business.

 

Our operations are subject to numerous international, national, state and local laws, regulations, treaties and conventions in force in international waters and the jurisdictions in which our vessels operate or are registered, which can significantly affect the ownership and operation of our vessels. These laws and regulations include, but are not limited to, the U.S. Oil Pollution Act of 1990, (the “OPA”), the Comprehensive Environmental Response, Compensation and Liability Act (“CERCLA”), the U.S. Clean Air Act, the U.S. Clean Water Act (“CWA”), and the U.S. Maritime Transportation Security Act of 2002 (the “MTSA”), and regulations of the International Maritime Organization (the “IMO”), including the International Convention for the Prevention of Pollution from Ships of 1973 (as from time to time amended and generally referred to as MARPOL) including the designation of Emission Control Areas (the “ECAs”), thereunder, the International Convention for the Safety of Life at Sea of 1974 (as from time to time amended and generally referred to as SOLAS), the International Convention on Civil Liability for Bunker Oil Pollution Damage, and the International Convention on Load Lines of 1966 (as from time to time amended, the “LL Convention”).

 

S-17


Table of Contents

Compliance with such laws, regulations and standards, where applicable, may require installation of costly equipment or implementation of operational changes and may affect the resale value or useful lives of our vessels. These costs could have a material adverse effect on our business, results of operations, cash flows and financial condition. A failure to comply with applicable laws and regulations may result in administrative and civil penalties, criminal sanctions or the suspension or termination of our operations. Because such conventions, laws, and regulations are often revised, we cannot predict the ultimate cost of complying with them or the impact thereof on the resale prices or useful lives of our vessels. Additional conventions, laws and regulations may be adopted which could limit our ability to do business or increase the cost of our doing business and which may materially adversely affect our operations. For example, the International Convention for the Control and Management of Ships’ Ballast Water and Sediments, or the BWM Convention, which was adopted by the UN International Maritime Organization in February 2004 and entered into force on September 8, 2017, calls for the phased introduction of mandatory reduction of living organism limits in ballast water over time (as discussed further below). In order to comply with these living organism limits, vessel owners must install expensive ballast water treatment systems or make port facility disposal arrangements and modify existing vessels to accommodate those systems.

 

Environmental laws often impose strict liability for remediation of spills and releases of oil and hazardous substances, which could subject us to liability without regard to whether we were negligent or at fault. Under OPA, for example, owners, operators and bareboat charterers are jointly and severally strictly liable for the discharge of oil within the 200-mile exclusive economic zone around the United States.

 

We are required by various governmental and quasi-governmental agencies to obtain certain permits, licenses, and certificates with respect to our operations, and satisfy insurance and financial responsibility requirements for potential oil (including marine fuel) spills and other pollution incidents. Although we have insurance to cover certain environmental risks, there can be no assurance that such insurance will be sufficient to cover all such risks or that any claims will not have a material adverse effect on our business, results of operations, cash flows, financial condition, and our future ability to pay dividends on our common shares.

 

Regulations relating to ballast water discharge may adversely affect our revenues and profitability.

 

The IMO has imposed updated guidelines for ballast water management systems specifying the maximum amount of viable organisms allowed to be discharged from a vessel’s ballast water. Depending on the date of the International Oil Pollution Prevention (“IOPP”) renewal survey, existing vessels constructed before September 8, 2017 must comply with the updated D-2 standard on or after September 8, 2019. For most vessels, compliance with the D-2 standard will involve installing on-board systems to treat ballast water and eliminate unwanted organisms. Ships constructed on or after September 8, 2017 are to comply with the D-2 standards on or after September 8, 2017. Our vessels have been fitted with alternate management systems (“AMS”) (IMO-approved ballast water treatment systems) that comply with the updated guidelines and standards, and all but two of these have also been approved by the U.S. Coast Guard. While we believe that our vessels have been fitted with systems that comply with the updated guidelines and standards, we cannot be assured that these systems will be approved by the regulatory bodies of every jurisdiction in which we may wish to conduct our business. If they are not approved it could have an adverse material impact on our business, financial condition, and results of operations depending on the available ballast water treatment systems and the extent to which existing vessels must be modified to accommodate such systems.

 

Furthermore, United States regulations are currently changing. Although the 2013 Vessel General Permit (“VGP”) program and U.S. National Invasive Species Act (“NISA”) are currently in effect to regulate ballast discharge, exchange and installation, the Vessel Incidental Discharge Act (“VIDA”), which was signed into law on December 4, 2018, requires that the EPA develop national standards of performance for approximately 30 discharges, similar to those found in the VGP within two years. By approximately 2022, the U.S. Coast Guard must develop corresponding implementation, compliance and enforcement regulations regarding ballast water.

 

S-18


Table of Contents

We are subject to international safety regulations and requirements imposed by our classification societies and the failure to comply with these regulations and requirements may subject us to increased liability, may adversely affect our insurance coverage and may result in a denial of access to, or detention in, certain ports.

 

The operation of our vessels is affected by the requirements set forth in the International Management Code for the Safe Operation of Ships and for Pollution Prevention, or the ISM Code. The ISM Code requires ship owners, ship managers and bareboat charterers to develop and maintain an extensive “Safety Management System” that includes the adoption of a safety and environmental protection policy setting forth instructions and procedures for safe operation of vessels and describing procedures for dealing with emergencies. In addition, vessel classification societies impose significant safety and other requirements on our vessels.

 

The failure of a shipowner or bareboat charterer to comply with the ISM Code may subject it to increased liability, may invalidate existing insurance or decrease available insurance coverage for the affected vessels and may result in a denial of access to, or detention in, certain ports. Each of our vessels is ISM Code-certified. However, if we are subject to increased liability for non-compliance or if our insurance coverage is adversely impacted as a result of non-compliance, it may negatively affect our ability to pay dividends on our common shares. If any of our vessels are denied access to, or are detained in, certain ports as a result of non-compliance with the ISM Code, our revenues may be adversely impacted.

 

In addition, the hull and machinery of every commercial vessel must be classed by a classification society authorized by its country of registry. The classification society certifies that a vessel is safe and seaworthy in accordance with the applicable rules and regulations of the country of registry of the vessel and the Safety of Life at Sea Convention. The cost of maintaining our vessels’ classifications may be substantial. If any vessel does not maintain its class or fails any annual, intermediate or special survey, the vessel will be unable to trade between ports and will be unemployable and uninsurable, which could negatively impact our results of operations and financial condition.

 

Volatile economic conditions may adversely impact our ability to obtain financing or refinance our future credit facilities on acceptable terms, which may hinder or prevent us from operating or expanding our business.

 

Global financial markets and economic conditions have been, and continue to be, unstable and volatile. Beginning in February 2020, due in part to fears associated with the spread of COVID-19 (as more fully described below), global financial markets experienced extreme volatility and a steep and abrupt downturn followed by a recovery. Markets may experience renewed volatility as the COVID-19 pandemic evolves, particularly if new variants of COVID-19 should result in an increase in the spread or severity of the disease. Such instability and volatility have negatively affected the general willingness of banks, other financial institutions and lenders to extend credit, particularly in the shipping industry, due to the historically volatile asset values of vessels. Credit markets and the debt and equity capital markets have been distressed and the uncertainty surrounding the future of the global credit markets has resulted in reduced access to credit worldwide. These issues, along with significant write-offs in the financial services sector, the re-pricing of credit risk and the uncertain economic conditions, have made, and may continue to make, it difficult to obtain additional financing. Adverse developments in global financial markets or economic conditions may adversely impact our ability to issue additional equity at prices that will not be dilutive to our existing unitholders or preclude us from issuing equity at all. Continued economic drag from COVID-19 and the international governmental responses to the virus may also adversely affect the market price of our common shares.

 

As a result of concerns about the stability of financial markets generally and the solvency of counterparties specifically, the cost of obtaining money from the credit markets has increased as a result of increases in interest rates, stricter lending standards, refusals to extend debt financing at all or on similar terms as existing debt arrangements, reductions, and in some cases, termination of funding to borrowers on the part of many lenders.

 

S-19


Table of Contents

Due to these factors, we cannot be certain that financing or any alternatives will be available to the extent required, or that we will be able to finance or refinance our future credit facilities on acceptable terms or at all. If financing or refinancing is not available when needed, or is available only on unfavorable terms, we may be unable to meet our obligations as they come due or we may be unable to enhance our existing business, complete the acquisition of newbuildings and additional vessels or otherwise take advantage of business opportunities as they arise. The COVID-19 outbreak has negatively impacted, and may continue to negatively impact, global economic activity, demand for energy, and funds flows and sentiment in the global financial markets. Continued economic disruption caused by the continued failure to control the spread of the virus could significantly impact our ability to obtain additional debt financing.

 

Outbreaks of epidemic and pandemic diseases, including COVID-19, and governmental responses thereto could adversely affect our business.

 

Global public health threats, such as COVID-19 (as described more fully below), influenza and other highly communicable diseases or viruses, outbreaks of which have from time to time occurred in various parts of the world in which we operate could adversely impact our operations, as well as the operations of our customers. The ongoing COVID-19 pandemic has, among other things, caused delays and uncertainties relating to newbuildings, drydockings and scrubber installations at shipyards.

 

COVID-19 has already caused severe global disruptions and may negatively affect economic conditions regionally as well as globally and otherwise impact our operations and the operations of our customers and suppliers. Governments in affected countries may renew or expand travel bans, quarantines and other emergency public health measures, which could impact our operations and those of our customers and suppliers, which could materially and adversely affect our business and results of operations. We may experience severe operational disruptions and delays, unavailability of normal port infrastructure and services including limited access to equipment, critical goods and personnel, disruptions to crew change, quarantine of ships and/or crew, counterparty nonperformance, closure of ports and custom offices, as well as disruptions in the supply chain and industrial production.

 

Epidemics may also affect personnel operating payment systems through which we receive revenues from the chartering of our vessels or pay for our expenses, resulting in delays in payments. Organizations across industries, including ours, are rightly focusing on their employees’ well-being, whilst making sure that their operations continue undisrupted and at the same time, adapting to the new ways of operating. As such employees are encouraged or even required to operate remotely which significantly increases the risk of cyber security attacks.

 

The occurrence of any of the foregoing events or other epidemics or an increase in the severity or duration of the COVID-19 or other epidemics could have a material adverse effect on our business, results of operations, cash flows, financial condition, value of our vessels, and ability to pay dividends. The extent of such effects on our operational and financial performance will depend on future developments, including the duration, spread and intensity of any such outbreak, any resurgence or mutation of the COVID 19 virus, the availability of vaccines and their global deployment, the development of effective treatments, the imposition of effective public safety and other protective measures and the public’s response to such measures. There continues to be a high level of uncertainty relating to how the pandemic will evolve, how governments and consumers will react and progress on the approval and distribution of vaccines, all of which are uncertain and difficult to predict considering the rapidly evolving landscape. As a result, although our operations have not been materially affected by the COVID-19 outbreak to date, the ultimate severity of the COVID-19 outbreak is uncertain at this time and therefore we cannot predict the impact it may have on our future operations, which impact could be material and adverse, particularly if the pandemic continues to evolve into a severe worldwide health crisis.

 

S-20


Table of Contents

World events, including piracy, terrorist attacks and political conflicts, could affect our results of operations and financial condition.

 

Past terrorist attacks, as well as the threat of future terrorist attacks around the world, continue to cause uncertainty in the world’s financial markets and may affect our business, operating results and financial condition. Continuing conflicts, instability and other recent developments in the Middle East, North Korea and elsewhere and the presence of U.S. or other armed forces in the Middle East, may lead to additional acts of terrorism and armed conflict around the world, which may contribute to further economic instability in the global financial markets. These uncertainties could also adversely affect our ability to obtain additional financing on terms acceptable to us or at all. In the past, political conflicts have also resulted in attacks on vessels, mining of waterways and other efforts to disrupt international shipping and ocean-going vessels, particularly in the Arabian Gulf region. Acts of terrorism and piracy have also affected vessels traversing in regions such as the South China Sea, the Gulf of Aden off the coast of Somalia and West Africa. If these piracy attacks result in regions in which our vessels are deployed being characterized as “war risk” zones by insurers or Joint War Committee “war and strikes” listed areas, premiums payable for such coverage could increase significantly and such insurance coverage may be more difficult to obtain. In addition, crew costs, including due to employing onboard security guards, could increase in such circumstances. Any of these occurrences could have a material adverse impact on our operating results, revenues and costs.

 

The world economy is currently facing a number of new challenges. Geopolitical events such as regulatory or other developments following the withdrawal of the U.K. from the European Union, or “Brexit,” and changes in U.S. trade policies, treaties and tariffs, as well as similar events in other jurisdictions, could impact global markets, including foreign exchange and securities markets; any resulting changes in currency exchange rates, tariffs, treaties and other regulatory matters could in turn adversely impact our business and operations.

 

If our vessels operate in countries that are subject to restrictions, sanctions, or embargoes imposed by the U.S. government, the European Union, the United Nations, or other governments, it could lead to monetary fines or adversely affect our reputation and the market for our shares of common stock and their trading price.

 

Although we do not expect that our vessels will operate in countries or territories subject to country-wide or territory-wide sanctions or embargoes imposed by the U.S. government and other authorities, or countries identified by the U.S. government or other authorities as state sponsors of terrorism, and we endeavor to take precautions reasonably designed to mitigate the risk of such activities, including relevant provisions in charter agreements forbidding the use of our vessels in trade or business that would violate economic sanctions.

 

The sanctions and embargo laws and regulations vary in their application, as they do not all apply to the same covered persons or proscribe the same activities, and such sanctions and embargo laws and regulations may be amended, strengthened, or lifted over time. Primary sanctions administered by the Office of Foreign Assets Control (“OFAC”) of the U.S. Department of the Treasury principally apply, with certain exceptions, to U.S. persons (defined as any United States citizen, permanent resident alien, entity organized under the laws of the United States or any jurisdiction within the United States, or any person in the United States). The United States can, however, extend secondary sanctions liability to non-U.S. persons, including non-U.S. companies, such as our Company. OFAC’s primary sanctions may also apply to non-U.S. companies conducting activity with a nexus to the United States sufficient for OFAC to exercise its jurisdiction.

 

Although we believe that we have been in compliance with all applicable sanctions and embargo laws and regulations, and intend to maintain such compliance, there can be no assurance that we will be in compliance with all applicable sanctions and embargo laws and regulations in the future, particularly as the scope of certain laws may be unclear and may be subject to changing interpretations. Any such violation could result in fines, penalties, or other sanctions that could severely impact our ability to access U.S. capital markets and conduct our business, and could result in some investors deciding, or being required, to divest their interest, or not to invest,

 

S-21


Table of Contents

in us. In addition, certain institutional investors may have investment policies or restrictions that prevent them from holding securities of companies that have contracts with countries identified by the U.S. government as state sponsors of terrorism. The determination by these investors not to invest in, or to divest from, our common stock may adversely affect the price at which our common stock trade. Moreover, our charterers may violate applicable sanctions and embargo laws and regulations as a result of their actions that do not involve us or our vessels, and those violations could in turn negatively affect our reputation. In addition, our reputation and the market for our securities may be adversely affected if we engage in certain other activities, such as entering into charters with individuals or entities in countries subject to U.S. sanctions and embargo laws that are not controlled by the governments of those countries, or engaging in operations associated with those countries pursuant to contracts with third parties that are unrelated to those countries or entities controlled by their governments. Investor perception of the value of our common stock may be adversely affected by the consequences of war, the effects of terrorism, civil unrest and governmental actions in these and surrounding countries.

 

Failure to comply with the U.S. Foreign Corrupt Practices Act could result in fines, criminal penalties, contract terminations and an adverse effect on our business.

 

We operate in a number of countries throughout the world, including countries known to have a reputation for corruption. We are committed to doing business in accordance with applicable anti-corruption laws and have adopted a code of business conduct and ethics which is consistent and in full compliance with the U.S. Foreign Corrupt Practices Act of 1977 (“FCPA”), UK Bribery Act, and other applicable anti-corruption laws. We are subject, however, to the risk that we, our affiliated entities or our or their respective officers, directors, employees and agents may take actions determined to be in violation of such anti-corruption laws, including the FCPA and UK Bribery Act. Any such violation could result in substantial fines, sanctions, civil and/or criminal penalties and curtailment of operations in certain jurisdictions, and might adversely affect our business, results of operations or financial condition. In addition, actual or alleged violations could damage our reputation and ability to do business. Furthermore, detecting, investigating, and resolving actual or alleged violations is expensive and can consume significant time and attention of our senior management.

 

The U.K.’s withdrawal from the European Union may have a negative effect on global economic conditions, financial markets and our business.

 

In June 2016, a majority of voters in the U.K. elected to withdraw from the EU in a national referendum (informally known as “Brexit”), a process that the government of the U.K. formally initiated in March 2017. Since then, the U.K. and the EU have been negotiating the terms of a withdrawal agreement, which was approved in October 2019 and ratified in January 2020. The U.K. formally exited the EU on January 31, 2020, although a transition period remained in place until December 2020, during which the U.K. was subject to the rules and regulations of the EU. On December 24, 2020, the U.K. and the EU entered into a trade and cooperation agreement (the “Trade and Cooperation Agreement”), which was applied on a provisional basis from January 1, 2021. While the new economic relationship does not match the relationship that existed during the time the U.K. was a member state of the EU, the Trade and Cooperation Agreement sets out preferential arrangements in certain areas such as trade in goods and in services, digital trade and intellectual property. Negotiations between the U.K. and the EU are expected to continue in relation to other areas which are not covered by the Trade and Cooperation Agreement. The long-term effects of Brexit will depend on the effects of the implementation and application of the Trade and Cooperation Agreement and any other relevant agreements between the U.K. and EU. Brexit has also given rise to calls for the governments of other EU member states to consider withdrawal. These developments and uncertainties, or the perception that any of them may occur, have had and may continue to have a material adverse effect on global economic conditions and the stability of global financial markets, and may significantly reduce global market liquidity and restrict the ability of key market participants to operate in certain financial markets. Any of these factors could depress economic activity and restrict our access to capital, which could have a material adverse effect on our business and on our consolidated financial position, results of operations and our ability to pay distributions. Additionally, Brexit or similar events in other jurisdictions, could

 

S-22


Table of Contents

impact global markets, including foreign exchange and securities markets; any resulting changes in currency exchange rates, tariffs, treaties and other regulatory matters could in turn adversely impact our business and operations.

 

Brexit contributes to considerable uncertainty concerning the current and future economic environment. Brexit could adversely affect European or worldwide political, regulatory, economic or market conditions and could contribute to instability in global political institutions, regulatory agencies and financial markets

 

There may be limits in our ability to mobilize our vessels between geographic areas, and the time and costs of such mobilizations may be material to our business.

 

We operate globally and our WTIVs may be mobilized from one area to another. However, the ability to mobilize WTIVs can be impacted by several factors, including, but not limited to, governmental regulation and customs practices, the significant costs of moving a WTIV, weather, political instability, civil unrest, military actions and the technical capability of the WTIVs to relocate and operate in various environments.

 

Additionally, while a WTIV is being mobilized from one geographic market to another, we may not be paid by the charterer for the time that the WTIV is out of service. In addition, we may mobilize a WTIV to another geographic market without a charter in place, which will result in costs not reimbursable by future charterers. Any such impacts of mobilization could have a material adverse effect on our business, results of operations, cash flows and financial condition.

 

Maritime claimants could arrest or attach one or more of our vessels, which could interrupt our cash flows.

 

Crew members, suppliers of goods and services to a vessel, lenders, and other parties may be entitled to a maritime lien against a vessel for unsatisfied debts, claims or damages. In many jurisdictions, a maritime lien holder may enforce its lien by arresting or attaching a vessel through foreclosure proceedings. The arrest or attachment of one or more of our vessels could interrupt our cash flows and require us to pay large sums of money to have the arrest or attachment lifted. In addition, in some jurisdictions, such as South Africa, under the “sister ship” theory of liability, a claimant may arrest both the vessel that is subject to the claimant’s maritime lien and any “associated” vessel, which is any vessel owned or controlled by the same owner. Claimants could attempt to assert “sister ship” liability against one vessel in our fleet for claims relating to another of our vessels.

 

Governments could requisition our vessels during a period of war or emergency, which could negatively impact our business, financial condition, results of operations, and available cash.

