Financial Innovation Set to Cut the Cost of Offshore Wind

FTI Consulting Releases First FTI Intelligence Report

LONDON, May 8, 2014 /PRNewswire/ -- FTI Consulting, Inc. (NYSE: FCN), the global business advisory firm dedicated to helping organisations protect and enhance their enterprise value, today announced the release of an FTI Intelligence report, the first of a series of data-driven publications evaluating competitive markets, policy, finance, technology and business models across the energy spectrum.

The report, Innovative Financing of Offshore Wind, focuses on renewable energy and explores the significant potential for cutting the cost of energy from offshore wind power by reducing financial fees and interest charges, which represent an astonishing 28 percent of project life cycle expenditures. The report is authored by members of the FTI-CL Energy practice, a cross-practice team of energy experts from both FTI Consulting and its subsidiary, Compass Lexecon.

A cost-of-equity sensitivity analysis by FTI-CL Energy professionals demonstrates how small changes in financing variables have a major impact on offshore wind energy costs to the consumer. The levelised cost of energy ("LCOE") is extremely sensitive to changes in debt margin. This analysis found that an increase of 100 basis points results in an average 3.4 percent increase in LCOE.

"Offshore wind energy economics are strongly governed by life cycle financial costs, and the potential to reduce these is considerable," explained Aris Karcanias, Managing Director at FTI Consulting and Leader of the Company's FTI-CL Energy practice in Europe, the Middle East and Africa. "Although financial costs normally are not expressed in terms of their share of overall capital expenditures, identification of the size of the opportunity to reduce capital expenditures shows the importance of financial innovation in providing cheaper electricity from offshore wind."

The report also found that the entry of new investors and lenders to the renewable energy sector with innovative ideas for structuring both equity and debt is applying beneficial pressure to financial margins. "Respectable returns without exposure to risk" was a strong message from European wind industry and financial sector chief executive officers interviewed for this report.

"Corporate and institutional investors looking for low risk, long-term and predictable yield investments are signing on pension, insurance and sovereign wealth funds, to name a few," said Athanasia Arapogianni, Consultant and member of the Company's FTI-CL Energy practice. "Innovative financing and an increase in the number of players in offshore wind finance are creating more competition among lenders, which will lead to lower charges, fees and risk premiums on interest rates."

The report further discovers that offshore wind now rates as an infrastructure asset favourably comparable with airports and highways, qualifying it as a safe harbour for investment and unlocking money markets previously closed to the sector.

"New classes of investors and lenders now are competing for involvement in offshore wind farms during construction and even pre-construction — once considered risky compared with investments in an operational facility," said Mr. Karcanias. "The latest innovation under discussion is bond finance. Investors are well-acquainted with bonds as a financing instrument and are using them to transform offshore wind projects into easy-to-comprehend investment opportunities, which, in turn, will assist in attracting capital to the sector."

In addition to the influx of capital for offshore wind investments, utilities and other equity investors are exercising exit divestment strategies and are selling their interests in completed projects to release capital back into more offshore wind construction.

"Replacement of equity with debt is creating a secondary market in refinancing offshore wind projects," continued Mr. Karcanias. "A clear pattern is emerging of how offshore wind construction will be financed in the future. Capital recycling and the lower capital expenditure levels achieved through learning curve experience are benefits expected to contribute to decreasing annual capital requirements for construction."

The report includes an analysis of this trend and reveals that 46 percent of the required investment by 2020 will be met by recycled capital. Global capacity today is about seven Gigga Watts ("GW") and the report projects capacity reaching 52GW in 2020, driven by notable growth in northern Europe, and 112GW by 2025, as markets in Asia and America continue to grow.

To purchase the FTI Intelligence Innovative Financing of Offshore Wind report in its entirety, visit the FTI Intelligence website at www.fti-intelligence.com or contact Aris Karcanias at aris.karcanias@fticonsulting.com.

Tuesday's updates on Nordic Business...

Nordic markets are securing bases... 

1) SinterCast secures new order for commercial vehicle series production installation
• Major European commercial vehicle OEM orders SinterCast process control technology
• SinterCast System 3000 to be installed in captive foundry during first quarter of 2013
• Product development and series production of heavy-duty CGI cylinder blocks
(http://www.sintercast.com/corporate)

2) According to Statistics Finland, the wages and salaries sum of the whole economy was 2.3 per cent greater in the past October to December period than in the corresponding period twelve months earlier. In December alone, the wages and salaries sum of the whole economy fell by 0.8 per cent year-on-year. In the October to December period one year ago, the wages and salaries sum grew by 3.4 per cent.

