Subsea 7 S.A. (SUBC) Earnings Call Transcript & Summary

Welcome, everyone, to this virtual investor event focusing on renewables. Let me start with our usual disclaimer that today's presentations include forward-looking statements that reflect our current views and are subject to risks, uncertainties and assumptions. The forewording of this disclaimer can be found in the slide pack. Today's session will be split into 2 parts with a chance to ask questions at the midpoint and at the end. The presentations given today will be available to download from our website after it concludes. I'll now pass you over to John.

Good morning, and good afternoon to everyone, and thank you for joining us for our first virtual event. Over the last year, there have been many, many requests and a lot of interests in understanding our renewables business and its associated strategy. We've had questions from analysts, we've had questions from investors, and we've had questions from our own staff. So our aim today is to discuss our view of the renewables market and our strategy as to how we intend to address the opportunities in offshore wind. Hopefully, we'll leave you with a better understanding of the important elements of this element of our business that will be a key to the energy transition strategy. We've planned to do this afternoon in 5 modules, with various members of our team covering the industry; our capabilities; we've given you some case studies of some of the projects that we've done; a look at the floating wind market; and of course, the financial framework for the business today and moving ahead. The team have put a lot of effort into the event, and I hope you'll see it being as a useful session for everybody to gain a better understanding of this business. But first, I'd like to start with a high-level view of Subsea 7 strategy and how renewables fits into the group. So first of all, Subsea 7 is a company based on a set of values. And our core values are shown on the right-hand side of this slide. Historically, we've had 5 values, but in 2019, we introduced the sixth called sustainability, and that hold together all the relevant elements to do with sustainability and how we make sure we address that key stakeholder topic very, very well. What is Subsea 7 about? And what are we as a company? Well, our aim is to lead the way in delivery of offshore projects and services for the energy industry. And we know that, that energy industry is very much an evolving one, where we can see the growth of non-hydrocarbons and a rebalancing of the hydrocarbons portfolio inside Subsea 7's business moving ahead. So for us, it's about how do we make that transition in the business, balancing hydrocarbons and non-hydrocarbons moving ahead. If we go ahead to the next slide, please. We did get a lot of feedback and a lot of very positive requests from very relevant stakeholders that we should do more work on sustainability and to give you better access to the messages and the actions that we're doing on sustainability. So I was very pleased in the quarter 1 this year to have published Subsea 7's very first sustainability report, and a copy is shown here on the slide and available on our website. So the sustainability report is the -- bringing together a lot of the work that we've done in the company over the last year. On the right-hand side, you can see the key material elements of sustainability and how it affects Subsea 7 as a group. The 6 key areas are health, safety and well-being; business ethics; labor practices and human rights; the energy transition; our own operational eco-efficiency; and lastly, the ecological impact of the activities that Subsea 7 does in its various markets. So now let's look at the business and how we categorize the different sectors that we work in. We run Subsea 7 as 3 business units, which should be quite familiar to everybody on this call. The hydrocarbons CapEx business is traded under the Subsea 7 name and that works in the SURF and Conventional business. We also have a hydrocarbons Life of Field business, that trades under the name of i-Tech 7. And lastly, the renewables business, which is the element that we're looking at today, trades under the Seaway 7 brand. We'll look at how these different hydrocarbon and non-hydrocarbon elements fit together in our future look at backlog. Today, I'm very pleased to say at the end of Q2, we've got a $7 billion backlog inside the group, with around $2.2 billion in renewables and the remainder in the oil and gas sector. Now let's look at strategy in a bit more detail. When I took over on the first of January this year as the Chief Executive of Subsea 7, I felt it was very important that we try to communicate very clearly and succinctly what Subsea 7 is about and our future focus areas. You all have seen this messaging given in previous quarterly releases, and it's around the fact that we will have a hydrocarbons business, which is on the left-hand side of the slide, and a non-hydrocarbons business on the right-hand side of the slide. People that have followed Subsea 7 for a number of years know that we have run 4 parallel piles in the area of hydrocarbons, and it's all to do with what do we genuinely believe the Subsea field of the future looks like. It's become clear to everybody that making cost-optimized solutions for our clients in the hydrocarbon space is about how you link the system and its full delivery together and deliver that as 1 package to the client. That is a different element, which we've spoken to the investor community in the past. First of all is our focus on early engagements and partnerships. The final cost and the final performance of any field architecture depends on Subsea 7 becoming involved very early on and working with our clients to optimize that field and optimize the infrastructure, both from a CapEx and OpEx viewpoint. We also, as you know, have many strong and long-lasting partnerships, where Subsea 7 are the exclusive contracting partner for a number of oil and gas companies on a global basis. Secondly, we've always taken a view that system integration needs to bring together a set of standard products that we have in our portfolio and how do we bring that product and technology thinking together and how do we integrate it as a system. And we'll talk a bit further about some of the technologies that Subsea 7 have deployed in the last few years. Thirdly, as you know, we were one of the pioneers of integrating SPS and SURF and offering that as a package with our relationship with OneSubsea and Schlumberger, which we created in 2015. Lastly, how we digitalized the delivery of our projects and long-term services to our oil and gas clients is also a key to how we deliver the field of the future. So those 4 elements are being bought together in the next few years and will integrate further and will be a part of our hydrocarbon delivery. We feel very confident that we can work with clients to bring fields in at below $40 a barrel in the future. Now let's look at the right-hand side. One thing Subsea 7 had is a choice. Like many of our peers in the industry, we had 3 choices as to how we look towards the energy transition. Choice #1 was to ignore it and just hope it went away. Second choice was just to sit on the fence and just see how it plays out. Third, we have which -- the path that we've gone down, which is we definitely believe that we should be a proactive participant in the energy transition. And that also has 4 different areas that we'll spend some time with you today, explaining how all that fits together. Firstly, we've seen in the last year, and particularly, in the last 6 months, our key oil and gas clients made very clear declarations of their view that they're moving very actively now in the energy transition. Our European clients have said they want to get proactively into renewables as well as reducing the carbon emissions from their oil and gas fields. Our North American clients are focusing very much on carbon reduction. Secondly, we know we have a part to play our own scope on emissions from our own activities. We need to make sure that our business in the future is sustainable and is efficient from a carbon measurement system as we possibly can. Thirdly, we know that the industry is very much excited and looking at new technologies. Where does hydrogen fit in? And where does CO2 fit in? And what opportunities do these new markets offer for Subsea 7? And lastly, we already have a very, very strong position in offshore wind, and the bulk of today will be around giving you more understanding of that sector. So now let's turn the page and just talk a little bit about the 3 elements that we won't be covering much in detail today in the energy transition. So this is about the oil and gas and how we assist our clients in a lower carbon environment in the future. Well, first of all, I think it's become very clear to everybody that gas is the key transition energy mode that the world will need to go from our world of 2020 to the world that we wish to have in 2050. So gas will have a high level of focus inside Subsea 7, working on gas field development and LNG projects as we move ahead. Secondly, we know that our clients are also looking at how they can digitalize the information, streams and how they involve their contractors like Subsea 7, not only from an early engagement but right the way through the construction and in -- to opt some maintenance in the future. One thing that we've done in the last year is to develop a carbon estimated tool that we use at tendering stage and at the early engagement stage to work with our clients to give them a view of what the carbon estimate of the impact of that development will have to allow them to make their choices, not only from a cost impact, a flow assurance impact but also from a carbon disclosure impact. So that, too, is running in parallel with the Subsea Planner, the tool that we developed with Schlumberger that assists our clients in very quickly looking at many, many different ways of field architecture and lay in-fields out in their early engagements with us. Secondly, we've also done a lot of work on technologies. We know that some of the technologies that we have in the industry are quite intensive in terms of energy usage and quite intensive in terms of CO2 emissions. So if we look at the newest technology that we bought to the market in 2020, that is EHTF, which is a pipeline heating system that we have developed and deployed this year. It's already installed on Aerfugl and will be also installed in the U.S. on Manuel at the end of this year. So that is really around trying to understand how these new technologies will assist our clients in taking their CO2 emissions down. That technology is far more energy-efficient than the DEH technology that we used in the last few years in the industry. So substantially less emissions on the FPSO to heat the same distance of pipeline that we would have done under old technologies. Lastly, electrification. We know that the clients are very much looking at how they can electrify their oil and gas fields. And that's around again reducing the CO2 emissions from the development of oil and gas fields. We've then been involved as a company in a number of the key power-from-shore projects that the industry has put into place in the last 5 years. We installed 163-kilometer power-from-shore cable from Martin Linge in Norway a few years ago. We're also working today on an early engagement SIA FEED study from Shell in Norway to electrify the Ormen Lange field and bring power to allow compression and our late life pumping into that reservoir to enhance recovery there. Lastly, as you might have seen, we have been selected for Tampen Hywind (sic) [ Hywind Tampen], the first floating wind development to power an offshore field for Equinor in Norway. So that's the lower carbon development and how we're assisting our clients on that. Now let's look at our own activities and the work that Subsea 7 does every day. So really, for us, we also know that we have a part to play in how the energy transition takes place. And we focused a lot on how do we maintain what we call clean operations. Clean operations is a defined methodology in maritime engineering, where you go ahead and plan an activity to ensure you minimize the emissions and the associated CO2 releases from the activities that you do. Subsea 7 has been running a clean operations campaign across its fleet for many years. And again, each year, we keep focusing on how do we improve that and how do we make sure that we track each campaign and track what we save. In 2019, we recorded over 3,500 clean operations across our fleet with equivalent saving of around 20,000 tonnes of CO2. So clean operations are key to us. We know where the biggest impact inside Subsea 7, and it's around how we operate our activities in moving ahead. We know that as we move into the future, the digitalization of the activities of our fleet is also going to be very, very important. And we are very much looking at how we can improve the fuel efficiency of the activities by better monitoring and better measurement of the activities moving ahead. One thing that we have done is the vessel that you see on the right-hand side here, which is one of the largest hybrid vessels in the offshore industry. This is the Seven Viking, and she currently works for us today on the 5-year inspection, repair and maintenance contract we have with Equinor. She is fitted with a battery system, which takes the very large bulk of the top of that vessel deck. It's full of batteries. And that allows the vessel to mix between low-sulfur traditional fuels and battery backup for it to operate. She has given a sterling service in the last 18 months, and we're very, very pleased with the results that we've got from her. We're seeing a 19% improvement in fuel efficiency, and that saved us around 2,500 tonnes of CO2 emissions in the last 18 months. So again, being bold, being proactive on energy transition is about making big investments in assets like this that can really show the way. We also know that our fleet strategy for the future needs to say, well, if you can do it on one, can you do it on others? So we currently have a study underway to look at the possibility of up to another 4 vessels that could also be quite quickly transferred into hybrid power operation. Lastly, just coming back to digitalization. I want to talk to you about another trend that we're pioneering in the industry, and we're seeing a lot of efficiency and better emissions coming from this. We now have 3 remote ROV operations where we run our ROVs from shore. So the ROV pilots rather than spending time on an asset like shown here on the photograph, work from our offices and run the ROVs remotely from shore. So using digital networks and very high-quality digital systems, we can run an ROV in 2,000 meters of water depth in the Gulf of Mexico from an office in Aberdeen. So again, new technology, new digitalization will really make a difference to the energy transition in terms of our own operations. If we change to the next slide, please. Let's talk about emerging markets and new opportunities for Subsea 7. Picture here on the right is a carbon capture system that Equinor are looking to develop at the moment. It's called Northern Lights in Norway, and Northern Lights is around taking the carbon emissions out of a very large cement plant, making sure that you scrub the CO2 out of that onshore, and then be able then to move that to an offshore location, and then reinject that in disused oil and gas fields offshore in the Norwegian sector. There is a pipeline system associated with that. And we'll be bidding that pipeline work in the next few months. That is actually out to the market at the moment. You need to remember as well that CO2 onshore is very much a known market in the U.S. There are 6,500 kilometers of pipelines already installed in the U.S. onshore sector for shipping CO2 around. So for us, we're very interested in where the CO2 and CO2 sequestration go in the next 5 years and what will be the opportunities for companies like Subsea 7 in working in CO2 handling. Hydrogen is also one of the new energy sources that we all read about that can really make a big difference in how we decarbonize the world in the future. And we know that green hydrogen is very much dependent on renewable electricity to be used as part of its production in the first place. So for Subsea 7, 2 very interesting markets which are coming, hydrogen and CO2. And our focus in the next 18 months or so is understanding the opportunities there and how we will work and gain a place in that market. We have a long history of partnerships. You saw us doing that with Schlumberger, OneSubsea on the trees, where people in power line industries come together in a new market, and there was no market in 2015 for integrated SURF and SPS to offer to our clients a different opportunity. And I believe that this is what we will do in both the carbon capture and hydrogen sector that we will look for partnerships and complementary companies that we can work with over the next few years to offer new technologies for our clients. Lastly, in this sector, we do also have Xodus, which is our early engagement, externally focused company, which works very much with a number of our clients. Today, Xodus is advising a number of clients on the regulatory matters to do with carbon capture and hydrogen as well as potential ideas for how to develop plants, both onshore in Europe, Australia and in Americas for handling carbon and hydrogen. So again, through Xodus, we get a good insight of which way the industry is heading on these emerging energies. Lastly, let's look at renewables, which is the bulk of today. So as you know, Subsea 7 already is a top-tier service provider in the fixed wind sector. And that is what today will be about. We'll be talking to you about our background and our history, what we've achieved, how the industry works, why we believe we have a part to play in this and where do we go in the future. You'll also hear today during the various presentations, how we see floating wind coming together. What part we've played in it already and what part will play with it in the future. And how do we think that will fit together. But our logic is that the efficiency that we've seen in fixed wind should hopefully be with us in floating wind by around 2030. And at that point, we will also be a top-tier player in the floating wind sector. As I mentioned briefly, on the new energy sources, both Xodus and 4Subsea, 4Subsea being our digital IRM capability company based out of Oslo. We also see a lot of capacity that Xodus and 4Subsea are now redeploying into the renewable sector. It's very interesting that one of our clients in oil and gas already has 4Subsea to instrument up all their turbines and associated cables to give them a good understanding of what the future life of those elements of the renewables fields will be coming together, which is what we do today for flexibles through 4Subsea for them in the oil and gas sector. Xodus has a very good brand reputation and a very good track record of providing support for early engagement activities in renewables. And lastly, over the next few years, we will be putting more of our R&D money and more of our investment money inside the renewables sector to help us make sure that we are relevant with technology and at the cutting-edge of where that industry will go to. So with that overview and introduction of Subsea 7 strategy and which way the company is heading, I'd now like to pass you over to Steph McNeill, who will give you a better understanding of the offshore wind industry. Thank you, Steph.

