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Britain’s Forgotten Ports Put Wind in Goldman’s Sails: Freight

May 02, 2013

Britain’s Forgotten Ports Put Wind in Goldman’s Sails

The project could also prove a boon for the dock’s owner Forth Ports Plc, which was purchased by Arcus Infrastructure Parners LLP for 746 million pounds in 2011. Photographer: Chris Ratcliffe/Bloomberg

Methil port north of Edinburgh, once the focus of Scotland’s coal exports, is set to tap a greener kind of energy as Samsung Heavy Industry Co. (010140) constructs the world’s biggest wind turbine in the town’s faded harbor.

The 7-megawatt model with a span of 562 feet is being built in Methil because of its proximity to three North Sea sites that will accommodate almost one-fifth of the 5,000 new turbines the U.K. aims to erect in the world’s biggest wind-power program.

Britain’s alternative-energy plans are reviving ports from Hull on England’s east coast to the Belfast docks in Northern Ireland that built the Titanic, boosting returns for investors including Goldman Sachs Group Inc. and paring costs for turbine builders and operators such as Siemens AG (SIE) and Iberdrola SA. (IBE)

“There are opportunities across the spectrum,” said Maf Smith, deputy director of RenewableUK, a trade group for wind- and tidal-energy companies. “Service vessels need a port close to the wind farm because of fuel and weather considerations. Manufacturing is significant because it has a long lifetime.”

Britain has 3,300 megawatts of installed offshore wind capacity, or about 970 turbines, more than the rest of the world combined, producing enough electricity to power 2 million homes. The government is targeting 18,000 megawatts by 2020, adding a projected 60 billion pounds ($93 billion) to the U.K. economy.

Boom Times

Construction of Samsung’s prototype Methil turbine, measuring 120 feet wider than the London Eye Ferris wheel, will boost a community that’s a world away from the university town and golf mecca of St. Andrews just 20 miles distant, with more than 3,000 of its 12,800 inhabitants filing for income support.

The project could also prove a boon for the dock’s owner Forth Ports Ltd. (FPT), which was purchased by Arcus Infrastructure Parners LLP for 746 million pounds in 2011.

The Edinburgh-based company, whose sites in Dundee and the Leith district of the Scottish capital also stand to profit from wind power, predicts the industry will impact U.K. harbors just as the coming of North Sea oil did from the late 1960s.

“We could benefit from land-rental fees, port fees, handling fees and marine fees like pilotage and towage,” Chief Executive Officer Charles Hammond said in an interview. “I don’t see the oil and renewable sectors as mutually exclusive. You still have a lot of oil to exploit in the North Sea.”

Belfast Boost

Belfast Harbour, where Harland and Wolff Ltd. built the RMS Titanic a little over 100 years ago, has spent 50 million pounds and 20 months preparing a 50-acre site for Danish utility Dong Energy AS, the world’s biggest offshore-wind developer.

Work included a 1,500-foot reinforced quay that can handle loads up to five times heavier than usual, cranes capable of lifting 1,000 tons, and custom-built protection for the jack-up rigs that carry blades, nacelles and other equipment out to sea.

The site was handed over to Dong and partner Scottish Power, a unit of Spain’s Iberdrola, in February and will be used as a base for construction of wind farms in the Irish Sea. Two installation vessels commence operations later this month and will work in rotation through the second quarter of next year, according to Joe O’Neill, the port’s commercial director.

Even bigger returns could come from construction of manufacturing facilities, according to RenewableUK’s Smith.

French nuclear-reactor supplier Areva SA (AREVA), an emerging player in wind turbines, signed a memorandum with the Scottish government in November to develop a plant at an unspecified site to complement its facilities at Le Havre on the English Channel and the German port of Bremerhaven in the southern North Sea.

Siemens Order

Siemens, Europe’s biggest engineering company, is working with Associated British Port Holdings Plc to build a 210 million-pound turbine plant at the port of Hull on the Humber.

Munich-based Siemens cut its full-year forecast today after booking an 84 million-euro ($111 million) quarterly charge for delayed grid connections to offshore wind farms. New orders included one from Dong for 166 turbines off Hornsea, England.

ABP, bought for 2.8 billion pounds in 2006 by a group led by Goldman Sachs, is also spending around 100 million pounds at ports including Hull to import wood pellets for Drax Group Plc (DRX) as Britain’s biggest coal-fired power plant converts to biomass.

Goldman retains a 23 percent stake in ABP, which owns and runs 21 general cargo ports and boosted its underlying operating profit 8 percent last year to 237 million pounds.

Progress toward manufacturing has been slower at Leith, Scotland’s largest deepwater port, where plans for two factories that would cost 150 million euros and create 800 jobs haven’t advanced beyond an outline agreement with turbine-maker Gamesa Corp. Technologica SA (GAM) signed in March 2012.

Subsidy Concern

Forth Ports is working to progress the deal and ensure that a reinforced quay and land are ready, while continuing to focus on a core business attracting 1.5 million tons of mixed cargo and 20,000 cruise-ship passengers annually, said Hammond. Consignments include grain related to Scotch whisky production.

One stumbling block is that the U.K. Electricity Market Reform bill, proposed last May and intended to spur investment, offers insufficient subsidy guarantees for manufacturers to sign deals with ports, according to the CEO, who says demand spanning 10 or 15 years is needed to justify the capital-spending level.

Danish turbine maker Vestas Wind Systems A/S (VWS), the world No. 1 by installed machines, halted plans for a plant at the Port of Sheerness, southeast England, a month after draft law appeared.

Whether offshore wind will allow Methil to recapture the level of activity seen in its 1930s heyday, when the port exported more than 3 million tons of coal annually, remains to be seen, according to Ross Mackenzie, lead investment officer for Fife Council, the regional authority that includes the town.

“We’ve maybe been looking through rose-tinted glasses,” he said at a site above Methil docks painted with map showing the growth plan. “We’ll have to wait and see if it comes through.”

To contact the reporter on this story: Kari Lundgren in London at klundgren2@bloomberg.net

To contact the editor responsible for this story: Benedikt Kammel at bkammel@bloomberg.net


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