FLOWMIS – Can Celtic Sea Ports Compete?

Port Developments take time to consent and build and in the absence of a clear forward pipeline desperately need public intervention to de-risk DEVEX and CAPEX exposure in parallel with the test and demonstration project’s delivery plans and upcoming commercial leasing round if they are able to support the needs of FLOW projects in the UK. Celtic Sea Power’s Infrastructure Development Director, Tim James has reviewed FLOWMIS application guidance and is left asking the question, will Celtic Sea Ports be in a position to place competitive bids?

A few weeks ago, The Floating Offshore Wind Manufacturing Investment Scheme (FLOWMIS), a major UK Government intervention that the Port’s industry has been waiting on since the award of the £75m to support the Able Energy Park development on the Humber in March 21 was announced. A significant announcement for all stakeholders with an interest in seeing the Celtic Sea deployment aspirations realised in a timely manner with local content, benefits and LCOE efficiencies at their core. And this is what the £160m is targeting to capture across the financial years 23/24 and 24/25 with £70m and £90m CAPEX funding available respectively.

Prospective bidders have until the 25th of June to submit their applications with eligible costs kicking in on the date the application is submitted. FLOWMIS has shifted its Scottish and Welsh focus and is open to all UK maritime ports. Looking at the scheme timelines that prospective bidders will need to satisfy the scheme, UK based ports will need to have tangible assets created that must be used for turbine integration with floating wind foundation, floating wind foundation assembly; and/of, floating wind foundation manufacture. In addition, The process by which the solutions are procured must be done openly and must provide water depth of 10m+ below chart datum at the quayside. Failure to pass any of these and the application will fall at the first hurdle.

Once passed, each applicant will be assessed on the strength of their business plan and also address a number of strategic, economic and financial criteria including profitability and evidence of commercial interest. Successful applicants will be placed on a primary list which will be assessed by an independent review panel with weaker bids being placed on a secondary list, which may be asked to address any areas of weakness if budget allows.

If applications from Celtic Sea Port’s make it to this second stage, the Celtic Sea ports should be in a position of relative strength. their proximity to the current and future leasing areas will result in cost efficiencies and risk reduction across the board. There is a significant body of evidence from their own work and industry reports (Celtic Sea Cluster Ports Position Paper – April 22, R-UK’s Offshore Wind Task force Port’s Paper – March 23, OREC’s Supply Chain Report – Jan 20,  Welsh Government’s Substructure and Port’s Review -Sep 21). In addition, existing government led programs (Swansea Bay City Deal and the recent Celtic Freeport announcement) and strength of commercial interest from developers who have openly signed MOUs to help realise mutually beneficial ambition are being delivered.

But can they meet the eligibility criteria to get to that second stage? In order to modify an existing quay or build a new quay that meets the 10m below chart datum criteria, the relevant consents must be obtained which could extend across both on and offshore legislation. Dependencies of these consents are the engineering and environmental surveys and getting the engineering design to a sufficient level of detail for procurement. These are typically classified as DEVEX spend until such time as sufficient development value is realised i.e. at point of consent or financial investment decision before being capitalised. This process is time consuming and whilst familiar and  beneficial, the requirement for them to be openly procured adds to the timing pressure. Following the legislative theme, modification of any Harbour Order through Revision or Works order will most likely be required. Once all are in hand with EPCI contractors procured the construction phase can take place.

With a decision due in Autumn 2023, the available funding time horizon for the 2023-2024 window is limited to 4-7 months with a further 12 months for FY 24/25. It’s understood that a prospective applicant’s project schedule can go beyond FY24/25 but taking the above into account, unless a Port has a fully consented and procured project with Harbour Revision Order / Works Order secured, it is highly unlikely to be able to utilise CAPEX funding within the funding timescales. Clarification from DEZNZ is needed on the eligibility of DEVEX funding, specifically whether and at what point of DEVEX costs can be capitalised.

Assuming this can be overcome then several applications could be submitted with funding per applicant covering enabling activity. This does leave a question over how their respective construction phase’s will be delivered be in the absence of clear end users and whether a commercial viability gap needs filling with a future funding or de-risking opportunity. With a UK Govt election looming, further clarity on future rounds is unlikely during the FLOWMIS funding window.

The application guidance is directing applicants to the UK Infrastructure Bank for infrastructure financing and partnering. With a £22bn commitment, projects that meet UKIB’s four ‘Investment Principles’ could be eligible for a range of financing tools including loans, credit enhancement and equity investments. The principles are largely met but need to deliver a positive financial return that will ultimately impact the LCOE of projects seeking to use the Ports. UKIB is not the only option available, but applicants will need to demonstrate availability of finance for the whole project.

In summary, FLOWMIS has the potential to support Celtic Sea Ports with early investment activity but doesn’t go far enough in terms of bridging the expected commercial viability gap of later construction phases. Clarity is needed on accountancy treatment of DEVEX funding and what will happen if funded projects don’t secure the necessary consents or reach FID.  The timing of the fund is out of sync with the upcoming Celtic Sea leasing round placing risk around end user commitment. This will likely put developments being backed by Scotwind projects at an advantage but other issues like timely grid availability are going to play a big part in the timing of those projects, which works to the Celtic Sea’s favour.

Celtic Sea Power are here to support Celtic Sea Ports both individually and collaboratively deliver their aspirations for the benefit of the Region. We wish applicant’s all the best with their submissions.

Tim James works on the Pembrokeshire Demonstration Zone project which is part funded by the Welsh European Funding Office and Swansea Bay City Deal and is part of the Port of Milford Haven project. 

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