 

A government could requisition one or more of our vessels for title or for hire. Requisition for title occurs when a government takes control of a vessel and becomes its owner, while requisition for hire occurs when a government takes control of a vessel and effectively becomes its charterer at dictated charter rates. Generally, requisitions occur during periods of war or emergency, although governments may elect to requisition vessels in other circumstances. Although we would be entitled to compensation in the event of a requisition of one or more of our vessels, the amount and timing of payment would be uncertain. Government requisition of one or more of our vessels may negatively impact our revenues.

 

Company Specific Risk Factors

 

We currently have only five WTIV vessels and are vulnerable should any of such vessels remain idle or lose contracted revenue.

 

Our fleet consists of five WTIVs, one of which remains subject to a call option that will remain exercisable until August 12, 2022, which, if exercised, would require us to re-sell one of the NG2500X vessels to the Sellers at the pre-agreed sale price of $65.0 million. If any of the vessels remains idle without charter or is taken out of

 

S-23


Table of Contents

operation, due to, for example, one of the risks described in this prospectus supplement materializing, this could materially impact our business, prospects and financial results and condition, including our ability to be compliant with the financial covenants pursuant to our financing arrangements.

 

In particular, the Seajacks Scylla and Seajacks Zaratan accounted for a large majority of our revenue in the last two years and account for 100% of our expected revenue from windfarm installation contracts signed as of November 8, 2021. Should either the Seajacks Scylla or Seajacks Zaratan be taken out of operation for any reason or should any of their existing charter contracts be terminated or breached, this could materially impact our business, prospects and financial results and condition, including our ability to be compliant with the financial covenants pursuant to our financing arrangements.

 

The vessels may be subject to operational incidents and/or the need for upgrades, refurbishments and/or repairs following which the vessels may be out of operation for a shorter or longer period of time. For example, we are presently evaluating the possibility of upgrading the crane, which would allow Seajacks Scylla to carry up to 15 MW turbines. With a fleet of only five vessels, the need to remove any vessel from service for a significant period for upgrades or repairs, or as a result of damage to the vessel, could reduce our earning potential for the period during which the vessel is out of service. In addition, our fleet may be further reduced if the Sellers exercise the call option noted above. Vessel upgrades may be necessary or desirable in the future. Expenditures may be incurred when repairs or upgrades are required by law, in response to an inspection by a governmental authority, when damaged, or because of market or technological developments. Such upgrades, refurbishment and repair projects are subject to risks, including delays and cost overruns, which could have an adverse impact on our available cash resources, results of operations and its ability to comply with e.g. financial covenants pursuant to its financing arrangements. Periods without operations for one or more of our vessels may have a material adverse effect on the business and financial results. If we do not acquire additional windfarm installation vessels or similar vessels in the future, such as the WTIVs in our newbuilding program, we will have a limited asset base, and any failure to maintain and/or perform secured contracts or failure to secure future employment at satisfactory rates for such vessel(s) will affect our results significantly more than those of a company in the offshore wind industry with a larger fleet, and may thus have a material adverse effect on the earnings and the value of our common shares.

 

Material acquisitions, disposals or investments in the future may present material risks and uncertainties, including distraction of management from current operations, insufficient revenue to offset liabilities assumed, potential loss of significant revenue and income streams, unexpected expenses, inadequate return of capital, potential acceleration of taxes currently deferred, regulatory or compliance issues, the triggering of certain covenants in our debt instruments (including accelerated repayment) or other agreements and other unidentified issues not discovered in due diligence. If we were to complete such an acquisition, disposition, investment or other strategic transaction, it may require additional debt or equity financing that could result in a significant increase in the amount of debt we have or the number of outstanding shares of our common stock. As a result of the risks inherent in such transactions, we cannot guarantee that any such transaction will ultimately result in the realization of the anticipated benefits of the transaction or that significant transactions will not have a material adverse impact on our business, financial positions, results of operations, cash flows and prospects.

 

We are a holding company, and we depend on the ability of our subsidiaries to distribute funds to us in order to satisfy our financial obligations and to make dividend payments.

 

We are a holding company and our subsidiaries conduct all of our operations and own or lease all of our operating assets. We have no significant assets other than the equity interests in our subsidiaries. As a result, our ability to satisfy our financial obligations and to pay dividends to our shareholders depends on our subsidiaries and their ability to distribute funds to us. If we are unable to obtain funds from our subsidiaries, our Board may exercise its discretion not to declare dividends.

 

S-24


Table of Contents

Seajacks has identified material weaknesses in connection with its internal control over financial reporting. Although we are taking steps to remediate these material weaknesses, we may not be successful in doing so in a timely manner, or at all, and we may identify other material weaknesses.

 

In connection with the audit of Seajacks’ consolidated financial statements for each of the years ended March 31, 2021 and 2020 and the review of Seajacks’ interim condensed consolidated financial information for the six months ended June 30, 2021, Seajacks’ management identified material weaknesses in Seajacks’ internal control over financial reporting. A material weakness is a deficiency or combination of deficiencies in the internal control over financial reporting such that there is a reasonable possibility that a material misstatement of its consolidated financial statements would not be prevented or detected on a timely basis. This deficiency could result in additional misstatements to its consolidated financial statements that would be material and would not be prevented or detected on a timely basis. The material weaknesses related to: (i) insufficient personnel in the finance team with an appropriate level of knowledge and experience in the application of International Financial Reporting Standards as issued by the IASB, including goodwill impairment testing; (ii) IT general controls have not been sufficiently designed or were not operating effectively, and (iii) policies and procedures with respect to the review, supervision and monitoring of the accounting and reporting functions were not operating effectively in some areas. As a result, a number of adjustments to Seajacks’ consolidated financial statements for each of the two years ended March 31, 2020 and 2021 and the interim condensed consolidated financial information for the six months ended June 30, 2021 were identified and made during the course of the audit and management’s review process.

 

Seajacks is not required to comply with Section 404 of the Sarbanes-Oxley Act (“SOX 404”), and is therefore not required to make an assessment of the effectiveness of its internal control over financial reporting. Further, Seajacks’ independent auditor has not been engaged to express, nor have they expressed, an opinion on the effectiveness of Seajacks’ internal control over financial reporting. As a public company, however, we are currently subject to SOX 404, which requires a report by our management on, among other things, the effectiveness of our internal control over financial reporting in our annual report on Form 20-F. The SOX 404 report by our management for the year ended December 31, 2021 and future periods will need to include disclosure of any material weaknesses identified in internal control over financial reporting. Management’s assessment of internal controls, when implemented, could detect problems with internal controls, and undetected material weaknesses in internal controls could lead to financial statement restatements and require us to incur the expense of remediation.

 

Assessing our procedures to improve Seajacks’ internal control over financial reporting is an ongoing process and will be part of internal controls over our financial reporting regarding the consolidated financial statements subsequent to August 12, 2021, the date of acquisition of Seajacks. To remediate the material weaknesses, we are taking actions designed to strengthen our compliance functions with additional experienced hires and external advisors to assist in our risk assessment process and the design and implementation of controls responsive to those risks. However, these actions may not be successful. If we are unable to remediate the identified material weaknesses effectively, if we experience additional material weaknesses or otherwise fail to maintain an effective system of internal controls in the future, we may not be able to accurately or timely report our financial condition or results of operations, which may cause us to become subject to investigation or sanctions by the Commission or adversely affect investor confidence in us and, as a result, the value of our common shares. There can be no assurance that all existing material weaknesses have been identified, or that additional material weaknesses will not be identified in the future. In addition, if we are unable to continue to meet our financial reporting obligations, this may impact our ability to be to remain listed on the NYSE.

 

Our costs of operating as a public company are significant, and our management is required to devote substantial time to complying with public company regulations. We cannot assure you that our internal controls and procedures over financial reporting will be sufficient.

 

We are subject to the reporting requirements of the Securities Exchange Act of 1934, as amended, or the Exchange Act, and the other rules and regulations of the Commission, including the Sarbanes-Oxley Act of 2002,

 

S-25


Table of Contents

or the Sarbanes-Oxley Act, and as such, we will have significant legal, accounting and other expenses. These reporting obligations impose various requirements on public companies, including changes in corporate governance practices, and these requirements may continue to evolve. We and our management personnel, and other personnel, if any, need to devote a substantial amount of time to comply with these requirements. Moreover, these rules and regulations increase our legal and financial compliance costs and make some activities more time-consuming and costly.

 

The Sarbanes-Oxley Act requires, among other things, that we maintain and periodically evaluate our internal control over financial reporting and disclosure controls and procedures. In particular, we need to perform system and process evaluation and testing of our internal control over financial reporting to allow management and our independent registered public accounting firm to report on the effectiveness of our internal control over financial reporting, as required by Section 404 of the Sarbanes-Oxley Act. If we have a material weakness in our internal controls over financial reporting, we may not detect errors on a timely basis and our financial statements may be materially misstated. We dedicate a significant amount of time and resources and incur substantial accounting expenses to ensure compliance with these regulatory requirements. We will continue to evaluate areas such as corporate governance, corporate control, internal audit, disclosure controls and procedures and financial reporting and accounting systems. We will make changes in any of these and other areas, including our internal control over financial reporting, which we believe are necessary. However, these and other measures we may take may not be sufficient to allow us to satisfy our obligations as a public company on a timely and reliable basis. Please also see “Seajacks has identified material weaknesses in connection with its internal control over financial reporting. Although we are taking steps to remediate these material weaknesses, we may not be successful in doing so in a timely manner, or at all, and we may identify other material weaknesses.

 

Because we are organized under the laws of the Marshall Islands, it may be difficult to serve us with legal process or enforce judgments against us, our directors or our management.

 

We are organized under the laws of the Marshall Islands, and substantially all of our assets are located outside of the United States. In addition, the majority of our directors and officers are non-residents of the United States, and all or a substantial portion of the assets of these non-residents are located outside the United States. As a result, it may be difficult or impossible for someone to bring an action against us or against these individuals in the United States if they believe that their rights have been infringed under securities laws or otherwise. Even if you are successful in bringing an action of this kind, the laws of the Marshall Islands and of other jurisdictions may prevent or restrict them from enforcing a judgment against our assets or the assets of our directors or officers.

 

The international nature of our operations may make the outcome of any bankruptcy proceedings difficult to predict.

 

We are incorporated under the laws of the Republic of the Marshall Islands and we conduct operations in countries around the world. Consequently, in the event of any bankruptcy, insolvency, liquidation, dissolution, reorganization or similar proceeding involving us or any of our subsidiaries, bankruptcy laws other than those of the United States could apply. If we become a debtor under U.S. bankruptcy law, bankruptcy courts in the United States may seek to assert jurisdiction over all of our assets, wherever located, including property situated in other countries. There can be no assurance, however, that we would become a debtor in the United States, or that a U.S. bankruptcy court would be entitled to, or accept, jurisdiction over such a bankruptcy case, or that courts in other countries that have jurisdiction over us and our operations would recognize a U.S. bankruptcy court’s jurisdiction if any other bankruptcy court would determine it had jurisdiction.

 

S-26


Table of Contents

Breakdowns in our information technology, including as a result of cyberattacks, may negatively impact our business, including our ability to service customers, and may have a material adverse effect on our future performance, results of operations, cash flows and financial position.

 

Our ability to operate our business and service our customers is dependent on the continued operation of our information technology, or IT, systems, including our IT systems that relate to, among other things, the location, operation, maintenance and employment of our vessels. Our IT systems may be compromised by a malicious third party, man-made or natural events, or the intentional or inadvertent actions or inactions by our employees or third-party service providers. If our IT systems experience a breakdown, including as a result of cyberattacks, our business information may be lost, destroyed, disclosed, misappropriated, altered or accessed without consent, and our IT systems, or those of our service providers, may be disrupted.

 

Cyberattacks may result in disruptions to our operations or in business data being temporarily unreadable, and cyberattackers may demand ransoms in exchange for de-encrypting such data. As cyberattacks become increasingly sophisticated, and as tools and resources become more readily available to malicious third parties, there can be no guarantee that our actions, security measures and controls designed to prevent, detect or respond to intrusion, to limit access to data, to prevent destruction or alteration of data or to limit the negative impact from such attacks, can provide absolute security against compromise.

 

Any breakdown in our IT systems, including breaches or other compromises of information security, whether or not involving a cyberattack, may lead to lost revenues resulting from a loss in competitive advantage due to the unauthorized disclosure, alteration, destruction or use of proprietary information, including intellectual property, the failure to retain or attract customers, the disruption of critical business processes or information technology systems and the diversion of management’s attention and resources. In addition, such breakdown could result in significant remediation costs, including repairing system damage, engaging third-party experts, deploying additional personnel, training employees and compensation or incentives offered to third parties whose data has been compromised. We may also be subject to legal claims or legal proceedings, including regulatory investigations and actions, and the attendant legal fees as well as potential settlements, judgments and fines.

 

Even without actual breaches of information security, protection against increasingly sophisticated and prevalent cyberattacks may result in significant future prevention, detection, response and management costs, or other costs, including the deployment of additional cybersecurity technologies, engaging third-party experts, deploying additional personnel and training employees. Further, as cyberthreats are continually evolving, our controls and procedures may become inadequate, and we may be required to devote additional resources to modify or enhance our systems in the future. Such expenses could have a material adverse effect on our future performance, results of operations, cash flows and financial position.

 

We may be subject to litigation that, if not resolved in our favor and not sufficiently insured against, could have a material adverse effect on us.

 

We may be, from time to time, involved in various litigation matters. These matters may include, among other things, contract disputes, personal injury claims, environmental claims or proceedings, asbestos and other toxic tort claims, employment matters, governmental claims for taxes or duties, and other litigation that arises in the ordinary course of our business. Although we intend to defend these matters vigorously, we cannot predict with certainty the outcome or effect of any claim or other litigation matter, and the ultimate outcome of any litigation or the potential costs to resolve them may have a material adverse effect on us. Insurance may not be applicable or sufficient in all cases and/or insurers may not remain solvent which may have a material adverse effect on our financial condition.

 

A change in tax laws in any country in which we operate could result in higher tax expense.

 

We conduct our operations through various subsidiaries in countries throughout the world. Tax laws, regulations and treaties are highly complex and subject to interpretation. Consequently, we are subject to

 

S-27


Table of Contents

changing tax laws, regulations and treaties in and between the countries in which we operate, including treaties between the United Kingdom and other nations. Our income tax expense is based upon our interpretation of the tax laws in effect in various countries at the time that the expense was incurred. A change in these tax laws, regulations or treaties, including those in and involving the United Kingdom, or in the interpretation thereof, or in the valuation of our deferred tax assets, which is beyond our control, could result in a materially higher tax expense or a higher effective tax rate on all or a portion of our worldwide earnings.

 

The Company and any of its subsidiaries may be subject to taxation in the United Kingdom.

 

Certain of our subsidiaries are resident for taxation purposes in the United Kingdom and so are subject to corporation tax in the United Kingdom on their income. However, we have significant tax losses and other deferred tax assets for United Kingdom tax purposes that we expect to be available (subject to the operation of the United Kingdom’s rules restricting the use of carried-forward losses) to offset the United Kingdom corporation tax that we would otherwise be required to pay until these tax attributes are exhausted. Most of these tax attributes were generated by entities in the Seajacks group prior to its acquisition by us and it is possible that the availability or quantity of these tax attributes could be challenged by the tax authorities. It is also possible that changes in our business, organizational structure or capitalization, including as a result of how we use the proceeds of this offering or future financing transactions, could significantly limit or eliminate these tax attributes, although we expect that we will be able to conduct ourselves in a manner such that this will not occur. These considerations, as well as changes in tax laws, applicable tax rates and market factors affecting expected future revenue and operating expenses, may impact our future taxation and profitability and our actual outcomes may differ from our estimates and judgements made which could result in all or part of the deferred tax assets remain unutilized or become unavailable.

 

U.S. tax authorities could treat us as a “passive foreign investment company,” which could have adverse U.S. federal income tax consequences to our U.S. shareholders.

 

A foreign corporation will be treated as a “passive foreign investment company,” or PFIC, for U.S. federal income tax purposes if either (1) at least 75% of its gross income for any taxable year consists of certain types of “passive income” or (2) at least 50% of the quarterly average value of the corporation’s assets produce or are held for the production of those types of “passive income,” including cash. For purposes of these tests, “passive income” includes dividends, interest, and gains from the sale or exchange of investment property and rents and royalties other than rents and royalties which are received from unrelated parties in connection with the active conduct of a trade or business. For purposes of these tests, income derived from the performance of services to third parties does not constitute “passive income.” U.S. shareholders of a PFIC are subject to a disadvantageous U.S. federal income tax regime with respect to the income derived by the PFIC, the distributions they receive from the PFIC and the gain, if any, they derive from the sale or other disposition of their shares in the PFIC.

 

For our 2021 taxable year and subsequent taxable years, whether we will be treated as a PFIC will depend upon the nature and extent of our operations. Our income from wind turbine installation should be treated as services income for purposes of determining whether we are a PFIC. Accordingly, we believe that our income from wind turbine installation should not constitute passive income, and the assets that we own and operate in connection with the production of that income should not constitute passive assets. However, no assurance can be given that we would not constitute a PFIC for any taxable year if there were to be changes in the nature and extent of our operations.

 

If we were treated as a PFIC for any taxable year, our U.S. shareholders may face adverse U.S. federal income tax consequences and information reporting obligations. Under the PFIC rules, unless those shareholders made an election available under the Code (which election could itself have adverse consequences for such shareholders), such shareholders would be liable to pay U.S. federal income tax upon excess distributions and upon any gain from the disposition of our common shares at the then prevailing (and for certain periods, the highest) income tax rates applicable to ordinary income plus interest as if the excess distribution or gain had been

 

S-28


Table of Contents

recognized ratably over the shareholder’s holding period of our common shares. See “Tax Considerations—U.S. Federal Income Tax Considerations—U.S. Federal Income Taxation of U–S. Holders—Passive Foreign Investment Company Status and Significant Tax Consequences” for a more comprehensive discussion of the U.S. federal income tax consequences to U.S. holders of our common shares if we are or were to be treated as a PFIC.

 

We may have to pay tax on U.S. source income, which would reduce our earnings and cash flow.

 

We may be subject to U.S. federal income taxation if our activities in the United States or its territorial waters constitute a trade or business. If we determine that any of our income is effectively connected with a trade or business in the United Stated, we would be subject to U.S. federal income taxation at the corporate tax rate applicable to U.S. corporations and we may be subject to an additional tax on branch profits. We may incorporate one or more subsidiaries to conduct activities in the United States or its territorial waters to mitigate against any potential adverse U.S. federal income tax consequences.

 

Our Chief Executive Officer, President, Chief Operating Officer, Chief Financial Officer, Vice President and Secretary do not devote all of their time to our business, which may hinder our ability to operate successfully.

 

Our Chief Executive Officer, President, Chief Operating Officer, Chief Financial Officer, Vice President and Secretary participate in business activities not associated with us, and some of them serve as members of the management teams of Scorpio Tankers Inc. (NYSE: STNG) (“Scorpio Tankers”) and are not required to work full-time on our affairs. Additionally, our Chief Executive Officer, President, Chief Operating Officer, Vice President and Secretary serve in similar positions in other entities within the Scorpio group of companies. As a result, such executive officers may devote less time to us than if they were not engaged in other business activities and may owe fiduciary duties to both our shareholders as well as shareholders of other companies which they may be affiliated with, including Scorpio Tankers. This may create conflicts of interest in matters involving or affecting us and our customers and it is not certain that any of these conflicts of interest will be resolved in our favor. This could have a material adverse effect on our business, financial condition, results of operations and cash flows.

 

We are dependent on our managers and their ability to hire and retain key personnel.

 

Our success depends to a significant extent upon our abilities and efforts to hire and retain key personnel with relevant expertise. The loss of any of these individuals could adversely affect our business prospects and financial condition. Difficulty in hiring and retaining such personnel could adversely affect our results of operations. We do not maintain “key man” life insurance on any of our officers

 

In addition, our success is dependent upon our ability to adequately crew our vessels. The market for qualified personnel is highly competitive and we cannot be certain that we will be successful in attracting and retaining qualified personnel and crewing our vessels in the future. If we fail to retain key personnel and hire, train and retain qualified employees, we may not be able to compete effectively and may have increased incident rates as well as regulatory and other compliance failures, which could have a material adverse effect on our business, financial position, results of operations, cash flows and prospects.

 

Risks Related to Our Indebtedness

 

Servicing our current or future indebtedness limits funds available for other purposes and if we cannot service our debt, we may lose our vessels.

