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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. ESVAGT has been operating since 1981, employs c.900 people and owns a fleet of c.40 vessels. 

    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 four 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.

     

    Developments in the year

    The market conditions in which ESVAGT operates improved during the second half of the year. The wind service operation vessels (‘SOVs’) segment is the primary driver of growth for the business where ESVAGT is the market leader. In the North Sea, ESVAGT has committed to five new contract backed SOVs since our acquisition.

    Internationally, ESVAGT is developing its focus on the US wind market, where it is preparing to support the expansion strategy of its European customers. ESVAGT is in discussions with the shipyard contracted to supply new SOVs, which is experiencing financial difficulties. We do not expect this to result in a material impact on ESVAGT’s ability to fulfil its contractual obligations.

    In the emergency rescue and response (‘ERRV’) segment, stabilising supply/demand dynamics allowed ESVAGT’s management to successfully implement its strategy of improving contract coverage for the fleet. However, we anticipate that the recent drop in oil prices will impact ERRV demand in 2020 and negatively affect ESVAGT’s spot business.

    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.
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