The prosaic business of making and laying cables is one of the hot sectors in the clean energy transition, as demand for products such as undersea high voltage lines leads to order backlogs of two to five years.
The world’s three biggest listed cable makers — Milan-based Prysmian, the Paris-based Nexans and the Danish NKT — had their market valuations at least more than double since lows last March, boosted by the EU green deal and by the Biden administration’s clean energy drive.
The trend was highlighted last week when Nexans, which supplies about one-fifth of global submarine cable market, said it would sell about a third of the company business to focus solely on electricity..
“Everything that requires electricity, requires cables,” Nexans’ chief executive Christopher Guérin told the FT. His new strategy will involve selling the units that make cables for the automotive sector, shipbuilding, and telecoms industry — which make up about 27 per cent of sales — in favour of the faster growing electricity business which makes up about 55 per cent of sales.
Guérin said the company would use the proceeds make further acquisitions in the electricity sector, spending between €1.5bn to €2bn over the next three years.
Historically, cable makers have produced a wide range of cables — including fibre-optic cables, wiring for cars and ships, and for buildings, as well as electricity transmission lines — but competition is growing to capture the lucrative segment linked to renewables.
The biggest cable projects, typically with the highest margins, are offshore wind cables and undersea interconnectors, which involve laying heavy cables on the seabed floor up to 1500m deep using specialised ships.
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While cables revenues are presently relatively modest, with annual turnover of Prysmian, Nexans and NKT at about €10bn, €6bn, and €1.5bn respectively, the market is destined to grow alongside the offshore wind industry and the clean energy transition.
“The connection of offshore wind farms, solar farms, nuclear — there are 200GW of new offshore wind that will be connected in the coming nine years,” Guérin said. “It is a huge market that is emerging for us.”
For a typical offshore wind project, about 25 per cent of the cost is spent on cables that connect the turbines to a substation, and the substation to the shore, according to data from Prysmian. (By comparison, 37 per cent of the cost is the wind turbine, and 23 per cent of the cost is the turbine foundation.)
The offshore wind cable market in Europe and the US is…
Go to the news source: Cable makers wired into clean energy boom