 

Borrowing under our credit facilities requires us to dedicate a part of our cash flow from operations to paying interest on our indebtedness under such facilities. These payments limit funds available for working capital, capital

 

S-29


Table of Contents

expenditures and other purposes, including further equity or debt financing in the future. Amounts borrowed under our credit facilities bear interest at variable rates, including, in certain loans, periodic pre-determined increases in the applicable interest rate. Increases in prevailing rates could increase the amounts that we would have to pay to our lenders, even though the outstanding principal amount remains the same, and our net income and cash flows would decrease. If we do not generate or reserve enough cash flow from operations to satisfy our debt obligations, we may have to undertake alternative financing plans, such as:

 

    seeking to raise additional capital;

 

    refinancing or restructuring our debt;

 

    selling our vessels; or

 

    reducing or delaying capital investments.

 

However, these alternative financing plans, if necessary, may not be sufficient to allow us to meet our debt obligations. If we are unable to meet our debt obligations or if some other default occurs under our credit facilities, our lenders could elect to declare that debt, together with accrued interest and fees, to be immediately due and payable and proceed against the collateral vessels securing that debt.

 

We are exposed to volatility in the London Interbank Offered Rate, or LIBOR, which can result in higher than market interest rates and charges against our income.

 

The loans under our secured credit facilities are generally advanced at a floating rate based on LIBOR, which has been stable, but was volatile in prior years, which can affect the amount of interest payable on our debt, and which, in turn, could have an adverse effect on our earnings and cash flow. Recently, however, there has been uncertainty relating to the LIBOR calculation process and the phasing out of LIBOR in the future. Indeed, the banks currently reporting information used to set LIBOR will likely stop such reporting after 2021, when their commitment to reporting information ends. On November 30, 2020, ICE Benchmark Administration (“IBA”), the administrator of LIBOR, with the support of the United States Federal Reserve and the United Kingdom’s Financial Conduct Authority, announced plans to consult on ceasing publication of U.S. Dollar LIBOR on December 31, 2021 for only the one-week and two-month U.S. Dollar LIBOR tenors, and on June 30, 2023 for all other U.S. Dollar LIBOR tenors. The United States Federal Reserve concurrently issued a statement advising banks to stop new U.S. Dollar LIBOR issuances by the end of 2021. Such announcements indicate that the continuation of LIBOR on the current basis will not be guaranteed after 2021.

 

In the event of the continued or permanent unavailability of LIBOR, many of our financing agreements contain a provision requiring or permitting us to enter into negotiations with our lenders to agree to an alternative interest rate or an alternative basis for determining the interest rate. These clauses present significant uncertainties as to how alternative rates or alternative bases for determination of rates would be agreed upon, as well as the potential for disputes or litigation with our lenders regarding the appropriateness or comparability to LIBOR of any substitute indices. In the absence of an agreement between us and our lenders, most of our financing agreements provide that LIBOR would be replaced with some variation of the lenders’ cost-of-funds rate. The discontinuation of LIBOR presents a number of risks to our business, including volatility in applicable interest rates among our financing agreements, increased lending costs for future financing agreements or unavailability of or difficulty in attaining financing, which could in turn have an adverse effect on our profitability, earnings and cash flow.

 

We are leveraged, which could significantly limit our ability to execute our business strategy and we may be unable to comply with our covenants in our credit facilities that impose operating and financial restrictions on us, which could result in a default under the terms of these agreements.

 

As of September 30, 2021, we had $198.3 million of outstanding indebtedness under our credit facilities and other financing obligations. Our credit facilities impose operating and financial restrictions on us, that limit our ability, or the ability of our subsidiaries party thereto, to:

 

    pay dividends and make capital expenditures if we do not repay amounts drawn under our credit facilities or if there is another default under our credit facilities;

 

S-30


Table of Contents
    incur additional indebtedness, including the issuance of guarantees;

 

    create liens on our assets;

 

    change the flag, class or management of our vessels or terminate or materially amend the management agreement relating to each vessel;

 

    sell our vessels;

 

    merge or consolidate with, or transfer all or substantially all our assets to, another person; and/or

 

    enter into a new line of business.

 

Therefore, we may need to seek permission from our lenders in order to engage in some corporate actions. Our lenders’ interests may be different from ours and we may not be able to obtain our lenders’ permission when needed. This may limit our ability to pay dividends on our common shares, finance our future operations or capital requirements, make acquisitions or pursue business opportunities.

 

In addition, our secured credit facilities require us to maintain specified financial ratios and satisfy financial covenants, including ratios and covenants based on the market value of the vessels in our fleet. Should our charter rates or vessel values materially decline in the future, we may seek to obtain waivers or amendments from our lenders with respect to such financial ratios and covenants, or we may be required to take action to reduce our debt or to act in a manner contrary to our business objectives to meet any such financial ratios and satisfy any such financial covenants.

 

Events beyond our control, including changes in the economic and business conditions in the shipping markets in which we operate, may affect our ability to comply with these covenants. We cannot assure you that we will meet these ratios or satisfy these covenants or that our lenders will waive any failure to do so or amend these requirements. A breach of any of the covenants in, or our inability to maintain the required financial ratios under, our credit facilities would prevent us from borrowing additional money under our credit facilities and could result in a default under our credit facilities. If a default occurs under our credit facilities, the lenders could elect to declare the outstanding debt, together with accrued interest and other fees, to be immediately due and payable and foreclose on the collateral securing that debt, which could constitute all or substantially all of our assets. Moreover, in connection with any waivers or amendments to our credit facilities that we may obtain, our lenders may impose additional operating and financial restrictions on us or modify the terms of our existing credit facilities. These restrictions may further restrict our ability to, among other things, pay dividends, repurchase our common shares, make capital expenditures, or incur additional indebtedness.

 

Furthermore, our debt agreements contain cross-default provisions that may be triggered if we default under the terms of any one of our financing agreements. In the event of default by us under one of our debt agreements, the lenders under our other debt agreements could determine that we are in default under such other financing agreements. Such cross defaults could result in the acceleration of the maturity of such debt under these agreements and the lenders thereunder may foreclose upon any collateral securing that debt, including our vessels, even if we were to subsequently cure such default. In addition, our credit facilities and finance leases contain subjective acceleration clauses under which the debt could become due and payable in the event of a material adverse change in our business. In the event of such acceleration or foreclosure, we might not have sufficient funds or other assets to satisfy all of our obligations, which would have a material adverse effect on our business, results of operations and financial condition.

 

S-31


Table of Contents

Risks Relating to the Offering and the Ownership of Our Common Shares

 

Management has broad discretion in the use of the net proceeds from this offering and may use the net proceeds in ways with which you disagree.

 

Our management will have broad discretion in the application of the net proceeds from this offering and could spend the proceeds in ways that do not improve our results of operations or enhance the value of our securities. You will be relying on the judgment of our management with regard to the use of these net proceeds, and you will not have the opportunity, as part of your investment decision, to assess whether the net proceeds are being used appropriately. The failure by our management to apply these funds effectively could result in financial losses that could have an adverse effect on our business or cause the price of our securities to decline. Pending the application of these funds, we may invest the net proceeds from this offering in a manner that does not produce income or that loses value.

 

We are incorporated in the Marshall Islands, which does not have a well-developed body of corporate law.

 

Our corporate affairs are governed by our amended and restated articles of incorporation and bylaws and by the Marshall Islands Business Corporations Act, or the BCA. The provisions of the BCA resemble provisions of the corporation laws of a number of states in the United States. However, there have been few judicial cases in the Marshall Islands interpreting the BCA. The rights and fiduciary responsibilities of directors under the laws of the Marshall Islands are not as clearly established as the rights and fiduciary responsibilities of directors under statutes or judicial precedent in existence in the United States. The rights of shareholders of companies incorporated in the Marshall Islands may differ from the rights of shareholders of companies incorporated in the United States. While the BCA provides that it is to be interpreted according to the laws of the State of Delaware and other states with substantially similar legislative provisions, there have been few, if any, court cases interpreting the BCA in the Marshall Islands and we cannot predict whether Marshall Islands courts would reach the same conclusions as U.S. courts. Thus, you may have more difficulty in protecting your interests in the face of actions by the management, directors or controlling shareholders than would shareholders of a corporation incorporated in a U.S. jurisdiction which has developed a relatively more substantial body of case law.

 

The market price of our common shares has fluctuated widely and may fluctuate widely in the future, or there may be no continuing public market for you to resell our common shares.

 

The market price of our common shares has fluctuated widely since our common shares began trading on the NYSE in December 2013, and may continue to do so as a result of many factors such as actual or anticipated fluctuations in our quarterly and annual results and those of other public companies in our industry, mergers and strategic alliances in our industry, market conditions in our industry, changes in government regulation, shortfalls in our operating results from levels forecast by securities analysts, announcements concerning us or our competitors, our transition to the offshore energy sector, and the general state of the securities market. Further, there may be no continuing active or liquid public market for our common shares.

 

The market for common shares has historically been, and may continue to be in the future, volatile. Therefore, we cannot assure you that you will be able to sell any of our common shares you may have purchased at a price greater than or equal to its original purchase price, or that you will be able to sell them at all.

 

We cannot assure you that our Board will continue to declare dividends.

 

Although we have declared and paid dividends in the past, we cannot assure you that we will continue to declare and pay dividends in the future. The declaration and payment of dividends, if any, will always be subject to the discretion of our Board of Directors, restrictions contained in our credit facilities and the requirements of Marshall Islands law. The timing and amount of any dividends declared will depend on, among other things, our earnings, financial condition and cash requirements and availability, our ability to obtain debt and equity financing on acceptable terms as contemplated by our growth strategy, the terms of our outstanding indebtedness

 

S-32


Table of Contents

and the ability of our subsidiaries to distribute funds to us. We cannot predict with certainty the amount of cash, if any, that will be available for distribution as dividends in any period. Also, there may be a high degree of variability from period to period in the amount of cash that is available for the payment of dividends.

 

We may incur expenses or liabilities or be subject to other circumstances in the future that reduce or eliminate the amount of cash that we have available for distribution as dividends, including as a result of the risks described herein.

 

In general, under the terms of our existing agreements of indebtedness, we are not permitted to pay dividends if there is a default or a breach of a covenant thereunder.

 

The Republic of Marshall Islands laws generally prohibit the payment of dividends other than from surplus (retained earnings and the excess of consideration received for the sale of shares above the par value of the shares) or while a company is insolvent or would be rendered insolvent by the payment of such a dividend. We may not have sufficient surplus in the future to pay dividends and our subsidiaries may not have sufficient funds or surplus to make distributions to us. We can give no assurance that we will continue to declare dividends on our common shares in the future.

 

Future sales of our common shares could cause the market price of our common shares to decline.

 

Our amended and restated articles of incorporation, as amended, authorize us to issue 81,875,000 common shares, of which we had issued and outstanding 19,091,604 common shares as of October 31, 2021. In connection with the Seajacks Transaction, we have entered into a registration rights agreement with Marubeni Offshore Power Limited, INCJ SJ Investment Limited, and MOL Offshore Energy Limited, pursuant to which we have agreed to register for resale the common shares that we issued in connection with the consummation of the Seajacks Transaction. Sales of a substantial number of common shares in the public market, or the perception that these sales could occur, may depress the market price for our common shares. These sales could also impair our ability to raise additional capital through the sale of our equity securities in the future. We intend to issue additional common shares in the future. Our shareholders may incur dilution from any future equity offering and upon the issuance of additional common shares upon the exercise of options we may grant to certain of our executive officers, or upon the issuance of additional common shares pursuant to our equity incentive plan.

 

Anti-takeover provisions in our organizational documents could have the effect of discouraging, delaying or preventing a merger or acquisition, or could make it difficult for our shareholders to replace or remove our current Board, which could adversely affect the market price of our common shares.

 

Several provisions of our amended and restated articles of incorporation and bylaws could make it difficult for our shareholders to change the composition of our Board in any one year, preventing them from changing the composition of management. In addition, the same provisions may discourage, delay or prevent a merger or acquisition that shareholders may consider favorable. These provisions include:

 

    authorizing our Board to issue “blank check” preferred stock without shareholder approval;

 

    providing for a classified Board with staggered, three-year terms;

 

    establishing certain advance notice requirements for nominations for election to our Board or for proposing matters that can be acted on by shareholders at shareholder meetings;

 

    prohibiting cumulative voting in the election of directors;

 

    limiting the persons who may call special meetings of shareholders;

 

    authorizing the removal of directors only for cause and only upon the affirmative vote of the holders of a majority of the outstanding common shares entitled to vote for the directors; and

 

S-33


Table of Contents
    establishing super majority voting provisions with respect to amendments to certain provisions of our amended and restated articles of incorporation and bylaws.

 

These anti-takeover provisions could substantially impede the ability of public shareholders to benefit from a change in control and, as a result, may adversely affect the market price of our common shares and shareholders’ ability to realize any potential change of control premium.

 

S-34


Table of Contents

USE OF PROCEEDS

 

We estimate that we will receive net proceeds of approximately $         million from this offering (or approximately $         million if the underwriters’ option to purchase additional common shares is exercised in full), in each case after deducting underwriting discounts and estimated offering expenses payable by us.

 

We intend to use all of the net proceeds of this offering of our common shares for general corporate purposes, including the funding of our newbuilding program, which includes our Newbuilding WTIV, Optional WTIV and Proposed Jones Act WTIV.

 

S-35


Table of Contents

CAPITALIZATION

 

The following table sets forth our cash and cash equivalents and total capitalization as of June 30, 2021:

 

    on an actual basis;

 

    on an as adjusted basis to give effect to the adjustments described in the unaudited pro forma condensed combined financial information; and

 

    on an as further adjusted basis to give effect to this offering.

 

There have been no other significant adjustments to our capitalization since June 30, 2021, as so adjusted.

 

You should read the information below together with the section of this prospectus supplement entitled “Use of Proceeds,” as well as our Report on Form 6-K containing our Management’s Discussion and Analysis of Financial Condition and Results of Operations and unaudited condensed consolidated financial statements and related notes thereto for the six months ended June 30, 2021, filed with the Commission on September 23, 2021, which is incorporated by reference herein.

 

     As of June 30, 2021  
In thousands of U.S. Dollars    Actual(2)     As Adjusted     As Further
Adjusted
 

Cash and cash equivalents (1)

   $ 270,787     $ 52,166    
  

 

 

   

 

 

   

 

 

 

Cash, restricted

     —         3,531                             
  

 

 

   

 

 

   

 

 

 

Current debt:

      

Bank loans, net

     —         127,650    

Financing obligation

     1,532       —      

Redeemable notes

     —         17,672    

Non-current debt:

      

Financing obligation

     16,506       —      

Redeemable notes

     —         53,014    
  

 

 

   

 

 

   

 

 

 

Total Debt

   $ 18,038     $ 198,336    
  

 

 

   

 

 

   

 

 

 

Shareholders’ equity:

      

Preferred Shares

     —         7    

Common Shares

     839       909    

Paid-in Capital

     1,731,718       1,889,856                             

Common shares held in treasury

     (717     (717  

Accumulated deficit

     (1,403,372     (1,355,340  
  

 

 

   

 

 

   

 

 

 

Total shareholders’ equity

   $ 328,468     $ 534,715    
  

 

 

   

 

 

   

 

 

 

Total capitalization

   $ 346,506     $ 733,051    
  

 

 

   

 

 

   

 

 

 

 

(1)   Cash, as adjusted, does not include the impact of cash flows from operations from July 1, 2021 through the date of this prospectus.
(2)   As of September 30, 2021, we had $64.9 million of cash and $198.3 million of debt.

 

S-36


Table of Contents

SELECTED SEAJACKS STAND-ALONE AND PRO FORMA FINANCIAL INFORMATION

 

The selected consolidated financial data of Seajacks presented below was derived from the reclassified Seajacks financial information that is included in the pro forma financial statements and has been prepared in accordance with the International Financial Reporting Standards as issues by the International Accounting Standards Board (“IFRS”). Such IFRS financial information has been reclassified to be presented on a basis consistent with Eneti’s presentation (for further information see Unaudited Pro Forma Condensed Combined Financial Information Note 2). The financial information for Seajacks for the six-months ended June 30, 2021 has been derived from internal management accounts information prepared by Seajacks management. Such financial information has been prepared including financial information for the three months ended March 31, 2021, which is also included in the consolidated financial statements for the year ended March 31, 2021. Historical results are not necessarily indicative of future results.

 

The unaudited pro forma condensed combined financial information of Eneti was prepared in accordance with U.S. Generally Accepted Accounting Principles (“U.S. GAAP”) and includes adjustments and reclassifications to convert the statement of financial position and statement of comprehensive income of Seajacks from IFRS to U.S. GAAP. The accounting policies used, on a preliminary basis, in the preparation of these unaudited pro forma condensed combined financial information are those set forth in the Company’s audited consolidated financial statements as of and for the year ended December 31, 2020.

 

The selected unaudited pro forma condensed combined financial data presented below is based on the historical financial information of us and Seajacks and gives pro forma effect to (i) our August 12, 2021 acquisition of Seajacks, after which Seajacks became our wholly-owned subsidiary, (ii) borrowings under our newly issued $71 million of redeemable notes, and the issuance of 7.5 million of common shares and 0.7 million of preferred shares used to partially finance the Seajacks Transaction, and (iii) the assumptions and adjustments described in the accompanying notes to the unaudited pro forma condensed combined financial information, including subtracting out the impact of our legacy dry bulk shipping business. The selected unaudited pro forma condensed combined financial data has been derived from, and should be read in conjunction with, the more detailed unaudited pro forma combined financial information of the combined company and the accompanying notes appearing in the section entitled “Unaudited Pro Forma Condensed Combined Financial Information.” The selected unaudited pro forma condensed combined financial data has been presented for illustrative purposes only and is not necessarily indicative of what the combined company’s financial position or results of operations actually would have been had the acquisition been completed as of the dates indicated. In addition, the selected unaudited pro forma condensed combined financial data does not purport to project the future financial position or operating results of the combined company.

 

S-37


Table of Contents
     Unaudited
Seajacks Stand-Alone
Financial Information

(IFRS)
    Unaudited Pro Forma Condensed
Combined Financial Information

(U.S. GAAP)
 
     Year Ended     6 Months
Ended

June 30,
2021
    12 Months
Ended

December 31,
2020
    6 Months
Ended

June 30,
2021
 
(in thousands)    March 31,
2021
 

Revenues

     42,755       121,926       42,755       121,926  

Vessel operating and project costs

     36,293       40,105       37,335       40,105  

Depreciation and amortization

     30,721       14,814       26,078       13,117  

Impairment of long-lived assets

     289,125       289,125       289,125       —    

Amortization of intangibles

     5,332       2,084       —         —    

General and administrative

     11,167       7,340       82,237       17,406  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total Operating expense

     372,638       353,468       434,775       70,628  
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating loss

     (329,883     (231,542     (392,020     51,298  
  

 

 

   

 

 

   

 

 

   

 

 

 

Interest income

     1,407       14       1,617       53  

Gain on equity investment

     —         —         —         5,381  

Gain on bargain purchase of Seajacks

     —         —         94,469       —    

(Loss) gain on derivative financial instrument

     (667     55       (667     55  

Loss from equity investment

     —         —         (105,384     23,836  

Foreign exchange gain

     809       (1,119     987       (1,544

Financial expense, net

     (21,571     (11,714     (6,239     (2,863
  

 

 

   

 

 

   

 

 

   

 

 

 

Total other (expense) income

     (20,022     (12,764     15,217       24,918  
  

 

 

   

 

 

   

 

 

   

 

 

 

Income before income tax benefit

     (349,905     (244,306     (407,237     76,216  
  

 

 

   

 

 

   

 

 

   

 

 

 

Income tax (benefit) expense

     (15,186     4,356       (12,367     7,084  
  

 

 

   

 

 

   

 

 

   

 

 

 

Net (loss) Income

     (334,719     (248,662     (394,870     69,132  
  

 

 

   

 

 

   

 

 

   

 

 

 

Preferred stock dividends

     —         —         140       70  
  

 

 

   

 

 

   

 

 

   

 

 

 

Net (loss) Income available for common shareholders

     (334,719     (248,662     (395,010     69,062  
  

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted EBITDA(1)

     (4,563     73,417       (87,412     92,143  

 

     Year Ended
March 31,
     6 Months
Ended
June 30, 2021
 
     2021  

Daily TCE Rates(2)

     

Seajacks Scylla

     126,800        362,800  

Seajacks Zaratan

     7,700        165,900  

Seajacks Hydra

     —          63,700  

Seajacks Kraken

     —          —    

Seajacks Leviathan

     62,000        63,000  

 

     Year Ended
March 31,
    6 Months
Ended
June 30, 2021
 
     2021  

Utilization(3)

    

Seajacks Scylla

     57     100

Seajacks Zaratan

     41     100

Seajacks Hydra

     0     20

Seajacks Kraken

     0     0

Seajacks Leviathan

     3     34

 

S-38


Table of Contents
     Year Ended
March 31, 2021
     6 Months
Ended
June 30, 2021
 

Daily Opex Rates(4)

     

Seajacks Scylla

     33,900        31,300  

Seajacks Zaratan

     26,600        38,100  

Seajacks Hydra

     6,700        12,700  

Seajacks Kraken

     8,200        10,900  

Seajacks Leviathan

     19,100        24,000  

 

*   This vessel was expected to be employed, including mobilization and demobilization time, from January through August at an expected TCE rate of $200,000/day. However, the contract was cancelled during the second quarter of 2021 and the Company received a termination fee for a majority of the contract. The vessel subsequently found additional employment at the end of the second quarter
(1)   Adjusted EBITDA represents net income available to common shareholders before interest income and interest and other financial expense, income taxes, depreciation, amortization, and impairment charges. Adjusted EBITDA is a non-GAAP and non-IFRS financial measure. Please see “Non-GAAP / Non-IFRS Financial Measures and Related Reconciliations” below.
(2)   TCE revenue is vessel revenue less voyage expenses, including bunkers and port charges. The TCE rate achieved on a given voyage is expressed in U.S. dollars/day and is generally calculated by taking TCE revenue and dividing that figure by the number of revenue days in the period. Revenues, as reported, include project costs and other service income. Therefore, in the calculation of TCE revenue, we deduct these amounts from revenues. TCE revenue is a non-GAAP and non-IFRS financial measure. Please see “Non-GAAP / Non-IFRS Financial Measures and Related Reconciliations” below.
(3)   Utilization is the ratio of aggregate number of days worked to total available days for all vessels available for time charter.
(4)   Daily Opex Rates represents vessel operating costs, not including project costs, and dividing that number by the number of revenue days in the period. Daily Opex Rates is a non-GAAP and non-IFRS financial measure. Please see “Non-GAAP / Non-IFRS Financial Measures and Related Reconciliations” below.

