Bonheur ASA
OSE:BONHR
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Bonheur ASA
Earnings Call Analysis
Q3-2023 Analysis
Bonheur ASA
The presentation began with an overview of the financial health of the company's fully owned entities. These units have shown a solid position, boasting a cash supply amounting to nearly NOK 4.9 billion compared to external debts tallying only NOK 3.6 million. This remarkable figure underscores the fact that the subsidiaries are net cash positive, underpinning the company's robust financial foundation and its strong performance that has secured dividends from joint venture activities, especially within the renewable energy sector.
Ivar Brandvold, Co-CEO of Fred. Olsen Renewables, discussed the various operations under his wing. There's a noticeable stability on the production side with ongoing strategic completion of Fabodliden 2, marked by the installation and testing of two major turbines, aiming for year-end completion. Besides improving the Rothes 3 site's capacity, the company's efforts are reinforced by managing a development portfolio encompassing an impressive 4 gigawatts in early stages. Additionally, Brandvold touched upon the broader market environment, noting a return to more normal conditions, a downturn in heightened gas and coal prices, and a stabilizing CO2 pricing that fosters continuous development of renewable energy resources. The Scandinavian hydrological balance is back to normal as well, meaning that entering winter, the energy sector appears stronger and more stable than in previous years.
A notable area of concern addressed by Brandvold was the Norwegian proposal of a resource rent tax on onshore wind, initially set at 40%—now marginally reduced to 35%. While the proposed tax saw the elimination of certain fees, the company, concurrent with industry consensus, argues against the imposition of resource rent tax, suggesting it's unfounded for onshore wind and would stunt investment in the country's renewable energy capabilities. The company's stance is resolute: existing wind farms shouldn't be affected, and any new tax implementation should be cash neutral and not dissimilar to regimes in place for other energy sectors like petroleum and hydro.
Lars Bender, at the helm of Fred. Olsen Seawind, conveyed the progress of key projects in Ireland and Scotland. With a Contract for Difference (CFD) secured for Ireland's substantial 1,300 megawatt Codling Wind Farm project and a consent application poised for submission in early 2024, the project is laying the groundwork for future development decisions and scaling up pertinent procurement and engineering activities. Meanwhile, Scotland's [Muir Mohr] project is amassing pivotal site data to fast-track its consent application. These maneuvers ensure that the company remains at the forefront of the offshore wind sector, despite market challenges, and cements its status as a potential first mover in Scotland's burgeoning floating wind landscape.
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Good morning, everybody. We are here today to talk about the third quarter and give you a presentation. We will start with Richard Olav Aa, our CEO for Bonheur, and -- But before I give the word to you, Richard, I would like to tell you that as we usually do, the CEOs will perform -- will talk about the different areas, and we will then do the Q&A at the very end. So Richard, the word is yours.
Yes. Thank you, Anette, and also a hearty welcome from me to this third quarter presentation. So if we could go to the first slide. Before we go into the slide, I think I would like to emphasize 3 important facts in this quarter that are items we have worked on for a long time, and which is coming to fruition this quarter, before we go into the numbers.I would like to highlight on renewable energy. There, we see a significant revenue decline due to lower power prices of 72% on revenues -- on the prices, while revenues are only dropping 45%, and that is due to a concerted effort -- commercial effort in Fred. Olsen Renewables on working on the other revenue streams.I'll come back to that, that how they have worked now on dismantling the old PPAs and work to get more out of the [ Rothes ], the REGOs and also how they plan curtailment and maintenance is really paying off on the revenues. Just one thing we will come back to.And on wind service, Fred. Olsen Windcarrier worked hard and long in Japan with Shimizu, and this quarter it's coming through with 2 contracts on what we now call our port vessel outside Japan. So another achievement in this quarter.And thirdly, on cruise, the countercyclical move acquiring 2 cruise ships in the midst of COVID, we see is now really paying off and the customers really load the 2 new vessels and we see that in the results.So in all areas, we see that some long-term bets we have taken on working more commercial in renewable energy, working consistently with our Japanese partner and taking a countercyclical move in cruise is now really starting to pay off.So with that as a backdrop for the results, we'll go into the numbers. We see despite the steep drop in power prices, revenues are on par with third quarter last year, around NOK 3.2 billion. While EBITDA is down from NOK 1.083 billion down to NOK 800 million this quarter, mainly due to the drop in the electricity prices.So I'll go through area by area. Renewable energy has dropped from NOK 748 million in third quarter last year to NOK 243 million this quarter. That is a drop of more than NOK 500 million. I'll come back to that. It's mainly driven by the power prices, which, on average, is 72% lower than third quarter last year. It's a drop in all markets, but in particular, U.K. and Norway, but this been offset by a lot of positive factors that I'll come back.Then construction, Ivar will come back to also that. Fabodliden 2 is on track, and then Ivar will cover the tax situation in Norway also in his presentation, but we also got another setback this quarter from the government, that the government has delayed the offshore wind application processes for both Sorlige Nordsjo and Utsira Nord, which Lars will come back to in his presentation. So some headwinds on the renewable energy development in Norway.Wind service and EBITDA almost on par with a record high third quarter last year, NOK 399 million. Tern vessels had close to 100% utilization. Some hiccups on the cranes had a slightly less than full commercial utilization. Alexander will come back to that. Backlog without the Shimizu contracts is at NOK 512 million, and then we have got 2 contracts now with Shimizu that both now