Boskalis_Annual Report_2017

boskalis at a glance ANNUAL REPORT 2017 – BOSKALIS 14 Offshore Energy The Expand pillar of our strategy remains strongly geared to Offshore Energy. Despite the sharp decline in the oil price and the cutback in capital expenditure by the offshore oil and gas industry over the last couple of years, specifc segments in this market remain attractive for Boskalis. Boskalis offers a broad range of capabilities, which can be subdivided into contracting-focused Installation & Intervention (I&I) activities, Subsea activities, including IRM, survey and cable laying and the more short-term-focused Transport & Marine Services (TMS) business. Given the nature of the contracting and subsea business, where we are expected to take on a broader responsibility with a higher reward potential, the I&I and Subsea activities are positioned higher on the S curve and are therefore an area where we want to pursue further development. Installation & Intervention The I&I market comprises installation and decommissioning of floating and fxed structures, landfalls and offshore wind-related activities. The competitive landscape for the installation and decommissioning of floating and fxed structures is highly fragmented, with the combined market share of traditional global Engineering, Procurement, Construction and Installation (EPCI) players estimated to be less than 40%. Many of the other players are active with just one or two key assets and due to the market downturn an increasing number of them are suffering from weak fnancial performance and overleveraged balance sheets. This presents us with an opportunity to step into this market and to position ourselves as an attractive independent player just below the EPCI contractors with a geographic focus on Northwest Europe, Africa and the Middle East. The offshore wind market has taken off in earnest in recent years but despite an impressive drop in cost per kWh the economics of offshore wind remains dependent on government subsidies. The wind-related I&I market in Northwest Europe is not expected to grow substantially beyond the current annual EUR 1.5-1.7 billion in the coming years. Boskalis’ share in this ranges from around 10% (foundations) to around 35% (cables) and the company is committed to maintaining a strong presence in the European market. Results: In 2017, the conversion of a former heavy transport vessel into the Bokalift 1, a 3,000 ton DP2 transport and installation crane vessel, was completed. Following a festive inauguration in Rotterdam in February 2018 the vessel will start in its frst offshore wind farm jacket installation project. The multifunctional vessel is ft to be deployed for a variety of projects including the installation of wind turbine foundations, topsides and jackets and will also be suited for decommissioning activities as well as wreck removal projects. A frm decision on the conversion of another vessel into a crane vessel and determining the exact specifcations is expected to take place in the course of 2018. For the floating installation market, we intend to position ourselves higher on the S curve by adding contracting assets such as construction support vessels. This could be achieved by acquiring assets in the market or by acquiring a player in the fragmented installation market.

Subsea Solutions Boskalis has over the years developed a modest but successful position in the subsea services market, focusing on survey and UXO clearance, diving and Inspection, Repair and Maintenance (IRM) work in shallow water regions in Northwest Europe, Africa and the Middle East. This is another highly fragmented market, with the vast majority of players operating just one or two survey and diving support vessels in a region. With numerous players also being fnancially stretched, we see opportunities for expanding our position in Northwest Europe, Africa and the Middle East by acquiring assets or by acquiring a player with assets. The global shallow water SURF (Subsea, Umbilicals, Risers and Flowlines) market is also substantial in size. Based on the market outlook and Boskalis’ existing subsea contracting capabilities, we want to look into a gradual expansion into the shallow water SURF market and will explore acquisition opportunities to achieve this. Results: In 2017, Boskalis acquired the renowned British survey specialist Gardline. With its fleet of 15 survey vessels, Gardline provides a solid basis on which we will expand our subsea survey activities. Furthermore, we added two high-end twin-bell SAT diving support vessels to our fleet in late 2017. These additions make Boskalis one of the leaders in the North Sea subsea services market. Both these steps fll in parts of our three year business plan at attractive prices and prepare the company for the future. Transport Boskalis has a global leading position in heavy marine transport and is also active in long-distance ocean towage. Demand in this market consisted of high-value long-term contracts requiring high-end engineering know-how, generally related to oil and gas production, complemented by straightforward short-term transport contracts for exploration rigs or ports and marine-related work. However, the sharp drop in the oil price has led to capital expenditure freezes by the oil majors resulting in a squeeze on the number of high-value long-term contracts as well as a decline in short-term contracts. The effect of this volume decline has been compounded by a further influx of new transport capacity. As a result, the low end of the heavy marine transport segment is suffering from a structural supply and demand imbalance. In light of the above we are redefning our market position. At the high end of the market we can still offer a unique proposition with our Type 0 and I vessels. Our scale is also unparalleled in terms of number of transport assets and the combination of heavy marine transport with long-distance towage. Going forward, we will continue to market this value-adding proposition. However, following the aforementioned developments in the market the smaller heavy marine transport vessels are now considered to be commodity assets. In accordance with the S curve philosophy we are open to forms of collaboration and/or consolidation similar to initiatives seen in comparable maritime shipping markets.