Plans for major offshore wind facility on Tyneside halted amid market uncertainties

Wallsend based OGN withdraw from £4.5m Regional Growth Fund package that held hopes for 800 jobs

Accolade Photography OGN Group
OGN Group

Plans to build a multi-million pound offshore wind components factory that would have created hundreds of jobs on Tyneside have been put on ice amid uncertainties in the industry.

Wallsend-based Offshore Group Newcastle (OGN) estimated that 800 jobs could be created when they received planning approval for the 36,000 sq m factory in 2012.

The firm’s subsidiary, Aquind Limited, was granted £4.5m in Regional Growth Fund money to use in support of the construction of the £50m facility at OGN’s existing Hadrian Yard.

Citing “delays and uncertainties” relating to the market for offshore wind in the UK and Europe, OGN said it had withdrawn from the RGF grant offer because it did not expect to use the money within the allotted timeframe.

No money was drawn down from the RGF pot and the company’s plans remain on hold.

The factory was due to manufacture metal jackets for offshore wind turbines in the UK and northern European markets. It was hoped to be up and running in 2014 with an estimated output of three jackets each week.

Russian businessman Alexander Temerko, who is the major shareholder in OGN, drew criticism when the company revealed it had donated £140,000 to the Conservative party around the time of the RGF award.

Details of the stall in the project emerged in OGN’s latest accounts for its 2014 financial year, filed at Companies House.

The offshore engineering outfit, which employs more than 608 people at its Hadrian Yard, saw turnover rise but pre-tax profitability fall by more than £2.3m in its 2014 financial year.

Turnover reached £115m from £99.13m the year before while pre-tax profits fell from £2.8m to £551,000, on the back of falling gross margins and more than £10m in administrative costs.

 

Increased spending on marketing, business and corporate development increased the administrative costs from £6,000 the year before.

Turnover was boosted by a major contract win from Talisman Energy in the previous financial year, and supplemented by three other contracts spanning works on oil field vessels, a fabrication contract and the production of 18 pre-assembled parts for a Norwegian gas plant.

OGN said the three significant contracts would provide for a “solid order book and revenue stream” in its current financial year, ended June 2015.

Within the accounts the firm detailed how it is looking for companies involved in the offshore wind industry to sub-lease a property in Lowestoft that it no longer uses.

Ongoing Government support for encouraging further exploration and development of the UK North Sea continues and this will provide the company with opportunities to bid for and secure future EPC (engineering, procurement and construction) work.

“The directors are therefore optimistic of securing further oil and gas contracts during the next 12 months to build on the success of securing and delivering on the recently completed EPC contract for a jacket structure and securing three further contracts during the financial year to June 30, 2014.”

OGN is currently financed exclusively by loans provided by its majority shareholder, OGN Investment Partners, which is incorporated in the British Virgin Islands.

The firm said that having amassed assets of £1.18m it was looking to diversify and expand its funding base to include shareholders, commercial banks, and prospective business partners.

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