Mainstream's back - but did it ever leave?

“Guess who’s back. Back again. Mainstream’s back. Tell a friend.”

As a veteran writer about the wind sector and a sometime consumer of rap music, I can safely say that Eminem has never written about mergers in the wind sector. It is a shame that ranks among the biggest losses in music.

But if he was writing ‘Without Me’ this week, rather than 20 years ago, then he should start it with the lyric above.

Tomorrow, Mainstream Renewable Power and Aker Horizons are poised to hold an extraordinary general meeting to confirm a proposed merger between Aker portfolio companies Mainstream – in which Aker Horizons bought a 75% stake in May 2021 – and Aker Offshore Wind. The aim is to form a renewable energy firm with 27GW of offshore wind, onshore wind and solar assets.

Announcements of the deal heralded it as the creation of a ‘global frontrunner in offshore wind’, and it is this that sparked the bizarre aside that started this article! Mainstream has already been a frontrunner in global offshore wind, before it quit the sector in 2016 to focus its strategy on emerging markets.

Is it the right time to give offshore wind another spin? And does it make sense to do so with Aker?

Lose yourself

The truth is not as straightforward as the previous paragraph suggests.

Mainstream took a strategic decision to exit offshore wind in 2016 due to the tough competition it was facing from cash-rich utilities in established European markets, but it was still a couple more years until it really left.

The company sold its Hornsea 1 project in Dong Energy – now Ørsted – in 2015, but it could not finalise its exit until it disposed of the 450MW Neart na Gaoithe project to EDF in 2018.

It has also remained active in offshore wind in markets outside Europe, such as in Vietnam where it has 1.9GW in development including the 1.4GW Phu Cuong Soc Trang scheme; and in the US, where it has been planning projects off the east and west coast. It has focused on these markets because they align with Mainstream’s strategy to focus on growth markets that offer higher returns than Europe.

In fact, if we dig further then we can see it has also been developing fixed-foundation and floating wind projects in Ireland, Japan, Norway, South Korea and Sweden too. Even so, the goal of being a ‘global frontrunner’ in offshore wind is a change from its recent strategy of staying in the background.

We see three reasons for the shift.

First, ownership. Mainstream founder Eddie O’Connor and the firm’s management team sold a 75% stake in the business to Norway’s Aker Horizons in a transaction that closed in May 2021 and valued Mainstream at €900m. It is unrealistic to think the new owners will be bound to the strategy and approach of the old owners, and particularly when those new owners have their own plans for offshore wind.

Second, the market. Mainstream opted to step back from offshore wind when the industry was focused on the North Sea, but with little activity elsewhere.

Offshore wind has since been opening up in more parts of the world as countries have seen the sector’s potential to deliver renewable energy at scale, including in Asia, North America, Latin America and in Europe. Even without the recent shift in ownership, it would make sense for Mainstream to become more visible offshore.

And third, it has complementary strengths with Aker Offshore Wind. It looks like a good fit to pair Mainstream’s track record in development – including as a major player in the early days of European offshore wind – with Aker’s emphasis on floating wind.

An estimated 70%-80% of global offshore wind potential is in areas where fixed-foundation projects cannot access. These are complementary strengths. It would make little sense for the pair to pursue projects separately.

Mary Quaney, chief executive at Mainstream, said the enlarged company would be able to unlock opportunities globally because of their competing strengths; and added that the enlarged firm would have “improved access to financing”. The transaction is expected to close in August 2022.

The deal might look like Mainstream is back in offshore wind, but you can make a strong case that it never really left. Things staying the same does not make for good rap lyrics, though. I’m not coming for Eminem’s job quite yet.