Empire Wind 2 monopiles contract terminated

Sif received a contract from Empire Offshore Wind for the production of 54 monopiles and transition pieces for Empire Wind Part 1 and 84 monopiles for Empire Wind Part 2. Sif was also in exclusive negotiations with Empire Offshore Wind for the production of 84 transition pieces for Empire Wind Part 2. The termination of the Empire Wind 2 contract by Empire Offshore Wind means that the previously contracted capacity is being removed from Sif's order book. As a result, Sif's order book currently totals 550 kton (including the portion of the order book relating to production in the fourth quarter of 2023), of which 210 kton is under exclusive negotiations. Production of Empire Wind 2 was planned for the period 2025-2026.

Under the terms of the Empire Wind 2 monopile contract, Sif is entitled to cancellation fees in the event of early termination. Equinor will attempt to close any gaps in Sif's production schedule resulting from the termination of the Empire Wind 2 contract. A successful attempt could result in a reduction of the compensation payments to which Sif is entitled under the contract terms.

The cancellation will not affect the financing of the expansion plans in Rotterdam, which are underway and on schedule. A budget of €328 million has been secured for the expansion plans, including €50 million in advance payments by Empire Offshore Wind, which were made in 2022. The portion of the advances related to Empire Wind 2 (€30.5 million) will be converted into a perpetual bond. The bond has no fixed maturity date and can be redeemed by Sif at any time against the principal amount, together with accrued and deferred interest. There is no risk of covenant breach as a result of this cancellation.

The event will impact the expected production volumes for 2025 and possibly 2026. The expected results that Sif announced in conjunction with the final investment decision in February 2023 remain unchanged for 2025 (EBITDA of €135 million) due to an expected contribution to results from the rescheduling of the order book and reimbursement of cancellation costs. The cancellation will not affect the start-up of the new factory, although Sif expects the production ramp-up to be less steep than initially planned. Despite this cancellation, Sif is confident that it can successfully meet the production volumes for 2026 and that the volume and EBITDA projections for 2026 can be maintained with an EBITDA of at least €160 million.

Fred van Beers, CEO of Sif Holding: "While it is disappointing that Empire Offshore Wind has had to temporarily terminate the supply contracts for its Empire Wind 2 US project, it is also clear that Sif's monopile contract for Empire Wind 1 is not affected. "

From a broader perspective, we are confident that offshore wind developments in the United States, as is the case in Europe and the United Kingdom, will continue to accelerate given the urgent need for green energy and the reduction of global warming. Empire Wind 1 remains, as originally planned, the launch project for our recently expanded production facility at Maasvlakte 2, which will begin production at the end of July 2024. First steel deliveries for this project are expected in January and February 2024.

In the coming period, we will continue to discuss the consequences of this termination in the same constructive manner as we have always done with Empire Offshore Wind, as a respected customer and one of our launching customers, and with Equinor, as a shareholder in the company. Together, we will pursue as many mitigating measures as possible for both Empire Offshore Wind and Sif. This includes our full support in exploring the possibility of relocating and/or booking other projects for the relevant capacity.

Note: Empire Offshore Wind has issued a press release regarding this termination, which can be found here: Empire Wind 2 offshore wind project announces reset, seeks new offtake opportunities.

Sif is a total solutions provider for the design and engineering excellence of offshore foundations for wind farms, including logistics and marshalling services. Sif traditionally serves the Northwest European markets and is exploring its global presence. Sif combines two highly automated and flexible production facilities in Roermond and Rotterdam (Maasvlakte 2) with technological leadership in the rolling and welding of heavy steel plates, based on 75 years of experience and innovative, in-house developed techniques and processes. Sif primarily produces monopiles, transition pieces, and piles used to anchor jacket foundations in the seabed for offshore wind turbines.

In February 2023, Sif decided to invest €328 million in the expansion of its production facilities at Maasvlakte 2, Rotterdam, the Netherlands. This investment will more than double Sif's production capacity to 500,000 tons, creating the world's largest monopile plant. The project is being financed with €100 million in upfront payments from launch clients (Empire Wind and Ecowende), €50 million in preferred share capital from Equinor, €50 million in ordinary share capital from a rights issue in July 2023, €80 million from a term loan, and €40 million from a lease facility. Construction of the expansion project began in April 2023, and first production is scheduled for July 2024. Completion is expected in January 2025.