Utilizing the SWOT framework, the strategic and financial analysis is summarized as strengths, weaknesses, opportunities, and threats. The financial analysis is combined with the governance review and company presentation representing the strengths and weaknesses. The analysis of the external environment represents the opportunities and threats. The factors included in the SWOT are the ones most important for future value creation and are used as the basis for the following forecast.
8.1 Strengths
Assets
Bonheur has ships for installation, operation and maintenance for offshore wind that are rare and in demand. Their growth in operating revenue in offshore wind was 204% from 2015-2020. During the period they have increased their capacity and the number of ships, and their level of utilization. They have also upgraded their cruise ship fleet in the same period.
Know-how and competencies
Bonheur has a long company history, and long experience from various industries. They have knowledge from offshore drilling and shipping, which is valuable for offshore wind. Their long experience within Media and Cruise is seen as valuable, despite the segment's most recent performance. The BoD and management have extensive knowledge, experience, and network relevant for success in renewable and offshore wind.
Page 87 of 148 Long term view
CEO duality and family ownership are recognized for a long-term view that could ultimately benefit shareholders in a long term. Agency issues leading to management decisions for short term stock performance, is not present for Bonheur. Their long-term view has also proved successful in their history of many long, and often successful business ventures.
8.2 Weaknesses
Profitability
As discussed in the financial analysis, the profitability of Bonheur has historically been below peer averages. Even though it is concluded that the company has a low risk of default in the short term, the development in liquidity illustrates an increased need for higher operating margins.
Corporate governance issues
Group thinking in executive decisions due to dependent BoD, the conglomerate nature of the business and the low ESG score found in the governance review, could potentially impact future earnings. Further, it is likely to negatively impact investors' interest in the company.
Ability to develop onshore wind portfolio
Their portfolio of wind parks “consented” and “under development” have been large for a long period of time, with relatively low deployment. The value of this portfolio could increase as LCoE goes down, however the looming threat is that permitting becomes more complicated and they wait too long before deploying, like in the case of the Norwegina Gilja park. In addition, they are a small company in the renewable energy sector, and industry competition could make winning bids for new projects difficult.
8.3 Opportunities
Growth in Offshore Wind & shipping
The PESTEL analysis found a favourable macro environment for Offshore wind, with investments and deployment expected to be high in the future, and the UK expected to more than doubling their capacity by 2025. Porter's 5 forces described an expected shortfall of service providers by 2025, leading to increased demand. There are great opportunities for growth in this segment.
Political goals
The legally binding goals for CO2 reduction incentivise governments to develop more renewable energy, which is a driving force behind the expected growth in both the onshore and offshore wind industry. The industry's development and performance are therefore in the interest of governments in general.
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There are great opportunities within both onshore and offshore wind outside today's operations in Bonheur, with projections of huge deployment in both Asia and North America. Their offshore service vessels have already operated in the Asia pacific, and the market could be highly relevant and profitable in the long term. Today's geographical focus is partly due to government support schemes, and similar incentives are expected to arise in new markets.
LCoE
The rapid development in LCoE is for Bonheur a double-edged sword. For onshore development it demands keeping up with larger industry rivals in developing wind at an increasingly lower cost. The development could see already consented farms more valuable as electricity output increases. For offshore wind and shipping the development is seen as positive, since it is a driving force behind the increased investments and deployment, increasing the demand for their services. The need for lowering the service costs in order to decrease offshore LCoE is expected to be offset by the future increase in demand, and efficiency in deployment and service.
8.4 Threats
Change in interest rate
An increase in interest rates is problematic for the industry, as high and expensive debt is the norm for development projects in the renewable energy sector. For Bonheur it could worsen their ability to cover their financial expenses with operational earnings, which is already far below peers.
Increasing exposure to Power Prices
The volatility and uncertainty of power prices is problematic for the industry, as it makes future revenues highly uncertain. Following decreasing government subsidies, and the long term out phasing of electricity certificates, will expose their renewable energy segment to the power prices to a higher degree. Potential power purchase agreements and higher electricity output from better technology, can reduce the net effect. Positively the industry will in the long term be exposed to less political risk.
High bargaining power for buyer and industry competition in renewable energy
As uncovered in the external analysis, the governments purchase power and auctions away permits for energy development. Leaving the risk in development and implied demand for lower costs to the industry. Commonly not concerned with the means of green production, this increases rivalry, threat of substitution and hence the future profitability.
New entrants in Offshore wind service
As the offshore wind industry is increasingly populated by large oil companies and successful established players, the service sectors will also grow. Previous offshore oil service providers (inhouse and external) and turbine manufacturers can expand their installation and service sector, which could lead to a higher competition in the long term. The expected growth will reduce the net competition in the near future. In the long term, exit barriers due to specific assets could imply high competition.
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