Energy Transition

Black-to-green in the red | Saipem plunges as offshore wind projects prompt profit warning

Shares down by almost 30% as transitioning oil & gas contractor says review of backlog shows big impact from pandemic and inflation

Saipem played a role in Hywind Scotland.
Saipem played a role in Hywind Scotland.Foto: Equinor

Shares in transitioning oil & gas contractor Saipem plunged on Monday after it posted a profit warning and flagged sharply lower than expected earnings from projects, including some in the offshore wind sector where the group has been one of the most ambitious 'black to green' players seeking new horizons in renewables and hydrogen.

Italy-based Saipem’s shares were at one stage trading almost 30% lower as it said it was talking to its main shareholders over their “willingness to support an appropriate and timely financing package” in light of a €1bn ($1.2bn) deterioration in expected consolidated adjusted core earnings for the second half of 2021 compared to an earlier positive forecast.

The company said that was down to a review of its backlog that “indicates a significant deterioration of the full life margins of some projects related to E&C Onshore and offshore wind, due to the persistence of the pandemic and the current and prospective increase of the costs of raw materials and logistics”.

Saipem added it had also seen “recent further difficulties in offshore wind projects, for which impacts from delays in critical supplies are combined with revised estimates of execution times and costs”.

Consolidated revenues for the second half of 2021 are seen as €1bn lower than previously expected at €3.5bn.

Saipem said the scale of its expected annual loss could trigger rules that allow banks to demand early repayment of some loans – prompting it to open talks with lenders and its main shareholder, the Italian oil & gas group Eni and CDP Industria.

Saipem did not specify which offshore wind contracts had contributed to the profit warning, but the Italian group has made major inroads into the sector in recent years, including a role in the installation of the pioneering Hywind Scotland floating project, and winning work to install substations at the world’s largest wind at sea development under construction, the 3.6GW Dogger Bank off the UK.
In mid-2021 Saipem struck a deal to buy the floating wind business of French marine renewables outfit Naval Energies and is advancing an offshore wind-plus-hydrogen project in the Adriatic seen as one of the most innovative globally. It is also partnering with Equinor in floating solar.
Saipem executives told Recharge in early 2020 that the ambition was for 50% of income at its offshore engineering and construction (E&C) division to come from “non-oil” projects within a decade.
The group has already been linked with setbacks in the offshore wind sector, however, after reporting a drag on financials from a project that is believed to be the 450MW Neart na Gaoithe (NNG) wind farm off Scotland, where Saipem is main construction contractor for developer EDF.
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Published 31 January 2022, 10:50Updated 31 January 2022, 11:46
SaipemItalyEuropeOffshorefloating