come in this quarter and also next year, which Alexandra will cover in more detail. But again, a great achievement.Global wind service had a quarter in line with the third quarter last year, with solid performance in Europe and Asia, while more struggling in the U.S. I think this quarter on the result, a really positive surprise in a way is Cruise that goes from minus NOK 42 million EBITDA last year to plus NOK 213 million. And we believe that -- 2 years ago that the cruise results would be almost on par with the renewable energy results that [ are ] halting swings and also the benefit of being diversified.3 ships, occupancy of 76% compared to 59% of full capacity. Still lower than previous years before COVID, but a solid improvement from third quarter last year. Pricing is stable from third quarter, GBP 189 per passenger. And we also got some help of reduced bunker cost, especially the diesel prices, very sky high last summer, and that's come down this summer.Other investments, EBITDA of minus NOK 55 million, down from NOK 42 million, a little weaker results in NHST and also some more spending on Fred. Olsen 1848. We had a successful placement of a new bond of NOK 600 million that we did in the quarter. Yes.And then on the parent company, equity ratio of 71.5%, which is a solid improvement from third quarter last year and also cash in the parent stands strong at close to NOK 2.9 billion.Already comment on revenues and EBITDA, but we have the high price levies in the U.K. with NOK 26 million this quarter. You may ask why we get that when the prices are so low. That's because we accrue on a quarterly basis the full year estimated impact.And we see forward prices for Q4 are up. So that means that we have to accrue more on the high-price levies. Whether or not that will be paid in tax, we will see when the year is over.Then on EBIT, we see some big swings on both depreciation and impairment. Depreciation is down because we impaired cruise lines last year. So impairments are down with NOK 73 million --no, depreciation is down with NOK 73 million.While impairments is significantly lower because impaired cruise lines, 2 ships in the cruise last quarter with NOK 416 million improvement on impairment. The small impairments we have this quarter is related to NHST and 2 projects in Scotland on [ renewables ]. So actually EBIT is improving by NOK 207 million this quarter.Then we need to spend a little bit of time on net finance because there we get the opposite effect with a swing of close to NOK 600 million. We had a very strong result on net finance third quarter last year. Most of these are unrealized effects. While this quarter we had the opposite effects. So we have reconciled that on the right hand. And we can see net interest cost is actually down. Despite that interests are increasing. That's because we have a lot of cash that we get better interest on and that a lot of our debt is fixed interest.So where we get the swing is in exchange rate differences. Third quarter last year, the krona weakened quite a bit, so our cash positions increased in value. This quarter the krona has strengthened, so we get the opposite effect.Then the biggest swing is on unrealized losses on financial instruments, where we had a gain of NOK 391 million third quarter last year. This is related to the interest swaps in U.K. So when the interest rate goes up, we get a significant unrealized gain on these swaps of NOK 391 million third quarter last year. While they were quite stable third quarter this year, so a small loss of NOK 6 million.Then we have some liquid shares that had a loss in third quarter last year, that had a gain the third quarter this year and then some other financial items. But the main effect this quarter is related to currency and that we didn't have the effect on the interest rate swaps in renewables. So we get a loss of NOK 211 million compared to a gain of NOK 387 million.Taxes, nothing special to report and the net result stands at NOK 172 million, and we see most of the result in this quarter goes to the shareholders of the parent company because we generate profits where Bonheur owns 100%. We also see that interest-bearing debt -- net interest-bearing debt is down significantly year-over-year by close to NOK 1.9 billion.Yes. The revenues we already commented on, the drop in the prices and the improved revenues on cruise. So we can move on to EBITDA. If we go to renewable energy, which is down NOK 505 million. And actually, it could have been down more, but the really strong effort by the commercial team and the operational team in renewable energy, how they have managed to dismantle the PPAs and get more paid for the [ Rothes ], get more paid for the REGOS, how they then plan maintenance and curtailments in a way so we get better results out of that, have resulted in a lot less decline on the revenues and EBITDA than we would have else. It's also been a quarter with a lot of planned maintenance and some unplanned maintenance that hit the OpEx in this quarter.On the Cruise EBITDA of NOK 255 million, it's driven mainly by occupancy but also the lower bunker prices. So those are the big effects on the EBITDA this quarter.Yes. On the capitalization, we can comment first on the 100% owned entity. We see now that renewable energy outside the joint ventures, it's with more than SEK 1 billion in cash. That is really the dividends that's come up from the joint venture due to the strong results the last quarters. Wind services generate good with cash in FOWIC and also now have a cash position close to the debt position and very positive crews now have NOK 400 million in cash, which is more than the salary credit to Carnival.So all the units we own 100% are actually net cash positive in some and almost all of them are cash positive individually. [indiscernible] close to NOK 3 billion, which is more than the debt of NOK 2.8 billion. So 100% controlled entities, sits with a cash or close to NOK 4.9 billion compared to an external debt of NOK 3.6 million, so a solid position.In the joint venture and not fully controlled entities, we have the 3 joint ventures in renewable energy, where we have a project finance in the U.K. joint venture of NOK 5.5 billion and a cash position of NOK 0.5 billion spread around the U.K. joint venture and the Norwegian and Swedish joint ventures.And wind service has about NOK 491 million in cash, while external debt is NOK 1.1 million. So we have further strengthened our capitalization on the 100% of entity and continue to have the appropriate leverage where we don't 100%.So by that, I think I can hand back to you, Anette.
