Future Solent - The road to a new economy

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Richard Ousey, Associate Director, Government & Infrastructure Advisory, Grant Thornton UK LLP

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Future Solent - The road to a new economy

  1. 1. Future Solent - The road to a new economy -The National Context & opportunities in Offshore wind and Green Deal supply chain Richard Ousey - Grant Thornton UK LLP richard.ousey@uk.gt.com DD: 07917 071 784© 2012 - Grant Thornton UK LLP. All rights reserved.
  2. 2. Contents1. Grant Thornton UK Overview - EES, MAS, Growth Accelerator2. The National Context - recent developments & market drivers3. Offshore Wind - Overview & Supply Chain opportunities4. Green Deal - Overview & Supply Chain opportunities5. QsAppendices- Links to recent GTUK publications- Manufacturing Advisory Service - Overview- Growth Accelerator- Overview 2
  3. 3. 1. Grant Thornton UK - Overview - EES, MAS, Growth Accelerator© 2012 - Grant Thornton UK LLP. All rights reserved.
  4. 4. Our firm: Grant ThorntonGrant Thornton is a leading The Grant Thornton Approach • partner / director led assignments from inceptionfinancial and business adviser • • solutions-oriented service offering focus on building collaborative and enduring relationships • pro-active, independent and commercial approachThe Grant Thornton Approach• member firms in 100 countries• 500 offices worldwide• over 30,000 employees• 2,600 partners• worldwide revenue of US$4 billion 4
  5. 5. Grant Thornton UK LLP: Advisory services Grant Thornton Audit Tax Advisory services Government & Infrastructure Advisory Business Risk Services Recovery & Reorganisation Forensic & Investigation Services Mergers & Acquisitions Transaction Advisory Services Valuations Capital Markets Grant Thornton provides the full spectrum of services
  6. 6. Introduction to EES  Grant Thornton has a team dedicated to the Energy, Environment and Sustainability (EES) sector which has been active over the last 10 years as a leading financial adviser supportingSector Focus dynamic organisations  Our team takes a holistic view of the EES sector and understands its complexities andIntegrated interfaces as we have an integrated and focused approach to these areasApproach  We offer a cohesive international team composed of people across all service lines and sectors in multiple locations  Grant Thornton offers core capabilities in each of the EES areas including financial advisory services in wind, wave & tidal, solar, biomass, waste, hydro, CHP and energy efficiencyCore Capabilities  This is combined with other specialist advisory services such as forensic investigations, leasing, transaction support, corporate finance as well as accounting and tax  Grant Thornton has a diversified client base of public and private sector organisationsDiversified client  Grant Thornton advises major public sector bodies setting policy and regulation or procuringbase projects as well as debt and equity providers, utilities and independent developers 6
  7. 7. EES - Activity Map Energy Environment Waste to Energy Anaerobic Digestion Biomass Solid waste management Onshore Water renewables Offshore: Sustainable grid, ports, sup Cities ply chain, wave Low Carbon & tidal Transport Hydro Nuclear Energy Efficiency Green Deal Resource District Heating Management Corporate governance, du e diligence Sustainability 7
  8. 8. Grant Thornton UK LLP - EES team - Services 8
  9. 9. Grant Thornton UK LLP - Manufacturing Advisory Service (MAS)and Growth Accelerator Manufacturing Advisory Service Growth Accelerator GTUK has been heading up MAS in England Bespoke, intensive 1:1 coaching support to since Jan 2012 - took over from RDAs businesses designed around their individual barriers to growth Strategic and technical support to SMEs to drive Targeting 26,000 companies with high growth business growth potential Focus on Strategy, Innovation, Efficiency and Eligible companies are those who employ up to 250 Supply Chain connections people with revenues below £40m Provides free 1 day business review for qualifying Core Services (i) Business Development coaching businesses (ii) Access to Finance (iii) Help to Innovate (iv) Leadership and Management Up to £1,000 funding (or max 50%) of Grants of between £500 and £2,900 depending on improvement project or £3,000 for more the size of business significant Step Change project 9
  10. 10. Grant Thornton UK LLP - Manufacturing Advisory Service(MAS) and Growth Accelerator - Contact details National helpline - 0845 658 9600 www.mymas.org Twitter @mymas_mfg david.a.hare@uk.gt.com www.growthaccelerator.com Twitter Domain: @GrowthAccel Twitter Hashtag: #highgrowth LinkedIn Company Page: GrowthAccelerator YouTube: www.youtube.com/user/growthaccel Blog: www.growthaccelerator.com/news-blog 10
  11. 11. 2. The National Context - recent developments & market drivers© 2012 - Grant Thornton UK LLP. All rights reserved.
