Stephen Bull: fixing offshore wind's 'bashed heads' and a new challenge as Vargronn CEO

Offshore wind developers need to understand that an outmoded approach to procurement that involves "bashing heads" with a costs stick will send the best in the supply chain looking elsewhere for business, according to the CEO of Vargronn, who has moved back to the developer's side of the table after a stint with contracting giant Aker Solutions.

Stephen Bull, who took up his position with Vargronn this month, is hailed as a pivotal industry figure for the pioneering role that he played in the development of offshore wind at Norwegian oil major Equinor, where he held senior positions for almost 15 years.

Bull's most recent position at Aker Solutions was as executive vice president for strategy, portfolio & sustainability, where he led a major push to expand the technology and services provided to renewables industries, especially offshore wind.

The strongest lesson drawn from this, Bull explains, was the value of cooperation and collaboration, and he has some tough warnings about how old-style thinking can fall short when it comes to de-risking projects.

"I think, in terms of sitting on the other side of the table, and understanding from the service side of the industry, we've seen how the race to the bottom plays out on some of those contracts. This was particularly the case with the very low prices we've seen for auctions, with developers then turning around to basically smash [service companies] on the head as much as possible, and ask them to compete and deliver," he states.

Broken model

"I think that model is just not tolerable anymore… this is a broken model of procurement-driven developments. I don’t think there are many service companies that really want to entertain that commercial environment anymore," he adds.

Bull suggests contractors will gravitate to developers most willing to engage earlier to look for opportunities to de-risk and for new ways of working together.

“From a commercial and also a cooperation or collaboration point of view, it’s been fantastic to learn which are the right clients, those that actually are willing to work closely and upfront early to de-risk projects. It has been a great experience to work with those kinds of progressive clients," he states.

“This can mean cooperation models, or collaboration alliances, or just looking at simpler contract structures on things like cost and full transparency. But I think a willingness for developers and the supply chain to work early is the way to crack the code, particularly when it comes to floating wind,” Bull says.

"I think it's hard to use that as a single benchmark, we just don't have enough maturity in floating," he states.

"We've seen where some very low bids in bottom-fixed wind have meant projects have sometimes not been built out, or we've seen the developers have got cold feet and tried to renegotiate, but it's hard to use one bid as a benchmark or a proxy for the rest of the industry.

"I think you will see, developers trying to turn every stone on every cost item and this will include looking at different types of turbines, but whether European, Chinese or anything else.

"But the most important point is that it cannot just be a game where the developers will go out there and expect that all [requests for information] will be answered and they can then just try to drive prices down to the bottom. If that is the approach, I don't think they are going to succeed," he states.

Fresh challenge at Vargronn

After working at two much larger organisations, Bull says he is excited to be at the helm of a smaller company that aims to be agile technically and commercially savvy, as well as potentially fast-growing.

“It really attracted me to see that this small organisation can make a big impact on the energy transition,” he reflects.

"We have taken on some really good people, key people with strong engineering and project management competence and a genuine curiosity around digitalisation and AI… the threshold for trying new ways of working is probably easier in the smaller company than the larger one,” he adds.

Vargronn itself is no minnow, however, as its shareholders are Plenitude — the renewables arm of Italian oil major Eni — and Norwegian private equity firm HitecVision.

"In Plenitude, we have a very solid company, with an extremely professional procurement department and solid engineering competency, and a huge retail power business so we can pull on those resources in Vargronn," he says.

Bull describes HitecVision as “extremely successful in its energy investments” and likely to turbocharge Vargronn’s growth. “In terms of a competitive advantage from such a relationship, you have the financial savviness and financial engineering and a company that's used to developing a deal flow,” he says.

Unsurprisingly, Bull sees "lots of opportunities" when asked about prospects for growth through mergers and acquisitions, adding that while this will typically lead to where there are advantages of being an early entrant, this may not necessarily be the case.

"M&A is a natural way for us to grow, part of the growth toolbox across all elements of the value chain", he says

Vargronn's interest in development projects remains exclusively European and includes both bottom-fixed and floating wind, but it will generally be based around a partnership strategy, Bull explains.

Dogger Bank is being built in the North Sea more than 130km from the Yorkshire coast in three 1.2GW phases known as Dogger Bank A, B and C.

An SSE-led team started foundation installation for the second phase of the development in May.

Diversifying

Vargronn’s UK partnership with Flotation Energy is also beginning to bear fruit with the granting of planning permission for the 560MW Green Volt floating offshore wind project in Scotland.

When completed, it will deploy up to 35 turbines to deliver renewable electricity to help decarbonise offshore oil and gas production, as well as providing electricity to the UK grid.

Stavanger-based Vargronn has worked with Equinor in preparation for a possible bid on the Utsira Nord floating offshore wind area in Norway.

It has also tried to position itself for an attractive entry into the the Irish market by building a partnership with local renewables developer Energia. The pair have focused their attention on two phased fixed-bottom projects in the Dublin Bay area.

"The reason we are quite bullish on Ireland is that the right signals are coming from the government there. So that's that's an interesting development as well and also a very solid partnership," Bull says.

A partnership with Denmark’s European Energy is geared toward the Baltic Sea in general, but with a particular focus on Estonia and Lithuania.

Bull states that Vargronn is attracted to less mature markets and regulatory environments with strong potential. This can mean a low cost entry and a chance to try to work with authorities and the regulatory environment to shape the right kinds of conditions.

"This is a situation where we, as an agile player in the industry, can have a chance to provide context and content, including for the governments and regulatory authorities,” the Vargronn boss says.

Bull gives the impression that Vargronn will be creating some more headlines on the deals front and will be prepared to “act fast” when the right opportunities arise.

“There are a lot of opportunities we're reviewing at the moment. We also have extremely active and smart owners in HitecVision and Plenitude. We can say that it's an active space and that it is a natural part of our strategy as a company to use M&A actively to grow," he relates.

Vargronn's longer term strategy includes a targeted 5GW of offshore wind capacity either in operation or in development by 2030.

"For me, the special sauce in this company is its ability to be agile, our ownership, attracting top-notch people within technology, projects and engineering, and that we can do something a little bit different in terms of supply chain relationships, financing and new commercial models.

"It's these factors that help give us our competitive edge, being an attractive partner and a trusted developer," he enthuses.