Okay. The deeper dives into the different companies. We will today start with you, Ivar. Ivar Brandvold is Co-CEO of Fred. Olsen Renewables. Ivar?
Thank you, and good morning to everybody. I'll cover the development construction market and tax in my presentation.If you look at the development side, we are working diligently in all aspects and the whole value chain of development. There is not really any change on the producing assets. It's the same as before. When it comes to Fabodliden 2, that is now in the completion phase, and I will get back to that.When you're looking at the consented site, there is a change since last time, and that is that the capacity on the Rothes 3 been increased from 170 to 193 megawatts, and that is due to extra grid capacity being secured in the quarter. When it comes to the development activity in early stages, there are some changes. But in all, we are working on the portfolio of 4 gigawatts in the development phase.If you then look at the market, you can say that over these last 2 years we have been in an extraordinary situation, and we are more back to a normal situation as we speak. If you look at the drivers, the gas price has come down quite significantly in this last -- during 2023 on the back of storage being secured and also the transformation to receiving more LNG in Europe and hence, making Europe less reliable on the Russian gas.Quite an extraordinary change, I would say, in Europe over so few months. But nevertheless, that is the situation going forward. And you can also see that the coal prices are coming down also to more normalized levels whereas the CO2 pricing is stable around NOK 80 to NOK 100, which, of course, is a real important instrument in terms of maintaining focus on the renewable energy being developed.And if you then look at Scandinavia, the hydrological balance is now about normal. So all in all, we are now entering into the winter season in a more, should we say, a strong level, and we have been in the past. And you can then also see that on the prices in all our markets have come down significantly since the peak in 2022. And we expect some volatility going forward. And of course, weather dependency is always there.We are nearing completion. When it comes to the third site being constructed in Northern Sweden, it's the Fabodliden 2. There are 2 large turbines being installed. They are installed and testing is now ongoing, and we expect the project to be completed by the end of fourth quarter, hopefully before Christmas this year, and the project has been progressing on budget and on plan.Then to the last topic of significance, and that is the introduction of a resource rent tax in Norway. This was proposed 1 year ago by the government to be implemented on the onshore wind industry in Norway and it was a public hearing on -- that was introduced on the 16th of December. And following the public hearing, or should we say the consultation process, the government decided to delay the introduction of resource rent tax until 2024.And that was now proposed in conjunction with the national budget early October and also as a proposition or proposal to the parliament, which is then being progressed, or processed this fall in parallel to the national budget. There is just minor changes basically from what was proposed last year and what is now being proposed.So last year, it was in the resource rent of 40% being proposed. There was a high price contribution introduced at 23%, above [ NOK 0.70 ] per kilowatt hour. And there was certain production fee that was increased -- proposedly increased from [ NOK 0.10 ] to [ NOK 0.20 ] per kilowatt hour, and then there was also a natural resource tax introduced of [ NOK 0.13 ].In the new proposal, the resource rent tax has been reduced to 35%, and the production -- price contribution has been canceled from 2024 going forward, which was expected. And then when it comes to the production fee, that is proposed to be increased to [ NOK 0.23 ] and then the natural resource tax to be canceled.In addition, the government are introducing what they call generous transition measures. Basically, they are the same as was also in the original old time, so not really any changes there. So the material change is the resource rent being reduced from 40% to 35%. We are working consistently on this topic and communicating to politicians and stakeholders, and also documenting through analysis and reports that there is not really any basis for resource rent tax on onshore wind in Norway.I think that stands really concrete and I was also say in undisputed, also demonstrated by the recent analysis undertaken by statistics Norway.So the position in Fred. Olsen Renewables, which is consistent with the position in the industry is that there is no basis for resource rent on land, wind in Norway and also that the proposed tax would have very negative consequences in terms of investments in renewable energy in Norway, also spilling over to the future solar and also offshore wind, and of course, also in terms of onshore wind going forward.And of course, also Norway as a stable -- having a stable regime and being investor-friendly is really at stake here. If it is going to be implemented, the position is that it should not have an effect of existing wind farms, and it should be introduced under the same umbrella as the wind, now as the petroleum and also the hydro, that it should be cash neutral and a negative [ result ] and should be paid in cash at the start.That has been the position of the company, that has been in the position of the industry of this entire year, and it is still the position. Thank you.
