Saipem Faces Cost Blowout at French Wind Project Amid Drilling Setbacks #FrenchFinance

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(Bloomberg) — Saipem SpA is struggling to drill foundations for a wind farm off France’s northwest coast, where it’s on the hook for hundreds of millions of euros in cost overruns, people with knowledge of the matter said.

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The company in 2021 won a €460 million ($474 million) contract to build and install foundations for 64 turbines at the Courseulles-sur-Mer project, led by Electricite de France SA. But faulty boring equipment has slowed progress and the wind farm will likely now be commissioned in 2026 at the earliest, rather than this year as planned, the people said.

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Saipem’s problems are the latest in a long series of cost increases that have troubled offshore wind farms around the world. The industry continues to face expensive growing pains, particularly as it expands to more markets and deploys new equipment in the challenging conditions found at sea.

The Italian firm’s first-of-a-kind boring machine must dig holes 9.5 meters (31 feet) across and about 36 meters down into the seabed.

In recent months, Saipem has been able to drill just one of the 64 “sockets” that will host the piles on which the turbines will stand, the people said, asking not to be identified as the information isn’t public. Cost inflation, drilling issues and delays have blown out the budget and the firm would like the wind farm’s owners to absorb part of that overrun — requiring approval from both them and their lenders — the people said.

EDF and Saipem both declined to comment on such a proposal.

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Saipem fell as much as 5% in Milan trading, and was down 3% at €2.65 as of 9:22 a.m. local time.

Saipem said the project is progressing and it’s now working on the second socket, while preparing to install the first monopile. The company said it accounted for additional costs when it booked provisions tied to various projects in its 2021 backlog analysis.

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Chief Financial Officer Paolo Calcagnini said in October that a “significant part” of the provisions set aside was for the Courseulles work, declining to be more specific.

This isn’t the first time Saipem, traditionally a driller servicing oil producers, has struggled in offshore wind. Three years ago, the firm had to raise capital after reporting a “significant deterioration” in margins, in part a result of cost pressures at wind projects amid the pandemic.

EDF Renewables confirmed that following tests and adjustments to ensure the proper functioning of the drilling machine, work at Courseulles started late last year and is continuing. EDF leads the project along with Skyborn Renewables, Enbridge Inc. and the Canada Pension Plan Investment Board. A new timetable will be established in the coming months, the French company said.

(Updates with shares in seventh paragraph.)

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