Okay. Good afternoon, and thank you, John. As John said, I'm Steph McNeill, and I lead the renewables business unit here in Subsea 7. I've been in the offshore energy business for over 30 years now, and I was one of the founding members of the Subsea 7 renewables business unit when we started it back in 2009. I'm going to start our session this afternoon on renewables with a short introduction to the market and to explain to you some of the basics. So when we look here at the total global energy mix, we know there are various scenarios and many different projections on the evolution of this total energy mix. However, while there is some variance, they do all show a significant growth as anticipated renewables in the next decade, while at the same time, over the same period, fossil fuels are expected to gradually reduce their share. So when we drill down into renewable sources, what we see today is that hydroelectric currently has the largest slice, but this has a limited remaining capacity for growth. Onshore wind, we see is strong, and it will continue to grow. However, limits on turbine size and competition for land use mean that it's already approaching saturation in some early adopting regions like the U.K. It has got a relatively high cost, and it requires a high level of subsidy. And we now see that onshore wind is starting to lose out to other forms of renewable energy and to offshore wind in particular. Solar, we see is becoming fast, becoming the largest source of renewable power. And this is driven by significant improvements in efficiency and a reduction in cost. And finally, we see offshore is the newest source of large-scale energy. While it's still at an early stage of development, it's showing today to be on the fastest growth trajectory. So if we drill further into the offshore renewables slice, what we see is, it's dominated by far by bottom-fixed offshore wind today. We're even entitled to have massive theoretical potential, but unfortunately, costs of development are very high, and we see no imminent signs of cost reduction. And finally, as John said earlier, we see floating wind is starting to emerge. And again, it has a fast growth potential, and we believe will be probably the next more significant source of energy with the highest potential for growth. Now obviously, these free and limitless natural supplies of energy are a great thing on our journey to a carbon-free future, but they're not without their challenges. By the very nature, obviously, wind and solar, these power sources fluctuate significantly. So they're not always available when we did them and exactly where we need them. So because of this intermittent nature, there is a limit to how much we can rely on them as they grow as part of our energy mix. So other technologies will need to evolve to allow us to store this energy and to have it available when required. So we see already great advances in battery storage, and we see the impending incoming supply of green hydrogen emerging as parts of this solution. So we're pretty confident they will come with us, and they will allow us to continue to expand the renewables source. So when we look at the market, and here, we see the global expansion, this forecast for offshore wind expressed in gigawatts. So it's true to say that this is a market that's still in its very early stages of global development. So up to today, Europe very much has led the way in the development and the commercialization of offshore wind, but it still has massive growth potential. Within Europe, the U.K. has the largest planned growth in offshore wind. In the U.K., we completed Triton Knoll earlier this year, and we plan to be out operational next year again on both Hornsea Two and Seagreen. After U.K., Germany is the second largest market we see in Europe, where we completed Borkum and first power was achieved early this year. And then we see Netherlands as the third largest market in Europe, and we're going back out offshore next year to start our campaign on Hollandse Kust Zuid for Vattenfall. France has been a little bit slow to start, but we believe it will be next, and we already have our team in place there. And they're currently working and supporting our second floating wind project in Norway, as John said. And then lastly, in Europe for the moment, we see Poland is expected to follow, and we welcomed our first polish employees to the Seaway 7 team only last week. So then when we look outside of Europe, Asia is the next region we see seriously adopting offshore wind, and we see that being led initially by Taiwan. So we opened our office there back in 2018. We already completed Formosa 1 last year. That was the first offshore wind farm in Taiwan. And this year, we're out there working currently on new one in Taiwan, pulling cables. And then later this year, we'll start to install the foundations for Formosa 2 and that will carry on through to next year. China has a significant and growing offshore wind industry as well. And pretty much -- generally speaking, in shallow water regions. And for the moment, this is currently a closed market to us, although we believe this may change in the future when the development start to move further offshore and into deeper, more challenging water, requiring a different set of skills. And then lastly on our list today, we show that U.S. is leading projections to be the next region for large-scale offshore wind development. And we opened our office up there in Providence early this year, and we've completed our first U.S. project demonstrator, offshore Virginia, just last month. So in summary, you see a large amount of the growth in this market is being driven by only a handful of countries. So with huge global targets on energy transition to meet and so much undeveloped opportunity offshore, and quite frankly, no other plans to address it, we believe it's inevitable that many more countries will join the party sooner rather than later. So we look next at the evolution of offshore wind costs. And I apologize, this graph is a little bit busy. And I want to talk about the driving forces behind the growth in offshore wind. And the key driver is obviously cost. So what you see here in this graph is an intent to represent the evolution of the cost of both fixed and floating wind over time and by region. So the different color dots represent the different regions. The graph along -- the scale on the bottom, sorry, is the progression of time running from 2005 to 2025. And then the vertical axis shows a thing called the levelized cost of energy. So this is a term you may not be familiar with, but you do hear a lot in renewables, often abbreviated to LCOE for levelized cost of energy. And basically, it's a method of normalizing the estimation of the cost of an energy source. So we do this to allow us to compare different energy sources more recently on a like-for-like basis. So it's a little bit you could equate it to the equivalent of using Brent crude as a benchmark in the surface sector. So what we see here, we've drawn an approximate trend line, but we see the average trend in LCOE, first of all, in fixed wind has been downward. So just as an example, if you look 10 years ago, the typical LCOE for fixed offshore wind in the U.K. was $150 per megawatt hour 10 years ago. So today, we see new developments in the U.K. being sanctioned for as low as $50 per megawatt hour. So if you think about it over 10 years, the cost of production of offshore wind has gone down by 1/3. Now albeit that's in a mature sector like the U.K. and not everybody can deliver cost -- can deliver at that level cost of offshore wind today, but it does show you the trend as the economy in the market develops to support offshore wind in the region. So what has driven this massive reduction is a number of factors. Number one, I would say, is scale. The size of the wind farms. We moved from small demonstrators, individual units to much larger and larger farms. And obviously, the economy of scale as we put in, more and more units kicks in. One of the biggest factors, though, has been turbine size. So turbine sizes have increased progressively over the time frame from being sub-1 megawatt to 1 megawatt to 2 megawatts up to recently 9 megawatts projects. We're working on now where 12-megawatt turbines will be installed. And the latest generation of turbines is now 15 megawatts. So again, massive increase in the capacity of the individual turbines over this time period. Confidence in this market has increased. Offshore wind was a bit of a novel technology 10 years ago. Whereas now, the scale and the technology and the maturity and the confidence is significantly higher. And this has reduced the cost of finance. This is no longer -- investing in offshore wind is no longer a risky, but actually a pretty safe proposition. And then finally, and I touched on it earlier, it's the evolution of technology and supply chain in the regions that have adopted wind that have allowed the LCOE to reduce as well. So when we look at the market rate, now it's impossible really for me to show the market rate as it's evolved over time because it varies greatly, and it's different every country for different geopolitical reasons. But in simple terms, what we see in the more advanced regions that the LCOE of wind is approaching and is sometimes even below the market rate in the country. To the point that in the U.K. recently, offshore wind was quoted as being the cheapest form of new power across all sources of power within the U.K. We've seen also in the Netherlands, for instance, we've seen 10 years earlier than we'd originally expected. The first subsidy-free wind farms are actually being built with Hollandse Kust Zuid in the Netherlands for Vattenfall, and Subsea 7 will be there installing the foundations and cables. However, we have to be clear that some form of subsidy mechanism is absolutely essential in all regions to support and sustain offshore-fixed wind. However, the level and the amount of that subsidy has reduced rapidly in the last 10 years. And then finally, if we look here, floating wind. So floating wind today has a much higher LCOE than fixed wind, not surprisingly. But as this market matures and it moves further offshore beyond the reach of fixed wind, the LCOE of floating wind will progressively reduce. It's important to remember as well that some regions in some areas don't have that -- the seabed and the topography that will support floating wind -- sorry, that would support fixed wind, and so floating wind is the only option. So a combination in reduction in LCOE of floating wind and evolution into other regions will drive the LCOE and the market for floating as we go forward. So if we look now what does this translate to in terms of investment? We allow for the increase in turbine size and reducing LCOE in planned developments. And even then, we still estimate a considerable growth in investment activity as shown here. So even with the reducing LCOE, we still see considerable growth with a CAGR of 18% and a doubling in terms of investment over the next decade. So yes, we do see turbine sizes increasing, but at the same time, the size of the fields and the number of turbines that are being installed is growing rapidly. So just to give you an example or a couple of examples to help understand. At the SSE Beatrice wind farm where we landed the EPCI contract back in 2016, there are 84 turbines of 7 megawatts each. So the total field capacity is 588 megawatts. So this year, we were awarded the contract, the EPCI contract, for the SSE Seagreen wind farm. And there, there will be 114 turbines of 10 megawatts each, which gives a total of 1.1 gigawatts, practically double the size of Beatrice only 5 years later. And then when we look to the future and we look at the SSE and the Equinor development at Dogger Bank, development will start in the coming years, and they only plan to have up to 270 turbines of 13 megawatts each. So that will give us -- that will give a total capacity for the field of 3.6 gigawatts. So a massive increase over a relatively short period of time, pretty much a 10-year lifespan, going from a 580-megawatt field to a 3.6-gigawatt field. And if it helps you to get head around those numbers, I'd like to think of as 1 gigawatt power -- sorry, 1 gigawatt is enough power for approximately 1.25 million homes. But it is a spiky market. If you look particularly where we are now in the early years of us in this market, it's very spiky. This is driven by subsidy rounds and the licensing rounds that -- basically awards of acreage where you can develop these wind farms. And this spiky nature will continue at least until the middle of this decade, driven by the relatively small number of countries that are currently developing offshore wind. And you see, in particular, the nature of what happens in perhaps lean years like 2020, where we've seen lower levels of activity. But we believe this spiky nature will become much smoother as we move into the middle of the decade and the level of investment in regions starts to kick up. Okay. So I think it's useful -- in order to understand this market, I think it's important to be aware of some of the key steps in the development of regional offshore wind markets. So to do this, we've prepared this sort of simplified generic model and time frame to help you understand. I mean I would highlight that this market does operate quite differently in every country. And it's important to study the rules in each country and the market and the mechanisms in each country separately, if you really want to understand this. But for today's purposes, I think this simplification will allow us to help us to understand some of the key things to look for. So we're all aware of the global plans, the Paris Accord, et cetera, and the targets that have been set on a global base to reduce our CO2 emissions. So what this in turn leads to is individual countries and nations setting their own targets. Having set their own targets, they then have to develop a plan for how they'll get there. So when they conclude the offshore wind will be a part of that plan, they can then take some considerable time to develop the necessary detailed legislation and the processes to allow that market to develop. And key within that, obviously, is securing a budget to provide the money for the subsidy, and then developing a subsidy mechanism. Also key in there is establishing a mechanism to identify the areas of the seabed that can be developed, when they can be developed, and how leases for those areas of seabed for the developments can be awarded. So it's quite a complex process. It can be quite a challenge to get it going, particularly the first time you do it in a new region, and it certainly gets faster after the first time you do it. What's helped is early pioneers, Denmark and Netherlands, Germany, the U.K. have put in place good systems that are well established, and we see other countries starting to copy these systems. But notwithstanding, it's -- you should not underestimate the effort required to get these processes off the ground. Certainly as well, we find the societal expectations and pressures help a lot to oil these fields. So potential -- once the road map has been laid, the potential developers then engage with this process, and they work, first of all, to secure a potential site. They have to define their project plans. What's very important here is to find a way to connect the development to the national grid. Typically, we find that these areas are not necessarily in areas with high areas of population. So connecting to the grid can be a massive onshore logistical engineering challenge. And they have to start to establish their cost base, and they also kick off the very lengthy consent applications process. Again, these processes aren't with a challenge, and it's certainly not smooth to get through all the consents the first time you go around this loop. And it still has its challenges even on the second and the third time. However, when the time is right, the developers will then start to intensively engage with the supply chain to help them detail their plans. When they're ready, they'll submit their bids and try to secure the subsidy necessary for their development to proceed. And at this point, for the losers who don't secure the subsidy, having spent a lot of time and money, it's obviously quite a frustration, and then it's back to the drawing board and typically recycle the plans and have another go at the next round of subsidy, which can be a number of years later. But then for the developers lucky enough to have won a subsidy, the projects can then proceed through the FID process, the financial close, and the development can finally start to go ahead. So the detailed design is completed, construction starts, and finally, first power is achieved. And at Seaway 7, we're involved, and we provide support -- have provided and will provide support to practically all stages through this process to varying degrees, right from we've engaged with government bodies at -- in the early days when they're putting those in place. And then we support developers looking at potential sites for their developments. And then we carry a pretty much supporting activities all the way through -- right through into the field being in operation. Okay. I think, again, to help understand the conversation this afternoon and to understand the market and to get our capabilities, we've prepared here a simplified view of what an offshore wind farm looks like. So I'll start from the left and I'm working my way out to the offshore to the right, and that's essentially the typical installation sequence. And these are the main components. So we see, first of all, the export cable, and that connects the onshore substation out to the offshore substation. And we see the substation foundation and its topsides, and these are the main hub for collecting and transmitting power back to the beach. And we've installed more of these than any contractor to date, to the best of my knowledge. Then the foundations and the transition pieces are installed next. And depending upon the design, we may or may not have to install foundation piles first like we did in Beatrice or as we're currently doing on Formosa 2. Then we connect all the foundations together with the array cables. And then from the array cables -- the array cables are going back to the substation. And then finally, last but by no means least the turbines themselves are bolted on and plugged in typically by others. The thing that's useful for us to spell out what we see some of the -- from our contractor perspective, some of the key differences between -- and some of the key issues relating to the design and installation of probably the 3 largest offshore elements to help understand contract awards. So starting with wind turbine generators themselves, I mean, without doubt, these are the most complex components within the field. However, these are supplied by others. And from our perspective, these are relatively standardized components with a common design. And in terms of the installation, it's mostly awarded as a subcontract to the turbine manufacturing contract. And then the installation project that comes out of that has relatively low engineering, supply chain and project management content. And overall, we see these projects as having a lower level of complexity. And we then start to move below the water line, though, and we get into the foundations and the array cables. Typically here, we see a much higher level of customization. These are awarded usually as a contract directly to a main contractor and the typical lump sum contracts. And what you have to do is carry out unique design checks on the design process and the fabrication, logistics and installation requirements that have to be tailored for each individual location for every site in the field. So it requires a high level of bespoke engineering and a very complex supply chain and project management activity. So overall, we see these projects having a higher level of complexity from our view. So I'd like to talk a little bit now, then about the typical developer contract models. And I apologize if this is a bit confusing, but this is how it works. And for the offshore parts of the wind farm, developers have a wide range of contracting models depending on the preferences and the type of development. As you see here, there are many individual scopes of work, typically split across what we call 4 main contracting groups. So again, in order of installation, the first of these groups is offshore transmission, which covers everything from the onshore substation out to and including the offshore substation. The second group then includes all elements related to design, the fabrication, transportation and installation of the foundations. The third group covers supply design, installation of the cables, including trenching. And the last group includes supply, installation and commissioning of the turbines themselves. So some developers who have a lot of internal capability tend to segment scopes and award separate contracts for each one of these elements and then manage all interfaces themselves in what we call a multi-contracting approach. However, as we see because of the complex interfaces and the risks between these different elements, other developers who have less internal capability or capacity or because the complexity of the field and the size is increasing, we'll often package these elements together in line with the main groups, as we've shown, creating EPCI or EPIC large contracts, as we've illustrated here. And then as the field size increases, the interface risk and the clashes between the foundations and the cables, in particular, become very significant. And it's key to make this work smoothly in order to allow you to accelerate the development time. So we've already secured several, what we call, integrated projects or integrated contracts, where we're combining a number of the elements of the foundation scope and the cable scopes together in a single contract package, which we call an integrated project. And then finally, because of the same complex interface between cables and foundations, we also see some contractors choosing to package all of the elements of foundations and cables together in a very large balance of plant EPCI contract like Seagreen or Beatrice. And this obviously requires a large multinational contractor capable of significant project and risk management, coping with large numbers of interconnected scopes. Now as we see it, as the market becomes increasingly global, as projects are becoming larger, becoming more complex and the client base expands, this is where we differentiate ourselves, and we believe there will be an increasing demand to be able to provide these integrated and EPCI services. So then if I look at where the money is spent offshore. Here, we give you a simplified view of what I would call a typical CapEx split. And design, it's a relatively low cost in the overall development, but it's, obviously, strategically and technically very important. So as John has explained earlier, with the capabilities within Seaway 7 or our partners in Xodus and 4Subsea, we have the full capability to manage the design from the concept through FEED to detailed design. And so the design, supply and installation of the export and the array cables together is a significant portion of work. And again, here, we have the capability and track record to deliver. The fabrication and the subsequent installation of the foundations is the largest scope available for -- to a contractor, where, again, Seaway 7 have the capability and track record to manage. The actual turbine supply is the largest single element of spend. But this is strictly a scope for the turbine suppliers contracted directly to the developer, and this isn't an area where we can have access. The turbine installation then, it's relatively small, but obviously, a very significant element of the scope. But this is typically awarded through the turbine supplier, and it's not something in our skill set today. And finally, we have the manufacturer of the substations, which is another very specialized element managed by the large electrical contractors. So all together, we see that approximately half of the offshore CapEx is aligned with our capabilities today. So finally, for me, I'd like to touch briefly on our clients. And so here, we show you our main potential clients today. So we show you here the top 8 developers in terms of: first, the currently operated wind farms; then the developments that are under construction; the developments that have reached FID and will soon be under construction; and then their potential planned developments. So we've supported all of them in the past with both their existing developments, and currently, have ongoing projects for all of the big 4. We're carrying out Hornsea 2 for Ørsted in the North Sea today and next year. We're getting a Hollandse Kust for Vattenfall in the Netherlands, starting up offshore next year. We're on Kaskasi for RWE in Germany. And we're supporting Seagreen for SSE in the U.K. And we expect the market to grow, obviously, and we expect to see more of the IOCs appear on this list, and this client base will grow. You see Equinor are already there on the top 8, but we do expect to see Total, Shell and BP join this list of leading offshore wind developers as we move into the future. We have strong relationships with all of them already through our SURF business, and we're ready to help support them as they exert on their energy transition journey. So that's me, and I'd now like to hand you over to Harke Jan to expand on our capabilities and renewables.