Very loud and clear, Ivar, and you will all understand that we feel strongly about this point. Next, Lars Bender, responsible for Fred. Olsen Seawind. Lars?
Thank you. Yes, and I will give you an overview of the activities in Fred Olsen Seawind in the third quarter. And I will start by giving you an overview of our core markets and core projects, and then I'll say a bit about the general situation in offshore wind, which has been, I think, in many newspapers over the last months.But to start with our activities. If we start in Ireland, as you're aware, we won a CFD in May on the Codling Wind Farm project. That's CFD for 1,300 megawatt. We were naturally -- and we are very excited about that and very happy about that.Next phase of the project has now begun, which is preparing the project for the consent application that has been undertaking for quite a number of years, but we are looking to submit a consent application in '24 -- first half of '24. So that is very much what's progressing now. In addition to that, we are overall getting the project ready for a later FID, which means that procurement activities and engineering activities are ramping up.But overall, the project is on track for consent application and the project also remains on track despite current market challenges that we see in offshore wind. I will come a bit back to that later.If we then turn to Scotland [ on ] [ Muir Mohr ] project, that project has been from the get-go, and this is to take a fast track towards consent application. We are still pursuing that track. That means that we have over the last months collected data on site in relation to geophysical seabed data, wave data and wind data. That is more or less finalized now, and we've begun the analysis of that data, which will inform our consent application, which we expect to submit in '24.So the project remains on track to submit an early consent application and also to protect its position as one of the first movers for floating wind in Scotland and again, protect the position of being one of the projects with a potential of being the first -- one of the first commercial scale floating wind projects in the world.If we then turn to Norway, as Richard already said in the beginning, we've had a setback in this quarter, I would say actually 2 setbacks because we've had 2 delays over the last months. First, the original dates in August, September was delayed until November. And then just last week, we had yet another delay of the submission dates.And overall, of course, it's fair to say that is both, of course, disappointing. We've been preparing for this for a number of years. We've been working closely together with our partners to prepare for this. And naturally, we have hoped that these time lines would go through, and that will we see a [ submission ] this year.What the new framework actually means is still very early to answer because it came out last week. Some of the issues relate to European legislation, but we are naturally monitoring this very closely and looking at what it means for both [indiscernible] going forward.If we then turn to kind of the general offshore wind market, I think it's fair to say that the news over the last months have been dominated by a lot of, to some extent, negative news around offshore wind projects. There has been news around projects being either put on hold or even canceled due to poor project economics. We've seen it in the U.S., but we've also, to some extent, seen it in Europe.I think before going into the detail of what is challenging the industry right now, it's maybe important to remember the backdrop of the long-term picture for offshore wind. I think we are coming from a situation where we, over the last years, have more than doubled the installations of offshore wind. We are a significantly growing industry. And also, when you look at the outlook, both up against 2030 but also 2050, it is a significant growth path that the industry is on, and that picture still remains the same.But it's also clear that some of that growth is short-term, challenged by, you can say, to some extent, growth [ pains ]. And if we look at what's challenged the industry right now, it's probably 2 things. It's the general market environment, which relates to inflation and interest rates; and then second, it is growth [ pains ], which is related to supply chain.And if we look a bit closer on those 2, I think some projects have had a challenge over the last months that they have locked in CFDs at a time with different assumptions, both in relation to interest rates but also in relation to supply chain. And that's probably what's driving the main challenges right now for some of the projects which are put on hold or canceled.I think it's important to say that from our perspective and our project portfolio, we are not in the same situation where we have projects that we see are not economically viable. We have a very solid portfolio of projects, and we still remain on track with developing them.And we are probably less impacted by these factors than other players in the industry right now. That doesn't mean that we should not take the supply chain challenges in the industry very seriously. We definitely should. And we are, of course, working very closely, both together with our partners and the project teams on securing that we do not see impacts on our activities.So overall, as of today, we do not see an impact on our business or our projects, and we remain on track to develop those and also maintain a positive outlook for offshore wind long term, even though we do see some short-term challenges. Thank you.
Thank you, Lars. So challenging times, but lots of opportunities. Next is Sofie Jebsen responsible for Fred. Olsen 1848.