3) Ericsson sign USD 1 billion managed services contract for wireline and wireless networks for North and West India
• Covers 100,000 km of fiber and mobile infrastructure in 11 telecom circles, across North and West of India, including Delhi and Mumbai
• Will lead to productive integration of 5,000 employees by moving them to Ericsson - providing them global opportunities
• Integrated management to deliver world class customer experience using global expertise and bringing in operational efficiencies and cost optimization


4) Swedish Orphan Biovitrum
- Recombinant Fc fusion proteins show potential to transform care by providing long-lasting protection from bleeding with fewer injections than the current standard of care -
Biogen Idec (NASDAQ: BIIB) and Swedish Orphan Biovitrum (Sobi) (STO: SOBI) released data that confirmed the ability of investigational recombinant factors VIII Fc fusion protein (rFVIIIFc) and IX Fc fusion protein (rFIXFc) to provide long-lasting protection from bleeding with fewer injections than are required with the current standard of care for people with hemophilia. The data, from the largest phase 3 registrational studies conducted in hemophilia to date, were presented this week at the 6th Annual Congress of the European Association for Haemophilia and Allied Disorders (EAHAD).


5) Presentation of Telenor's fourth quarter results 2012. Telenor will present its financial results for the fourth quarter 2012 on Wednesday 13 February 2013 at 09:00 hrs Norwegian time/CET. The presentation, which will also be broadcast live over the Internet, will be held in Auditorium Voice, Telenor Expo Visitor Centre at Fornebu near Oslo. The figures will be published on Telenor's website at 07:00 CET. CEO Jon Fredrik Baksaas and CFO Richard Olav Aa will present the results. The presentation will be held in English.

Toyota is the Latest Major Automotive Brand to Leverage Best-in-Class Nokia Mapping Technology using its Local Search for Automotive.

Espoo, Finland - Nokia today announced that Toyota Motor Europe is the latest automotive brand to select the HERE platform's Nokia Local Search for Automotive to power its next generation Touch & Go  navigation and infotainment systems. Nokia Local Search for Automotive is a specifically designed solution developed to fulfill the requirements of the automotive industry.


By leveraging Nokia Local Search for Automotive, Toyota drivers will have fast and easy online access to the latest high-quality industry mapping information and community-generated content - including millions of ratings, reviews and images fed directly into their cars.

The introduction of this service demonstrates how Nokia's HERE business is continuing to extend its industry-leading portfolio of products to meet the needs of its automotive customers.

"The ability to deliver comprehensive and driver-relevant content tailored to automotive requirements makes the Nokia Location Platform an interesting proposition," said Derek Williams, General Manager, Telematics & Multimedia, Toyota Motor Europe. "It is an excellent basis for creative location-centric concepts and we are delighted to bring this technology to our customers. Nokia Local Search for Automotive is expected to be commercially available in Toyota systems from early 2014 in Europe, Russia and the Middle East."

Moving forward, Toyota Motor Europe will collaborate with Nokia to study more services that leverage the Nokia Location Platform, including best-in-class content. Nokia is currently the leading company providing end-to-end mapping, navigation and location solutions for the automotive industry.

"Nokia and Toyota share the same vision of what the in-vehicle location experience should be - immersive, always on. Today's announcement underlines Nokia's commitment to providing fresh content and services to the auto industry so it can deliver innovative consumer solutions," said Eric Fumat, Vice President Sales & Business Development EMEA, Nokia Location & Commerce.

Danish Business briefs

Carlsberg blames poor performance on weather - Danish Nets move to buy Luottokunta - Pension fund buying stake in ISS

Despite a boost from the Euro 2012 football tournament, Carlsberg failed to fulfil its quarterly profit forecasts, blaming bad weather. A 5 percent drop in consumption across western Europe heavily outweighed the boost in Polish beer sales during the Euro 2012 tournament. “This [fall] was a little more than expected with Euro 2012 taking place in Q2 and was driven by very bad weather,” Carlsberg said. The company also reported 1 percent growth in Russia despite rigid alcohol regulation and high beer taxes designed to tackle alcohol abuse. Carlsberg has keept its full-year earnings prediction: an operating profit of 9.82 billion kroner, matching last years’ performance. The Danish based brewer, the fourth-largest in the world, is responsible for many brands such as Carlsberg, Tuborg and Baltika. “There is an effect of the weather, but otherwise this could be a sign that the economic crisis is felt on sales of the more expensive brands.” Brand analyst Stig Nymann told Reuters.

Danish payment solutions company, Nets, looks set to buy Finnish card payment service Luottokunta for 170 million euros. Luottokunta is responsible for all Visa and Mastercard transactions in Finland. It also produces the Lounasseteli luncheon vouchers. The merger will not take place until it has received approval at the Nets AGM and from the Finnish Finanacial Supervisory Authoirty. Nets employs over 2,200 staff in the Nordic countries, operating across a total of 12 countries. In 2011, combined net sales for Nets and Luottokunta neared 850 million euros, whilst they oversaw close to five billion card transactions. Luottokunta cheif executive Heikki Kapanen, said: “All the services will reamin as they are.” Talking about the future of the nearly 500-strong Helsinki workforce Kapanen said: “In time the change will affect us all, but in what way, nobody knows at this stage.”