Thank you, Steph. And good afternoon, ladies and gentlemen. Let me start with a quick introduction. My name is Harke Jan Meek, and I'm the Chief Commercial Officer of Seaway 7 based in the Netherlands, in our central main office, just located outside the city of The Hague. So with the offshore wind market context nicely set by Steph just now, I will, in the next 20 minutes or so, talk you more specifically about Seaway 7. How are we organized, our capabilities and our strategy to position ourselves in this offshore wind market, concluding with a summary of what we have achieved to date and currently have ongoing. But let me make -- let me start by taking a step back in time first. So there is a lot of attention and interest in renewables recently, amongst others driven by the Paris Agreement on greenhouse gas emissions and resulting global political and public focus on the energy transition, and we can only fully subscribe to that, as John clearly outlined in his opening statement. It is worthy, though, to highlight that we, as a company, have already been active in the offshore renewables business long before with our first wind turbine foundation and substation being installed as early as 2009. So as of today, we already have a 10-plus year journey behind us, during which we have established a long track record. And we'll talk about that track record later in more detail. Let me now talk a bit more about Seaway 7 by showing you where our offices are based and where we manage our operations from. We have 5 main offices, 4 of which are in Europe, which currently still is the largest offshore wind market. With offices in the U.K., France, Germany and Holland, we have a strong local presence in all key European markets. And this multi-location setup also provides us good access to a large and flexible research pool. Our fifth office is our Taipei office that we opened about 2 years ago, initially to support our commercial activities. But now also, it is a project office to support the numerous ongoing projects in Taiwan, and I'll talk about those projects later. With the development activity in U.S. picking up significantly, we have also recently decided to establish a beachhead over there. And as such, opened a commercial office in Providence, Rhode Island. Currently, all of its personnel accounts for about 500 people with another 550 working offshore on one of our 4 vessels. We have 2 heavy lift vessels in our fleet, the Seaway Strashnov and Seaway Yudin. We have 1 cable lay vessel, the Seaway Aimery, and 1 installation support vessel, the Moxie. And Moxie typically works together with the Aimery as the dynamic duo, as we'd like to call it, which is nicely shown in the next slide. This slide basically visualizes the range of activities we perform with our asset. And you'll no doubt recognize the various wind farm components from Steph's earlier session. At the bottom right, you can see the Seaway Aimery installing cables, after which the Seaway Moxie would be used for cable pooling, testing and termination work, allowing the Aimery to already move on to the next cable, allowing us to optimize the cable installation cycle time. On the bottom left, a cable installation for a floating wind foundation is shown reflecting the Equinor Hywind Tampen project, where we will execute the work in 2022. We also have a separate session about that in the floating wind session later. In the back, you see the Strashnov installing a jacket foundation and the Yudin driving a monopile foundation into the seabed. And although we have only 2 heavy lift vessels in our fleet, you will note the third vessel on the top right, which is the 7 Borealis, a vessel from the wider Subsea 7 fleet to which we have access to as and when required, which, for example, was the case on the Borkum project a few years ago, where she supported the installation of transition pieces. So one of the benefits for Seaway 7 to be part of the wider Subsea 7 group. If we then move to the next slide, I will talk you through how we're organized as a company. We are basically set up to align with and mirror the client-typical contract merge. Meaning we are set up to offer stand-alone specialized installation services for either heavy lifting array cables or we can combine them in integrated solutions where we take away interface rigs from our clients. And generally, we can also offer more optimized execution plans. In addition to the various scope combinations, we can offer also different commercial models ranging from transport and installation to complete EPCI solution, whereby we also manage the design, the procurement and fabrication elements. So the various scope and commercial combinations that we can offer are summarized in the next slide here. Here, you see our offering basically mapped against the various packages that are generally requested by our clients. The table shows that with our capabilities, we cover a significant part of the offshore wind marked out there, and it also visualizes what scope an integrated T&I or balance of plant EPCI would cover, if we talk about those. Although the export cable scope is generally contracted as a completely separate package by our clients, which the cable manufacturers often execute in their work with large dedicated vessels, there are regular opportunities for us, though, [indiscernible] as well. Most the cable is limited, and the scope can be effectively combined with the inner array cable scope. And our Coastal Virginia project as well as the union projects are good examples where we are currently executing on the export scope as well. So when we talked about how we organize the Seaway 7 and what scope and commercial offerings we can offer and how it is aligned with the specific markets. So let me spend some more time expanding on our specific capabilities that make us deliver those services and underpin our value proposition to our clients. I would like to highlight 4 elements in that respect. Starting at the top left is our core components and specialist expertise in transportation and installation. What truly differentiates us, though, are our capabilities in project management, risk management, procurement and engineering. Those are capabilities that are enablers to be able to successfully execute and deliver integrated EPCI projects. As the resource needs in our project-based business are very cyclic, it is very valuable and beneficial to be able to have access to the wider Subsea 7 resource and asset pool to complement or strengthen our capabilities for specific projects. In addition to the various skills and expertise required to ramp projects, we have another unique capability that is worthwhile highlighting, which is our front-end services. With the front-end services that, for example, comprise concept studies, environmental consulting or digital solutions, we have an opportunity to engage with clients very early in the project, long before a tender would come to the market. And help them define and design the project in the most cost-effective way. We actually find that this is probably through those early engagements with clients that we can have the biggest impact on the project cost, and especially via 4Subsea and Xodus entities that are both part of the Subsea 7 family but operate different -- independently that we deliver those services. Our force capability area is shown on the top right and is about our capability and expertise to offer various commercial models, which require specific skills and capabilities as well. To better understand the value of our offering and how we do fit in the market, I think it's useful to spend a few minutes on the competitive environment. So the first statement to make here and probably the most important takeaway of this slide is the fact that it is a very competitive market out there with many active companies. So positioning of your company is extremely important. So yes, offshore wind is an attractive, fast-growing market, yet a lot of parties are trying to get a piece of the pie there. The group of players is very diverse, though, with respect to expertise, background, scope, commercial offering and what have you. And one can roughly divide all contractors in 3 groups, which has been done on the right-hand side of the slide here. The first group or Tier 1, if you wish, are the companies that, like Seaway 7, can offer a full balance of plant scope. Then you have Saipem that focuses on foundation installation, both on T&I and EPCI basis. And thirdly, you have the group of companies that is offering specialist installation services, which is generally done on a T&I basis. So with the market growing so rapidly as it currently does, and at the same time, the globalization dimension of new countries without an established supply chain coming into play, the context of offshore wind markets become more complex. We believe that clients, as a result, will see more and more benefits and value in integrated service offerings from reputable service providers. So being able to offer that, like we do, provides a differentiating position. So when we talk about this growth and globalization, let's zoom in on where we expect all these actions to take place. Moving to the next slide here. This graph is a visualization of the Bloomberg forecasts for projects to be developed in the 2020-2030 time frame. So the vertical axis and bubble size indicate the market size, whereas the horizontal axis indicates the maturity of the market in the respective country. It should be noted that we have excluded China in this analysis as we consider China a self-supporting market, which has very little, if any, excess potential for non-Chinese players. So if we then look at the graph on the screen, you will see that the U.K. and U.S. are forecasted to be the 2 largest markets. However, although the market size is envisioned to be roughly the same, there is a significant difference between those 2 markets and differences in market maturity. So the U.K. with an established permitting and subsidy regime and currently having around 40% of all the global offshore wind capacity installed in -- on waters is here ranked the most mature market. The U.S. has a lot of potential and a lot of activities are ongoing, yet there's only a demonstrator project in place to date, and permit and environmental approvals are still outstanding for the first commercial wind farm. The market is less mature at this moment in time than the key European countries and Taiwan. So as we discussed in the beginning of my presentation, we have a local presence with local people in all of these key markets. And it is not just the presence in each market, we also have an established track record going with it, as you can see on this slide here. Most of our activities to date have been in Europe where the routes of offshore winds reside, having executed numerous projects for both cables and foundation scopes and the various commercial schemes and having worked for a wide range of clients. We're also very proud and have been part of the first offshore wind farm that has been installed in Taiwan, where we installed monopile foundations in 2019. And equally, we have been involved in the pioneering Coastal Virginia offshore wind demonstrator project, offshored the U.S., for Dominion and Ørsted as recent as this year. So as of today, we have a proven track record in both the established as well as the main emerging markets. So the graphic on the bottom left of this slide summarizes our track record to date. Impressive numbers that we are proud of, but probably more remarkable to realize is the fact that the foundation and cable numbers shown here are actually expected to double once we'll have liquidated our current backlog. So let's have a look at the projects we currently have under execution then. Very pleased, of course, to have a robust backlog in the North Sea, which is still seen as the largest offshore wind market going forward. Furthermore, the backlog comprises a range of different contract types from a T&I to an integrated and EPCI, highlighting again the importance of our ability to be able to deliver a range of those services. So in the next session, we will present a few case studies to go into more detail on the various projects mentioned here. The second largest market outside Europe is Taiwan at the moment. So to have 4 Taiwanese projects in our current backlog underwrites our successful country focus on key markets, I think. Now having discussed our track record and the projects currently in execution, the obvious next step is to talk to you about what is next. So let's move to the prospect pipeline now, which we can see here. So this slide provides a summary of our prospect pipeline, where we see a high level of tendering in Europe, Taiwan and the U.S. And depending on the timing of the various governmental approvals, we expect that the first commercial U.S. projects will be awarded in 2021. Apart from fixed-offshore wind tenders, we also see prospects for floating-offshore wind emerging, which is a very interesting new development. And following the case studies on ongoing project that will be presented after this session, we will also have a separate dedicated session on floating wind where Philippe will provide you a market overview and talk about our views and positioning in that market in specific. With that, I would like to thank you all for listening, and I'll now hand over to Lloyd, who will kick off the case study session. Lloyd, over to you now.

