SmallCapNews | Steve Remp and the rise of SeaEnergy plc

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Steve Remp and the rise of SeaEnergy plc

04 December 2009

Steve Remp knows a thing or two about frontier exploration. The American oilman who made millions by leading Ramco Energy into some of the most volatile oil and gas districts in the world has a keen eye for a new challenge.

But while opening up the Caspian and doing deals in unpredictable ex-Soviet states made Ramco one of the biggest names on AIM in recent years, the company nearly collapsed under the strain of a disastrous deal in Ireland in 2005. With those problems now behind him, Remp is focused on a return to the frontier – except this time he’s swapped oil and gas for wind energy.

Together with managing director Steve Bertram, Remp has turned Ramco into AIM-listed SeaEnergy plc, and now wants to play a big part in the roll-out of wind farms in the seas around Britain over the coming years. To do it, he’s hired some of the best engineers in the business and borrowed a partnership approach from his oil and gas days that is seeing the company team up with some of Europe’s biggest utility companies.

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Joel Staadecker, the CEO of SeaEnergy Renewables, with Steve Remp, Executive Chairman, and Steve Bertram, Managing Director of SeaEnergy plc

Changing strategy

It is all a far cry from Remp’s early life as an oil-obsessed Californian who arrived in Aberdeen in 1973, just as the North Sea industry was about to take off. He started Ramco in 1977 from the proceeds of a hotel venture in the Scottish city and grew rapidly through a heady mix of risk and ambition. By 1989 he was being widely credited as the first Westerner to open up the huge oil and gas potential of Azerbaijan and the Caspian – cashing in on projects that involved partnering with some of the biggest players in the industry.

Ramco’s fall from grace was triggered in 2004 when the team decided to ditch its partnership strategy and go it alone in producing gas from the Seven Heads discovery offshore Ireland. Contracts were signed but the production wells turned out to be problematic. It left Remp and Ramco in financial turmoil.

“With Ramco, the source of the problem was that we departed from a very successful model,” Remp said. “Throughout the nineties, the model that was so successful, and which made us the largest company on AIM at one point, was ‘small company partners BP, Statoil, Pennzoil, Lukoil’. We did it in a consortium. We then sold out and decided to go our own way instead of risk-sharing and that was the mistake. We thought we could do it ourselves, we converted from really being an oil and gas investment company into a small E&P company and we weren’t good at it. So, we departed from the model and we have come back to the model that worked for us. That’s what I took from the experience.”

Wind energy

The catalyst for the switch to SeaEnergy came in June 2008 when Remp and Bertram hired the team of designers and engineers behind the renowned Beatrice Wind Farm in the North Sea - the world’s first deep water wind development project.

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Beatrice offshore wind farm demonstrator project, operated by Talisman Energy

The wind farm had originally been developed by Talisman Energy and Scottish & Southern Electricity (SEE) but Talisman had decided to return to its oil and gas roots, just as Ramco was looking for a new direction.

Now the company wants to leverage the skills and experience of its engineering team and partner big companies in developing wind energy projects. Specifically, Remp is eyeing the British Government’s plan to roll out 33 gigawatts (GW) of wind power generation offshore UK by 2020. That target is part of a wider mandate to channel more than 30% of the UK’s power from renewable sources by then.

Ultimately it wants to build partnerships in a 1GW portfolio of offshore wind projects over the next five years with a view to building a company worth more than £500 million.

It has already secured 456MW of that portfolio. In February this year, the team joined forces with SSE Airtricity and nPower Renewables to secure two separate licences in the latest Scottish licensing round. Initial scoping work there is now underway. It has also got in early with a wind energy tie-up in Taiwan – something which Bertram thinks could eventually outpace SeaEnergy’s domestic operations.

However, the main prize right now lies in the forthcoming Round 3 UK offshore wind licensing awards. There have been 40 bids for nine zones and the results are due to be announced by the Crown Estate before the end of 2009, possibly coinciding with the Copenhagen climate summit. SeaEnergy is taking a 25% stake in a partnership with Portuguese company EDP Renovaveis (EDPR), the fourth biggest wind energy producer in the world.

Remp explained: “I have been a through-and-through oil person, but the attraction of this is that there are so many analogies between oil and gas and offshore wind. Scale, operating in a hostile environment, designing and building structures for deep water. You cannot do what the Government wants to do unless you have got an oil and gas background – it can’t be done.

“This is just like the oil business when I was a young guy in Aberdeen in 1973. Most people couldn’t see it coming and I don’t think I saw the scale of it either. We are on the verge of something so big that the investing public don’t get it yet – but they are going to get it real fast, they are going to get it around the time of Copenhagen.

“So for an oil and gas man, this is enormously exciting. I suppose the industry looks at me and asks: what does he know that we don’t know? I’ve been early before and got it right – I called the Caspian before anybody. We took Ramco from 8p to 1350p in a relatively short space of time on the back of the Caspian. We were a publicly-quoted pure-play in the Caspian, partnering big guys. That’s what we are doing again today – we’re partnering big guys in the form of utilities into a huge play.”

Value curve

But while SeaEnergy can see the way to the deal tables of some of the major utilities that will eventually be running these wind farms, it also has a close eye on the value curve as it makes its way there.

Once licence zones are awarded by the government, the companies involved enter a number of years of data gathering, planning consent, design and development, followed by construction and then operation. At every stage, the project increases in value and provides an opportunity for SeaEnergy to either sell-down its stake or exit completely.

Bertram said: “The valuation curve starts with the site being awarded and moves up sharply as you reach milestones and you get consent. Most of the value is added before you start construction. Will we be there at the construction phase? We would like to be, but on the way up that value curve, expect to see us sell out or sell down the projects, or possible take another oil and gas mechanism – a carried interest. There are a number of options and we have got that data-gathering period to work out which is the best way forward for the company.”

Remp adds: “The thing about this business that is so interesting is that during the first four years you don’t need a lot of money. The big money comes later but the big value comes now and during the next four years. Oil and gas has a history of consortia building and those companies understand partnering and risk sharing. Utilities don’t have that history; they do their own projects. But all of a sudden, the scale of what they are confronting requires them to build groups for the first time in a major way.

“So this story is truly unique, this is one of a very small number of small guys partnering with giant utilities. Why would a small guy like us be invited to partner with a big utility? It must be because we have something they want.”

Ben Hobson, SmallCapNews.co.uk