 

Non-GAAP / Non-IFRS Financial Measures and Related Reconciliations

 

To supplement the Company’s financial information presented in accordance with U.S. GAAP and the Seajacks’s financial information presented in accordance with IFRS as issued by the IASB management uses certain “non-GAAP financial measures” or “non-IFRS financial measures” as such term is defined in Regulation G promulgated by the Commission. Generally, a non-GAAP or non-IFRS financial measure is a numerical measure of a company’s operating performance, financial position or cash flows that excludes or includes amounts that are included in, or excluded from, the most directly comparable measure calculated and presented in accordance with GAAP or IFRS. Management believes the presentation of these measures provides investors with greater transparency and supplemental data relating to the Company’s financial condition and results of operations, and therefore a more complete understanding of factors affecting its business than GAAP or IFRS measures alone. In addition, management believes the presentation of these matters is useful to investors for period-to-period comparison of results as the items may reflect certain unique and/or non-operating items such as asset sales, write-offs, contract termination costs or items outside of management’s control.

 

Earnings before interest, taxes, depreciation and amortization (“EBITDA”), Adjusted EBITDA,TCE revenue and Vessel Operating Expenses are non-GAAP and non-IFRS financial measures that the Company believes provide investors with a means of evaluating and understanding how the Company’s management evaluates the Company’s operating performance. These non-GAAP and non-IFRS financial measures should not be considered in isolation from, as substitutes for, nor superior to financial measures prepared in accordance with GAAP. Please see below for reconciliations of EBITDA, Adjusted EBITDA, TCE revenue and Vessel Operating Expenses.

 

S-39


Table of Contents

EBITDA and Adjusted EBITDA (Unaudited)

 

     Seajacks (IFRS)     Eneti Pro Forma
(US GAAP)
 
     Year
Ended
    6 Months
Ended

June 30,
2021
    12 Months
Ended

December 31,
2020
    6
Months

Ended
June 30,
2021
 
(in thousands)    March 31,
2021
 

Net (loss) income

     (334,719     (248,662     (394,870     69,132  

Adjustments:

        

Depreciation

     30,721       14,814       26,078       13,117  

Income tax (benefit) expense

     (15,186     4,356       (12,367     7,084  

Amortization of intangibles

     5,332       2,084       —         —    

Interest income

     (1,407     (14     (1,617     (53

Financial expense, net

     21,571       11,714       6,239       2,863  
  

 

 

   

 

 

   

 

 

   

 

 

 

EBITDA

     (293,688     (215,708     (376,537     —    

Impairment of long-lived assets

     289,125       289,125       289,125       —    
  

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted EBITDA

     (4,563     73,417       (87,412     92,143  

 

TCE Revenue (Unaudited)

 

     Seajacks
(IFRS)
    Eneti Pro Forma
(US GAAP)
 
     Year
Ended
    6 Months
Ended

June 30,
2021
    12 Months
Ended

December 31,
2020
    6 Months
Ended
June 30,
2021
 
(in thousands)    March 31,
2021
 

Revenues

     42,755       121,926       42,755       121,926  

Project costs

     (1,840     (18,934     (1,840     (18,934

Other (income) expense

     (12,580     (1,166     (12,580     (1,166
  

 

 

   

 

 

   

 

 

   

 

 

 

TCE Revenue

     28,335       101,826       28,335       101,826  

 

Vessel Operating Costs (Unaudited)

 

     Seajacks
(IFRS)
    Pro Forma
(US GAAP)
 
     Year
Ended
    6 Months
Ended

June 30,
2021
    12 Months
Ended

December 31,
2020
    6 Months
Ended

June 30,
2021
 
(in thousands)    March 31,
2021
 

Vessel operating and project costs

     36,293       40,105       37,335       40,105  

Project costs

     (1,840     (18,934     (1,840     (18,934
  

 

 

   

 

 

   

 

 

   

 

 

 

Vessel operating costs

     34,453       21,171       35,495       21,171  

 

S-40


Table of Contents

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

 

The following unaudited pro forma condensed combined financial information is based on the historical financial information of Eneti Inc. and its subsidiaries (as used in this section, “Eneti”) and Atlantis Investorco Limited and its subsidiaries (as used in this section, “Seajacks”, and together with Eneti, the “Combined Group”) and gives pro forma effect to (i) our August 12, 2021 acquisition of Seajacks (as used in this section, the “Acquisition”), after which Seajacks became a wholly-owned subsidiary of Eneti, (ii) borrowings under our newly issued $71 million of redeemable notes, and the issuance of 7.5 million of common shares and 0.7 million of Class A preferred shares used to partially finance the Acquisition, and (iii) the assumptions and adjustments described in the accompanying notes to the unaudited pro forma condensed combined financial information.

 

Seajacks has a March 31 fiscal year end, and the Combined Group will retain a December 31 year end, as such the following periods are presented, in accordance with Rule 11-02(c)(3) of Regulation S-X.

 

    The unaudited pro forma condensed combined balance sheet as of June 30, 2021 combines Eneti’s unaudited consolidated balance sheet at June 30, 2021 with the unaudited consolidated statement of financial position of Seajacks at June 30, 2021 and is presented as if the Acquisition occurred on June 30, 2021.

 

    The unaudited pro forma condensed combined statement of operations for the fiscal year ended December 31, 2020 combines Eneti’s audited consolidated statement of operations for the year ended December 31, 2020 with the audited consolidated statement of comprehensive income of Seajacks for the fiscal year ended March 31, 2021 and is presented as if the Acquisition occurred on January 1, 2020.

 

    The unaudited pro forma condensed combined statement of operations for the six months ended June 30, 2021 combines Eneti’s unaudited consolidated statement of operations for the six month period ended June 30, 2021 with the unaudited consolidated statement of comprehensive income of Seajacks for the six month period ended June 30, 2021 and is presented as if the Acquisition occurred on January 1, 2020.

 

The preliminary allocation of the purchase price used in the unaudited pro forma condensed combined financial information is based upon a preliminary valuation (see Note 5). The estimated fair values of certain assets and liabilities have been determined with the assistance of a third-party valuation firm. Our estimates and assumptions are preliminary and accordingly are subject to change upon finalization of the valuation.

 

The unaudited pro forma condensed combined financial information is not intended to represent or be indicative of our consolidated results of operations or our financial position that would have been reported if the Acquisition, share issue, and borrowings had been completed as of the dates presented, and should not be taken as representative of the future consolidated results of operations or financial position of the Combined Group. The unaudited pro forma condensed combined financial information does not represent any operating efficiencies and cost savings that we may achieve with respect to the combined companies. The unaudited pro forma condensed combined financial information should be read in conjunction with the historical consolidated financial information and accompanying notes of Eneti included in our annual report on Form 20-F for the year ended December 31, 2020 and the Report of Foreign Private Issuer on Form 6-K containing our unaudited interim consolidated financial statements, and the accompanying notes thereto, for the six month period ended June 30, 2021 and the consolidated financial statements of Seajacks, including the notes thereto, included herein.

 

S-41


Table of Contents

ENETI INC.

 

Unaudited Pro Forma Condensed Combined Balance Sheet

June 30, 2021

(Amounts in thousands)

 

    Eneti
Historical

(U.S. GAAP)
    Seajacks
(IFRS as
reclassified)

Note (2)
    Exit from
Dry Bulk
Business

Note (3)
    Policy
Alignment

Notes (4a,b)
    Pro Forma
Adjustments

Notes (5, 6)
    Note (6) ref.     Combined
Pro Forma
 

Assets

             

Current assets

             

Cash and cash equivalents

  $ 270,787   $ 48,581     2,366     —       $ (269,568     (a)     $ 52,166

Cash, restricted

    —         3,531     —         —         —           3,531

Trade and other receivables

    —         53,611     —         —         —           53,611

Contract fulfillment costs

    —         9,991     —         —         5,169     (b)       15,160

Due from related parties

    4,081     —         —         —         —           4,081

Inventories

    655     5,863     (655     —         (1,245     (b)       4,618

Prepaid expenses and other current assets

    9,649     —         —         —         —           9,649
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

 

 

 

Total current assets

    285,172     121,577     1,711     —         (265,644       142,816
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

 

 

 

Non-current assets

             

Property, plant and equipment

    —         579,522     —         —         (12,522     (b)       567,000

Equity investment

    47,521     —         —         —         —           47,521

Intangible assets

    —         71,571     —         —         (67,053     (b)       4,518

Goodwill

    —         —         —         —         —         (b) (n)       —    

Contract fulfillment costs

    —         591     —         —         8,149     (b)       8,740

Non-current assets held for sale

    17,008     —         (17,008     —         —           —    

Other assets

    10,750     5,334     —         362     —           16,446

Deferred tax asset

    —         27,948     —         —         —         (p)       27,948
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

 

 

 

Total non-current assets

    75,279     684,966     (17,008     362     (71,426       672,173
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

 

 

 

Total assets

  $ 360,451   $ 806,543   $ (15,297   $ 362   $ (337,070     $ 814,989
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

 

 

 

Liabilities and stockholders equity

             

Current liabilities

             

Bank loans, net

  $ —     $ 282,846   $ —     $ —     $ (155,196     (c)       127,650

Redeemable notes

    —         —         —         —         17,672     (d)       17,672

Financing obligations

    1,532     —         (1,532   $ —       —           —    

Accounts payable and accrued expenses

    13,342     32,041     —         201       11,523     (m)       57,107

Contract liabilities

    —         21,328     —         —         (2,043     (b)       19,285

Due to related parties

    603     93,660     —         —         (93,624     (c) (d)       639
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

 

 

 

Total current liabilities

    15,477     429,875     (1,532     201     (221,668       222,353
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

 

 

 

Non-current liabilities

             

Bank loans, net

    —         68,643     —         —         (68,643     (c)       —    

Financing obligation

    16,506     —         (16,506     —         —           —    

Redeemable notes

    —         —         —         —         53,014     (d)       53,014

Contract liabilities

    —         2,147     —         —         538     (b)       2,685

Other liabilities

    —         2,042     —         180       —           2,222
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

 

 

 

Total non-current liabilities

    16,506     72,832     (16,506     180     (15,091       57,921
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

 

 

 

Total liabilities

    31,983     502,707     (18,038     381     (236,759       280,274
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

 

 

 

Shareholders’ equity

             

Preferred shares

    —         —         —         —         7     (e)       7

Common shares

    839     595,000     —         —         (594,930     (f) (g)       909

Paid in capital

    1,731,718     —         —         —         158,138     (e) (f) (g) (r)       1,889,856

Common shares held in treasury

    (717     —         —         —         —           (717

Accumulated other comprehensive income

    —         (1,661     —         —         1,661     (g)       —    

Accumulated deficit

    (1,403,372     (289,503     2,741     (19     334,813     (g) (n) (r)       (1,355,340
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

 

 

 

Total shareholders’ equity

    328,468     303,836     2,741     (19     (100,311       534,715
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

 

 

 

Total liabilities and shareholders’ equity

  $ 360,451   $ 806,543   $ (15,297   $ 362   $ (337,070     $ 814,989
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

 

 

 

 

See accompanying notes to the unaudited pro forma condensed combined financial information

 

S-42


Table of Contents

ENETI INC.

 

Unaudited Pro Forma Condensed Combined Statement of Operations

Year Ended December 31, 2020

(Amounts in thousands, except per share data)

 

    Eneti
Historical

(U.S. GAAP)
    Seajacks
March 31, 2021
(IFRS as
reclassified)

Note (2)
    Exit from Dry
Bulk Business

Note (3)
    Policy
Alignment

Notes (4a,b)
    Pro Forma
Adjustments

Notes (5, 6)
    Note (6)
ref.
    Combined
Pro
Forma
 

Revenue:

             

Vessel revenue

  $ 33,120   $ 42,755   $ (33,120   $ —     $ —         42,755

Vessel revenue-related party pools

    130,612     —         (130,612     —         —           —    
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

 

 

 

Total vessel revenue

    163,732     42,755     (163,732     —         —           42,755
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

 

 

 

Operating expenses

             

Voyage expenses

    6,716     —         (6,716     —         —           —    

Voyage expenses-related party

    3,293     —         (3,293     —         —           —    

Vessel operating and project costs

    80,860     36,293     (80,860     1,042     —           37,335

Vessel operating costs-related party

    11,946     —         (11,946     —         —           —    

Charterhire expense

    21,107     —         (21,107     —         —           —    

Depreciation expense

    48,369     30,721     (48,369     (362     (4,281     (h)       26,078

Impairment of long lived assets

    —         289,125     —         —         —           289,125

Amortization of intangibles

    —         5,332     —         —         (5,332     (j)       —    

General and administrative expenses

    17,568     11,167     (102     451     50,555       (i)       79,639  

General and administrative expenses-related party

    8,103     —         (5,505     —         —           2,598

Loss / write down on assets held for sale

    458,610     —         (458,610     —         —           —    

Loss / write down on assets held for sale-related party

    36,803     —         (36,803     —         —           —    
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

 

 

 

Total operating expenses

    693,375     372,638     (673,311     1,131     40,942         434,775  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

 

 

 

Operating (loss) income

    (529,643     (329,883     509,579     (1,131     40,942         (392,020
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

 

 

 

Other (expense) income:

             

Interest income

    210     1,407     —         —         —           1,617

Gain on bargain purchase of Seajacks

    —         —         —         —         94,469     (n)       94,469

Gain on derivative financial instruments

    —         (667     —         —         —           (667

(Loss) income from equity investment-related party

    (105,384     —         —         —         —           (105,384

Foreign exchange gain (loss)

    (348     809     348     178     —           987

Financial expense, net

    (36,818     (21,571     36,818     128     15,204     (o)       (6,239
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

 

 

 

Total other (expense) income

    (142,340     (20,022     37,166     306     109,673       (15,217
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

 

 

 

Income before income tax benefit

    (671,983     (349,905     546,745     (825     68,731         (407,237

Income tax (benefit) provision

    —         (15,186     —         (2,265     5,084       (p)       (12,367
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

 

 

 

Net income (loss)

    (671,983     (334,719     546,745     1,440     63,647         (394,870

Preferred stock dividends

    —         —         —         —         140     (l)       140
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

 

 

 

Net income (loss) available for common shareholders

  $ (671,983   $ (334,719   $ 546,745   $ 1,440   $ 63,507     $ (395,010
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

 

 

 

Basic earnings per share

  $ (70.85             $ (23.25

Diluted earnings per share

  $ (70.85             $ (23.25

Weighted average number of shares outstanding

             

Basic

    9,484           7,505     (f)       16,989

Diluted

    9,484           7,505     (f)       16,989

 

See accompanying notes to the unaudited pro forma condensed combined financial information

 

S-43


Table of Contents

ENETI INC.

 

Unaudited Pro Forma Condensed Combined Statement of Operations

Six Month Period Ended June 30, 2021

(Amounts in thousands, except per share data)

 

    Eneti
Historical

(U.S. GAAP)
    Seajacks
(IFRS as
reclassified)

Note (2)
    Exit from Dry
Bulk Business

Note (3)
    Policy
Alignment

Notes (4a,b)
    Pro Forma
Adjustments

Notes (5, 6)
    Note (6)
ref.
    Combined
Pro Forma
 

Revenue:

             

Vessel revenue

  $ 82,585   $ 121,926   $ (82,585   $ —     $ —       $ 121,926

Vessel revenue-related party pools

    14,895     —         (14,895     —         —           —    
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

 

 

 

Total vessel revenue

    97,480     121,926     (97,480     —         —           121,926
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

 

 

 
                —    

Operating expenses

             

Voyage expenses

    9,782     —         (9,782     —         —           —    

Voyage expenses-related party

    4,800     —         (4,800     —         —           —    

Vessel operating and project costs

    20,825     40,105     (20,825     —         —           40,105

Vessel operating costs-related party

    3,025     —         (3,025     —         —           —    

Charterhire expense

    29,346     —         (29,346     —         —           —    

Depreciation expense

    —         14,814     —         (181     (1,516     (h)       13,117

Impairment of long-lived assets

    —         289,125     —         —         (289,125     (k)       —    

Amortization of intangibles

    —         2,084     —         —         (2,084     (j)       —    

General and administrative expenses

    10,403     7,340     (202     237       (1,405     (i)       16,373

General and administrative expenses-related party

    2,316     —         (1,283     —         —           1,033

Loss / write down on assets held for sale

    (23,438     —         23,438     —         —           —    

Loss / write down on assets held for sale-related party

    1,454     —         (1,454     —         —           —    
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

 

 

 

Total operating expenses

    58,513     353,468     (47,279     56     (294,130       70,628
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

 

 

 

Operating (loss) income

    38,967     (231,542     (50,201     (56     294,130       51,298
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

 

 

 

Other (expense) income:

             

Interest income

    39     14     —         —         —           53

Gain on sale of equity investment

    5,381     —         —         —         —           5,381

Gain on derivative financial instruments

    —         55     —         —         —           55

(Loss) income from equity investment-related party

    23,836     —         —         —         —           23,836

Foreign exchange gain (loss)

    3     (1,119     (3     (425     —           (1,544

Financial expense, net

    (13,350     (11,714     13,350     213       8,638     (o)       (2,863
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

 

 

 

Total other (expense) income

    15,909     (12,764     13,347     (212     8,638       24,918
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

 

 

 

Income before income tax benefit

    54,876     (244,306     (36,854     (268     302,768       76,216

Income tax (benefit)

    —         4,356     —         —         2,728       (q) (p)       7,084  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

 

 

 

Net income (loss)

    54,876     (248,662     (36,854     (268     300,040         69,132  

Preferred stock dividends

    —         —         —         —         70     (l)       70
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

 

 

 

Net income (loss) available for common shareholders

  $ 54,876   $ (248,662   $ (36,854   $ (268   $ 299,970     $ 69,062
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

 

 

 

Basic earnings per share

  $ 5.16             $ 3.81

Diluted earnings per share

  $ 5.03             $ 3.75

Weighted average number of shares outstanding

             

Basic

    10,628           7,505     (f)       18,133

Diluted

    10,907           7,505     (f)       18,412

 

See accompanying notes to the unaudited pro forma condensed combined financial information

 

S-44


Table of Contents

ENETI INC.