Thanks, Harke. Let me start by introducing myself. My name is Lloyd Duthie, I'm Managing Director for the EPCI business unit within Seaway 7 based out of the Aberdeen office. I'm responsible for the win and execute of the large integrated EPCI projects, moved into the renewables business unit in 2016. Let's move to the next slide. My move to the renewables business unit coincided with the Seaway 7 being awarded the contract for their engineering and procurement, construction and installation of the Beatrice wind farm foundations and inner array cables. Our Beatrice was the largest offshore wind farm being developed in the world with 84 7-megawatt turbines situated off the Northeast Coast of Scotland. This brought unique challenges to the developer, including significant water depth range, along with complex and variable soil conditions across the site. This meant that 1 design would not see to all conditions. The client led by SSE engaged earlier with Seaway 7 back in 2001, recognized the value that we can bring to identify and manage the development risks for them. In May 2016, FID was achieved, and we were awarded the EPCI contract, valued at $1.3 billion. Let's move to the next slide. Coming back to some of these challenges and how we managed them. In engineering, we had to address the complex geology in the area, along with a water depth varying between 35 and 55 meters. A common design for the whole site would have resulted in a conservative solution and impacted the project economics. Conversely, due to the variability across the site and the interaction with the turbines, a design for each location would not have been possible within the time frames available. This was addressed with a balanced approach with 5 different structural designs, combined with a bespoke solid solution for each site. And we managed to complete this within what was a very tight schedule. The project economics for the development provided an early power generation. And key to this was our ability to offer a staged completion on the design to allow the fabrication and procurement activities to get started within weeks of FID and maintain the schedule. This involved completing the design of the piles ahead of the jacket in a manner where the risk of interrelated change was eliminated. And in a similar vein, we were able to release the jacket design in 3 stages with the top, middle and bottom section of jackets all phased in. Next slide, please. The clients' lessons learned from our previous project heightened our focus on quality. And at Seaway 7, they saw our capabilities from oil and gas to manage this risk on a global footprint, which you can see in this picture. Where the risks were high, our focus extended down into the supply chain with our presence being felt in over 55 companies across 11 countries to manage the quality but also ensure delivery of -- to the project on time. Next slide, please. The clients' experience of our heavy lift assets on previous contract was another key factor in selecting Seaway 7. Our industry-leading safety performance, combined with our assets, gave them confidence in our capability to address the key risks of completion on time, equipment reliability for a high number of foundations to be installed and our accuracy in performance. As an example, the piles for the jackets have to be installed within a 1 centimeter depth accuracy and all to that within a 0.5-degree verticality. This level of accuracy require significant Subsea instrumentation to measure progress. When you consider the massive loads being applied to drive these piles, it would be a challenge to the equipment for a one-off operation. However, with our focus on the reliability, we ensured these key elements are delivered for all 344 piles, and we achieved this with no breakdown. Including the array cables within our scope allowed us to address the engineered interfaces and optimize the foundation steelwork, while still also allowing us to optimize the installation sequence and deliver early power generation to the client. Finally, our marine logistics experience was another aspect of our offering, which added value to the coin with over 20 of our own vessels in the field at any one time, combined with the ongoing substation and wind turbine installation, we ensured that all operations, including those in the various jackets, continued without interrupting each other. Let's move to the next slide. So in summary, Beatrice is a world-scale offshore wind development. We've set the bar for these large projects, delivering on the various design challenges, managing a complex supply chain with a quality focus ahead of schedule and within budget. Next slide. Let's take us -- this takes us into our next and current and ongoing EPCI project, the Seagreen offshore wind farm. Next slide, please. Seagreen, SSE's next large EPCI project in Scotland presented similar challenges that aren't in Beatrice. However, we knew we had to progress to be successful in what we knew is going to be a competitive client -- climate. Our Aberdeen office having demonstrated the transferable capabilities from oil and gas to renewables on Beatrice became the hub for our offering towards the client and supported their local content commitments for the project. In many ways, the project demonstrates the progression within the industry in such a short period of time. With approximately double the power generation of Beatrice, we have maintained the foundation costs at the Beatrice levels of $1.3 billion, was delivering 46% more foundations, with double the tonnage of steel and double the length of array cables. Our balance of plant offering encompassing the foundations and array cables combined with our performance in Beatrice was a key factor in supporting our client's win and their successful subsidy option and in their decision to award us a contract in June of this year. Next slide, please. This progress was achieved through early engagement, again, with the client on soils were, once again, one of the challenges. In this instance, bedrock was relatively close to the seabed and restricted the use of the driven-pile approach we used at Beatrice. Supporting the client June feed, subjugations were adopted that not only addressed the soil risk but also reduced offshore installation timing and so weather risk there. Early engagement in the supply chain was a key element in our successful award. This allowed us to widen the supply chain, which allowed us the time to ensure we could select suppliers who we've had confidence could deliver for the project. And we ended up with 3 fabricators from Far East and Middle East to give us a balance risk for the delivery of the 114 foundations, including the array cables within the balance of plant scope followed the Beatrice model and allowed us to take advantage of our supply chain knowledge for the cables and bespoke assets to meet the clients' needs. In this case, logistics management is arguably more challenging on CD, given the supply location for the foundations and cables and with over 2,000 vessel days using some of the largest heavy transport vessels in the world, as you can see here, to bring the foundations, jackets and cables to the North Sea prior to the installation. This is an addition to the fuel logistics challenge associated with a just-in-time delivery to the heavy lift vessel in field for the installation and then followed by the direct vessel operations, rock placement, cable installation, burial, and finally, testing and commissioning of the system. From contract award to completion, Seagreen will be complete within 2.5 years. Thank you. And now let me hand you over to Philippe Gleize, who will go through some of our integrated projects for you.

