What bigger business blow could you suffer than have a £300m contract snatched away 30% into completion? That’s the frustration and anguish Alex Dawson and his management and shopfloor teams suffered when the Sea Dragon contract in 2009 was switched suddenly from Teesside to Singapore.
Reportedly, the project had become “too risky for North East industry” - a view even government of the day subscribed to, despite the ambiguous implication that Teesside’s centuries of experience in shipbuilding, rig and platform construction no longer met up to the job! But as Dawson details now, Sea Dragon was a recession victim.
He explains: “We had 30% constructed when banks pulled the plug. We were contracted to the company Sea Dragon, which was still trying to raise funds to finish the contract. It had a massive loan from Lloyds Bank but during that period, I understand, they were supposed to be raising equity in support of that loan also.
“Again, recession hit. They couldn’t raise the equity. I think Lehmann Brothers got involved before they went pop. I think the bank simply said that in the situation it couldn’t continue to fund the debt. I’ve no inside knowledge, but I understand when KPMG got to represent Sea Dragon they’d had an offer from a Singapore company that was prepared to finish the project and only get paid at the very end. We couldn’t compete with that.”
Sea Dragon Offshore was then a new owner and operator of semi-submersible rigs. The one it wanted Teesside Alliance Group to undertake at Haverton Hill, with a hull bought from the Sevmarsh shipyard in Russia, represented the UK’s biggest drilling rig construction project for more than a generation. Indeed, it was projected as one of the world’s largest semi-submersible rigs and a forerunner of two further.
“In the end,” says Dawson, “we had to regroup here and decide what to do. We completed the work available, settled with all our creditors and emerged in a reasonable position ready to start again.”
Now four years on, as TAG Energy Solutions, it’s a project management and construction manufacturer of bed-to-surface foundations for offshore turbines - and the first UK manufacturer to secure a really substantial renewables project in British waters.
Its tubular production facility is state-of-the-art quality that could eventually earn billions. With its automated facility, rolling and welding the large diameter tubulars, and building solid foundations, it will now tailor to order monopiles, tripods, jackets and transition pieces – for renewables or oil and gas purposes.
On 42 acres of windswept industrial coastland where 6,000 early 20thC Teessiders once built ships, TAG is raising its workforce to 150 to turn out 16 monopiles and transition pieces for E.ON’s offshore wind farm, Humber Gateway. TAG Energy Solutions thus has clinched the big one, helping plant 73 turbines on the £736m farm off the Humber Estuary, generating from 2015 up to 219MW of electricity - enough to power up to 170,000 homes.
Chief executive Dawson says: “We’re the first UK manufacturer with this kind of set-up in a perfect location, beside where all offshore renewable developments are taking place off the east coast of Britain.
"We’ve converted our idea on paper into the UK’s best facility for our kind of workload, competing now with well established companies in Europe.
“No other company in Britain has a riverside set-up like this, or a production rolling facility like this. There are other companies in the renewables market. But the nearest facility to ours is on mainland Europe.”
Are there more big opportunities then? “I really think so. The market’s extremely large right across Europe, particularly in Germany. We haven’t been sitting around waiting for Round 3 (the UK Crown Estate’s most recent list of bidders chosen to develop up to 32GW of offshore wind farms). When you look at developments necessary over the next decade, the existing manufacturing capability is insufficient.”
E.ON has given TAG the opportunity to prove it’s a key British manufacturer in the European industry, where main competition in Germany, Denmark and Holland has been in renewables for many years. Could TAG break into the German market, then?
“Absolutely. German manufacturers are good. They have a headstart. But we were the first UK company last year to deliver a product into the German market, a project for the Riffgat development. We had to achieve all the necessary German standards, particularly in welding. Our quality was very high, our delivery prompt.
“That was our proving. We’d done small contracts. Riffgat was the next step up. This year is about building and expanding on the like of Humber Gateway - a strong foundation of quality going for bigger and more valuable workloads.”
So did it take courage to enter the renewables ring? “After Sea Dragon, oil and gas business was thin in 2009. We had the option to close up or look elsewhere. I looked into renewables. I felt we could move into this.”