  12. 12. The National Context - Market DriversThe sector in the UK is being driven by cost-conscious customers and government interventionSurvey of businesses to understand reason for uptake of clean technologies Source - GT International Business Report 2012 - Cleantech Sector Focus 12
  13. 13. The National Context - recent developmentsGovt White Paper Renewable Heat Incentive DECC announcement onEnergy Market Reform (RHI) Scheme launched Non Solar PV tariffsCarbon Price Floor Commercial properties intially, New tariff rates for AD, hyrdo, micro 20 year tariff payments, no export CHP and (Small) Wind. Wind tariff reductions of 8-41% but other tariffs retainedContract for Difference Feed in Tariffs Domestic properties - launch("CfD") delayed but vouchers available. £300 Solar Thermal, £950 biomass Ongoing reductions in tariffs rates but boiler, £850 air source heat pump, not to commence until April 14 £1,250 ground/air source heat pumpCapacity Mechanism Take up to date not great Exemption for community schemes to achieve EPC level D Potential additional revenue streamEmissions Performance Standard for District Energy Schemes Jul-11 Nov-11 Feb-12 Jul-12 DECC announcement DECC - Renewable Obligation on Solar PV tariffs Certificate (ROC) rebanding Tariffs to be lowered to target a typical 5- AD - Plants below 5 MW to be 8% investment return excluded from ROCs from 1 April 2013, those over 5MW 2 ROCs per 55% step down rates after March 12 & MWh to 2016/17 then 1.8 further step down July Export tariffs up to 4.5p (from 3.1p) Higher than expected ROC banding for Energy from Waste CHP (1) & Payment periods down 25 to 20 years standard gasification and pyroloysis (2 to 2014/15 then 1.9 then 1.8) Further 6 monthly tariff reductions linked to deployment levels - est 10% 13
  14. 14. The National Context - City Region CO2 analysisDECC CO2 emissions analysis - Kt of carbon dioxide per capitaCity Region analysisCity Region Population (000) Total, 2010South Hampshire 992.30 5.84London 9,816.30 6.02 For 2012 South Hampshire has the lowest Kt CO2 emissions per CapitaNottingham 872.80 6.17Greater Birmingham 2,884.40 6.18 Signifcantly lower than nat avg. in Industry and CommercialWest of England 1,098.00 6.22North East 1,119.60 6.22Glasgow 1,796.60 6.32Leeds 2,249.50 6.51Belfast 657.20 6.71Greater Manchester 3,472.20 6.79Liverpool 1,472.70 6.93Cardiff 1,122.50 7.20Leicester 955.30 7.31Sheffield 1,784.40 7.49Aberdeen 462.90 8.02Derry 228.20 8.22Edinburgh 1,201.80 8.52Coventry 548.70 9.12Hull 759.90 16.99Swansea 681.90 19.01Total 34,177.20% UK population 55% Industry and Domestic Road Transport CommercialSouth Hampshire 992.30 2.02 2.01 1.77 5.84National Average 3.88 2.27 1.88 8.09 14
  15. 15. 3. Offshore Wind - Overview & Supply Chain opportunities© 2012 - Grant Thornton UK LLP. All rights reserved.