Thank you, Lloyd. Good afternoon. My name is Philippe Gleize. I lead the Seaway 7 [ Integrated Projects and Floating Wind ] business unit in France, based in our Paris office. In particular, I look after our integrated projects, floating wind and our clients based in France. I will talk you through one of our integrated projects, and then later, will share our views on floating wind. Next slide. Historically, our clients have either contracted cables and foundations together in a full BOP EPCI or they follow a multiple contracting approach with multiple individual contracts, where they manage their interfaces. However, probably the most significant interface in the balance of plant is the installation of foundations and cable. As offshore wind farms become larger and installation periods become shorter, this interface becomes increasingly critical. Therefore, in recent years, Seaway 7 has been working with our key clients to develop a third way, which is our integrated project solution. This approach will combine foundations and cables installation in a single offering. The Hollandse Kust Zuid project in Netherlands with 140 monopiles and more than 300 kilometers of cable is a good illustration of it. Next slide, please. Working collaboratively early with Vattenfall, one of the leading developers in offshore wind, to get -- together, we achieved a successful outcome on HKZ 1 and 2, helping them to win the auction. We supported them to achieve an optimized execution plan, leading a lower cost solution for a subsidiary-free development. Building on success with HKZ 1 and 2, we have been chosen by Vattenfall to be their partner, again on HKZ 3 and 4, leading to further success when Vattenfall also won the auction. Next slide. In total, for HKZ 1 and 2 and 3 and 4, we will be installing 140 monopiles and 325 kilometers of cables. Some of the innovations adopted reduce costs and help Vattenfall to secure the project. Traditionally, monopiles were installed where vessel is more on the ongoing system. Seaway 7 developed an innovative installation methodology and trade-off to allow monopiles to be installed while on dynamic positioning mode. This saves significant time during the installation by avoiding the need to deploy and to recover the movings. Otherwise, towing floating monopiles to the installation side for sizable units avoid significant transportation, transit and lean works. Such installation methods led cost reduction. Our combination of innovative contracting model and technical expertise to optimize costs led to these important contracts for Vattenfall. Next slide. Following on from these 2 Vattenfall projects, we have already secured, on a similar approach, our third integrated project, Kaskasi in Germany for RWE. Thank you, and then I will introduce Lars for the next subject.