 

Notes to Unaudited Pro Forma Condensed Combined Financial Information

 

Note 1—Basis of pro forma presentation

 

This unaudited pro forma condensed combined financial information is based on Eneti’s historical consolidated financial statements as adjusted to give pro forma effect to these transactions: (i) the acquisition of Seajacks by Eneti, (ii) the issuance of borrowings and shares to finance the acquisition, and (iii) the Eneti exit from the Dry Bulk business.

 

The purchase of Seajacks is accounted for as an acquisition in accordance with Accounting Standards Codification (“ASC”) Topic 805, Business Combinations (“ASC 805”) which requires the allocation of purchase consideration to the fair value of the identified assets acquired and liabilities assumed upon consummation of a business combination.

 

The unaudited pro forma condensed combined financial information of Eneti was prepared in accordance with U.S. Generally Accepted Accounting Principles (U.S. GAAP) and includes adjustments and reclassifications to convert the statement of financial position and statement of comprehensive income of Seajacks from IFRS as issued by the IASB to U.S. GAAP. The accounting policies used, on a preliminary basis, in the preparation of these unaudited pro forma condensed combined financial information are those set forth in Eneti’s audited consolidated financial statements as of and for the year ended December 31, 2020.

 

S-45


Table of Contents

Note 2—Reclassifications of Seajacks historical information to Eneti presentation format

 

A preliminary review has been performed by management to assess if reclassifications are necessary in the unaudited pro forma condensed combined financial information to conform Seajacks presentation to Eneti’s balance sheet and statement of operations presentation. Accordingly, the unaudited pro forma condensed combined balance sheet has been adjusted to reflect certain reclassifications of Seajacks’ balance sheet to conform to Eneti’s financial statement presentation, as indicated in the table below:

 

Balance Sheet Reclassifications (June 30, 2021)

   Seajacks
Historical
     Reclassifications     Notes   Seajacks as
reclassified
 
(Dollars in thousands)                        

Assets

         

Current assets

         

Cash and cash equivalents

   $ 48,581    $ —         $ 48,581

Cash, restricted

     3,531      —           3,531

Trade and other receivables

     53,611      —           53,611

Contract fulfillment costs

     9,991      —           9,991

Inventories

     5,863      —           5,863

Prepaid expenses and other current assets

     —          —           —    
  

 

 

    

 

 

     

 

 

 

Total current assets

     121,577      —           121,577
  

 

 

    

 

 

     

 

 

 

Non-current assets

         

Property, plant and equipment

     583,736      (4,214   (a)     579,522

Right of use assets

     1,120      (1,120   (b)     —    

Intangible assets

     71,571      —           71,571

Goodwill

     —          —           —    

Contract fulfillment costs

     591      —           591

Other assets

     —          5,334   (a) (b)     5,334

Deferred tax asset

     27,948      —           27,948
  

 

 

    

 

 

     

 

 

 

Total non-current assets

     684,966      —           684,966
  

 

 

    

 

 

     

 

 

 

Total assets

   $ 806,543    $ —         $ 806,543
  

 

 

    

 

 

     

 

 

 

Liabilities and stockholders equity

         

Current liabilities

         

Bank loans, net

   $ 282,846    $ —         $ 282,846

Loan from shareholders

     81,562    $ (81,562   (c)     —    

Derivative financial instruments

     2,049      (2,049   (d)     —    

Accounts payable and accrued expenses

     26,888      5,153   (d) (e) (f)     32,041

Contract liabilities

     21,328      —           21,328

Corporate income taxes payable

     2,775      (2,775   (e)     —    

Lease liabilities

     329      (329   (f)     —    

Convertible loan notes

     3,856      (3,856   (c)     —    

Other Liabilities

     8,242      (8,242   (c)     —    

Due to related parties

     —          93,660   (c)     93,660
  

 

 

    

 

 

     

 

 

 

Total current liabilities

     429,875      —           429,875
  

 

 

    

 

 

     

 

 

 

Non-current liabilities

         

Bank loans, net

     68,643      —           68,643

Contract liabilities

     2,147      —           2,147

Lease liabilities

     2,042      (2,042   (g)     —    

Other liabilities

     —          2,042   (g)     2,042
  

 

 

    

 

 

     

 

 

 

Total non-current liabilities

     72,832      —           72,832
  

 

 

    

 

 

     

 

 

 

Total liabilities

     502,707      —           502,707
  

 

 

    

 

 

     

 

 

 

 

S-46


Table of Contents

Balance Sheet Reclassifications (June 30, 2021)

   Seajacks
Historical
    Reclassifications      Notes    Seajacks as
reclassified
 
(Dollars in thousands)                         

Shareholders’ equity

          

Common shares

     595,000     —             595,000

Accumulated other comprehensive income

     (1,661     —             (1,661

Accumulated deficit

     (289,503     —             (289,503
  

 

 

   

 

 

       

 

 

 

Total shareholders’ equity

     303,836     —             303,836
  

 

 

   

 

 

       

 

 

 

Total liabilities and shareholders’ equity

   $ 806,543   $ —           $ 806,543
  

 

 

   

 

 

       

 

 

 

 

Financial information presented in the “Seajacks as reclassified” column in the unaudited condensed combined pro forma statements of operations have been reclassified to conform to the presentation of Eneti as indicated in the table below:

 

     Year ended March 31, 2021     Six months June 30, 2021  

Statement of Operations
Reclassifications

   Seajacks
Historical
    Reclassifi-
cations
    Notes     Seajacks as
reclassified
    Seajacks
Historical
    Reclassifi-
cations
    Notes     Seajacks as
reclassified
 
(Dollars in thousands)                                                 

Vessel revenue

   $ 42,755   $ —         $ 42,755   $ 121,926   $ —         $ 121,926

Other operating income

     22     (22     (A)       —         23     (23     (A)       —    

Operating expenses

                

Vessel operating and project costs

     36,315     (22     (A)       36,293     40,128     (23     (A)       40,105

Depreciation expense

     30,721     —           30,721     14,814     —           14,814

Impairment of long lived assets

     289,125     —           289,125     289,125     —           289,125

Amortization of intangibles

     5,332     —           5,332     2,084     —           2,084

Foreign exchange loss (gain)

     (809     809     (B)       —         1,119     (1,119     (B)       —    

Loss (gain) on derivative financial instruments

     667     (667     (C)       —         (55     55     (C)       —    

General and administrative expenses

     11,167     —           11,167     7,340     —           7,340
  

 

 

   

 

 

     

 

 

   

 

 

   

 

 

     

 

 

 

Total operating expenses

     372,518     120       372,638     354,555     (1,087       353,468
  

 

 

   

 

 

     

 

 

   

 

 

   

 

 

     

 

 

 

Operating (loss) income

     (329,741     (142       (329,883     (232,606     1,064       (231,542
  

 

 

   

 

 

     

 

 

   

 

 

   

 

 

     

 

 

 

 

S-47


Table of Contents
     Year ended March 31, 2021     Six months June 30, 2021  

Statement of Operations
Reclassifications

   Seajacks
Historical
    Reclassifi-
cations
    Notes     Seajacks as
reclassified
    Seajacks
Historical
    Reclassifi-
cations
    Notes     Seajacks as
reclassified
 
(Dollars in thousands)                                                 

Other (expense) income:

                

Interest income

     1,407     —           1,407     14     —           14

Gain (loss) on derivative financial instruments

     —         (667     (C)       (667     —         55     (C)       55

Foreign exchange gain (loss)

     —         809     (B)       809     —         (1,119     (B)       (1,119

Financial expense, net

     (21,571     —           (21,571     (11,714     —           (11,714
  

 

 

   

 

 

     

 

 

   

 

 

   

 

 

     

 

 

 

Total other (expense) income

     (20,164     142       (20,022     (11,700     (1,064       (12,764
  

 

 

   

 

 

     

 

 

   

 

 

   

 

 

     

 

 

 

Income before income tax benefit

     (349,905     —           (349,905     (244,306     —           (244,306

Income tax (benefit)

     (15,186     —           (15,186     4,356     —           4,356
  

 

 

   

 

 

     

 

 

   

 

 

   

 

 

     

 

 

 

Net income (loss)

   $ (334,719   $ —         $ (334,719   $ (248,662   $ —         $ (248,662
  

 

 

   

 

 

     

 

 

   

 

 

   

 

 

     

 

 

 

 

Notes to Balance Sheet Reclassification Table

   As of June 30, 2021  
     (Dollars in thousands)  

(a)   to reclass non-vessel property, plant and equipment to other assets

     4,214

(b)   to reclass right of use asset to other assets

     1,120

(c)   to reclass borrowings from related parties to due to related parties

     93,660

(d)   to reclass derivative financial instruments to accounts payable and accrued expenses

     2,049

(e)   to reclass corporate income taxes payable to accounts payable and accrued expenses

     2,775

(f)   to reclass current lease liability to accounts payable and accrued expenses

     329

(g)   to reclass non-current lease liability to other liabilities

     2,042

 

Notes to Statement of Operations Reclassification Tables

   Year ended
March 31, 2021
    6 months ended
June 30, 2021
 
     (Dollars in thousands)  

(A)  to reclass other operating income to vessel operating and project costs

   $ 22   $ 23

(B)  to reclassify foreign exchange loss (gain) from operating (loss) income to other (expense) income

     (809     1,119  

(C)  to reclassify loss (gain) on derivative financial instruments from operating (loss) income to other (expense) income

     667     (55 )

 

Note 3—Adjustment to reflect exit from dry bulk business

 

Eneti announced on August 3, 2020 its intention to transition away from the business of dry bulk commodity transportation and towards marine-based renewable energy including investing in the next generation of wind turbine installation vessels. During July 2021, the Company completed its exit from the business of dry bulk commodity transportation, as such the unaudited pro forma condensed combined balance sheet reflects the impact of the sale of all vessels as if it had taken place on June 30, 2021 and the unaudited pro forma condensed combined statement of operations as if it had taken place on January 1, 2020.

 

Note 4—Accounting policy alignments and adjustments

 

(4a) Accounting policy alignments

 

As stated in Note 1—Basis of pro forma presentation, as part of preparing the unaudited pro forma condensed combined financial information, Eneti performed a review of the accounting policies of Seajacks to

 

S-48


Table of Contents

determine if differences in accounting policies potentially required revising of financial statement items to conform to Eneti’s accounting policies. Although Eneti management believes the adjustments to Seajacks’ financial statements represent the known material adjustments to conform to U.S. GAAP, the IFRS to U.S. GAAP adjustments presented below are preliminary and are subject to further adjustments as additional information becomes available and as additional analyses are performed.

 

Presentation in Seajacks’ historical financial
statements

   Presentation in pro forma combined financial
information
   Year ended
December 31, 2020
     6 months ended
June 30, 2021
 
(Dollars in thousands)                   

Inventory(1)

   Vessel operating costs      1,042      —    

 

Note: (1) to reflect the expensing of previously capitalized inventory consumables from inventory to vessel operating costs; excluding tax benefit of $198

 

(4b) Adjustments from IFRS to U.S. GAAP

 

The following adjustments have been made to convert the Seajacks balance sheet from IFRS to U.S. GAAP:

 

(Dollars in thousands)    Notes     At June 30, 2021  

Other assets

     (1     362

Accounts payable and accrued expenses

     (1     201

Other liabilities

     (1     180

Accumulated deficit

     (1     (19

 

The following adjustments have been made to convert the Seajacks statement of operations from IFRS to U.S. GAAP:

 

(Dollars in thousands)    Notes     Year ended
December 31, 2020
    6 months ended
June 30, 2021
 

Depreciation and amortization

     (1     (362     (181

General and administrative expenses

     (1     451     237

Foreign exchange (gain)

     (1     (178     425

Financial expense, net

     (1     (128     (213

Income tax benefit

     (2     2,067     —    

 

IFRS to U.S. GAAP Notes:

 

  (1)  

Under U.S. GAAP, leases are classified as either finance or operating at lease commencement if specified criteria have been met, whereas after the adoption of IFRS 16 Leases, IFRS does not distinguish between operating and finance leases. Rather, IFRS applies a single recognition and measurement model to all leases, which is similar to the treatment of finance leases under U.S. GAAP after the adoption of ASC 842 Leases with effect from January 1, 2019. All of Seajacks’ leases have been classified as operating under its U.S. GAAP accounting policy, where the lease liability is measured as the present value of the remaining lease payments and the right-of-use asset is re-measured as the amount of the lease liability adjusted for any lease incentives, prepaid/ accrued rents, initial direct costs, or impairment. Therefore, amortization and finance cost recognized on right of use assets and the corresponding lease liability under IFRS 16 has been reversed, and adjustments have been made to recognize rent expense on a straight-line basis over the lease term. The adjustment resulted in the reversal of amortization expenses of $0.2 million and $0.4 million and Financial expenses of $0.2 million and $0.1 million for the six months ended June 30, 2021 and the year-ended March 31, 2021, respectively, recognized under IFRS, and an increase in General and administrative expenses of $0.2 million and $0.5 million for the six months ended June 30, 2021 and the year-ended March 31, 2021, respectively, under U.S. GAAP. The adjustment also resulted in a increase to Foreign exchange loss of $0.4 million for the six months ended June 30, 2021 and an increase to Foreign

 

S-49


Table of Contents
 

exchange gain of $0.2 million the year-ended March 31, 2021. The adjustment also resulted in an increase to the right of use asset of $0.4 million and an increase of $0.2 million each to both Accounts payable and accrued expenses and Other liabilities as of March 31, 2021 under US GAAP.

 

  (2)   IFRS requires tax laws enacted or “substantively enacted” as of the balance sheet date to be used, while the requirement under U.S. GAAP is to use only the enacted tax rates or laws. On March 11, 2020, the United Kingdom announced a change to the main corporation tax rate from 17% to 19% and was substantively enacted for IFRS purposes on March 17, 2020. Under IFRS, this resulted in the remeasurement of deferred tax balance as of March 31, 2020. Under U.S. GAAP, the rate change was not considered enacted until the Finance Bill received Royal Assent, which occurred on July 22, 2020. As such, under U.S. GAAP, the rate change should be reflected in the period ended March 31, 2021.

 

Note 5—Preliminary purchase price allocation

 

The preliminary purchase price for the Acquisition is listed below, subject to certain adjustments.

 

     Consideration  
(Dollars in thousands)       

Issuance of redeemable notes

   $ 70,686

Equity issued

     152,288
  

 

 

 
   $ 222,974
  

 

 

 

 

As part of the Acquisition, Eneti issued approximately 7.5 million common shares and 700,000 preferred shares valued at $18.56 per share, for total consideration of $152.3 million, issued $70.7 million of redeemable notes (maturing in March 2023) to selling shareholders and assumed Seajacks’ remaining debt obligations. The redeemable notes carry an interest rate of 5.5% until December 31, 2021 and 8.0% thereafter.

 

The purchase price allocated below has been developed based on preliminary estimates of fair value using the historical financial information of Seajacks as of June 30, 2021. In addition, the allocation of the purchase price to acquired identifiable assets and assumed liabilities is based on the valuation of the tangible and identifiable intangible assets acquired and liabilities assumed by management to prepare the unaudited pro forma condensed combined financial information. The Company’s acquisitions are accounted for such that the assets acquired and liabilities assumed are recognized at their acquisition date fair values, based upon preliminary appraisals performed, with any excess of the consideration transferred over the estimated fair values of the identifiable net assets acquired recorded as goodwill, or if the fair value of the net assets acquired exceeds the purchase consideration (“negative goodwill”), a bargain purchase gain is recorded.

 

S-50


Table of Contents

The purchase accounting is dependent upon certain valuation and other studies that have not yet been completed. Accordingly, the preliminary purchase accounting is subject to further adjustments as additional information becomes available and as additional analyses and final fair valuations are conducted. The final fair valuations could differ materially from the preliminary fair valuations presented below and, as such, no assurances can be provided regarding the preliminary purchase accounting.

 

(Dollars in thousands)             

Purchase price:

     $ 222,974  

Allocated to (preliminary):

    

Historical book value of Seajacks assets, net

     374,522  

Fair value adjustments:

    

Property, plant & equipment

     (12,522  

Inventory

     (1,245  

Contract assets—current

     5,169  

Contract assets—non current

     8,149  

Contract liabilities—current

     2,043  

Contract liabilities—non-current

     (538  

Write down of pre-acquisition intangible assets

     (71,571  

Other net assets and liabilities

     8,918  
  

 

 

   

Fair value of tangible net assets acquired

       312,925

Brand name—identifiable intangible*

       4,518
    

 

 

 

Preliminary gain on bargain purchase (excess of the estimated fair value of net assets acquired over acquisition cost)

     $ (94,469
    

 

 

 

 

*   indefinite useful life, based upon appraisal performed

 

Management’s preliminary estimate as of the date of this prospectus supplement is that the fair value of the net assets and liabilities acquired is greater than the purchase price (resulting in a negative value for goodwill). When the net fair value of the identifiable assets and liabilities acquired exceeds the purchase consideration, the fair value of net assets acquired is reassessed, with any residual negative goodwill recognized immediately in net income as a bargain purchase gain.

 

A key reason for the preliminary gain on bargain purchase is that the transaction was priced based on net asset value (“NAV”), with the number of shares issued being based on NAV per share. However, the share price upon which the fair value of the consideration is based for accounting purposes, the actual quote price, was materially lower. Also, the previous owners recognized that additional funding would be required to enable Seajacks to grow its business further through new vessel construction and upgrade of the existing vessels, however previous ownership structure was not appropriate for such growth due to the limitation of one of the former owners. The reduction in share value combined with the previous owners’ desire to close the transaction on an accelerated basis enabled Eneti to obtain the Seajacks business at a lower price resulting in the recognition of a bargain purchase gain.

 

Note 6—Transaction pro forma accounting adjustments

 

(a) Reflects the decrease in cash for cash consideration for acquisition financing and debt repayment ($237.8 million) and acquisition costs ($31.8 million)

 

(b) Reflects adjustments to record acquired assets at estimated acquisition date fair values and reflect the excess of the fair value of net tangible and intangible assets acquired over acquisition cost (see note 5)

 

(c) Reflects the pay down or assumption of existing Seajacks debt by Eneti

 

S-51


Table of Contents

(d) Reflects the issuance of $70.7 million of redeemable notes in exchange for shareholder loan

 

(e) Reflects the issuance of 700,000 preferred shares to partially finance the Acquisition

 

(f) Reflect the issuance of approximately 7.5 million common shares to partially finance the Acquisition

 

(g) To eliminate the shareholder equity accounts of Seajacks ($303.8 million)

 

(h) Reflects lower depreciation expense following fair value adjustments to property, plant and equipment

 

(i) Reflects non-recurring acquisition costs being fully reflected in the combined statements of operations for the fiscal year ended December 31, 2020 and relating to compensation ($38.4 million for the combined statement of operations for the fiscal year ended December 31, 2020), consulting and financing fees ($12.1 million for the combined statement of operations for the fiscal year ended December 31, 2020 and $1.4 million for the combined statement of operations for the six months ended June 30, 2021)

 

(j) Reflects the reversal of intangible amortization costs following fair value analysis determination of indefinite life

 

(k) Reflects the removal of non-recurring items (i.e. impairment of property, plant and equipment and goodwill impairment) from the six month period combined statements of operations ended June 30, 2021 as these items are already reflected in the results of operations for Seajacks for the year ended March 31, 2021.

 

(l) Reflects dividend distribution to preferred stock as if they had been issued on January 1, 2020

 

(m) Reflects accrual of transaction costs not yet paid

 

(n) Reflects management’s preliminary estimate that the fair value of the net assets and liabilities acquired is greater than the purchase price and the related recognition of bargain purchase gain (see Note 5) in net income ($94.5 million), which is non-recurring in nature.

 

(o) Reflects lower interest costs from lower debt levels following Acquisition

 

(p) Seajacks has a history of tax losses and therefore recognition of deferred tax assets is limited to the amount that will more likely than not be recoverable and utilized in a foreseeable future to settle probable tax benefits. As of June 30, 2021, such recoverability was mainly assessed based on the existence of firm signed contracts, which will generate firm revenue over a known horizon of 2-3 years. A valuation allowance of $82,5 million has been recorded against deferred tax assets that will not more likely than not be realizable, including deferred tax assets on pro forma adjustments. This valuation is subject to adjustment if, based upon its evaluation, there is a change in the amount of deferred tax assets that are deemed more-likely-than-not to be realized.

