2nd Spanish Wind Power Congress Madrid;June 28th 2016 0 There ain't no mountain high enough, Reducing the cost of Ain't no valley low enough, Ain't offshore no river wide wind enough by sharing To keep us from getting to you. risk improvement measures..an insurer s approach 1
AGENDA Brief industry introduction facts and drivers Claims; facts and drivers Introduction to THB Key drivers for offshore cable losses Where can insurers help projects? Q&A Wrap up and close
PROVIDING CAPACITY TO 75 % OF THE WORLDS OFFSHORE WINDFARMS 1. West of Dudden Sands (389 MW) 20. Horns Rev II (209 MW) 39. Vindeby 58. EirGrid 2. Gwynt Y môr (576 MW) 21. Rhyl Flats (90 MW) 40. Bockstiegen 59. NordLink 3. Global Tech I (400 MW) 4. Dan Tysk (288 MW) 5. Baltic II (288 MW) 22. Robin Rigg (180MW) 23. Rødsand II (207 MW) 24. Wave Hub 41. Nysted / Rødsand (166 MW) 42. North Hoyle (60 MW) 43. Lynn & Inner Dowsing (194 MW) 60. NSN Link 61. Nemo Link 6. Riffgat (108 MW) 25. Samsø 44. Scroby Sands (60 MW) 62. Hohe See 7. Meerwind (288 MW) 26. Hywind 45. Blythe 8. Butendiek (288MW) 27. Horns Rev I (160 MW) 46. Northwind (272 MW) 9. Karehamn (48 MW) 28.Lillgrund (110 MW) 47. Amrunbank (288MW) 10. Humber Gateway (220 MW) 29. Borkum West II (200 MW) 48. Q10 (129 MW) 11. Teesside (62 MW) 30. C-Power Phase II+III (295 MW) 49. BorWin 1 & 2 12. Baltic I (48MW) 31. Alpha Ventus (60 MW) 50. SylWin 1 13. Robin Rigg (180MW) 32. Nordsee Ost (288 MW) 51. HelWin 1 & 2 14. Barrow (90 MW) 33. Sheringham Shoal (315 MW) 52. DolWin 1 & 2 15. Burbo Bank (90 MW) 34. Ormonde (150 MW) 53. Fukushima Recovery Project phase 1 + 3 16. Kentish Flats (90 MW) 35. London Array Phase I (630 MW) 54. Gemini Offshore Wind Farm (600MW) 17. Greater Gabbard (504 MW) 36. Lincs (270 MW) 55. Wikinger 18. Thanet (300 MW) 37. Utgrunden 56. Nordsee One 19. Lillgrund (110 MW) 38. Ytre Stengrund 57. WindFloat Market leading experience in Offshore projects 3
DEVELOPING WITH THE INDUSTRY First offshore wind project in the world First onshore wind park First floating turbine First offshore grid/cluster 4
Indsæt første kapitel overskrift via Indsæt/Sidehoved & Sidefod 5
Claims Facts and drivers 6
BUILDING AN OFFSHORE WINDFARM 500MW+ windfarm European waters, depths 20-30 m ECV 1.75bn GBP
BREAKDOWN OF CLAIMS (CONSTRUCTION) Source: Lloyd Warwick & Codan 8
WHY ARE CABLE CLAIMS SO COMMON.. AND SEVERE? Poor workmanship or complacency Sub-contractor inexperience Recklessness due to tight deadlines Use of the wrong vessel or equipment for the task The time allocated for these sub-contractors are kept to a minimum due to high vessel costs - sometimes dramatically shortened by weather conditions There is also a tendency for the cable laying sub-contractors to take advantage of an insurer at a time of stress in some cases the cable manufacturer will insist on being the cable layer as well, this leads to an exclusive market for the insurer and potentially larger claim costs Availability and cost of vessels can also extend to the waiting on weather extensions And lastly, it is a complicated task e.g. busy shipping lanes, weather and tidal effects etc.
COST DRIVERS Claims costs allocation Vessel charges Special machinery Site works Engineering costs Admin costs Materials 5% 8% 5% Claims drivers General repair times Export cable repair up to 6 months / 20 mgbp Array cable repair up to 3 months / 3 mgbp Vessel charges Jack-up; 20mGBP per month worst case Cable vessel; between 80-225 tgbp per day Weather depending 16% 1% 65% Costs and drivers likely to change Expiry of warranties on operational assets Business Interruption insurance will take hits Current insurance market already under pressure and will not sustain at existing premium rates 10
Where can insurers help? 11
EARLY INVOLVEMENT IS KEY Risk transfer via broker Designing the insurance package Deductibles, waiting periods, captive involvement Risk management Business Continuity Planning Design issues; redundancies Scope of works for MWS Time schedules Lessons from losses Proactive claims handling Mitigating downtime Reducing overall cost 12
PROJECT COSTS = CAPEX + OPEX Grid ready for export Planning, Contracting, Construction Operation Dismantling Capex cost 20 to 25 year Opex cost Revenue Return Business Case Design phase is important as chosen quality will have an impact on the later coming Opex cost which again will have significant influence on the business case. Vital to involve O&M early in the process to enhance continuity. 13
A RECENT EXAMPLE OF A CAPEX/OPEX CLASH Bathymetric surveys showed significant scouring across the export cables Recommendations given during project phase were not followed as deemed to expensive for the capex project team Higher costs transferred to OPEX Potential major loss - Insurers reaction The incident could have been avoided 14
Top 5 priorities for project owners Focus on the risk instead of the Capex and involve O&M-team in construction Keep contractual hierachy as simple as possible and only use contractors with a strong track record Involve a specialist Marine Warranty Surveyor not a generalist! Timeline and Business Continuity Planning strategies are key! Involve insurers early 15
THANK YOU Jonas Dalsgaard International Offshore Wind Underwriter Renewable Energy Codan / RSA Insurance @: jdo@codan.dk Tel: +45 3037 8770 16