Thank you, Philippe, for your previous presentation, and good afternoon, and welcome to this case study session related to the Hornsea offshore wind farm project. My name is Lars Muck, and I'm working for Seaway offshore cables in Germany. Our office is located in the city of Leer, one of the German shipping industry centers, and conveniently located along the River Ems at the Dutch-German border on the North Sea Coast. By part of using the adjacent [ mountain range ], the Eemshaven, where our marine base is located, is approximately 45 minutes; Bremen, approximately 1 hour; and Cuxhaven as well as Hamburg approximately 2 hours away. From origin, I'm a naval architect with specialization on subsea engineering, and I've started my career 24 years ago and have since then been actively involved in the submarine cable industry. My first direct involvement in the offshore wind farm industry took place in March 2001 and continued with the installation of the export and inner array grid cable system of the Arklow Bank test offshore wind farm in 2003. In 2004, 16 years ago, I joined what now has become Seaway Offshore Cables. And within this period, I have served in numerous positions and functions, whereby my current position is the Head of the Wind Team. So the team, which is actively involved in defining our business strategy, supporting the development of new markets and business area, and which is for the majority of time, actively pursuing new projects and tenders with existing and potential new customers. Next slide, please. I now have the pleasure to provide some inside information about the Hornsea offshore wind farm project as developed by Ørsted in 4 separate phases. Once completed, the Hornsea offshore wind farm will have an installed capacity of approximately 6 to 7 gigawatts, whereby Phase 1 has a capacity of 1.2 gigawatts utilizing 174, 7-megawatt wind turbines; Phase 2 would have a capacity of 1.4 gigawatts, utilizing 165, 8-megawatt wind turbines; Phases 3 and 4 are still under development and show each have a capacity of approximately 2 gigawatts. In November 2016, we were awarded the contract for the transport and installation of approximately half of the inner array grid cable system of the Hornsea 1 offshore wind farm project. Ørsted took the decision to award the overall vertical in 2 almost equal parts to 2 separate installation contractors in order to minimize the risk due to potential performance issues. Maybe just a quick anecdote on that one. Even before we were awarded the contract for the Hornsea 1 offshore wind farm project, we were invited to participate and exhibit at the rest of the -- 2016 Safety Day as the management team of Ørsted recognized that the Seaway duo, our cable lay vessel, Seaway Aimery, and our installation support vessel, Seaway Moxie, were an innovative solution to the significantly growing demand in the offshore wind farm market. Our clear intent with the introduction of the Seaway duo was to industrialize the installation of submarine cable systems within the offshore wind farm markets, thus retaining new levels of reliability, predictability and safety whilst minimizing the risk to our personnel, assets and the submarine cables. As it turned out, our own expectations were even exceeded, whereby the Seaway duo has, since its market entry, continuously set new performance benchmarks when it comes to the rates of progress for the safe and efficient installation of submarine cables. At the end of the Hornsea 1 offshore wind farm installation works, we were even awarded the installation of an additional portion of approximately 10% of our original work scope as Ørsted had partially de-scoped the second installation contractor. All set, the number of installed inner array grid cables reached the level of 89 with a combined length of approximately 170 kilometers. The associated overall contract value at the end of the project reached just above $50 million. Next slide, please. Next to the ordinary submarine cable installation and post-lay trenching works, a number of additional work scopes were undertaken by our project team. Notably, the relocation of more than 2,500 boulders from the inner array grid cable routes and designated jack-up zones was undertaken by our teams. The relocation of these boulders was an important step of the site preparation works, which ensure, on the one side, that the submarine cables can be safely laid onto, and subsequently, trenched into the seabed in between the individual foundations and platforms, but also allows for safe jack-up operations for foundation and wind turbine installation as well as maintenance operations during the lifetime of the offshore wind farm. Further to the relocation of the seabed boulders, additional associated work scopes, such as pre-lay inspection surveys and pre-lay grapnel runs to ensure that the seabed is free of any obstructive debris were completed as well as messenger wires were installed in order to facilitate the individual cable pull-in operations at the foundations and platforms. Next slide, please. Based on the excellent safety performance and our ability to establish new benchmark levels on the rates of progress in combination with a never-reached workability, we were invited to tender for the inner array grid installation works of the Hornsea 2 offshore wind farm project. This time Ørsted based on -- sorry, its experience on Hornsea 1, took the decision to award the entire inner array grid cable installation scope, consisting out of 165 submarine cables with a total length of approximately 422 kilometers, to a single contractor. After a competitive process, the contract for the Hornsea 2 offshore wind farm project was awarded by Ørsted to Seaway Offshore Cables in July 2020. Hereby, the contract value at that stage was just below $100 million. In addition to the Hornsea 1 and Hornsea 2 offshore wind farm projects, we were also awarded the contract for the submarine cable installation works of the first offshore wind farm in federal waters in the United States of America by Ørsted, but this time, under a contract covering the turnkey supply and installation of the entire submarine cable system. It is important to recognize that the majority of contracts that Seaway Offshore Cables enters into are based on an EPIC approach. Hereby, we are responsible for the turnkey delivery of the submarine cable system, and we are collaboratively partnering with all major submarine cable manufacturers and other permanent material suppliers from around the world. Just to explain, these projects which have become part of the DNA of our projects teams do not just involve the ordinary transport and installation but also the project-specific customization of permanent materials, inclusive of submarine cables, related accessories and cable protection systems in close cooperation with our suppliers and our customers. Furthermore, the termination, testing and pre-commissioning of the installed electrical infrastructure up to the point that it can be simply energized as part of the WTG installation forms part of this EPIC-based work scope. I hope I have been able to provide you with some brief insight into the capabilities, experience and daily business of Seaway Offshore Cables. The team of Seaway Offshore Cables is made up of 27 different nationalities with an average age of 37, and all of this at a staff level of less than 200. Our success is also visible when you take a look at our order backlog of more than 1,800 kilometers of submarine cables to be installed and more than 600 wind turbine generators to be connected. This backlog exceeds all project works we have undertaken in the last 7 years since we focused on the renewable energy sector in 2013. We are passionate about our daily work and regardless whether the financial or commercial, the technical or the operational or the contract or administrative staff is concerned, we are enthusiastic to play an active role in the development of a greener tomorrow. In case you have any questions, please feel free to raise them as part of the Q&A session at the end of this webinar. Thank you and enjoy the remaining presentations of the Subsea 7 Investor Day. And Steph, now it's up to you. Thank you.