To get backing for a new venture took determination as steely as those titans TAG now produces. The firm did raise £17m in the private equity market as starters, then got £1.5m from what was One North East and £1.5m grant support from the Department of Energy and Climate Change. Platina Partners, an independent European investor focused on renewable and energy infrastructure, and the Environmental Technologies Fund (ETF) committed too.
“With that early £20m we built this new state-of-the-art rolling facility, and a new painting facility. It took all of 2010 to raise the cash. You circulate with a power-point presentation saying: ‘This is a great idea. Give me 20 million.’ It took some convincing, being the worst possible time to raise funds. We’d entered the recession by the time we had this bright idea,” he laughs as he remembers.
“But we managed. We put up new buildings, put in the equipment. Then 2012 was proving time. We did a series of small contracts leading to this major one.” He holds Churchillian conviction about the renewables breakthrough nearing not only for TAG but for an entire North East cluster beavering between Berwick and Saltburn.
“The North East has potential to become a global hub for offshore renewables. “It’s a unique region in geography, experience, infrastructure and technical capabilities,” he insists.
With about 80% of work on offshore wind farms in the North Sea done presently by non-UK resource, he and George Rafferty, chief executive of the sector body NOF Energy, created Energi Coast, the region’s renewables group and supply chain now led by a steering group of more than 20 firms, with Dawson chairing.
“With One North East’s demise no-one was really promoting this region and its capabilities,” he recollects. “One reason so much on renewables was done externally was because of perceptions that no suitable infrastructure existed in the UK. LEPs and councils do a great job. But we wanted our profile up to a global level.
“Besides manufacturing, many firms do design and geology work - all sorts of things. In the North East about 6,000 people work in renewables, mainly in offshore. About £400m of private development has gone into it. So a lot’s going on.”
Of TAG he says: “For me it’s very much long term, sustainable and offering to create a new manufacturing base for the future generation. People entering now could expect a 30 year career at least.
“For me, it replaces the oil and gas industry I remember as a young engineer.” But the businesses will have to run on a long-term volume production basis to meet UK power needs.
“This isn’t like an oil and gas yard, where you do a job then nothing until another job comes. We want to leave cyclical activity for something more like Nissan, producing thousand ton lumps weekly, working seven days a week, three shifts round the clock.
“That will enable the vast quantity of units needed to be delivered.” As to bringing on the workforce of tomorrow, TAG has five apprentices already, and has taken on two qualified engineers in their late 20s.
“What’s interesting,” he observes, “is that this is engineering, heavy steel and all, but because it’s renewables with a green and environmentally friendly label, it becomes more than just engineering.
“Young people who might have avoided oil and gas thinking it a dirty non-environmental old industry will come into this industry. We’re gaining interest, which is good.”
TAG also works presently with Principle Power (Europe) and the Department of Energy and Climate Change to develop innovative floating support structures for offshore turbines, tantamount to mini sub-submersibles, to work in depths of up to 60m compared to the 30m of a monopile.
Proving its ongoing prowess in carbons, TAG recently completed an initial offshore foundation piles contract for Saipem, to support a jacket construction in Elgin B Oil & Gas field.
This involved structures 100m long, justifying the retention on site of one of the UK’s longest remaining construction halls at 174m. While the past year hasn’t boomed for offshore renewables - “projects haven’t failed to materialise but still face hurdles, particularly in finance” - Dawson suspects 2014 and 15 will be key years, with a good 50 years’ work after, including operation and maintenance.
“There’s traction already,” he suggests, “in the Government’s proposal now to have 50% of UK developments made at home. That will encourage investors towards something far from old fashioned steel bashing.”
The strong commitment needed from government, in terms of targets in carbon reduction and the like, is approaching as the Energy Bill nears adoption.
“Then the industry will know where it’s going. There’ll be more market confidence projects come forward,” Dawson predicts. He’s certain too: the UK’s future energy provision will be a balanced mix, with fossil fuels, renewables and nuclear.
“We don’t want the lights switched off. Here’s a great opportunity for UK energy to have its own security and be in charge of its own destiny.”
Oh, and whereas it will take up to 20 years for a new nuclear plant to produce, wind structures can produce within 12 months.
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