 

The Finance Act 2021 was enacted after receiving the Royal Assent on 10 June 2021. As a result, deferred taxes have been calculated using the standard rate of corporation tax in the UK of 19% for the portion expected to reverse until March 31, 2023, and 25% for the portion expected to reverse thereafter

 

(q) Reflects decreased tax benefit from lower interest expense ($3.7 million), lower depreciation and amortization costs ($1.8 million) partially offset by tax benefit of acquisition related compensation costs ($0.4 million) for the combined statement of operations for the fiscal year ended December 31, 2020 and lower interest expense ($2.0 million) and lower depreciation and amortization costs ($0.7 million) for the combined statement of operations for the six months ended June 30, 2021.

 

(r) Reflects accelerated vesting of certain restricted share awards resulting from the Acquisition which impact on compensation expense is shown in adjustment (i).

 

S-52


Table of Contents

REVIEW AND ANALYSIS OF SEAJACKS’ FINANCIAL INFORMATION

 

The following review and analysis of financial information of Seajacks should be read in conjunction with Seajacks’ historical financial statements, which have been prepared as of and for the years ended March 31, 2021 and 2021 in accordance with the IFRS as issued by the IASB, which are included herein, together with the historical financial information for Seajacks as of and for the six months ended June 30, 2021 appearing in Note 2 to the Unaudited Pro Forma Condensed Combined Financial Information of Eneti, included herein.

 

The following review and analysis of Seajacks’ financial information provides investors with certain information regarding the financial condition and results of operations of Seajacks for the periods presented, however, it is not intended, and does not purport, to provide a complete presentation of management’s discussion and analysis of financial condition and results of operations of Seajacks for the periods presented. We note in particular that this review and analysis does not include, among other things, an analysis of liquidity and capital resources, or a discussion of critical accounting estimates and does not include review and analysis of financial information as of and for the six months ended June 30, 2020.

 

The following review and analysis contains forward-looking statements that reflect future plans, estimates, beliefs and expected performance. The forward-looking statements are dependent upon events, risks and uncertainties that may be outside of our control. Our actual results may differ significantly from those projected in the forward-looking statements. Factors that might cause future results to differ materially from those projected in the forward-looking statements include, but are not limited to, those discussed in the sections entitled “Risk Factors” and “Cautionary Statement Regarding Forward-Looking Statements” included elsewhere herein.

 

History of Seajacks Prior to Eneti Acquisition

 

Seajacks International Limited was formed in 2006 by current management and sponsors and listed on the Oslo Axess Exchange in 2007. In 2010, the equity in the company was acquired by Riverstone LLC (Private Equity). In 2012, the equity in the company was sold by Riverstone LLC to Marubeni Corporation and INCJ (Innovation Network Corporation of Japan).

 

On August 12, 2021, Seajacks was acquired by us for cash, shares and the assumption of debt in a transaction which valued Seajacks at approximately $561 million (Enterprise Value). Seajacks has previously performed an annual impairment analysis, and since it was expected by the management of Seajacks to maintain the vessels for the foreseeable future their carrying value would be recoverable based on the higher of value in use and fair value less cost of disposal.

 

In 2014, the size of the typical offshore wind turbine increased beyond the capabilities of the NG2500X, so the core markets for these vessels became oil and gas related work in the Southern North Sea (maintenance and decommissioning of key infrastructure / platforms), maintenance on the installed capacity of offshore wind turbines in the North Sea (“O&M”), and hook up and commissioning of offshore substations that are required to transfer power generated from the offshore wind farm to the grid.

 

In 2014, the oil price fell sharply which significantly reduced the demand for the NG2500X vessels. At the same time supply of NG2500X increased by 100% as a new competitor, GMS, added three vessels to the North Sea. The result was low utilization and low day rates for the NG2500X vessels during the subsequent years. In 2019, GMS relocated two of the NG2500X back to the Middle East, which tightened the market in the Southern North Sea. However, this reduction in supply coincided with COVID 19, which led to a temporary reduction in demand as oil and gas programs and ‘ad hoc’ O&M work was deferred.

 

In order to be able to install the next generations of larger offshore wind turbines that were being located in deeper waters and farther from shore, Seajacks built Seajacks Zaratan and Seajacks Scylla, delivered in 2012 and 2015, respectively.

 

S-53


Table of Contents

The Seajacks Zaratan was designed to support efficient and effective construction of offshore wind farms and has successfully installed wind turbines and wind turbine foundations associated with wind turbines of up to 6MW and facilitated commissioning of offshore substations. Given the increased deck size and crane capacity relative to the NG2500X, the Seajacks Zaratan is also able to support more challenging oil and gas requirements at more demanding locations

 

The Seajacks Scylla has also been designed to support efficient and effective construction of offshore wind farms, has successfully installed offshore wind turbines and foundations associated with wind turbines in excess of 8MW, and will be able to support the next generation of 12 -14MW+ offshore wind turbines. Given the increased deck size and crane capacity relative to the Seajacks Zaratan, Seajacks Scylla is also able to support more challenging oil and gas requirements at more demanding locations.

 

In 2014, wind farm installation demand in Northwest Europe started to slow as 15 projects in the United Kingdom and Germany were completed. At the same time, the supply of installation vessels was increasing as new build installation vessels were delivered. This led to an oversupply of installation vessels in Northwest Europe which resulted in low utilization and day rates in subsequent years. In 2019 the installation market dynamics began to shift as commercial wind farms started to be developed outside of Northwest Europe, and the industry started the move from being one ‘local’ market to a ‘global’ market incorporating Asia (China, Taiwan, Japan), and the United States. As the number of wind farms under construction in new markets has increased, so clients have had to pay significant amounts to mobilize vessels out of Northwest Europe to meet international demand. This has led to a tightening of the market and significant improvements in both utilization and rates.

 

Demand for our vessels is dependent upon factors including the overall demand for wind turbine installation, as well as demand for other offshore wind-related services such as O&M, and, for the smaller NG2500 vessels, work in the oil and gas industry. The key factors affecting the employment of our vessels are vessel capability, notably crane capacity, deck strength, leg length, vessel speed and accommodation capacity. Additional factors include the evolution in the offshore wind industry including the progression to next generation, typically larger, wind turbines, geographic location, as existing proximity to projects and the avoidance of long mobilization periods is a competitive advantage in respect of projects in Asia and Northwest Europe, and the supply of available competing vessels with similar specifications as well as, more generally, macroeconomic and other factors impacting the offshore wind and oil and gas industries or particular installations in the region.

 

Seajacks Revenues and Vessel Utilization

 

Year Ended March 31, 2021 vs. Year Ended March 31, 2020 (restated)

 

Revenues for the years ended March 31, 2021 and 2020, were $42.8 million and $53.2 million, respectively. The decrease is due primarily to reduced utilization resulting principally from the outbreak of COVID. For the year ended March 31, 2021, Seajacks revenues were primarily generated by the Seajacks Scylla which was employed in the North Sea installing foundations, as well as construction supervision income, while for the year ended March 31, 2020, higher revenues were generated due to higher utilization.

 

Seajacks vessel operating costs decreased in the year ended March 31, 2021 from the prior year due to lower overall employment of vessels due principally to the outbreak of COVID and cost saving measures undertaken by the Company to reduce overall operating costs when the vessels are not employed particularly for the NG2500X vessels, which more than offset higher maintenance costs.

 

S-54


Table of Contents

Utilization rates for the years ended March 31, 2021 and 2020 are as follows:

 

     2021     2020  

Seajacks Scylla

     57     26

Seajacks Zaratan

     41     33

Seajacks Hydra

     0     56

Seajacks Kraken

     0     28

Seajacks Leviathan

     3     48

 

Six Months Ended June 30, 2021

 

Seajacks revenues for the six months ended June 30, 2021, were $121.9 million and generated primarily by the Seajacks Zaratan and Seajacks Scylla.

 

The Seajacks Scylla generated revenues of $74.1 million in the six months ended June 30, 2021. This was largely attributable to a termination payment paid by the client as a result of its decision to terminate the Formosa 2 contract for convenience in April 2021, a month prior to the contractual start date. In June 2021, Seajacks signed a contract with, and commenced operations for, GPO at the Yuedian Yangjiang Shapa offshore wind farm project at a rate of $125,000 per day.

 

The Seajacks Zaratan generated $40.0 million in revenues during the six months ended June 30, 2021, by installing foundations for Kajima Corporation at the Akita offshore wind farm. This project continued through October 2021.

 

Seajacks also earned $1.7 million, including a project initiation fee, during the six months ended June 30, 2021, related to the supervision of the construction of third party owned newbuilding vessel. The Company expects to continue to earn approximately $150,000 per month plus the reimbursement of costs incurred providing support at a mark-up of 10% until the vessel is completed.

 

The Seajacks Leviathan and Seajacks Hydra earned a combined $6.1 million performing oil and gas maintenance in the North Sea during the six months ended June 30, 2021.

 

Vessel operating costs on a per day basis during the six months ended June 30, 2021, reflected (i) costs incurred as vessels transitioned from Europe to Asia (ii) higher crew and travel related costs due to COVID and (iii) increased costs specific to each vessel as outlined below.

 

The Seajacks Scylla and Seajacks Zaratan were relocated from Europe to Asia for employment. Prior to and during their mobilization the vessels incurred extensive maintenance in preparation for harsh weather conditions in Asia specific, resulting in higher operating costs.

 

Increasing crew costs arose related to the impact of the COVID-19 pandemic. Travel restrictions such as lockdowns, mandated quarantine and other measures restricted the ability to change crews on normalized schedules and increased costs. The inability to change crews more frequently resulted in an increase in overtime pay and thus higher overall operating costs.

 

In addition to COVID-19 related costs, employment costs on the Seajacks Zaratan increased after the vessel received Japanese class in 2021. The requirement to use Japanese crew members increased the operating cost of the vessel.

 

S-55


Table of Contents

Utilization rates for the six months ended June 30, 2021 are as follows:

 

Seajacks Scylla

     100

Seajacks Zaratan

     100

Seajacks Hydra

     20

Seajacks Kraken

     0

Seajacks Leviathan

     34

 

Current and Upcoming Projects

 

We have contracted to perform assignments for 2022, representing contracted revenue of $104.3 million as of November 8, 2021. Contracted revenue for chartering is calculated at the contract dayrate multiplied by the number of days remaining on the contract, assuming full utilization (but excluding any contract extensions). Contracted revenue also includes revenues derived from specific services or actions in relation to the completion of the respective project such as, sea fastening, mobilization, demobilization, transit and reservation fees. The amount of actual revenues earned and the actual periods during which revenues are earned will be different from the contracted revenue projections due to various factors. Downtime, caused by unscheduled repairs, maintenance, weather and other operating factors, may result in lower applicable dayrates than the full contractual operating dayrate. In addition, we have options under these contracts which, if exercised by the charterers, could result in additional revenue of up to $17.5 million.

 

Our current and upcoming projects include:

 

    We currently have a time charter contract with a wind farm project to operate the Seajacks Scylla to provide transportation, management and installation services for certain wind turbine generators for an offshore wind farm project in China, which is expected to last until December 2021. Contracted revenue during the fourth quarter of 2021 for this project is $10.1 million, which, in addition to contracted revenue for chartering, includes demobilization fees from this project.

 

    We currently have a time charter for the Seajacks Hydra to perform maintenance on a gas production platform. Contracted revenue during the fourth quarter of 2021 for this project is $2.0 million.

 

    We have a time charter contract with a group of offshore wind farm project companies to operate the Seajacks Zaratan to provide transportation, management and installation services over a five month period for wind turbine generators for an offshore wind farm project off the coast of Japan that is expected to commence in 2022. Contracted revenue for this project is $35.7 million, which, in addition to contracted revenue for chartering, includes mobilization and demobilization fees and payments for sea fasteners;

 

    We have a time charter contract with an offshore wind farm project company to operate the Seajacks Scylla to provide loading, transportation, crane operation and installation services for certain wind turbine generators for an offshore wind farm project in Taiwan, commencing in February 2022 and expected to last for eight months. Contracted revenue for this project is $68.6 million which, in addition to contracted revenue for chartering, includes mobilization and demobilization fees and payments for sea fasteners, and assuming the option for additional days is exercised.

 

In light of our securing these contracts, and the expected firm revenues and earnings that they represent, and our expectations that the level of future earnings and revenues will be higher than in the last few years before 2021, due primarily to the factors noted below, we believe that the historical financial performance of Seajacks has limited relevance in the discussion of future expectations with regard to revenues and earnings from this business. This belief is principally based on the anticipated strong demand for wind turbine installations for vessels with the capabilities that Seajacks Scylla and the Seajacks Zaratan offer in the worldwide and for the Seajacks Zaratan, the Japanese markets, and an anticipated strong recovery in demand for the NG2500X assets related to stronger demand from oil and gas companies for production enhancement for their North Sea oil and gas facilities.

 

S-56


Table of Contents

We consider the Seajacks Scylla to be a highly capable vessel whose specifications are well suited for the installation of new larger wind turbines of 12 MW or greater that are currently being installed worldwide (excluding Japan). In light of its capabilities and anticipated demand, we expect the Seajacks Scylla to secure employment at the end of the employment it has which is to end in the third quarter of 2022 and for it to focus on installing larger size wind turbines at new wind farm projects in Asia or Europe after this time.

 

The Seajacks Zaratan has been positioned in the Japanese offshore wind market and flies the Japanese flag. The Japanese wind turbine market utilizes smaller wind turbines of less than 10 MW and we believe the specification of the Seajacks Zaratan make it well suited to these kind installation jobs. We consider the vessel to also be well suited to pursue other turbine installation work in adjacent countries as well as be employed for geotechnical work. This is seabed drilling to ascertain the suitability of the seabed surface to host wind turbine foundations and the siting of offshore wind farms. Unlike traditional oil and gas basins like the North Sea, where the seabed has been well mapped, extensive geotechnical work would be expected to be needed offshore Japan to ascertain suitable sites for offshore wind farms.

 

Finally, we consider the outlook for the NG2500X vessels to be favorable. While these vessels are no longer large enough for turbine installation as turbine sizes have increased, we consider their specifications to be well suited for O&M of the existing offshore wind farms and their accommodation capacity and ability to jack-up alongside existing North Sea oil and gas installations makes them suitable for production enhancement activities. With a higher oil price currently prevailing and creating stronger demand, we anticipate these vessels to have significant utilization rates and earnings in 2022 and beyond.

 

S-57


Table of Contents

THE OFFSHORE WIND INDUSTRY

 

The statistical information and industry and market data contained in this section (the “data”) is based on or derived from statistical information and industry and market data collated and prepared by 4C Offshore Ltd. (“4C Offshore”). The data is based on 4C Offshore’s review of such statistical information and market data available at the time, including internal surveys and sources, independent financial information, independent external industry publications, reports or other publicly available information. Due to the incomplete nature of the statistical information and market data available, 4C Offshore has made some estimates where necessary when preparing the data. The data is subject to change and may differ from similar assessments obtained from other analysts of the offshore wind industry. While reasonable care has been taken in the preparation of the data, 4C Offshore has not undertaken any independent verification of the information and market data obtained from published sources. The Company believes and acts as though the market data provided in this section, “The Offshore Wind Industry” is reliable and accurate.

 

1 Introduction

 

Electricity is at the heart of modern economies. Demand for electricity is set to increase further due to increasing population, rising incomes, the electrification of transport and heat, and growing demand for digitally connected devices. Rising electricity demand is one of the key reasons for increasing global CO2 emissions and resulting climate change. Renewable energy plays an increasingly vital role in producing decarbonised electricity.

 

The International Energy Agency (IEA) shared its two scenarios for electricity demand growth and how offshore wind will contribute:

 

    Stated Policies Scenario: Global electricity demand grows at 2.1% per year to 2040. This raises electricity’s share in total final energy consumption from 19% in 2018 to 24% in 2040. Offshore wind capacity is set to grow by 13% per year and global electricity supply from offshore wind will increase to 3%.

 

    Sustainable Development Scenario: Electricity share in total energy consumption reaches 31% of the final energy consumption. Offshore wind capacity increases fifteen-fold from 2018 to 2040 (560 GW) (Figure 1). Offshore wind’s share of global electricity supply rises to 5%.

 

Installed capacity

 

  

Share of electricity supply

 

LOGO    LOGO

 

Figure 1. Projected global offshore wind capacity and share of electricity supply by scenario

 

The Paris Climate Change Agreement, adopted by 196 Parties in December 2015, is a legally binding agreement on climate change which aims to limit global warming to well below 2°C. The EU and its Member states are all signatories. To achieve this ambitious target, an immense expansion of renewable energy deployment is required at global scale. Offshore wind has a huge potential that is technologically and commercially feasible, and will play a critical role in Europe’s efforts to achieve net zero emissions by 2050.

 

S-58


Table of Contents

The advantages of offshore wind power include:

 

    Renewable source with growth potential: Offshore wind is one of the highest growth sources of electricity supply. According to the IEA, offshore wind expansion could avoid between 5 billion and 7 billion tonnes of CO2 emission from the power sector globally (EIA, 2019).

 

    Stronger and more reliable wind resources: Offshore wind resources tend to be stronger and more consistent than on land. Small increases in wind speed result in large increases in energy production. The faster wind speeds offshore mean much more energy can be generated than onshore.

 

    Higher capacity factors: The net capacity factor is the ratio of an actual electrical energy output over a given period of time compared to the maximum possible electrical energy output over that period. Offshore wind’s capacity factor is higher than solar and onshore wind, as solar panels do not produce energy at night.

 

    Cost competitive: Offshore wind is expected to be the second cheapest electricity source after solar by 2040 (BEIS,2020).

 

    Close proximity to demand centres: Most of the global population is concentrated in major coastal cities. Conversely, good land-based wind sites are often located in remote locations, far from cities where the electricity is needed. Building offshore wind farms in these coastal areas can help to meet energy needs from a domestic source of energy.

 

    Reduced land requirements: Land requirement/MW is a lot less for offshore wind compared to solar technology. Offshore wind turbines are also widely spaced apart allowing other activities in the project area.

 

    Less local impact: With onshore wind, concerns exists over the noise produced by turbine blades and the visual impacts to the landscape. Because offshore windfarms are getting further from shore the concerns for noise or aesthetics are minimal.

 

Vindeby was the first offshore windfarm, deployed in the coast of Danish island of Lolland in 1991. However, in the last 10 years the market has really taken off. Soon to be world’s largest offshore wind farm, Hornsea Two (1.4GW) is under construction off the coast of England. Hornsea One (1.2 GW) is the largest operational windfarm to date. The global leader Ørsted’s Hornsea One project produces enough energy to power well over one million homes. Ørsted has built more offshore wind farms than any other offshore wind developer in the world, with 9.9 GW operational capacity expected by 2022.

 

2 Offshore Wind Market Outlook

 

Despite the COVID pandemic, the outlook for renewable energy continues to improve as the world transitions to cleaner sources of energy. While offshore wind has growth has been slower than other renewable energy sources such as solar and onshore wind projects, it has accelerated over the last few years.

 

The acceleration in growth of offshore wind is not only due to ambitious national targets and supportive policy frameworks, but also declining costs and improving economies of scale. Thus, offshore wind is posed for significant growth over the next decade.

 

The high level of offshore wind growth can be credited to favourable economics versus other sources of electricity, and additionally supportive policy frameworks reducing risk to lenders.

 

Annual capacity entering construction globally has increased by around 27% per year between 2010 and 2019 (Figure 2). A significant level of 2020 capacity build out is driven by China. Chinese projects were incentivised to enter construction in order to secure subsidies; these projects began construction but made minimal progress in 2020 and each will continue to work in batches for 2-3 years until completion. China is excluded from analysis throughout this report due to its self-served market dynamics.

 

S-59


Table of Contents

The global offshore wind market is set to grow 18% per year from 2021 through 2026. Offshore wind cumulative capacity is expected to increase to 153 GW by end-2026, 95.5 GW up from the end-2020 underway capacity

 

Annual and cumulative global offshore wind capacity by offshore construction start, 2011-2026

Annual and cumulative underway capacity (GW)

 

LOGO

 

Average turbine (MW) size by year and by georegion

 

LOGO

 

Figure 2.Annual offshore wind capacity entering construction by georegion, and average turbine size, 2010-2026.

 

Significant technological improvements have led to increases in the size and output of offshore wind turbines. For example, Vesta’s V-80 turbine constructed in 2000 was only 2 MW whereas it’s new V-236 turbine is 15 MW and expected to being production in 2024.