Okay. So thank you to Lars in Germany; and thanks also to Philippe in France; thanks to Lloyd in Scotland; and last but not least, thanks to Harke and the team in the Netherlands. So I think, as you've heard today, we have experienced local teams based close to our clients in all our key markets today. I think our diversified and localized team is a great strength. It's very useful, and it's especially in times of COVID where international travel is challenging. So I think our case studies have helped to demonstrate to you our strength and depth. I think we've shown we are well-established in all of the current offshore renewables market regions today. For our early engagement, we support developers to reduce their costs and win subsidies. We're delivering on projects for the major renewables developers, and in turn, we're winning repeat business from them. We differentiate ourselves through our EPCI and our integrated capabilities. And as part of that, we manage large, complex projects. We're experienced at managing major interfaces and risks. We have an extensive supply chain management capability. And our projects are executed from and supported by our global network of local offices. So as we move forward, we're more and more supporting developers as projects become larger and expand globally. And finally, we provide reliable on-time delivery. And so with that, I'd like to hand you back to John Evans to lead our first Q&A session of the afternoon. Thank you.

So everybody, this is the first of 2 Q&A sessions. This one will focus on the industry and Seaway 7. Please, can you save any floating wind and financial questions as we'll cover these topics in the next part. There will be a longer Q&A session at the end. So don't worry if you don't have -- we don't have time to take your question in this next session. Operator, please go ahead.

[Operator Instructions] Your question comes from the line of Michael Alsford from Citi.

Firstly, your positive outlook on the market potential is similar to ours actually for offshore wind utilization to conduct the larger, more complex project scopes under, say, the balance of plant or the integrated contract models. For example, I guess, could you do 2 Seagreen type projects at the same time or how many integrated type projects could you do? I guess what are the physical and target operational limitations currently from the organization? And then secondly, more specifically on the fleet, I guess, can you talk a little bit more about the flexibility to the shift more vessel capacity to offshore wind? And I guess, what the CapEx might be for that?

I'll try and answer your questions, and I might ask Steph to chip in, but I'll start off. I guess, for us, I think the message that Steph gave is that we believe that in due course, there will be more larger projects, such as in an EPCI configuration or an integrated configuration. With the way we're structured, we have engineering capability and supply chain capability. We can switch between oil and gas and renewables. The vessels in this market, and we'll talk a bit more about that in the second half of today's presentation. More ability to subcontract. And I'll ask Steph to talk a little bit about subcontracting in a moment. So subcontracting as an opportunity. So I think the key thing for us will be, we believe we have the capability. It will be the speed the market goes from a segment model into a new that says there is more value and integrated or ultimately more value in EPCI. But maybe, Steph, you just spend just 1 minute answering the question on subcontracting.

I think, as you said, I mean, we have a lot of strength and depth in the organization and I believe we certainly have the capabilities to matter. In terms of vessels, we obviously have our own capability, significant capability across our fleet but we do see that in renewables, there's, I would say, less differentiation between the vessel types. And so we have on a number of occasions to date, we have subcontracted to our peers to the other big contractors. And equally, we have been subcontracting their vessels as well, and we'll continue to do that. I think in terms of efficiency, the ability to subcontract work backwards and forwards. It certainly helps us cope with the global nature of the market and develop economic and efficient solutions to deal with either big demands or geographical conflicts. So I think the capacity in the market and our ability to manage subcontracts. At the end of the day, it's another subcontract of many that we're quite happy and comfortable to manage, I think, as we've demonstrated. And Michael, you also asked a question on -- John, on the fleet.

Yes. Sorry. Thank you, Steph. So there was a second question about the fleet, and could we switch assets between oil and gas? We do have. And later on in the presentation, we'll give you an example of something that we intend to do. But yes, there is a limited number of oil and gas assets that can be deployed. As Harke told you, we put the Borealis to work on renewables in the past. It's scheduling suited. So again, we have the ability to switch those around. We believe that there is enough capacity in the market to allow us between self contracting and our own fleet to be able to expand and grow the business.

Your next question comes from the line of Mark Wilson from Jefferies.

Great. Just checking if you can hear me?

Yes. We can.

Right. So you say it's a very competitive industry, current, and at the same time, projections for the annual spend show [ budget ] of build out growth. Do you think the industry very simply can actually meet this level of demand? And where are the specific bottlenecks in the value chain that may have to be addressed to actually meet that kind of build out?

Well, as we touched on earlier, we saw this in oil and gas 20, 25 years ago. Clients used to segment all the pieces of the work, and we would do little slivers of the contract. And about 25 years ago, the oil and gas companies realized as these projects got deeper, more complex during scale that they needed Tier 1 players that can bring all this together. To our view, actually, the bottleneck is the own ability of the industry to get itself organized and arranged around it. We do know that the top 3 players in this world, your All States, Vattenfall and RWE have some exceptionally good internal capabilities, and that will take the industry so far. So we believe that the bottleneck is the ability of the industry to organize itself in a manner that can bring skills with companies like Subsea 7 to bear. I think you can see -- you've seen a number of people and ends in the market that are building more tonnage. So we don't think tonnage will be a problem. I think the challenges we've seen in SURF is how many people really understand risk and arbitrage risk properly to be able to deliver big projects on time securely. That's what we've been able to do in hydrocarbons, that's what we'd like to do in this business. So for us, we need our business model and the stability of these large EPCIs coming in. For us, just doing T&I work and moving assets all around the place, which is what we've been doing in the last couple of years, is not particularly productive for us. So I think the industry has to get itself organized around how does it want to contract and how does it want to work. We've also seen in oil and gas partnership type relationships developed. We've also seen in oil and gas early engagement where the oil and gas industry says, we can't do it ourselves. So I think we'll see that change coming, and it's probably the unlocking of that side that we believe will probably get us to where we need to be by 2030 as an industry.

Certainly from yourself, you don't see the need to add additional tonnage, let's say, in terms of foundation installation or cable lay vessels. Is that a message you're giving?

If you wait to the second half, you might want to ask that question again, but we will give you some more information on cable lay vessels in the second half. I think on the very large lifters, we are clear that there are some interesting single advantages in some of the large jackets that can turn their hands to foundations or wind turbine installation. But at the moment, we have no view that we would enter into that sector. But on the cables, we'll have something to present to you in the second half.

Your next question comes from the line of Vlad Sergievskii from Bank of America.

Yes. Let me ask the question, which is on many investors' minds. There are obvious operational benefits for Seaway 7 being a part of Subsea 7. at the same time, renewable pure-play companies do benefit from very rich market [ valuations ] right now. In this context, what would be your thought out [indiscernible] and my knowledge is [indiscernible] Seaway 7 at some point in the future, potentially, for example, to fund the digital capacity.

Well, Vlad, I guess, we, like everybody else in the market -- and we can see what's happening in the market. And I guess the honest answer is that the executive and the Board are very open to -- or open-minded to how we configure the company and how we structure the business going ahead. We are one of the very first guys in the audio sector to break out our renewal business separately, to give visibility of the trials and tribulations of how we get on in our business and how we can move ahead. We always look at different options. And I think that we're -- today that there is a merit to keep the 2 businesses together because as we've discussed in this presentation, we move assets and people backwards and forwards. Is it hot to do a full spin-off yet? I don't think that's very desirable and probably less attractive to us. But the optionality of the part will spin-off is something that we'll be thinking about over the next few months, see what the market is, but also about where do we want to be in the future. So the message we want to give to everybody, our unique position in all that competition that Harke showed is the fact that project management and engineering and the ability to handle big projects, put balance sheet behind it. It's something that Subsea 7 can offer and how we would structure any form of spin-offs through that would need quite a bit of thought. We're open-minded to the topic, but we're not going to rush into anything. We're going to be in this business for a long time. You heard my strategic statements at the start that we're going to be proactive in the new energy transition, and it's part of our future. So we will need careful thought about what we do on that topic.

Your next question comes from the line of Mick Pickup from Barclays.

Mick here. A couple of questions today, I'll say technical. You talked a lot about engineering on the cable side. Can you just talk to what engineering is actually the physical properties of the cable itself? And secondly, you mentioned going from Pickup to Seagreen. From what I saw, it was double the size for the same price. I can understand turbine getting bigger and getting cheaper, but I would have thought you'd be a bit more sticky on your unit costs on site. Can you just talk how that project doubled in size, yet the price bid the same?

Well, good questions, Mick, and I'll pass those over to Steph to give you the answers to those.