Thank you. I would like to give you an update on the different technologies that we're developing. Firstly, to start off with, the floating maintenance solution, which is the solution where we do maintenance on site, on the floating wind turbines in order not to have to [ tow ] them to shore, which is not an optimal solution. And there is a [ crane ] solution lifted onto the foundation and then maintenance is performed when they have the same movements.We are working together with Fred. Olsen Windcarrier on this solution as they see this as an interesting solution for the future. We're currently working on a [ FEED ] study detailing all the operational, technical and commercial properties, but also adjusting the [ FEED ] study to account for the trend in the market where we see that developers are looking more at 20-megawatt plus size turbines instead of the 15-megawatt turbines.Also, the Brunel Floating Foundation is going along. Design scope is progressing well. This is the foundation based on steel tubulars, where the thinking has been that we would like to tap into the tubular supply chain where monopiles, wind towers are produced and where we could then have the benefits of the cost outs that have been done in these production lines, and also be able to produce enough foundations for the large wind parks that will be there in the future floating.There are some benefits with regards to power production as well that we are currently seeing. It looks like it will be 1.5%, which will be a good result, and the foundation also has a maintenance solution, sustained crane, as you saw on the previous slide. The Brunel maintenance solution, however, is slightly more elegant as the crane is placed on a barge, slided over the pontoons of the foundation, as you see on the lower picture and then jacked-up on the foundation to then have the same movements when you perform the [ freight ] exchange.Also working on a pilot project for Brunel, which is, of course, a very important part to test the supply chain. Then I would like to go a bit more in depth on Bolette, the floating solar technology that we're working on. The other 2 are on floating wind. So we have a film to show you. Please show the film.[Presentation]So you've now got an introduction to our floating solar technology, Bolette, which we are currently installing a pilot hub outside of [ research ] in Norway. Very excited about this technology and the pilot [indiscernible]. And the pilot as you see on the picture is the same size as one football field, just to give you an impression of the size here.We are also working with DNB to get the concept verification. This will, of course, be very important going forward, and doing a lots of the design [ optimalizations ] on all the different parts that pilot consists of. It [ should ] [ alter ] where the solar panels is lying on the roadblocks, et cetera. Everything has to be optimized to provide a optimized and cost-efficient products.So we are currently also planning on a 3 mega unit. That will be the commercial product that we will offer to the market. That will be the size of 10 football fields, just to give you an impression, and we have lots of interest from all the major developers within floating solar.That was the introduction or update I wanted to give you today. Thank you.
And usually, Sofie, you talk about the name, 1848. And I think just as a small reminder, 1848 was the year that Fred. Olsen and company was incepted. And it's nice to reflect that we are still in our 175 year.So with that, thank you, Sofie. And Alexandra -- Alexandra Koefoed is responsible for Fred. Olsen Windcarrier.
Good morning. So again, show this picture last quarter. This is a pretty picture. So I think you can see it once more. Q3 for Windcarrier, it's been a busy quarter. All FOWIC control vessels have been installed in turbines for the full quarter, which is exactly what we would like to do. And as Richard has already mentioned, I think the big news in the quarter is that our partnership with Shimizu initiated back in '21 has come to fruition and actually by the end of the quarter, [ she ] went on contract where the agreement is that any work outside Japan, we have an exclusivity agreement with Shimizu, which means FOWIC will market and be the contracting party. So we have the contract with the end client and then a back-to-back contract with Shimizu. So I think that's the big news for the quarter.So next slide. In terms of results, solid contract coverage, 100% utilization on the fully controlled vessels in the quarter. We have had some unplanned maintenance that's been preventative maintenance to make sure that we don't have larger incidents on the crane and also partly on the jacking system on Blue. So it just boils down to safety first and making sure that we take care of our assets, which has led to a commercial uptime of 91.4% on the fleet in the quarter. That's less than we usually have. Normal numbers for FOWIC is 98% to 99%.And then we had the partnership with Shimizu and starting on a contract 20th of September. So at the very end of the quarter, we went on contract with Orsted on the Shimizu vessel. So a good quarter. Revenue of NOK 53.1 million and EBITDA of NOK 29.4 million. So, so far, a good year and still a quarter to go before the end of the year.So backlog in terms of fully controlled vessels, we have now split the backlog into fully controlled vessels and the Shimizu vessel, Blue Wind. And the reasoning for that is there is a difference in the EBITDA margins on this backlog. And the fully controlled vessels, of course, will have a larger EBITDA margin because we have the CapEx investment in those vessels, while on the Blue Wind vessel, we don't own the vessel. We are simply the contracting counterparty. So we think it's prudent to split up these backlogs so that we don't mislead the market in terms of that they will generate the same margin.So for fully controlled vessels, the backlog is now NOK 512 million. So completed work on ongoing projects, and we have still some additional work related to existing contracts added in the quarter. And then for the Blue Wind, the Shimizu vessel, we now have a revenue backlog of EUR 134 million. Some of that was the reservation agreement that we have talked about previously for 2024, but also a significant contract for Q4 2023.On tendering activity, again, Lars talked about sort of bottleneck in the supply chain. And I guess we see that from the other side in terms of market tightening from -- some of our competitors have announced some really good contracts in the last couple of weeks. And we also see a high interest from clients to secure long-term capacity, both in T&I and O&M. So we have a very positive outlook for the future. Thank you.