 

Europe has been the global leader in offshore wind farm development, where high wind speeds, shallow waters and favorable ground conditions have facilitated rapid growth. In Europe the average installed turbine size has increase from 4 MW in 2014 to 8-10 MW in 2021. This is expected to increase further as 15MW are being planned for installation in 2026.

 

Asia has followed Europe in offshore windfarm development, while their average installed turbine has been 5-6MW, turbine sizes are expected to increase to 8-9MW through 2026.

 

Recent announcements for offshore wind development North America, specifically the United States, and proposed projects are expected to install turbine capacity similar to Europe.

 

The growth rate of offshore wind has been nurtured in European countries where high wind speed, shallow waters and good ground conditions have provided suitable conditions for rapid growth. Considering the total

 

S-60


Table of Contents

commissioned capacity (Figure 3) by country, it can be seen that the UK retains its position as the global leader, with a total of 10.4 GW capacity commissioned by Q3 2021. The global total, excluding China, stands at 25.3 GW with another 19 GW of capacity currently under-construction, or in pre-construction (having reached FID) (Figure 4).

 

UK, Germany dominate the global market (exc. China)

Fully commissioned capacity (MW)

 

  

UK remains the biggest market

Under construction and FID made capacity (MW)

 

LOGO    LOGO

 

Figure 3. Global fully commissioned capacity by Q3 2021.China (not shown) has 5.8 GW of fully commissioned capacity.

  

 

Figure 4. Global capacity under construction and having reached financial investment decision by Q3 2021. China (not shown) has 19GW capacity under construction and post-FID.

 

3 Offshore Wind Turbine Trends

 

Turbines convert kinetic energy from wind into alternative current (AC) electrical energy. Offshore turbines are horizontal axis wind turbines with three-bladed rotors and are much larger than onshore models.

 

The main turbine components are:

 

    Nacelle: supports the rotor and converts the rotational energy from the rotor into AC electrical energy. The nacelle includes a generator, gearbox, yaw system, bed plate and many other components.

 

    Rotor: extracts the kinetic energy from the air. The blades form part of the rotor, attached to the nacelle at the hub. Swept area refers to the area of the circle created by the blades as they rotate through the air. New turbine designs have a larger swept area to capture more energy and achieve a higher capacity factor.

 

    Tower: is a tubular steel structure supporting the nacelle and rotor.

 

S-61


Table of Contents
LOGO  

LOGO

Figure 6. Illustration of turbine size (Source: BNEF)

Figure 5. Illustration of an offshore wind turbine (Source: TU Delft,2020)

 

Wind turbine suppliers are systems integrators. Blades are typically manufactured in-house, along with other components in some cases. Most of the internal components however are supplied by different manufacturers. The design life of an offshore wind turbine is generally 25 years.

 

The market has seen rapid progress in turbine technology, with larger turbines contributing to cost reductions for three primary reasons:

 

  I.   Energy yield is proportional to the swept area of the rotor, which scales with rotor diameter by the relationship pr2, i.e. energy yield scales at a quicker rate than the increase in rotor diameter.

 

  II.   Larger turbines mean fewer turbine installations and associated balance of plant are required to reach the target capacity, reducing CAPEX/MW.

 

  III.   OPEX is primarily driven by the number of turbines and not the wind farm capacity, so fewer turbines mean lower O&M costs per unit of energy production.

 

S-62


Table of Contents

Increasing appetite driven by competitive pressure for low cost energy means turbine manufacturers continue to develop larger turbines (Figure 7).

 

     MW      Rotor Diameter (m)     

First Commercial Commissioning

LOGO

        

Haliade-X 12 MW

     12/13/14        220      2022, Skipjack,USA

LOGO

        

V236-15.0 MW

     15        236      Not contracted yet, serial production is expected in 2024

V164-10.0 MW

     10        164      2022, Golfe du Lion,France

V174-9.5 MW

     9.5        174      2023, Arcadis Ost, Germany

V164-9.5 MW

     9.5        164      2020, Northwester 2

V164-8.0 MW

     8        164      2016, Burbo Bank Extension, UK

LOGO

        

SG 14.0-222 DD

     14        222      Dominion Energy,US, Hai Long 2A,Taiwan and Sofia, UK

SG 11.0-200 DD

     11        200      Gode Wind 3, 2024, Germany

SG 11.0-193 DD

     11        193      2023, HKZ I and II, Netherlands

SG 10.0-193 DD

     10        193      No current contracts, available from 2022 (was HKZ)

SG 8.0-167 DD

     8        167      2020, Seamade, Belgium

SWT-7.0-154

     7        154      2017, Walney Ext

 

Figure 7.Latest offshore wind turbine models (excluding Chinese models).

 

The growing physical dimensions of turbine components increases the demands placed on the jack up fleet which install them. As rotor diameter increases, the turbine tower height and thus weight, also increases. The tower height must encompass both the blade length and a measure of blade clearance to allow for high sea states, typically in the region of 25-35 m. Nacelle weight increases with rated turbine capacity, although innovations in drive trains and design optimisation mean this trend is not linear (Figure 8).

 

Higher stiffness materials with improved fatigue performance, lighter weight and higher reliability are being continually developed and commercialized to give longer, more slender blades. As blades get increasingly longer, there will be further production, transportation and installation challenges.

 

S-63


Table of Contents
LOGO    LOGO

 

LOGO

  

 

Figure 8. Offshore wind turbine physical dimensions trends

 

4 Cost of Offshore Wind: LCOE & CAPEX

 

The levelised cost of electricity (LCOE) is the revenue required to build and operate a project over a cost recovery period. The long-term success of offshore wind industry depends on its cost competitiveness. The latest BEIS (Department for Business, Energy and Industrial Strategy) report estimates the LCOE for projects starting operation in 2025, 2030, 2035 and 2040. By 2040, offshore wind is expected to overtake onshore wind as the second cheapest solution following solar (Figure 9).

 

UK government expects renewable costs to drop

Levelised Cost Estimates for Projects Commissioning in 2025, 2030, 2035 and 2040 in UK, EUR/MWh (Source: BEIS, 2020)

 

LOGO

 

Figure 9.Forecasted cost of electricity generation from different resources in the UK (Source: BEIS, 2020)

 

Technologicaldevelopments, changes in financing costs, competitive auctions and cluster effects have facilitated offshore wind to experience rapid cost reduction. The windfarm supply chain has also developed more efficient manufacturing and installation practices. The cost of offshore wind is expected to fall further; global offshore wind LCOE dropped under €100/MWh in 2019 and is projected to decline to €50/MWh on average by 2025 (Figure 10).

 

S-64


Table of Contents

Global Offshore Windfarm LCOE by year (exc.China)

LCOE (EUR/MWh) for the projects >30MW

 

LOGO

 

Figure 10.LCOE of global offshore wind farms excluding China.

 

Capital Expenditure (CAPEX) is the cost of all activities up until works completion date and the largest contributor to the lifecycle costs, at approximately 60-65% of LCOE. Offshore wind turbine supply makes up around 40% of total CAPEX. 4C estimates the current turbine installation cost is around 2% of the total CAPEX (Figure 11) which is in line with the UK Crown Estate’s latest “Guide to an Offshore Windfarm” report. Vattenfall has also stated the turbine installation cost for its upcoming UK projects to be around 2% of the CAPEX.

 

LOGO

 

Figure 11.CAPEX breakdown of a typical fixed-bottom offshore windfarm. Other includes contingencies, management reserves, resource costs, insurance and construction management.

 

5 Siting Trends in Offshore Wind

 

A clear trend towards increased water depth, further distance from shore and increased project size in Europe, Asia, and North America can be seen in Figure 12.

 

The depths at which turbines are installed has steadily increased in Europe and will continue to do so as larger upcoming projects are scheduled install larger turbines in deeper waters. Future offshore wind sites in the midterm (by 2026) are similar to some of those existing or underway. The average project capacity is steadily increasing as economy of scale starts to be realised in larger parks. 1GW projects are expected to become the norm in Europe and North America by 2026 but Asia is lagging behind.

 

S-65


Table of Contents

Planting deeper and further

Weighted average water depth (m) (annual)

 

  

Weighted average distance to shore (km)

 

LOGO    LOGO

Increasing project sizes

Annual project sizes (MW) by georegion

 

  
LOGO

 

Figure 12. Weighted depth (top left), weighted distance (top right), and annual project size (bottom) of global offshore windfarms by offshore construction start year. Asia excludes China.

 

S-66


Table of Contents

6 Offshore Wind Project Value Chain

 

The offshore wind industry connects a wide range of industries and companies worldwide, starting from the development phase through to decommissioning. Figure 13 summarises a typical offshore windfarm project life cycle.

 

Development and consent

 

Manufacture

 

Installation and
commissioning

 

Operation and
maintenance

 

Decommissioning

•  Activities up to the point of financial close, including: planning consents, environmental impact assessments, resource and met ocean surveys, engineering and consultancy services

 

•  Developers are responsible for development and consents

 

•  Key Developers: Ørsted, Vattenfall, RWE, Equinor, SSE

 

•  Supply of the key components contracted by the developer

 

•  Turbine Suppliers (OEM): Siemens Gamesa, GE, Vestas

 

•  Foundation suppliers: Bladt, EEW, Sif, Navantia (Designers: COWI, Atkins, Ramboll)

 

•  Cable Suppliers: JDR, Hellenic Cable, LS Cable, Nexans, NKT, Prysmian

 

•  Offshore substation Suppliers-Electrical: ABB, GE, Schneider

 

•  Offshore substation Suppliers-Structure:Bladt, Smulders, Navantia

 

•  Installation and commissioning of the key components contracted by the developer

 

•  For more detail see the Installation Value Chain Section

 

•  It is the combined functions of day-to-day management, maintenance of assets, and service of assets during the lifetime of the wind farm. Activities formally start at construction completion date

 

•  The wind farm operator will oversee and fulfil overall site operations activities, including turbine and balance of plant maintenance

 

•  Key Operators: Ørsted, Vattenfall, RWE, Equinor, SSE

 

•  Removal or making safe of offshore infrastructure at the end of its useful life, plus disposal of equipment.

 

•  Contractors will be similar to those used for installation.

DEVEX   CAPEX   OPEX   DECEX

 

Figure 13. Offshore windfarm project lifecycle

 

Development and consent are managed by the windfarm developer, covering the activities up to the point of financial close with a time span of 5-7 years. The developer will typically procure the Tier 1 suppliers to design, supply and installation of key components in the late stage of development.

 

The offshore wind supply chain has a strong cohort of major component suppliers which contract directly with project developers. This top level of the supply chain is commonly referred to as Tier 1, and typically supplies or installs wind turbine generators (WTGs), foundations, substations (onshore & offshore) export and array cables.

 

S-67


Table of Contents

Manufacturing, and transport and installation (T&I) contracts are often signed two years before construction. Construction of an offshore windfarm takes 3-4 years on average. Turbine installation is the final stage of construction, and typically takes place in the final 12 months of the construction process. Once the windfarm is fully commissioned, the longest value chain activities start, in the operation and maintenance (O&M) phase. O&M activities last for 20-25 years or more.

 

Wind turbines are typically under warranty for 5 to 10 years of operations and the wind turbine suppliers (i.e. Siemens Gamesa, GE, Vestas) offer a service level agreement to the windfarm operator during this period to provide turbine maintenance and service. After this initial warranty period, the wind farm operator may choose to retain the services of the supplier, maintain and service the wind farm using an in-house team, contract a specialist company, or develop an intermediate arrangement where turbine technicians transfer to the wind farm owner at the end of the warranty period.

 

7 The Installation Value Chain

 

The typical offshore installation process for fixed bottom windfarms is in the following order, with overlaps where possible to shorten the construction timeline:

 

Foundation Installation

 

Offshore Substation
Installation

 

Array Cable Installation

 

Export Cable
Installation

 

Turbine Installation

•  Monopile, jacket or gravity-based foundation installation

 

•  Monopiles and jackets can be installed by floating or jack up vessels. Gravity-based can be installed by floating vessels or crane barges.

 

•  Monopiles usually also require a separate transition piece installing, and jackets usually require pre-piling.

 

•  The foundation is installed prior to the topside. The substation foundation can be a monopile or jacket.

 

•  Substation installation is a heavy lift operation requiring high crane capacity.

 

•  Sheerleg crane vessels, barges, heavy lift vessels and semisubmersible vessels can be used.

 

•  Cable installation between wind turbines and the offshore substation (typically rated at 66kV AC)

 

•  Steps include: Cable lay, cable burial (pre-trenching/ simultaneous lay & burial), cable pull in to turbine and testing & termination.

 

•  Specialized cable lay vessels are used

 

•  Cable installation between offshore and onshore substation (typically rated at 220kV AC)

 

•  Export cable installation steps involves the same activities as array cables.

 

•  Same cable lay vessels can be used for export cable installation however, export cable installation vessels will typically have larger carousels.

 

•  Turbine installation vessels transport turbine components to the site and install the turbine on the foundation

 

•  Jack-up vessels are used for turbine installation

Key Players: DEME, Van Oord, Subsea 7, Boskalis, Saipem   Key Players: Subsea 7, DEME, Scaldis, Heerema, Saipem, Boskalis   Key Players: Boskalis, Subsea 7, DEME, Global Marine, Van Oord   Key Players: Boskalis, NKT, Prysmian, Jan De Nul, DEME, Nexans   Key Players: DEME, Van Oord, Fred Olsen, Cadeler, Jan De Nul, Seajacks

 

S-68


Table of Contents

Figure 14. Installation stages of an offshore windfarm

 

Turbine installation vessels are specifically designed for the purpose. Currently, turbine installation is completed using self-propelled jack up vessels, which are fitted with long support legs that can be raised and lowered. The vessel transits into the windfarm site in floating configuration and jacks up at the work location by extending the legs down to the seabed. Jack ups provide a stable platform for lifting in what can be harsh sea conditions and are used in the offshore wind sector for a variety of roles across development, construction, O&M and decommissioning.

 

LOGO

 

Figure 15. Illustration of a turbine installation vessel, jack up vessel

 

Crane capabilities and deck space are increasingly important drivers of competitiveness. Leg length, crane reach and vessel stability determine the water depths and sea states in which vessels can jack-up, and the height above deck it is possible to reach. The current available fleet was designed to install 6-10MW turbines. Currently, 15MW turbines are being developed by manufacturers. While several vessels have undergone upgrades, upgrades can impact other aspects of vessel performance if they were not taken into consideration in the initial design. To date, emerging market turbine sizes have lagged behind Europe (Figure 2). Therefore, vessels no longer suitable for the European market can work in emerging markets, especially those in Asia. However, projects in Asia are also catching up with bigger turbine sizes so this is only a likely revenue source in the short term.

 

Smaller jack-ups which are no longer capable of installing newer, larger turbines can find roles in accommodation, geotechnical investigations, transition piece installation, substation commissioning work, large component repair and replacement during operations, and lastly decommissioning.

 

Turbine Installation: Larger turbines place greater demands on vessels, installation processes and port infrastructure meaning further innovation and adaptation of installation equipment and methodologies are expected as turbine size increases. As demand for larger rotor size increases, pre-assembly becomes less viable due to the additional quayside and deck space required as well as subjecting vessels to greater dynamic loads, navigational challenges and lift limitations. All European projects in recent years installed on site using the five-piece lift installation method (tower, nacelle, three blades), but tower weight constraints may move the market back toward split tower configuration.

 

Turbine Installation Contract: EPCI contracts, with full turnkey scope were common on the very first pioneering projects (e.g., North Hoyle, 2003 and Kentish Flats, 2005) but were considered unsuitable following a series of cost overruns and supply chain insolvencies as a result of exposing contractors to unanticipated risks (e.g. Greater Gabbard).

 

Therefore, multi-contracting became more popular as projects grew in size and complexity, with the project developer signing several contracts for the delivery of different components of the wind farm, often with separate

 

S-69


Table of Contents

contracts for the supply and T&I of each key component. The most experienced developers (e.g. Ørsted) manage the most contracts and use their in-house project development, design and contract management expertise as a source of competitive advantage. Taking the risks in-house and managing them successfully rather than passing them on to the supply chain allows for cost savings and more control over design and delivery.

 

Recent announced contracts show a mix of contracting styles, but in the 40+ turbine contract (EPCI and installation) contracts which have been awarded since 2019 (exc. China and Vietnam), multi-contracting, i.e. separate supply and installation contacts for turbines, remains the most popular.

 

8 Wind Turbine Installation Vessel Supply

 

The water depth at which jack-ups can safely install turbines is dependent on several site-specific variables including wave and wind conditions, sea bed conditions, tides and tidal range and sea state. Turbine transport and installation requires stable platforms for operations to ensure safe operations and reduce the risk of damage to components. A small motion at deck level quickly becomes a large movement at an elevated hook height, adding dynamic loads on to the crane and making turbine installation more complex. For these reasons only jack-up platforms are used for turbine installation.

 

Maximum installation depth: The actual limiting depth for each deployment depends on installed leg length, sea-bed penetration and required air-gap and must be determined through site specific assessment. Vessel water depth capability at each windfarm site is not accounted for in this supply analysis due to the inaccuracy in estimating future site conditions, but for the purpose of fleet comparison, maximum operable water depth as stated by the operator, is presented for each vessel.

 

Maximum hook height (ASL): A crane’s maximum nacelle lifting height is determined by the hook height above deck (which will be reduced by outreach) plus the depth of the vessel and the height of the airgap, less the height of any rigging and the nacelle module:

 

Maximum hook height ASL(m) = airgap (10 m) + vessel depth(m) + hook above deck(m) – rigging allowance(m)

 

Maximum Lift Capacity: Quoted lift capacity at working radius (~30-40m) was used as a preferred estimate to max lift.

 

S-70


Table of Contents

LOGO

 

Figure 16.Illustration of a jack up and parameters for turbine installation

 

S-71


Table of Contents

Key Operators and Market Shares

 

LOGO

 

Figure 17. Key operators and their assets by turbine rating. Current assets and firm orders only. Options are not included and upgrades are not presented.

 

LOGO

 

Figure 18. Turbine installation market share by operator and by vessels, global exc. China, 2016-2021

 

Eneti is well positioned in offshore wind market with Seajacks acquisition (5 vessels) and 1 new build. The market leader DEME owns 6 turbine installation vessels but currently they are not capable of install larger than 10MW turbines. Sea installer will undergo crane upgrade and operator also have an option to upgrade Sea Challenger. All key operators have firm orders in place for jack ups to install next generation turbines except DEME and Fred Olsen.

 

Market share charts show the known market shares of turbine installation vessels from 2016 through 2021.DEME Offshore is the market leader for turbine installation over the last five years, using Sea Installer and Sea Challenger (Figure 18). Other key players for turbine installation include Fred Olsen, Cadeler, Seajacks, Jan de Nul, and Van Oord. 5 major operators (DEME, Fred Olsen, Cadeler, Seajacks, JDN) secured 80% of the global market share with 10 vessels.

 

Current Fleet

 

The active turbine installation fleet consists of 15 jack ups. Many of these vessels also engage in foundation installation and turbine maintenance. Three additional jack ups are also considered; although not currently active

 

S-72


Table of Contents

in turbine installation they are technically capable and thus likely to contribute to future installations. These are DEME Offshore’s Innovation (a foundation installation vessel, likely to transition from foundations to turbines due to increasing foundation weights), Van Oord’s MPI Adventure (primarily engaged in maintenance but could be re-deployed for remaining <10 MW turbine installations) and Penta-Ocean’s CP-8001 which is intended for use in the Japanese market. A further 13 jack ups are not competitive in turbine installation and operate in the <10 MW maintenance and oil and gas markets.

 

Outside of Europe, the jack ups in Table 1 are likely to serve emerging Asian markets, where cabotage rules allow, until domestic assets are built. Since the latest update, Taillavent was sold to a Chinese operator.

