Dutch offshore services provider Boskalis has reported a significant decline in the operating result at the Offshore Energy division in the first six months of 2019 caused mainly by operational and contractual issues on a limited number of offshore wind cable projects.
The operating result at the Offshore Energy division in the first half of 2019 amounted to minus EUR 94.5 million, compared to minus EUR 7.2 million reported for the first half of 2018.
According to Boskalis, circumstances within the offshore wind market have changed due to the move to zero subsidies and increased competition.
This has led to ”a recent and unexpected change in the attitude of clients” which resulted in ”a sharp increase in the number of disputes and protracted claim negotiations,” Boskalis said.
Following a thorough review of the projects in hand, provisions of slightly more than EUR 100 million have been made on a limited number of onerous contracts, according to the company.
Boskalis expects to recover a substantial part of these provisions.
”Although we are confident that we will be able to recover a large proportion of the outstanding claims in the future, we have prudently taken provisions on a limited number of offshore projects, whereby we reviewed the entire offshore portfolio,” Peter Berdowski , CEO of Boskalis, said.
”In order to respond better to the changed market situation, we have tightened the organization of the Offshore Energy division and in particular that of Subsea Cables. The provisions have a major impact on the earnings of the Offshore Energy division in the first half of the year resulting in a loss, despite the stable revenue and the decent occupancy of the vessels. We expect a positive contribution from the Offshore Division for the second half of the year and we see clear signs of recovery for the medium term.”
At the end of the six month period, Boskalis’ order book stood at EUR 1,325.5 million, of which approximately half is directly related to offshore wind.
This includes two major offshore wind cable contracts won during the period, the first of which is for the replacement and repair of certain inter-array cables at an existing offshore wind farm in the UK.
Boskalis also secured the offshore export cable installation contract for the Hornsea 2 offshore wind farm in the UK.
Early 2019, Boskalis signed an exclusive Pre-Construction Agreement for the Inch Cape offshore wind farm project. The project scope includes the transportation and installation of the wind turbine foundations, the offshore substation and cables. The formal contract award is subject to a successful bid by the client in the next UK Contracts for Difference auction and the project’s financial close.