InfraStrata (INFA ) has acquired ‘substantially all’ of the assets of Burntisland Fabrication for £0.85m, thereby increasing its capacity across two sites in prime locations in Scotland.
Burntisland Fabrication, also known as BiFab, is a company which specialises in major fabrication works from facilities across Scotland operating within the oil and gas, renewable, and infrastructure industries. The company entered administration in late 2020.
InfraStrata said it has paid £0.65m in cash for the assets, with a further deferred consideration of up to £0.2m in cash subject to the achievement of future revenue targets.
It highlighted that these facilities will trade under the Harland & Wolff brand, a Belfast-based yard which InfraStrata acquired in 2019. The Group said this would represent the final fabrication piece of its UK footprint, thereby ‘positioning it to fully deliver on its existing strategy faster than it would have done with its two existing sites in Belfast and Appledore.’
It said the acquisition provides it with ‘increased capacity’ across the sites with particular regard to renewable and defence projects; Methil on the east coast of Scotland and Arnish on the west coast of Scotland. The Burntisland site will not form part of the transaction.
The acquisition includes over 25,000m2 of undercover fabrication capacity acquired, with 580,000 m2 of total site area and 24,000 tonnes of quayside load-out capabilities, and annual throughput tonnage potential estimated at over 100,000 tonnes. The sites are also close to both ongoing and planned wind farm projects in the Irish Sea and the North Sea.
InfraStrata said the acquisition brings numerous historic pre-qualification and live tender opportunities and Bifab’s existing track record in the oil & gas and renewables markets.
The acquisition is also expected to accelerate Harland & Wolff’s renewable market penetration by opening up projects previously at the planning stage before the Belfast site was acquired in 2019 but are now ready to commence tendering for fabrication works.
The Company said the rationale behind the acquisition was the fact that the UK lacks sufficient shipbuilding and heavy fabrication capacity, as well as the Company’s own objectives which are to target the growing offshore wind opportunities in the region.
It said the capacity shortage has been exacerbated by the Government's twin strategy of rejuvenating the shipbuilding sector coupled with the "Green Industrial Revolution".
The Group believes its current shipbuilding strategy is ‘closely aligned’ to Government policy and could lead to some large contracts, both from Government and the private sector.
It said several negotiations are currently taking place with a view to consummating multiple shipbuilding contracts, conversion projects and significant fabrication works in due course.
The Company’s view is that the wind farm fabrication market is set to grow exponentially which it said has been reinforced by certain factors including, inter alia, the Government's announced "Green Industrial Revolution" as well as plans for future legislation in the sector.
It said Harland & Wolff has seen ‘a significant increase’ in inquiries from wind farm developers for fabrication capabilities across its sites since these announcements.
Commenting on the acquisition, John Wood, CEO of InfraStrata stated, “Whilst the total consideration is not material, relative to our balance sheet size and market cap, it nevertheless is a very important and highly strategic acquisition for InfraStrata.
With this acquisition, we now have a footprint in Scotland, which is the hotbed for major wind farm projects as well as for shipbuilding programmes. We have now positioned ourselves strategically across the UK, with four sites capable of servicing our five core markets.
This acquisition gives us the flexibility to optimise our operations across the Group and offer our clients the ability to fabricate faster and de-risk their exposure by offering multiple sites.”
He said, “As the Company moves into larger contracts, it is crucial that we demonstrate the capacity to bid for and deliver on these projects, and that the acquisition of Bifab's assets “delivers that capability” and will open up a larger demographic of tender opportunities.
He added, “Most importantly, it is expected to substantially boost our existing sales pipeline success rate given that the fabrication risk carried by the project developers will drop significantly since we will now be more favourably located geographically than others.”
Investors will be pleased the rationale for the acquisition of Bifab is underpinned by both the UK's lack of shipbuilding capacity and the UK Government's strategy to rejuvenate the UKs heavy industry heritage with its "Green Industrial Revolution" programme. Shares in InfraStrata have increased by nearly 10% since the beginning of November 2020 and entry into the windfarm sector will bring plenty of positive Newsflow to propel the shares further during 2021.
InfraStrata is a London-listed firm focused on the development, commercialisation and operation of advanced high-value strategic infrastructure facilities across the globe.
Reasons to Follow INFA
InfraStrata is a London-listed firm focused on the development, commercialisation and operation of advanced high-value strategic infrastructure facilities across the globe.
Energy Storage
The group holds a salt cavern gas storage project at Islandmagee in County Antrim, Northern Ireland is a pioneering low-cost fast cycle facility that it believes will provide ‘safe, secure and flexible gas storage that will in time serve the island of Ireland and the UK mainland.’
In May 2020, the company entered into a term sheet with West Face Long Term Opportunities Global Master L.P to acquire Meridian Holdings Co., under which sits the proposed Floating Storage and Regasification Unit Project (“FSRU Project”), located in North West England.
The Project will be the UK’s first to be developed and commercialised. Since more than 30% of the UK’s natural gas supplies arrive via LNG (liquified natural gas) cargoes, the FSRU is positioned to take advantage of LNG arriving in the UK seeking storage and regasification.
The estimated CAPEX for the FSRU Project will be circa £350m-£450m with further CAPEX optimisation planned through value engineering. The CAPEX for the FSRU Project is expected to be funded by putting together a consortium of partners at the project level. Estimated project revenues come to £80-£100mm annually with a 25-30 year project life.
Discussions with key partners have commenced with a consortium consisting of globally recognised companies involved in the development, construction, operations and commercialisation of regasification terminals worldwide will be formed in due course.
Shipbuilding
In August 2020, the Group completed the acquisition of substantially all the assets of Appledore Shipyard in North Devon, enabling the Company to compete from a ‘dominant position at two distinct ends of the shipyard market’ being the lower end of the market at less than 119 metres of dock length, with H&W - Appledore and the upper end of the market, requiring dock lengths of 300+ metres with H&W - Belfast.
The group signed a Letter of Intent (“Lol”) with Triumph Subsea Services to build two Windfarm Development Vessels ("WDV”) at a length of 200m and a beam of 35m.
The vessels will be built with diesel-electric hybrid engines that will eventually transition into hydrogen fuel cells, offering what management considers to be the ‘greenest’ solutions to wind farm developers.
The WDVs will be used for fixed and floating wind farm installations and sub-sea cable laying and providing marine services for offshore carbon capture and green hydrogen projects.
Significant Forward Pipeline
As the Group stands today, the Directors of INFA have identified a potential weighted pipeline of “£2 billion in contract opportunities between now and 2025” and believe there are near term revenue opportunities of £80.5 million and up to £825 million in the medium term.