  16. 16. Scope of the UK Offshore Wind Opportunity• UK is officially the windiest place in Europe• Coalition Government stated that Offshore Wind will be a central part of its energy strategy going forward• Offshore doesnt suffer from the same level of NIMBY/Daily Mail rage that tends to accompany every onshore wind proposal• The size of the future offshore windfarms to be delivered as part of Round 3 in deeper water will dwarf that of previous rounds• Nature of the plant and logistics will tend to favour supply chain businesses situated close to the offshore wind areas for Solent Rampion and West of Isle of Wight are key focus Round 3 zones 16
  17. 17. Scope of the UK Offshore Wind Opportunity (2)• Estimates vary but of the £75bn manufacturing opportunity coming out of the UKs Offshore Wind Round 3 opportunity (2015-) only 5% will be manufactured in England• Offshore Wind Developers’ Forum vision for “the UK to be the centre of offshore wind technology and deployment, with a competitive supply chain in the UK, providing over 50% of the content of offshore wind farm projects”• Grant Thornton on behalf of MAS recently submitted a Regional Growth Fund bid with partners Renewable UK and Advanced Manufacturing Institute to help stimulate the national Offshore Wind SME supply chain. Even at a conservative estimate we concluded that Round 3 offers a £15bn manufacturing opportunity• With Round 3 kicking off in 2015, however, lead time not great so right now is a critical tipping point in terms of seizing the opportunity 17
  18. 18. Scope of the UK Offshore Wind opportunity - (3)Crown Estates - Guide to an Offshore Wind FarmEg 500 MW Wind Farm £msUpfrontImpact Surveys 8.4Met Station 8.5Sea Bed Surveys 9.0Geophysical surveys 1.5Geotechincal surveys 12.5Front-end eng/design surveys 1.0 40.9Wind TurbineNacelle 2.5Rotor 1.5Tower 1.0 5.0Balance of PlantCables 80.0Turbine Foundation 300.0Offshore Substation 50.0 430.0Installation and commissioningExport cable laying 80.0Foundation Installation 100.0Array Cable laying 60.0Construction port 15.0Offshore Substation installation 10.0Turbine Installation 140.0 405.0Operations and MaintenanceO&M 40.0Total 920.9 Source - Crown Estates 18
  19. 19. RGF Bid - Manufacturing Supply Chain Opportunities Turbine Components Non-Turbine Components Towers Foundations & Transition Pieces Gearbox / Generator Subsea Cables Blades DC, substation electrical systems Nacelle components Value of Castings & Forgings Manufacturing Opportunity 19
  20. 20. RGF Bid - Key Learning Points• On the manufacturing side feedback from OEMs/Tier 1s is that at this time it was not the sexy stuff they would want from manufacturers, turbines etc. but the lower technology kit i.e. Foundations, Cables, Metal ladders etc.• May in the longer term be opportunity to develop the higher tech / intellectual property type componentry / technology• For SMEs, about establishing contacts to understand who Tier 2 and Tier 3 are supplying in to the Siemens / Vestas of this World• Recurring message from Tier 1 and OEMs we spoke to was that SMEs often create a market in their head which doesnt necessarily exist in reality 20
  21. 21. Offshore Wind - Other Opportunity areas Maintenance Anchors & Transport to and Vessels - Cable / Pipe laying Platforms - accommodation on Supply & Manufacture, new offshore Installation installation & installations ongoing O&M Surveys - Development Environmental, Skilled of Port Health & Met Station, Personnel Facilities Safety Geophysical. Geotechnical 21
  22. 22. 4. Green Deal - Overview & Supply Chain opportunities© 2012 - Grant Thornton UK LLP. All rights reserved.
  23. 23. The Green Deal - What is it? • A delivery and funding model allowing householders to receives a package of energy efficiency measures at no up-front cost • The Green Deal will include  owner-occupiers  private and social rented sectors and  commercial sector (SME?) • Customer only has to deal with the Green Deal Provider • Rigorous accreditation and Quality AssuranceGoes live in October 2012 23
  24. 24. Green Deal - What is it (2)• Green Deal offers nothing new in terms of energy efficiency measures, the innovation is around the model to deliver these measures• Being appointed Green Deal Provider WILL NOT guarantee exclusivity over properties in the affected area• Green Deal finance will not be structured as a conventional loan: the householder will be liable for the repayments only whilst they live in the property, debt stays with the meter and passes on to the new occupier• The cost of the measures plus interest is paid back over the long term through repayments made via energy bills• The cost of the repayments must be equal to or less than the likely energy bill savings over a max period of 25 years in order to satisfy the Golden Rule - see over 24
  25. 25. The Golden RuleInsulation Illustration Annual Without Green Deal Green Deal household cost Green Deal Impact (insulation) Energy bill £1,194 - £365 £829 Green Deal cost - + £355 £355 Total £1,194 - £10 £1,184 25
  26. 26. Green Deal - Overview ECO Regulatory oversight Financial Regulator Ofgem Bill payments £ Finance Provider £ Electricity supplier £ Electricity bill payer Green Deal paymentsGreen Deal £ Liability attaches to theregulator meter Green Deal Provider £ Upfront payment £ Installer Assessor 26
  27. 27. Current Green Deal Initiatives• Birmingham Energy Savers ("BES") - Significant Guinea Pig project (see below)• Manchester, Bristol, Cardiff, Newcastle, Nottingham, Stoke LAs all developing• Seeing groups of Housing Associations also exploring potential group delivery models 27
  28. 28. Green Deal - Supply Chain Opportunities• DECC have estimated that if all 26 million householders adopt Green Deal measures then this would generate around 225,000 jobs nationwide• Govt. has also announced that 1,000 Green Deal apprentices will get supporting funding• For smaller SMEs targeting assessor / installation contracts the best route to market will be to fully understand the supply chain that sits below the main Green Deal providers.• B&Q - Strong local presence and likely Green Deal Provider• The challenge to all businesses will be finding a way to work around the constraints of the Golden Rule. Green Deal providers are likely to scrutinise margin in the wider supply chain.• One solution to this will be to Cross sell other renewable technologies - Solar Solar PV, RHI etc. while on site 28
  29. 29. Questions 29
  30. 30. Appendices Appendix 1 - Recent GTUK publications Appendix 2 - Manufacturing Advisory Service - Overview Appendix 3 - Growth Accelerator - Overview© 2012 - Grant Thornton UK LLP. All rights reserved.
