Seaway 7, a fixed-bottom offshore wind installation affiliate of Subsea 7, on Monday revised its adjusted EBITDA guidance for the full year 2022, citing issues with offshore wind projects in the Netherlands and Taiwan.
The company said its revenue is expected to be in line with previous guidance towards $1 billion, with an Adjusted EBITDA margin now expected to be approximately 6%.
Seaway 7 said it had encountered reduced progress on the Hollandse Kust Zuid offshore wind project in the Dutch North Sea, relating primarily to adverse weather conditions and mechanical breakdowns. The cost increases associated with these challenges will result in a contract loss provision of approximately $30 million to be recognised in the second quarter of 2022.
In the UK North Sea, the installation of foundations for the Dogger Bank A and B projects is expected to start in 2022, as originally planned, although due to Seaway Alfa Lift foundation installation vessel's delivery delay, the Seaway Strashnov vessel will now be deployed on the project for a full 2023 campaign. The increased cost of the extended Seaway Strashnov campaign will result in an increase in the contract loss provision of approximately $35 million, the company said.
"This loss will be reflected in a revision to the preliminary purchase price adjustment relating to the combination to form Seaway 7 ASA and will not affect Adjusted EBITDA. This revision will be recognized in the second quarter 2022," Seaway 7 said. To remind, Subsea 7’s fixed offshore wind renewable segment and OHT AS last year combined to form Seaway 7.
Furthermore, Seaway 7 said that the company had also encountered reduced progress on the Formosa 2 project in Taiwan, related primarily to lower offshore productivity.
"Pursuant to an indemnity from Subsea 7 as part of the combination to form Seaway 7 ASA, the related costs will be reimbursed by Subsea 7 and will not affect Seaway 7," Seaway 7 said.
In a separate statement, citing Seaway 7's provisions, Subsea 7 also said it would revise its Adjusted EBITDA guidance for the full year 2022, and that Seaway 7's offshore wind project delays as well as increase in the existing provision on the Formosa 2 project, including the effects of Covid-19, would impact Subsea 7’s Adjusted EBITDA for 2022, which is still expected to be broadly in line with 2021.
Seaway 7 ASA is listed on Euronext Growth and its financial statements are consolidated as part of the Subsea 7 Group.
As part of the combination agreement between Subsea 7’s fixed offshore wind renewable segment and OHT AS to form Seaway 7 ASA, the economic interest on the Formosa 2 project was retained by Subsea 7 S.A. and not transferred to Seaway 7 ASA. The financial outcome of this project is therefore recognised in Subsea 7’s Renewables segment and not in the financial statements of Seaway 7 ASA.