 

                                              Capacity Installable  

Vessel

  Operator   Year
Built
  Design   Hook
height ASL
(m)1
    Max lift
capacity(t)2
    Max water
depth (m)
    Variable
deck
load (t)
    10
MW
    12 - 14MW     15 MW     #12-15
MW
 

Aeolus 2.0

  Van
Oord
  2014   N/A     136.1       1600       45       7250       X        

Apollo

  DEME
Offshore
  2018   NG 5500X     158       500       70       4500       X 4       

Blue Tern

  Fred.
Olsen
  2012   KFELS MPSEP     124.75       800       65       7000       X 56       

Bold Tern

  Fred.
Olsen
  2013   NG-9000C-HPE     138       640       60       9500       X 5       

Brave Tern

  Fred.
Olsen
  2012   NG-9000C-HPE     138       640       60       9500       X 5       

CP-80017

  Penta-
Ocean
  2018   GJ-3750C       800       50         X 5       

INNOVATION

  DEME
Offshore
  2012   N/A     141       1500       65       8000       X        

MPI Adventure

  Van
Oord
  2011   NG-7500/6     120       1000 3      40       6000       X 6       

SEA CHALLENGER

  DEME
Offshore
  2014   NG-9000C     140       632       55       6000       X 6       

SEA INSTALLER

  DEME
Offshore
  2012   NG-9000C     121       632       55       6000       X 6       

Seajacks Scylla

  Seajacks   2015   NG-14000X     153       1500       65       9425       X       X 6        4  

Seajacks Zaratan

  Seajacks   2012   NG-5500C     119       600       55       5200       X        

Vole au Vent

  Jan de
Nul
  2013   N/A     139.5       1500 3      50       6500       X        

Wind Orca

  Cadeler   2012   N/A     117.4       1200       60       8400       X 6       

Wind Osprey

  Cadeler   2012   N/A     152.4       1150       60       8400       X       X 6        3  

 

Table 1 Specifications of the current turbine installation fleet. (1) Hook height above deck + specified vessel depth + 10 m air gap (2) At ~30-40 m radius (3) At 20-25m radius (4) Lift weight marginal (5) Hook height marginal (6) At sites with low blade clearance and/or increased air gap (7) Unlikely to leave Japanese market.

10 MW: 112 m hub height + 15 m rigging allowance, 450 t nacelle weight (exc. ~50t for grillage, equipment and rigging)

12-14 MW: 150 m hub height + 15 m rigging allowance; 850 t nacelle weight (exc. ~50t for grillage, equipment and rigging); carrying capacity assumes ~2200t per turbine.

15 MW: 155 m hub height + 20 m rigging allowance; 550 t nacelle weight (exc. ~50t for grillage, equipment and rigging) ASL: Above Sea Level

 

New Builds and Upgrades

 

Increasing turbine dimensions mean that to secure asset longevity operators are proceeding with upgrades to existing vessels. Upgrades provide a lower cost option than newbuilds and are usually scheduled over winter months to minimise lost earnings impact.

 

Several existing operators and new market entrants intend to build new jack ups to meet the rising demand. Those considered most viable to reach the market by 2026 are listed in Table 2 along with the planned upgrades.

 

S-73


Table of Contents

While the modelled new build market includes ten jack ups, three are Japanese builds and are expected to see sufficient demand to remain in their domestic market.

 

                                            Capacity Installable  

Vessel

  Operator   Year
Delivery
  Status   Design   Hook
height ASL
(m)1
    Max lift
capacity (t)2
    Max water
depth (m)
    Variable
deck load
(t)
    12-14 MW     15 MW     #12-15 MW  

Voltaire

  Jan de
Nul
  2022   Under
construction
  N/A     187.1       3000       80       14000       X       X       6  

JU VIND 1

  OHT   2023   Ordered   NG-14000XL-G     177       1250       65       8750       X       X       4  

Name tbc

  Eneti   2024   Pre-order   NG-16000X     189.5       2600       65       12500       X       X       5-6  

Name tbc

  Cadeler   2024   Ordered   NG-20000X-G     192       2000       80       17000       X       X       7  

Name tbc

  Cadeler   2025   Ordered   NG-20000X-G     192       2000       80       17000       X       X       7  

Charybdis

  Dominion
Resources
  2024   Under
construction
  NG-16000X-SJ     173.7       2200         11500       X       X 3      5  

Name tbc4

  Shimizu   2022   Under
construction
  SC-14000XL     179       1250       65         X       X       3  

Name tbc4

  Penta-
Ocean
  2022   Under
construction
  GJ-9800C     140       1600       50          

Name tbc4

  Obayashi   2023   Under
construction
  N/A       1250            

Name tbc

  Van Oord   2024   Ordered   N/A       3000       70         X       X    

Upgraded Bold Tern6

  Fred.
Olsen
  2022   Upgrade
Ordered
  NG-9000C-HPE     174       1250       60       8000       X 6      X 6      3  

Upgraded Wind Orca

  Cadeler   2024   Upgrade
Ordered
  N/A     180.1       1600       60       10000       X 6      X 6      4  

Upgraded Wind Osprey

  Cadeler   2024   Upgrade
Ordered
  N/A     180.1       1600       60       10000       X 6      X 6      4  

Upgraded Sea Installer

  DEME
Offshore
  2023   Upgrade
Ordered
  NG-9000C       1600       55         X       X    

 

Table 2 Specifications of future vessels and upgrades. (1) Hook height above deck + specified vessel depth + 10 m air gap (2) At ~30-40 m radius (3) At sites with low blade clearance or increased air gap (4) Likely to remain in Japanese market (5) Likely to remain in US market (6) Restricted depth and tower weight restrictions 1

12-14 MW: 150 m hub height + 15 m rigging allowance; 850 t nacelle weight (exc. ~50t for grillage, equipment and rigging); carrying capacity assumes ~2200t per turbine unless otherwise stated

15 MW: 155 m hub height + 20 m rigging allowance; 550 t nacelle weight (exc. ~50t for grillage, equipment and rigging) ASL: Above Sea Level

 

S-74


Table of Contents

Vessel Suitability Analysis

 

Number of vessels capable of installing turbine capacity

 

LOGO

 

Figure 19.Number of vessels capable of installing turbine capacity by end-2026. Compares hook height above deck + specified vessel depth + 10 m air gap, and maximum lift capacity at 30-40m radius to turbine hub height + rigging allowance and nacelle weight. Includes marginal capability vessels, excludes the Japanese fleet. Charybdis expected to meet 15 MW + turbines but likely to remain in US market due to high demand.

 

Based on lift height and weight, only 1 existing vessel are capable of installing a 12+ MW turbine (under specific site conditions). Including new builds and vessel upgrades increases the pool to 12 vessels (Figure 17). This does not include Japanese vessels but does include the US-built Charybdis.

 

Increasing tower weights will prove an additional challenge, with a 12-15 MW turbine tower weighing in the region of 900-1200t. Towers can be installed offshore in sections but this increases offshore installation time and, due to reduced deck space, means fewer installations per loadout. It could also increase mobilisation time.

 

The 15 MW+ market is limited to 11 vessels due to increased lift height requirements.

 

9 Wind Turbine Installation Vessel Demand

 

As the demand for large offshore wind turbines grows so does the demand for highly specialized vessels capable of installing these larger components. An analysis of the scale and characteristics of this demand is forecasted below.

 

Turbine installation start (if unknown) is modelled assuming that turbine installation will start one year after offshore construction starts (foundation installation start).

 

Installation is spread through the year and may roll into the following year. The length of the installation period (unless known from developer communications) is calculated by multiplying the number of turbines by an installation rate of 3 days per turbine. Projects in Asia are modelled at the average European rate plus 0.5 days per turbine to account for the learning rate and the influence of typhoons and earthquakes. Floating projects and projects in under 15 m water depth are excluded from the installation demand since these projects are not suitable for jack-up vessels. Chinese projects and Japanese projects (after 2023) are also excluded due to self-served market dynamics.

 

In order to forecast the number of vessels required per year, an estimate of number of vessel days for future turbine installations (number of turbines x turbine installation rate) is calculated. Additionally, the productivity rate of a vessel (the proportion of the year spent on turbine installation related activities) is set at 65% in accordance with historical data. A lower productivity rate will increase the number of vessels required for turbine installation and vice-versa.

 

S-75


Table of Contents

Global turbine installation demand peaks in 2025

Demand by turbine installation start year

 

 

Global turbine installation demand in number of vessels

Demand by turbine installation start year

 

LOGO   LOGO

 

Figure 20. Global turbine installation demand by turbine bins and by year (exc. China and excluding Japan after 2023)

 

Forecasting shows an average of 20-21 vessels per year will be required between the period 2024-2026 (Figure 18). The demand for vessels that can install 12MW+ turbines is 17 and 18 vessels in 2025 and 20261.

 

Turbine Installation Demand in the US

 

LOGO

 

 

1   Assumptions for demand analysis:

 

    Project timelines are based on 4C’s project opportunity pipeline

 

    Charts excludes Chinese projects, floating projects and projects <15m water depth. Also, Japanese projects starting turbine installation in 2023 and later excluded. It is assumed that once the new Japanese builds are online, the Japanese market will be self-served close market.

 

    Turbine installation starts one year after foundation installation

 

    Turbine installation rate in Europe: 3 DpT, in North America& Asia: 3.5 DpT

 

    If the turbine size is not known yet, 4C’s turbine rating model has been used to estimate the turbine rating

 

    Turbine bins: Under 10MW, 10-12MW (excludes 12MW turbines), 12-15MW (excludes 15MW turbines), 15MW+ (includes 15MW turbines)

 

S-76


Table of Contents
    Demobilisation and mobilisation time is included in the vessel days. Demob: 7days/project, Mob: 35 days/project

 

    Turbine installation vessel will spend average of 230 days for turbine installation in a year (based on historic installation data)

 

Global turbine installation demand peaks in 2027

Demand by turbine installation start year

 

  

US: Turbine installation demand in number of vessels

Demand by turbine installation start year

 

LOGO    LOGO

 

Figure 21. US turbine installation demand by turbine bins and by year

 

22GW of offshore wind capacity is expected to be installed between 2023 and 2030 in the US. The US turbine installation demand peaks in 2027 with 8 turbine installation vessels required. The demand for vessels that can install 12MW+ turbines is average of 4 vessels each year between 2024 and 2030.

 

10 Supply vs Demand

 

Vessel Supply

   2021      2022      2023      2024      2025      2026  

Total Fleet

     15        18        16        20        21        21  

12MW+ vessels only

     2        5        6        11        12        12  

 

Figure 22.Total vessel fleet and number of vessels capable of installing 12MW + turbines for the period 2021-2026. Excludes Chinese vessels. Starting from 2023, Japan is modelled as a closed market due to expected delivery of domestic vessels.

 

Vessel Demand

   2021      2022      2023      2024      2025      2026  

Total Demand

     7        13        9        15        25        21  

12MW+ vessels only

     0        0        2        3        17        18  

12MW+ demand for foundation installation

     0        0        0        4        2        1  

 

Figure 23.Total vessel demand and demand for the vessel capable of installing 12MW + turbines for the period 2021-2026. Excludes Chinese demand. After 2023, Japan is modelled as a closed market due to expected delivery of domestic vessels.

 

The increasing demand for projects with larger turbines and the limited corresponding supply of jack-ups results in a shortage in 2025 and 2026 (Figure 24). Developers will find it increasingly difficult to secure vessels needed to ensure their projects remain on schedule and meet planned commissioning dates Project delays can have knock on effects for developers in terms of additional development costs, missed milestones in power offtake contracts and suboptimal alignment of projects within the developer’s portfolio. Under these conditions some market power is likely to shift from project developers towards those vessel operators that have assets capable of installing large turbines (12-15MW).

 

S-77


Table of Contents

On the other hand, a shortage of foundation installation vessels to install over 1500t monopiles is expected. Therefore, turbine installation vessels are expected to be contracted to install foundations. WTIV capable of installing larger than 1500t monopiles required to have high lifting capacities therefore only 12MW+ turbine vessels can perform foundation installation. It is estimated that 4 WTIVs will be required to install foundations in 2024(top right). Foundation installation demand will lessen the impact of oversupply of 12MW+ vessels in 2024 but turbine installation vessel shortage will increase in 2025 and 2026 (bottom right).

 

The current estimated price for turbine installation is approximately €0.6m/ turbine. The average day rate for existing vessels is 180-220k USD/day and the assumed day rate for newbuild vessels is 180-260k USD/day. Under the current supply shortage, it is likely that vessel operators will target the high-end of the range. It is expected that developers will struggle to secure a capable asset to keep their projects on schedule, and therefore the 240-260k/day levels are considered achievable.

 

The less capable vessels will become obsolete for the turbine installation market beyond 2025, unless they undergo upgrades, and are otherwise expected to compete in the O&M market.

 

Global (exc China) Supply and Demand for all turbine rating

 

 

12MW+ turbines: Supply vs. Demand Balance

 

LOGO   LOGO

 

Figure 24.Comparison of global turbine installation vessel supply and demand and foundation demand for 12MW+ vessels (left) for all turbine ratings, and the balance of supply and demand of those capable of installing 12MW+ turbines(right)

 

S-78


Table of Contents

BUSINESS

 

Business Overview

 

Our Business

 

We are a company focused on serving the offshore wind and marine-based renewable energy industry through our operation of wind turbine installation vessels (“WTIVs”). WTIVs are vessels specifically designed for the transport and installation of offshore wind turbines, which are power generating devices driven by the kinetic energy of the wind near-shore or further offshore on coastlines for commercial electricity generation, onto pre-prepared foundations. Our current fleet consists of five WTIVs that are currently on-the-water. Certain WTIVs in our current fleet are also employed in the maintenance of existing offshore wind turbines and are also suitable to employment servicing offshore oil and gas installations.

 

In addition, we have one contract with Daewoo for the construction of a newbuilding WTIV that we expect to take delivery of during the third quarter of 2024 and an option, that we intend to exercise using a portion of the net proceeds of this offering, with Daewoo for the construction of an additional WTIV with similar design specifications as the newbuilding WTIV that we expect to take delivery of during the second quarter of 2025. We are also in late stage negotiations with Keppel Amfels shipyard in Texas, United States for the construction of a U.S. Jones Act-compliant WTIV that, based on our current contractual expectations, we would expect to take delivery of by the end of 2024.

 

We were formed by the Scorpio group of companies, with an affiliate of the Scorpio group remaining one of our principal shareholders, and completed our initial public offering and commenced trading on the NYSE in 2013. From March 2013 through July 2021, we were an international shipping company that owned and operated dry bulk carriers. Over the past year, we have shifted our focus from the dry bulk commodity transportation business to focus on serving the offshore wind and marine-based renewable energy industry, through the acquisition and operation of WTIVs. In July 2021, we completed our exit from the business of dry bulk commodity transportation by selling the last of the 49 vessels that were previously in our fleet. In August 2021, we completed the transformational Seajacks Transaction described below, through which we acquired our current fleet of five WTIVs, becoming the only NYSE-listed company that exclusively owns and operates WTIVs.

 

In addition to the ownership and operation of our fleet, we, through one of our wholly-owned subsidiaries, serve in a technical advisory role to Dominion Energy, the owner of the first WTIV being constructed in the United States under the Jones Act.

 

Acquisition of Seajacks

 

On August 12, 2021, one of our wholly-owned direct subsidiaries acquired 100% of Atlantis Investorco Limited, the parent of Seajacks, for aggregate consideration of 7,892,679 shares (as further described below), $302.0 million of assumed net debt, $70.7 million of newly-issued redeemable notes, and $12.0 million of cash, which we refer to as the “Seajacks Transaction.” In connection with the closing of the Seajacks Transaction, 7,000,000 common shares and 700,000 Class A preferred shares, which are convertible to common shares on a 1:1 basis, were issued to the Sellers, and the remaining 192,679 common shares are expected to be issued to the Sellers on a pro rata basis on November 11, 2021.

 

The Class A preferred shares have no voting rights but are entitled to participate in distributions made to our common shareholders, including dividends. The holder has the right (and shall use reasonable endeavors) to convert the Class A preferred shares into common shares on a one-for-one basis, provided that such conversion would not result in the holder thereof (together with its affiliates) holding 20.0% or more of our then total issued and outstanding common shares.

 

Seajacks as founded in 2006 and is based in Great Yarmouth, United Kingdom. It has a track record of installing wind turbines and foundations dating to 2009. Seajacks’ flagship, NG14000X design Seajacks Scylla,

 

S-79


Table of Contents

was delivered from Samsung Heavy Industries in 2015 and is capable installing turbines up to 14 MW. Seajacks also owns and operates the NG5500C design Seajacks Zaratan which is currently operating in the Japanese market under the Japanese flag capable of installing turbines up to 9.5 MW, as well as three NG2500X specification WTIVs capable of installing turbines up to 4 MW.

 

We believe our combination with Seajacks creates one of the world’s leading owner/operators of WTIVs and that our operating fleet, along with our high-specification contracted and planned newbuilding WTIVs (including the Proposed Jones Act Vessel) creates the most capable installation fleet in the offshore wind sector.

 

Competitive Strengths

 

We believe we are well-positioned to execute our business strategies and deliver on our long-term growth objectives based on our competitive strengths:

 

Leading Owner and Operator of WTIVs with a High-Specification Diversified Asset Base.    We are one of the largest owners of purpose-built, self-propelled WTIVs with the capacity to carry turbines of approximately 10 MW and above (including the two Daewoo-constructed newbuilding WTIVs contracted for or for which the option is expected to be exercised). We believe that our current fleet of five WTIVs, together with the one we have contracted for, and the two prospective newbuilding WTIVs that we intend to enter into construction contracts for, including one which is expected to be U.S. Jones Act-compliant, are well-suited to serve the rapidly evolving offshore wind landscape. Our flagship vessel, the Seajacks Scylla, was delivered in 2015 and is designed to be able to install 12-14MW turbines, which, we believe, makes it the most capable WTIV on the water today, inclusive of recent newbuilding announcements in our industry. Our contracted newbuilding NG16000X WTIV, together with the additional NG16000X newbuildings that we intend to contract for, including one that we expect to be Jones Act-compliant, are designed to be able to install next generation 15-20MW turbines globally. Our contracted and anticipated newbuilding WTIVs are expected to be delivered to us between the third quarter of 2024 and the second quarter of 2025. Each of our current and potential newbuilding vessels have been designed to operate at sites with challenging seabed conditions. Our fleet includes vessels with large cargo area and high capacity deck loading capabilities to enable the vessels to offer the flexibility required in the transportation and installation of wind turbines and their foundations. Additionally, we have a demonstrated operational history in Europe dating back to 2009 through our NG2500X vessels, with those vessels commercially suited for work both in offshore wind and the oil and gas industry.

 

Established Track Record with Developed and Scalable Global Platform.    In August 2021, we acquired Seajacks, an offshore wind focused operating company, with a track record in the industry going back to 2009, making it a first mover. Since its inception, Seajacks’ WTIVs have installed nearly 500 wind turbine generators (representing over 2.5 GW of capacity), 450 foundation structures (monopiles, transition pieces and jackets), and three foundations for electrical substations. Through the acquisition of Seajacks, we have gained significant operational expertise and customer relationships, which include Original Equipment Manufacturers (“OEMs”) and developers. As we seek to further expand our asset base through our current and anticipated newbuilding program, we believe we will benefit from our management’s experience from our relationship with the Scorpio group which has managed over 180 newbuild projects over its 60 year history. We expect that there will be additional opportunities for us to leverage our leading platform to pursue additional organic and acquisition growth.

 

Global Presence in All Core Offshore Wind End Markets, including the U.S.    We believe we are the only WTIV operator currently serving Asia and Europe and we expect to serve the United States market following the delivery of the Proposed Jones Act WTIV that we are currently in late stage negotiations with Keppel Amfels shipyard in Texas to contract and that we expect to be delivered by the end of 2024. We are today engaged in the United States as well through our technical advisory role to Dominion Energy relating to the first WTIV being constructed in the United States under the U.S. Jones Act and our plans to serve the U.S. market through the delivery of the Proposed Jones Act WTIV for which we are in advanced discussions for a

 

S-80


Table of Contents

delivery by the end of 2024. Our Japanese flagged vessel, the Seajacks Zaratan, positions us to serve the Japanese market, with its capacity for installations of up to 9.5 MW turbines, which is the anticipated average size of future wind projects in the region. We have experience with projects in Taiwan and China, and our three WTIVs of NG2500X design (the Seajacks Hydra, Seajacks Leviathan, and Seajacks Kraken) have a long history of employment in Europe and the North Sea. We believe we have a first-mover advantage as the only NYSE-listed company currently focusing on the WTIV sector and that expects to contract for a Jones Act-compliant newbuilding WTIV.

 

First Mover Advantage and Significant Opportunity in the Growing U.S. Offshore Wind Market.    We serve in a technical advisory role to Dominion Energy, the owner of the first WTIV being constructed in the United States under the Jones Act. Additionally, we are currently in late stage negotiations with Keppel Amfels shipyard in Texas (which is the same shipyard constructing the Dominion Energy WTIV) to contract for the Proposed Jones Act WTIV that we expect to be delivered by the end of 20