Thank you. We now open up for questions.
[ Cruise ] -- just comment on...
Sorry, I always forget. Sorry. Good to remind me.
Yes. No issue. Just some remarks on the cruise in the quarter. And also, before I hand back to Anette to give you a little bit of a [ heads ] of time, last time we had the presentation, we had some problems with the Q&A. So we encourage people to have a question, to start announcing that to the organizer as early as now, but we'll come back to that.But cruise, a good result, one of the absolute better results that we have had in cruise lines over the years, a positive EBITDA of NOK 213 million. All 3 ships operated well in the quarter, good technical performance. Braemar is in layup and still up for sale. Occupancy was up significantly, which is the main driver of the improved result from 59% in third quarter last year to 76% this quarter -- this year.76%, could it be better? Yes, it could absolutely be better. The ships have -- all the 3 ships have a capacity around 1,300 passengers. We have been sailing this summer with the 2 new ships around 1,000 passengers around on average. The ships could definitely take more passenger and still be very comfortable. The guest feedback, we measure that very regularly, is really good and improving, especially on the 2 newest vessels.Ticket income is not up, GBP 189 compared to GBP 188. We have prioritized occupancy as that is a very good lever of driving profitability, but we have also to shift maybe in the future a little bit more focus on how we can drive per diems cruise lines have over the years, been able to drive per diems up significantly after the financial crisis, but a little bit of a flattish development from 2002 to 2003 on the back of a significant improvement in occupancy.Bunker costs from the same quarter is down by GBP 7.4 million. We work very systematically to drive down bunker costs to optimize the itineraries, optimize how we use the engines, thinking about newer designs of propellers and painting and what have you. But the main driver this quarter is a drop in the diesel prices. And it's maybe especially in U.K. last -- third quarter last year, the diesel prices in U.K. just skyrocketed with problems with Brexit and everything, and I don't have any refineries really longer than to supply the U.K. So diesel in the U.K., third quarter last year was really bad and a good improvement this quarter. So almost NOK 100 million improvement from diesel.Continue to see improved booking numbers. We were afraid that the strong bookings we had were a little bit of an aftermath from COVID and pent-up demand. Still see strong bookings from the U.K. despite the high interest rates and inflation and so on.And finally, we have -- we welcome our new CEO in Cruise lines, Samantha Stimpson, which comes with 25 years of experience from the travel industry. She has basically covered all positions in the travel, except the finance position, but brings a lot of commercial experience that hopefully can continue to drive the performance of cruise lines further in the right direction. I mean that's -- Anette, I hand it back to you.
Thank you. We are, of course, very happy that ships are now back sailing and there is a lot of focus in how to now promote the product and bring cruise very much towards in good position in the marketplace. So now, questions and answers.
[Operator Instructions] Your first question comes from the line of Anders Rosenlund from SEB.
Could you just talk a bit about -- or walk us through the yard stay for the installation vessels in 2024? What's the plan and what's the number of vessel days which are not effectively being marketed?
Yes, Alexandra, you are the best one to answer here.
No, it's correct. So you've been following us for a while. So we have a major yard stay coming up on Brave Tern in 2024, where we -- [ she ] will undergo the same conversion as Bold Tern did last year. So Brave Tern will be out of the market for approximately 6 months. But in '24 in terms of reserve capacity to sell to the market, there's very limited. Looking into '25, we do have some spare capacity, which we look at as an opportunity in the current market.
And then just to understand, when we start looking at 2024, is that from, say, January 1? Or is it -- where during 2024 will the vessel be out? Which quarters will be affected?
First half of 2024, so Q1 and Q2.
And in 2026 -- are you planning commercial in '26 as well on the last vessel?
That's still not decided. Blue Tern is the last vessel where we haven't made a financial investment decision in terms of when she will be upgraded. So that's really down to what kind of contracts. Currently, we have managed to close good contracts on Blue Tern without a conversion. And as long as we can do that, I think that will be status quo.
Your next question comes from the line of [indiscernible] from Arctic.
Yes. Just 2 questions from my side. Could you explain a little more about your curtailment in -- I guess, it's Scotland of 60 megawatt hours. Why is that? And is that an issue we might see come in the future as well?
Ivar, do you want to give an answer, or Richard?
Yes, definitely, I can try. I mean we see in all our markets that the grid capacity is a big constraint. And we also see it on offshore wind that the governments are really struggling to build enough grid and transfer capacity [ those ] both, [ and we ] have it in Scotland. The systems for [ holder ] curtailments are done, are different from markets to markets. And we have seen in all our markets that we have curtailments this quarter. It's especially related to Sweden and Scotland. And we try the best we can to play in maintenance and work with the regulator to do this in an efficient way for the regulator and ourselves, and some of them the curtailment we get then compensated for. So that is some countereffect to the lower production this quarter.
