The management has an excellent track record of establishing businesses from the concept stage and adding value for shareholders
SeaEnergy PLCs (earlier Ramco Energy PLC) strategic approach to growth entails entering new businesses at an early stage when the need for capital is low and exiting these ventures when the right value is attained. The company, which was incorporated with focus on oil services, evolved into| an energy investment company with interest in oil and gas assets. SeaEnergy is currently also focusing on the development of its offshore wind service business, SeaEnergy Marine. In line with its strategy, the company has successfully monetized its business interests in the past. It liquidated its 2.0825% interest in the Azeri Chirag Guneshli (ACG) field in Azerbaijan for USD150 million during 2000 and divested its 80.13% stake in SeaEnergy Renewables Limited (SERL) for a cash consideration of £38.6 million in 2011.
SeaEnergy Marine – Banking on the promising offshore wind energy services sector
SeaEnergy is venturing into services related to the installation, operation and maintenance (O&M), and support of wind turbines through SeaEnergy Marine. It will stand out in terms of efficiency and cost-effectiveness. Offshore wind capacity in Europe is estimated to rise from 2.6GW at the end of 2010 to 43.3GW by 2020. This is likely to create massive demand for vessels that can facilitate the installation and O&M of wind turbines. The industry is currently facing a dearth of right-fit vessels that can execute these activities efficiently. For instance, wind farm owners in UK currently depend on workboats that operate at a maximum wave height of 1.5 meters and at a distance of 60 miles from shore, severely limiting their usefulness for wind farms now in development. The huge gap between demand and supply reflects the opportunities for growth in the offshore wind energy sector.
SeaEnergy Marine – A one-stop-shop for offshore energy sector
SeaEnergy Marine plans to integrate all services that offshore wind farm owners/developers may require. The company’s state-of-the-art vessels will shorten the installation cycle and increase accessibility for O&M. In addition, SeaEnergy Marine’s vessels will offer these services at very competitive rates, making the economics of operation quite favourable for its customers.
Past experience, established business model increase probability of success
SeaEnergy Marine benefits from the management’s experience in the offshore wind energy sector, especially the exposure gained while working with SERL. Moreover, the business model is well established. SeaEnergy Marine is also actively submitting tenders for contracts with major offshore wind companies.
The Discounted Cash Flow approach yielded a fair value of GBp50.5 per share, based on a cost of equity at 14.48%, inclusive of an additional risk premium of 8% as the company is still in the inception phase. As the marine business will gradually materialise, the additional premium will be faded out over time , providing further upside. In addition, our fair value excludes current (and further) upside from the O&G assets.
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Source: seaenergy, October 05, 2011