  31. 31. Grant Thornton EES - Selected Recent Reports Grant Thornton produces thought-pieces on EES-related opportunities and challenges for individuals, communities and organisationsLinks to the reports: http://www.grant-thornton.co.uk/PageFiles/3481/Sustainable_Cities_Full_Report.pdf http://www.gtfinland.com/files/ibr2012%20-%20cleantech%20sector%20report.pdf http://www.grant-thornton.co.uk/Global/Waste_Sector_report_2011.pdf 31
  32. 32. THE MANUFACTURING ADVISORY SERVICE• A national single common delivery service to all manufacturing businesses in England from 1st January 2012 delivered by the Manufacturing Advisory Consortium which GTUK leads• Built upon the foundations of a successful service.• Delivering strategic and technical support to SMEs.• Driving Business Growth.
  33. 33. MANUFACTURING ADVISORY SERVICE (MAS)• If they buy products & put them together (assemble)... they are a manufacturer• If they make any kind of physical product ... they are a manufacturer• We work with all companies who make any kind of product…• Printers, Bakers, Furniture Makers!• Designers who outsource manufacturing• Logistics companies in manufacturing
  34. 34. ELIGIBLE PROJECTS• Those demonstrating a good fit with at least one overarching objective :- • Driving Business growth • Developing advanced manufacturing capabilities • Creating high value jobs • Improvement of resource efficiency (carbon footprint)
  35. 35. CLIENT JOURNEY Level 3 Best Practice Events and Self Help collateral Manufacturing Review Direct Calls Level 4 Intervention Enquiry Handling Foundation Foundation Improvement Email Level 1 Level 2 Website Step Change Step Change MAS Client Referrals Transformation External Referrals Level 5 Active Referrals Integrated Action Plan
  36. 36. SUBSIDY GUIDELINES• Foundation ProjectUp to £1,000, up to 50% of total project costs and up to £300 per day subsidy.• Step Change ProjectUp to £3,000, up to 50% of total project costs and up to £300 per day subsidy.• Repeat Projects1st Project in rolling 12 month period – up to 50% subsidy2nd Project in rolling 12 month period – up to 40% subsidy3rd Project in rolling 12 month period – up to 30% subsidy
  37. 37. Growth Accelerator Premium service delivered in partnership with government to drive private sector growth in the economy England wide service targeting up to 10,000 businesses per year with high growth potential to achieve their ambition Not a universal service and not a replacement for Business Link Ambition to deliver £2bn of growth Bespoke, intensive 1:1 coaching support to businesses designed around their individual barriers to growth
  38. 38. Target Companies Investment• Growth ambition Micro and start-up businesses (up to 9 employees) – £600• Scalable business model Small businesses• Willingness to invest in their (10 to 49 employees) – £1,500 own growth Medium-sized companies• Ability to grow by 20% per (50 to 249 employees) – £3,000 annum for 3 years
  39. 39. Support Bespoke package of support including: Business development coaching - strategy, driving the sales engine Access to Finance - growth capital, debt and equity Help to Innovate - new products, protecting and commercialising IP Leadership and Management - senior management effectiveness Access to a peer group masterclasses Commercial impact not days!!!
  40. 40. Energy, Environment and Sustainability | Summer 2012© 2012 Grant Thornton UK LLP. All rights reserved.‘Grant Thornton’ means Grant Thornton UK LLP,a limited liability partnership.Grant Thornton UK LLP is a member firm withinGrant Thornton International Ltd (‘Grant Thornton International’).Grant Thornton International and the member firms are nota worldwide partnership. Services are delivered by the memberfirms independently.This proposal is made by Grant Thornton UK LLP and is in allrespects subject to the negotiation, agreement and signing ofa specific contract/letter of engagement.The client names quoted within this proposal are disclosed on a confidential basis. All information in this proposalis released strictlyfor the purpose of this process and must not be disclosed to anyother parties without express consent from Grant Thornton UK LLP.© 2012 Grant Thornton UK LLP. All rights reserved 40www.grant-thornton.co.uk

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