The Kirk Kristiansen family will partner with a Canadian pension fund to invest 500 million euros to acquire a quarter of ISS, a Danish facility services provider. Kirkbi Invest, a holding company investing on behalf of the family, said the investment will give them a 26 percent stake in the company. Ontario Teachers’ Pension Plan, a pension fund managing the assets of 300,000 active and retired teachers, is providing 342 million euros – most of the investment. ISS helps companies manage facilities as diverse as cleaning, catering and security, and is aiming to reduce debt before an initial public offering. The company operates across 50 countries, employs 530,000 staff and reported nearly 13 billion dollars of revenue. “[ISS’s] management is experienced, with deep industry knowledge and has put the company on the right strategic path,” Jo Taylor, the vice-president of Teachers’ Private Capital said. “We look forward to helping ISS expand.”

Source: The Copenhagen Post (http://cphpost.dk/)

Outlook for the economy remains fairly subdued

According to the Business Tendency Survey conducted by EK in April, Finnish business growth stabilised in the early part of the year following the increase in uncertainty last autumn. The current business situation is described as somewhat weaker than average in all the main sectors.

The business outlook for the coming months is cautious in all the main sectors but has improved from the January level. No substantial changes in the general economic conditions are expected in the next six months. 

Output and sales projections for the coming months predict very slow growth at best. Gradual acceleration of growth is expected to take place in late summer and autumn in manufacturing and services. However, employment expectations are very low, and the labour force is expected to decline in all but the service sectors. 

In April, the business outlook balance indicator for manufacturing was +9, up from -6 in January. In all, 18% of respondents expected an upturn during the summer and early autumn, while 9% felt that the economy would deteriorate during this period. 

The business outlook for construction improved to -5 in April from -32 in January. A total of 11% of companies anticipated an upturn, while 16% believed that the situation would deteriorate.

The business outlook for services improved to +2 in April from -8 in January. An upturn was forecast by 11% of respondents, while a decline was expected by just 9%.  

Output scarcely grew at all – expectations until late summer cautious
New orders received by manufacturing companies that responded to the survey remained at the same level during the first quarter as at the end of last year. In construction, the number of orders declined slightly compared with the end of 2011. In both manufacturing and construction, order books were reported to be slightly below average.  

Finished goods inventories decreased in manufacturing to normal levels. The volume of unsold dwellings owned by construction companies rose from low to average. 

Manufacturing companies that responded to the survey expect the number of new orders they receive during the second quarter to remain stable. In construction, however, the volume of orders is expected to continue to decline slightly. 

In manufacturing, output growth was rather slow at the beginning of the year, but slightly better than the low expectations of the previous survey. Output is expected to remain on the rise in the coming months, though the rate is expected to be sluggish. There are expectations of a tentative acceleration in growth in late summer and autumn. Construction output began to decline slightly in the early part of the year, and is anticipated to remain steady in the coming months. 

In services, sales were up moderately in the early months of 2012, as at the end of 2011. The rate was slightly quicker than forecast three months ago. Nevertheless, growth is predicted to remain slow in the coming months, but growth expectations for late summer are slightly better, as is the case for manufacturing. 

For manufacturing companies, the capacity utilisation rate recovered slightly from a dip in the autumn, but is still quite clearly below the long-term average. In April, 35% of manufacturing companies had unused capacity (43% in January). 

Employment expectations rather cautious – total labour force to decline
In the service sectors, the labour force growth almost stopped during the early part of the year. In construction, the total number of employees stayed the same, and in manufacturing it decreased slightly. Nevertheless, the employment trend as a whole was marginally better than forecast three months ago. 

Employment growth expectations are quite cautious. In both manufacturing and construction, the labour force is projected to decline slightly during the late spring and summer, and only service companies expect their labour force to remain steady. 

General picture lacklustre – but some companies suffering from labour shortages
Sales prices started to rise gradually in the manufacturing sector, and in services the rate of increase accelerated. In construction, sales prices remained unchanged. Costs rose quite strongly in all three main sectors. 

In the coming months, the rise in prices is forecast to slacken off in services. Prices are expected to rise slightly in manufacturing and construction. Cost pressures are expected to continue to be common despite an expected slowdown in the pace of cost increases in both manufacturing and services.

Profitability remained almost unchanged in all the main sectors during the early part of the year, and it is not expected to change substantially in the near future. 

In the construction and service sectors there are quite a number of companies experiencing insufficient demand and labour shortages, which is a reflection of the incoherence in the economy. In manufacturing, weak demand was clearly the most common factor holding back business activity. Over one third of manufacturing and construction companies reported weak demand, and in the service sectors the corresponding figure was one in five companies. A labour shortage was experienced by 7% of respondents in manufacturing, 15% in services and as much as 39% in construction. 

EK Business Tendency Survey
The Business Tendency Survey is published four times a year by the Confederation of Finnish Industries EK. The survey has been carried out regularly since 1966. 987 companies employing approximately 260,000 people in Finland responded to the April 2012 survey.