HomeMarket NewsCapitalizing on the Offshore Wind Vessel Shortage: A Smart Investment Move

Capitalizing on the Offshore Wind Vessel Shortage: A Smart Investment Move

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Wind power is taking center stage as governments worldwide shift towards sustainable energy sources, retiring fossil-fuel power stations in the process. Texas, a front-runner in the United States, already generates 28.6% of its energy from wind, second only to natural gas.

The wind energy sector, however, faced turbulence due to inflationary pressures causing impairments, leading to cancellations of over 3 GW worth of U.S. offshore wind projects. The aftermath of the Ukraine conflict saw escalating costs, rendering several projects economically unviable.

The Silver Lining

Despite setbacks, the wind power industry is showing signs of resilience. The wind business at GE Vernova predicts a turnaround in 2025 after facing significant losses, instilling hope in industry watchers. Executives, like GE Vernova’s Vic Abate, sound optimistic about the industry’s future.

Looking ahead, offshore wind capacity is set to quintuple globally by the middle of the next decade. To achieve this, larger wind turbines are being developed, creating a surge in demand for installation vessels.

Seizing the Opportunity

Presently, a scarcity of vessels capable of installing these massive turbines is evident. Wood Mackenzie estimates a significant investment of $14.8 billion is needed to meet future demand for these installation vessels.

Shipbuilding for these specialized vessels requires significant time and capital, with a minimum of three years and $400 million needed to construct a new installation vessel. This scenario is exacerbated by demand for ships in Asia already stretched by orders for oil and LNG carriers.

Investing in Success

One company capitalizing on this vessel shortage is Cadeler A/S ADR (CDLR). The recent merger with Eneti propelled Cadeler to become the world’s leading offshore wind turbine transport and installation company.

With a cutting-edge fleet of vessels, including four Offshore Wind Farm Installation Vessels and additional newbuilds in the pipeline, Cadeler is well-positioned to meet the escalating demand for its services. The company’s vessels are almost fully booked through 2027, marking a significant shift from previous years.

The rising demand for vessel charters has led to an increase in prices, with day rates jumping to around $350,000 for the newest and largest vessels. Cadeler secured record-breaking orders in 2023, ensuring a robust project pipeline through 2030.

Despite the current skepticism towards renewable energy investments, Cadeler’s stock presents a lucrative opportunity, especially below $19 per share.

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www.barchart.com

On the date of publication, Tony Daltorio did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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