TAG crash took the wind out of UK sails

TAG crash took the wind out of UK sails

How serious are we about reviving UK industry and promoting innovation, Brian Nicholls wonders, as a British offshore company ahead of its time on Teesside passes into German and Danish hands?

One normally extends the greater sympathy to creditors when a company crashes, since company crashes often indicate poor management or over-optimism. But it’s different, I believe, with TAG Energy Solutions, which fell into administration at Billingham with a deficit beyond £61m after winning just one big contract in three years, and is now no more.

That major contract was to supply foundations for the Humber Gateway offshore wind farm.

Costs escalated, which was blamed for TAG’s collapse. But surely the issue goes back further. Surely it has also been a victim of our country’s ambivalence, havering and short-sightedness, towards our future energy needs, a victim also of cavalier attitudes towards our offshore industry.

In an earlier existence TAG during 2009 had a £300m contract snatched from it 30% into completion. Reportedly, the project had become “too risky for North East industry”, a view endorsed at government level. Admittedly the commissioning firm Sea Dragon, massively supported by Lloyds Bank, needed additional finance to complete this, the UK’s biggest drilling rig construction project for more than a generation. None was forthcoming. The job was switched to a Singapore firm willing and equipped to finish the job and be paid at the end.

Alex Dawson, TAG’s chief executive then, and his management team were bruised but not broken. TAG completed their contribution, settled their bills and regrouped. It became a £20m project management and construction manufacturer of bed-to-surface foundations for offshore turbines – and the first UK builder to secure a substantial renewables project in British waters.

Its Billingham site was ideal for helping to plant 73 turbines on the £736m farm off the Humber Estuary, which from this year was expected to power up to 170,000 homes equivalent.

The Humber Gateway, through E.ON, was TAG’s opportunity to take Britain into an expanding segment of European industry – critical to the nation’s balance of payments, surely, and at a time when about 80% of work on offshore wind farms in the North Sea was being done by industries of other countries such as Germany, Denmark and Holland – countries that seem to have fewer issues than us about wind energy.

But as Dawson told BQ then: “With One North East’s demise no-one was really promoting this region and its capabilities.” Ironically TAG had already broken into the German market. But now two European firms have acquired the assets of Tees Alliance Group Corporate to establish a joint venture in offshore fabrication where TAG Energy Solutions once operated.

In late 2013 Alex Dawson had stood down after three years driving growth at TAG. His successor, Stuart Oakley, was at least able to pave a way for Denmark’s Bladt Industries and Germany’s EEW Special Pipe Construction to launch their joint venture, Offshore Structures (Britain) Ltd. It will create initially 100 jobs where 74 were previously – and 150 might have been. That, at least, is a relief.

Bladt and EEW propose to invest £30m in the purchase, expansion and upgrading there and Karl Klös-Hein, managing director of EEW, with foresight apparently absent here, sees the investment “as a step towards the further growth of our business in one of the most important European markets.”

The whole episode, as The Sunday Times has observed, indicates trouble in the offshore wind industry, a central plank of the Government’s £120bn low-carbon energy overhaul. Had further contracts been made available to bid for, TAG Energy Solutions might have remained Britain’s beacon in offshore renewables.

Despite stated proselytism to “heavy industry” is it a belief that banking, government and private investment circles still shrink from? Despite innovation being our region’s current buzzword, a valuable entry point to a new indigenous industry has closed. Investors and backers are nowhere near, and Britain, in an election year, still awaits a coherent solution to its energy crisis. And, as wind energy’s critics too often fail to acknowledge, whereas it will take up to 20 years for a new nuclear plant to produce, wind structures can produce within 12 months.