Secondly, you briefly commented that the tax rate was very high, and looking at the figures for renewables, I mean it's like more than 100% tax rate. Does that have something -- in the quarter, does that something to have to do with that -- to have the windfall tax as an operating expenditure and -- that you have corrected prior periods, or could you just elaborate a little on the tax rate?
A very good question, [ Sandra ]. The way the tax calculation is done in FORAS U.K., is it an updated estimate for the year. So it changed based on the estimate for the year. So you get some fluctuations in the quarterly tax rate for FORAS U.K. And this quarter, it was particularly high. So I think on the tax side in -- for FORAS U.K. And also the new tax on the electricity levy, that's also calculated on an annual basis. You have to look at these parameters more on an annual basis than on a quarterly basis. So we can also walk you through that offline, but you're picking up a good point there.
But you have accounted [indiscernible] estimate based on the future forward curve for fourth quarter when you have done that [ combination ]?
Yes. On the [ GL ], you have to estimate also the fourth quarter because we successfully [indiscernible] that it should be done on a yearly basis and not on a quarterly basis, because on a quarterly basis been really bad, and we have paid quite a bit of -- very high taxes in the first quarter when the results were high. And we haven't [ had ] offset when the prices were low in the second and third quarter. So it's done on a quarterly basis, the tax rate would have been much higher. So it's on an annual basis. And then we have to update our accruals every quarter for what we think the tax rate will be for the rest of the year. So then we look at the forward prices for the fourth quarter and see what -- how we should update the accrual then for the third quarter.
So just to finish the last question on that. Is it so that the EBITDA is -- actually in the quarter isolated is inflated in the sense that you have made corrections for the first half of the year? So I mean you have a higher EBITDA, but a much higher impact, which basically distorts the, let's say, quarterly picture?
No. It's the opposite. If you only can flip to the result -- the page. So it’s the opposite [ Sandra ]. You see it on the high price levels, the NOK 26 million. It's booked as an OpEx, and we were actually in the forefront of taking as an OpEx, and it's now coming as a standard in the accounting that the high price level should be booked as an OpEx. If you looked at this quarter, isolated, we should have -- not have any high price levels, but because of this annual kind of accrual thing and we look at the forward prices in the fourth quarter, we estimate that the year will be increased to high price levels with NOK 26 million. So actually, if you've taken that out, the EBITDA of Fred. Olsen Renewables would have been NOK 26 million higher. [indiscernible] So it's a little lower than the underlying performance.
Your next question comes from the line of [ Jonas Frenik ] from [ SP Wall Markets ].
So I want to start off with a question around Codling. So could you give some more clarity around the plan there? Do you expect to sell down a larger stake before the construction start? Could we see such a farm down ahead of FID? And do you have any guidance on CapEx also?
Yes. I can say -- I can comment on your question. I'm not sure I can give you all the details because, of course, some of what you're asking to is very sensitive information together with our partner, yes. What I've said earlier is that we are now planning the project for FID. That means that the main activities in the project right now is the consent application. Basically, that's to be regarded as a final building permit for the offshore side.Second part is procurement of all packages. And the third is, of course, preparing the financing of the project. And I think it's clear that we are looking at an option of project finance. Then on top of that, obviously, we are continuously looking at all our projects from a portfolio perspective, thinking about when is it prudent to potentially farm down or get an investor in on the projects. So that's not something we do just a one-time or -- we do that continuously. And of course, that's also relevant for Codling. But I think that's as close as I can get to an answer on your question.
But when you look at [ older ] farm downs in the offshore wind industry, would you say that it's difficult to farm down ahead of FID or would that be not possible?
No. I think the industry have proven there are several milestones which generate a significant value uplift for offshore wind projects and which are relevant for any developer to consider, if they are considering a farm down. And that's probably most -- 2 most important is, of course, FID, as you are well aware, but route to market, the CFD given that, that gives a guaranteed revenue stream for a number of years, is also a relevant point as a milestone.Then in addition to that, there is also consent or site exclusivity in some markets, which is relevant. So I think you have several points during a development where you could consider a farm down. That will very much also depend on the market, of course.
And next question from me relates to capital allocation. So you have a quite good balance sheet at the moment with a significant amount of excess cash. Just how should we think about the capital allocation going forward? I mean, you could potentially pay out significant amounts of dividends. And -- do you have any comments on capital allocation and how you plan to deploy capital going forward?
I think we have answered this question many times before. And certainly, we follow the -- we take the stand that we don't really comment on capital allocation in general before we have news to tell you about -- specific news. But Richard, do you want to...?
No. I think…
Ivar?
