In recent years more new ships have entered the market for specialized vessels that service the wind industry by setting up offshore wind turbines. This has, of course, put pressure on the rates for the older ships, says Jens Frederik Hansen, CEO of offshore carrier A2Sea, which recently released its annual report for 2014.
The result after taxes, which came to USD 34,4 million, down from USD 40.6 million in the previous year, does not worry Jens Frederik Hansen too much.
"The overall result is very nice, we are pleased with it, and we don't see it as a decline per se. Of course, we have some older vessels that we can't deploy at the same rates as before. But overall we have been good at completing projects and we have a generally high vessel utilization rate, which were are pleased with. This all goes to show that we have run our business quite well," he tells ShippingWatch.
More ships squeezing prices
According to Jens Frederik Hansen, more new vessels have entered the industry over the past few years, and because there are less big projects in 2015 and 2016 than last year, pressure on the daily rates has been unavoidable in the spot market and in general on projects over the coming years, where contracts have been signed earlier.
"But we are also noting that prices will presumably get back on track after that, since there are more projects. But this generally concerns the newer, larger ships," says Jens Frederik Hansen in regards to the carrier's two newest wind turbine installation vessels, Sea Installer and Sea Challenger, which according to the CEO can look forward to many jobs over the coming years.
"The smaller vessels will be less active in this part of the business in terms of installations. And we have vessels that are less occupied, and which we are trying to keep in the service market or similar industries, where they can stick to what they are good at. This was successful in 2014 and into 2015 as well. So we are optimistic."
In spite of the faith in A2Sea finding employment for these vessels, which must find work in the struggling spot market, the lower rates will inevitably affect the result for the coming year as well, says the company's management in the annual report, pointing to lower levels going forward than in 2014. The market is less active in 2015 compared to last year, Jens Frederik Hansen explains. But in two years this will be a different story, and the company is currently negotiating contracts for the vessels for projects in 2017 and 2018.
Improvement in 2017 and 2018
"Rates are on the way back up in 2017 and 2018, where there is a relatively large amount of projects, and where we see better rates than those we have seen in 2016. But it is still uncertain if we will return to the same level as before. Of course, when there are bottle necks in the industry, rates are relatively high, and it looks as though, there will be less bottle necks in the future, so it should stay relatively low," he says.
In 2014, A2Sea invested over USD 44 million to upgrade the two leading vessels of the fleet, Sea Installer and Sea Challenger. When the first vessel was purchased back in 2012, the carrier had a crane designed for 800 tons of capacity, and when the next vessel was delivered last year, the crane on this ship was upgraded to 900 tons. So last year the company also had reconstruction done on the first ship, enabling it to handle more capacity, which will be necessary to service the offshore wind industry, where the wind turbines keep growing.
"This is how we always work to upgrade things. We have also put a helicopter platform on Sea Installer, because it is necessary to operate for longer periods of time in the North Sea, and this way we can do more efficient crew replacements with a helicopter. We focus on the fleet, but the most important thing for us, is keeping the newest vessels occupied in our core business with wind turbine projects. This is what carries our business with the big investments that these projects represent."
According to Jens Frederik Hansen, there are currently no plans to invest in more large vessels. Over the next few years, the largest growth will come from North Europe, where several large projects off the coast of England and in the Danish part of the North Sea will begin. Meanwhile A2Sea eyes a dawning market in Asia, but it will take time before this becomes a reality, says Jens Frederik Hansen.