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    ESVAGT
    Denmark

    Energy

    ESVAGT

    Headquartered in Esbjerg, Denmark, ESVAGT is a leading provider of emergency rescue and response vessels (“ERRV”) and related services to the offshore energy industry in and around the North Sea and the Barents Sea. The company is also the market leader in the fast growing segment of service operation vessels (“SOV”) for the offshore wind industry. 

    Its ERRV services mainly involve the rescue and recovery of personnel, but also include the dispersion and recovery of oil spills, crew transfers and towing. ESVAGT is the leading provider of ERRV services in Denmark and Norway, with market shares of approximately 100% and 50%, respectively, as well as an established and growing presence in the UK. The majority of ESVAGT’s ERRV revenues are associated with North Sea oil and gas production support, with the remainder generated by supporting exploration activity.

    ESVAGT is also the pioneer and market leader in the provision of SOVs to offshore wind farms, with seven bespoke vessels in operation and a further two under construction. SOVs are purpose-built, high performance vessels, providing efficient transport of maintenance technicians to wind turbines and other offshore wind equipment, under long term contracts. The offshore wind market, and hence demand for SOVs, is expected to grow strongly over the coming years, creating significant opportunities for the company.

    ESVAGT has been operating since 1981, employs c.1,100 people and owns a fleet of c.40 vessels. 

    Developments in the year

    Overall the business performed in line with our post-Covid expectations during the year. The majority of ESVAGT’s contracted earnings are now generated by the SOV segment, where it is the established market leader in European offshore wind.

    The first of three new MHI Vestas SOVs was successfully delivered into operations in January 2021. The remaining two vessels are still under construction with delivery dates later in 2021. ESVAGT will begin participating in SOV tenders in the US in the coming year through its recently announced joint venture with Crowley.

    In the legacy ERRV fleet, performance in 2020 was initially negatively impacted by the oil price decline associated with the first wave of Covid-19, but the market has improved in the early part of 2021 with ESVAGT’s fleet fully contracted for the summer months.

    Investment rationale

    3i Infrastructure acquired ESVAGT from AP Møller-Maersk and other minority shareholders in September 2015, in a consortium with AMP Capital.

    ESVAGT has strong infrastructure characteristics and operates in an attractive market:

    • It is a market leader in Denmark and Norway and has a small but growing presence in the UK offshore oil and gas market and in the expanding North Sea offshore wind sector.
    • It is an asset intensive business, with a modern state-of-the-art fleet of purpose-built vessels.
    • A high proportion of its revenues is contracted over the medium term with a diverse customer base featuring limited customer concentration, underpinning stable and predictable cash flows.
    • It provides an essential service for the offshore energy industry in light of regulatory health and safety requirements, which constitutes a small component of the overall production cost, resulting in lower price sensitivity;
    • It operates in a market with high barriers to entry, as customers require bespoke vessels, manned by experienced crews with a strong safety track record. The harsh weather conditions and language barriers also inhibit new market entrants based outside the region; and
    • With its leading market position, strong safety track record and state-of-the-art fleet, ESVAGT is optimally positioned to exploit growth opportunities in the UK and potentially further afield, as well as in the offshore wind energy market.

    Sustainability

    ESVAGT’s SOVs support the efficient maintenance of offshore windfarms, a key contribution to the energy transition.

    Beyond that, it has continued to develop its internal policies and sustainability strategy during the year, including making a net zero emission commitment. This involves measures such as fitting battery powered equipment on newer vessels, implementing operational procedures to save fuel across the fleet and, over the longer term, using sustainable fuel sources for new built SOVs and retrofitting part of the existing fleet with electric engines.

    ESVAGT is also looking to upgrade the ballast water treatment systems on its vessels and significantly improve the removal of biological organisms to mitigate possible effects on the marine environment.

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