I think -- but just a comment on excess cash. When we look at the 3 segments, or especially the high-growth segments, renewable energy and wind service, there are so many opportunities, and we have such a strong ecosystem and so many possibilities to leverage that ecosystem into new positions. And typically, investments in those industries are quite capital intensive, just a normal onshore wind farm. The last large one we built, the Hogaliden is a CapEx north of NOK 1 billion. A new installation vessel, we see where Codling and others are building around EUR 350 million. So the word excess cash is -- I think, is a little bit -- I don't really buy the word excess cash. It's more kind of okay with the ecosystem we have and the investments do we have, how can we leverage that to find the really good investment opportunities. And then, if that's not possible, then you come into the question of excess cash. But as we stand today and where the industry is today with all the opportunities you have, I would -- I don't like the phrase excess cash.
So I think that was a much fuller answer.
And last question from me. You had some unrealized losses on the currency this quarter. Could you give some split on how much of the currency loss is owned by you? I mean the figure you [ told ] is consolidated. So if you give more insight if you made it proportionate?
I don't take that the top of my head, but there is significant cash in the joint venture. So the proportionate loss is lower. But I don't have that breakdown on the top of my head. Sorry about that.
Your next question comes from the line of Daniel Haugland from ABG.
So I was a bit late into the call. So if somebody else asked this already, I'm sorry about that. But on the Blue Wind vessel, could you maybe give us just a little bit color on how will the economics for FOWIC work there, committed a bit on lower EBITDA margins, but how does the economics work there?
Alexandra is moving up here to give you a fuller answer.
I think, again, something we won't answer very specifically. I mentioned that we split up the backlog in fully controlled vessels, and the Blue Wind vessel because it's a very different structure. So before we control vessels, of course, we have the CapEx investment, and hence, a much higher EBITDA margin, while the Blue Wind vessel is fully owned by Shimizu and sort of contracted by us. Of course, we're doing that for commercial reasons. So there's a margin there, but it is lower than what we have on the vessels that we own. I think, sorry, for market reasons, I'm not going to comment specifically on the margins we have on the Blue Wind vessel.
But it's kind of right of us to think you're basically hiring it in and then you're doing rates at a higher and you do the margin, right? That's how it works in your P&L?
Contract setup is we have the contract with the end client, and then have a subcontract with Shimizu. There's also a cooperation agreement that goes on the top of that. And there is a reason for the cooperation. Shimizu is a very large contracting company, but it's the first time they own a vessel. And that was the reason for the collaboration from their side to get access to the market and operational knowledge in FOWIC, and of course, that also has a value.
Your next question comes from the line of Anders Rosenlund from SEB.
I have a follow-up to [ Sandra's ] question earlier when talking about the curtailment. In the report, it says that the curtailment was 60 megawatt hours. But with a portfolio as large as yours that's 45 minutes of production. So why is this a big issue?
I think the 45 minutes, we have to look into our calculations there. I mean, it's -- but let's take that offline. It's significantly more than 45 hours. Yes. So we're pointing a little bit in the quarter around the 10%, if you see [indiscernible] curtailment.
Maybe I misunderstood the sentence afterwards. But of course -- it's 10% higher than last year, but anyway -- okay, anyway, if we can discuss that, [ absolutely ], that would be great. I also have a follow-up question on the FOWIC vessels. Just to be 100% clear. It means that you are basically recognizing revenues when you charter it out or -- and the chartered in vessels -- you recognize 100% of revenues in chartered out and you get the charter in cost as your costs. So it's basically consolidated. But what happens -- do you have any commitments to actually secure employment? Or is it just on a per contract basis that you do marketing and then you are exposed through that period of time where there is actually a contract?
I think I'll answer that quite briefly. No, we do not have any utilization risk on the Blue Wind vessel. And I think that answers your question.
Your next question comes from the line of [indiscernible] from SP Wall markets.
So one more question from me. So this relates to Fred. Olsen Windcarrier also. So in '26, you have a contract on [indiscernible]. So that's a good contract, and then you potentially have a crane upgrade. But when I look at the backlog, it definitely points towards another contract as well. And to my note, we haven't disclosed any more contracts for '26. So can you just add some light on this? Is there a second contract in '26?
In terms of the backlog, we provide the data we provide. It's very commercial sensitive to say sort of the exact periods our vessels are available and not. So basically the…
To bid on the project.
Yes. I will -- where we had a longer session around offshore wind in Norway, I think it was clear, at least that the framework stood at that point in time that it was not sufficient. Then there's been attempts to improve that. And I think there are still some attempts to improve it further. So where that exactly ends, I think it's a bit too early to say. But it's clear that we have been reserved from the start that it would be sufficient and also been skeptical to the setup around one site in one auction in general. But the news came out last week, and I think I would like to wait a bit with answering your question until we've seen the impact of the news on the final CFD contract.
[Operator Instructions] We have no further questions in our queue at this time.
Okay. Thank you very much for joining us this morning, and that ends our session here.