Sure. Yes. Thanks, Mick. I think starting with the cables, it really is a whole wind of engineering. So we start from the beginning and become involved with the developer in terms of the design of the cable. We work closely between the developers and cable suppliers. And obviously, the configuration of the cable drives the material, the steel driver and metal inside the cable, which is a significant impact on the cost. So we know all about the cables and the design of the cables. And then we work through, obviously, a cable, routing cable. We are optimizing lengths of cables. Trenching is an important part of the scope. So a good knowledge of the size and the C-band underneath the cables and where we can vary the cables to dent. And then obviously interface between the cables and the structures and the crown of the cables and the cable protection systems are okay. So we pretty much have the capability in-house to look at all aspects from cable supply, cable delivery, cable installation, cable transit and then the connection of the cable and structures. And so that's pretty much it. I think we covered some of it in the case studies, then when we look difference between Beatrice and Seagreen. But design has been important and optimization of the design for our fabrication solution and the cost per unit has been key and stretching to the Far East in terms of fabrication is probably the biggest single element in allowing us to reduce the cost there and to be able to deliver, as you said, double the size for practically the same price. It's all down to the -- to our knowledge of design and manufacturing of the foundations themselves.

Okay. And then going forward, do you think that process could optimize? Or will the unit cost be more sticky now?

The size -- well, the size, actually the top brands -- and if you look at the overall demand, the size of the turbines is going up. And so we will see larger turbines, which allows the further reduction in LCOE. So I don't think we've seen the LCOE read bottom rate yet. And we learn more all the time. So yes, I think we will see -- we will be able to support developers to further reduce their cost and reduce the [ LCOE ] as we look forward by various means, and further design innovation, design optimization, but also installation innovation in the techniques we use there. So I think we still have some way to go on that route, and we can continue to evaluate development.

Supplement -- sorry, just to supplement what Steph says. One thing that this industry has been grappling with is there was always a finite size to the model pile and how you can design a monopile. But as the industry has learned and developed, the monopiles are getting bigger and more complicated. I think you look at the design of Seagreen versus the design of Beatrice, one is 3 legged, one is 4 legged. The other thing, as Steph saves, we changed the foundation design suction cans, which are very much used in oil and gas and not very much used in renewables compared to installing piles. So there were thousands of tons of pin piles in Beatrice. So I think your question, I think, was how sticky is the price? Well, we moved from European fabrication on Beatrice to Far East and Middle East fabrication on Seagreen. So we probably found probably about as optimized a cost model as we can for complex jacket fabrication. But as Steph says, it's about the engineering and the better understanding of how we're doing and the upgrading of different specifications and standards in the industry, as we all learned over the last 5, 10 years, about what's going on in the industry. So as Steph said, it's not over yet, but the cost else are to do with where do you put the work and how would you move all the stuff halfway around the world is the key for us.

Our next question comes from the line of David Farrell from Crédit Suisse.

Can we try the next caller and ask -- see if David can go back.

Your next question comes from the line of Frederik Lunde from Carnegie.

I guess my question has been partly answered, but I was wondering if you're seeing any change in contracting with more oil companies now becoming active in offshore wind? And that could have obviously taken place in more alliances, more large EPCI or different criteria being emphasized in tenders rather than its price?

I think Frederik -- well good afternoon, and good to talk you. I think what's interesting here is at the moment, Total, nonoperators on Seagreen and BP, are nonoperators on the wind farms they purchased in the U.S. So I think at the moment, you've seen the oil and gas companies come in, in a nonoperated basis or is the traditional renewables clients. And I include Equinor in that because we work for Equinor a decade in that world. So I think at the moment, it is the utility companies that are leading that. But as the oil and gas companies move much more determinantly into the energy transition and clearer on the renewable leads a spec that we will look at flipping over and becoming operators. The question is which contracting models they use is not clear to us at the moment. But as we've said many times on this call, our belief is that there is meriting going towards these larger integrated projects or larger EPIC contracts. And I think the one thing that everybody is understanding, and Lloyd's example there of Beatrice, you just looked at the number of different companies that we had to have interactions with to get all the right pieces of Beatrice to turn up a few years ago. I think that we will see that as people are moving to the 150, 200 tower or turbine-sized fields, that there will be more opportunity in that front. Quite which way people will go, it's not clear. I think the other thing we all need to think about our oil and gas companies have very, very strong competitors in utilities. The utilities are power companies, and they understand how to generate power. So our traditional oil and gas clients are changing their position in the market and going into a market that may not be as familiar to them as oil and gas. So again, we will be working with both groups of clients as that takes place.

And you've been very vocal on the merits of alliances on oil and gas projects. Are you seeing the same rationale here on offshore wind?

I think it's fair to say, and Steph can give a bit more, that the traditional segmenting model sort of works okay. But I think a number of operators now, we saw Vattenfall was quoted there about their feedback about earlier engagement and how to work. The one thing to remember, most utilities are highly regulated generally in their home markets as to how they can contract and how they do their procurement because generally, in most countries in the world, there are price caps or mechanisms with regulators to control the price of power. So the ability for those guys to change their contracting models isn't as clear-cut as the oil and gas companies who are pretty capitalist in their thinking and they can switch models. But I do think that we are certainly seeing that a number of the clients now see value in talking earlier to us. Whether that will become more partnership type models in the next few years, not clear to us, I guess. Maybe, Steph, if there's anything to add to that?

Yes. No, John, absolutely completely agree with what you said. I think -- and we have seen it particularly on Vattenfall or on Hollandse Kust, where that's a subsidy-free development. So cost is obviously critical. So early engagement has been very important. And working -- I mean, there, that was a partnership. We worked very closely, very collaboratively with Vattenfall, both on Hollandse Kust 1 and 2 and then subsequently on Hollandse Kust 3 and 4. So I think without that partnership, without that approach, it would have been impossible to develop and optimize solution. I think it was developing the optimized solution, reducing the cost and certainly was significant in terms of winning the subsidy and for those projects to go ahead. So I think we see the logic. It stands up, for sure, in offshore wind. It's about early engagement. It's key to bring the cost down and key to success. So I would definitely recommend it. It remains to be seen, of course, the approach that our clients will take. But I do believe it would certainly add value.

Your next question comes from the line of Amy Wong from UBS.

A question for me. Throughout the presentation, you mentioned the word competitive process in time. And then I think in one of your answers, you also acknowledged that there was going to be a lot of tonnage coming in, that wasn't going to be a bottleneck for the industry. So my question comes down to kind of when you kind of take all that into account and you're entering commercial negotiations with your clients, how should we think about your ability to price your assets in kind of a way that best utilizes it for the best returns for your shareholder?

Thank you, Amy. I guess the way to look at it is just what we worked out 20 years ago in the oil and gas industry is really a margin that you can get over an EPCI contract if you're good at managing the EPIC contracts and can deliver those. 10% on a $1.3 billion job is better than 20% on $100 million of T&I in terms of cash returns to your shareholders. So for us, it's about the fact that, yes, EPCI has always had a lower margin than transport and install because all you do on transport and install is to get your slice to do with that particular area. If you have in-built skills, processes and competencies to arbitrage risk and manage risk, which is what we do in the oil and gas space, we believe that the economic returns of this industry heads towards a more integrated world will be what will give us returns for our shareholders. So that's how we try to think about this business. It's about the direction it's going to go in. We've been very open with you that just slugging it out on transport and install as every one of us has to expand globally and increase capacity rapidly, it's probably not really where we want to be long term. We're happy to have transport and install as part of the mix for the company. But longer term, we would like to have a mixture of EPIC along with integrated, along with transport and install. So that's the way we look at returns for this business for our shareholders. And Ricardo will talk a bit more about that in his presentation this afternoon.

Next question comes from the line of James Thompson, JPMorgan.

A couple from me, please. Just obviously, in the presentation, helpful to get the market backdrop, et cetera. China is clearly a big part of the market today, and obviously, one that you call self-supporting. When you think about the competitive landscape, what's the risk that the Chinese contract has actually start to play in the international arena, given that it looks like the work they've got there, that looks like they're growing particularly as we head through the rest of the decade, would be the first question. And then secondly, obviously, you talked about the turbines getting bigger. I just wondered whether that CapEx prior chart you effectively shown on the breakdown changes at all as we move to bigger turbines? Does that increase your share of the overall project? Or is that pretty similar as you move from a sort of 7-megawatt towards a 13-, 14-, 15-megawatt turbine setup?

I think I'll ask Harke to take both of those questions. Harke, if you can?

Yes. Sure, John. Thanks. So maybe to start with the China question then. China is very, I think, high-growth market, very interesting market. But what we see at the moment is that basically the market is served by own equipment. At the same time, we also see that most projects are in very shallow water, which I would say 15% is now less, for which you basically need a certain amount of assets. If China is growing as we think they will, then we move into deeper water. And what we actually see is that then there might be becoming new opportunity for possibly external parties to make a play because you need different assets to get involved. So I would probably ship more as an opportunity for maybe larger vessels to play in China moving forward than the other way around, then maybe moving internationally also because their market is very big. With respect to your question on the turbines, I think the ratio will probably remain thin. So yes, the turbine is going to be bigger. And pro rata, you got to have less turbines. But if you have less turbines, you would also have less foundations, which will be even bigger again to support your bigger turbine. So likewise for the cables, they will reduce in number, but it is on pro rata basis. So I would expect more [indiscernible].

Okay. As I understand it, you see things staying the same, regardless of where the turbine size trends towards.

I think what we're saying is percentage-wise, plus or minus, a couple of percent, yes, it might vary. But I think overall, the spread in that diagram is not too far from the truth.

I think we have time for one last question in this section before we go to a break. So operator, can you take the last question, please?

Your final question comes from the line of Sasikanth Chilukuru from Morgan Stanley.

Most of them have been answered, but I just wanted to understand regarding the cycle times for the heavy lift vessels and the cable vessels. So how long does it take for you to complete this project? And if you can give an indication of the utilization that you're looking at, that would be helpful.