Towards a model for European Seas Observatory Network Implementation

Michael Gillooly, Glenn Nolan and ESONIM team

A Specific Support Action funded under EC FP6

ESONET NoE All Regions Workshop

Barcelona, Sept. 5-7th 2007

ESONIM

ESONIM is a Specific Support Action (SSA) funded by FP6 that builds on the EU FP5 Project

ESONET (The European Seafloor Observatory Network)

The main aim is to facilitate the establishment of a European Seafloor Observatory Network (ESONET)

by providing EU Member States with generictechnical, legal and financial models and cases

to establish one or more pilot cabled seafloor observatories.

Participant Contact Country

Marine Institute – Lead M.Gillooly/G.NolanCSA Group Ltd N.O’NeillIFM-GEOMAR O. Pfannkuche

IFREMER J.F. Rolin

Alcatel (ASN) N.HazellUniversity of Aberdeen I.G. Priede

Goodbody Ltd C. O’RourkePhilip Lee Solicitors P. LeeUniversity of Göteborg P. Hall

ESONIM Project Partners (Authors)

WP1: Project Management

Define the ESONIM project’s management structure and reporting procedures.

WP2: Scientific Justification

To provide the over-arching specification of user needs and justification for the establishment of a European seafloor observatory network

WP3: Engineering Design

To identify the most appropriate technical design and engineering solutions for a cabled ocean observatory. The opportunities for industry involvement in the design, manufacture, deployment and operation of the system will be addressed in this work package.

WP4: Financial Model

To produce a 10 year cash-flow forecast for a cabled seafloor observatory with the European Seafloor Observatory Network (ESONET).

WP5: Legal Framework

To provide the overall legal context and framework for the implementation of a cabled seafloor observatory.

WP6: Implementation Model

To analyse and integrate the results of Work Packages 2-5 to develop a technical and financial project appraisal for a test case seafloor observatory that meets the criteria established by lending institutions.

WP7: Dissemination & Promotion

To disseminate the information and knowledge gained within ESONIM to the widest possible audience using multiple communications methods.

European Seafloor Observatory Network Implementation Model (ESONIM)

IMAGE SOURCE: GEBCO NORTH EAST QUADRANT 7

Hovland Md

BENGAL

Belgica Md

Canyon

BIOTRANS

Science Users by category (questionnaire):

Identified data end users by category

15%

17%

15%24%

2%

14%

4%9%

Government DepartmentsPublic InstitutesState Sponsored BodiesResearch OrganisationPrivate ConsultancyPrivate IndustryIndustry OrganisationCharitable Organisation

CeltNet Route (indicative)

Cable route designed using Irish Seabed Survey Data

Scientists defined sites

Route engineers joined the dots!

Engineering design: (CeltNet example case)

CeltNet Cable lengths (Courtesy ASN)

Indicative Budget: (CeltNet example case)

BUDGETARY PROPOSAL AND ESTIMATES FOR CELTNET TOTAL FOB

EurosSection 0 Engineering studies and survey 4 000 000 Section 1 Engineering & Project Management / System Acceptance & Commissioning 6 423 563 Section 2 Backbone Submarine Cable 12 802 552 Section 3 Backbone Wet Plant (Repeaters & Equalizers) 3 945 940 Section 4 Backbone Marine Operation (without survey) 10 096 297 Section 5 Land Cable + Civil works + Shelter with energy 2 686 506 Section 6 Shore Station Equipment (excluding Telecom Equipment) 2 214 894 Section 7 Telecom Shore Station Equipment + Network Management System 1 297 057 Section 8 Training and Documentation 224 652 Section 9 Wet plant & Marine operation from BU to TRF (non-equipped node) for 4 sites (less than 3500 water depth) 9 678 574 Section 10 Node equipment for 4 nodes (less than 3500 water depth) 12 434 477 Section 11 Wet plant & Marine operation from BU to TRF (non-equipped node) for 2 sites (more than 3500mwd) 3 600 000 Section 12 Node equipment for 2 nodes (more than 3500 water depth) 4 500 000 Section 13 J unction boxes (J B) for 6 nodes (3 per node) 2 228 571 Section 14 Marine operations for secondary junction boxes for 6 nodes and 3 J B per node 2 214 286 Section 15 Generic instrumentation 11 285 714 Section 16 Marine operation for generic instrumentation 1 857 143

TOTAL FOB Price 91 490 226

ESONIM Business Model• MS Excel based software tool• Allows user to input realistic capital and operating costs for their

observatory site• Allows user to profile schedule of node deployment• Different grant aid scenarios• Cost of Servicing debt (built-in function)• Compare required and potential revenue over lifetime of the

observatory• Generates balance sheet• Examine viability of the observatory over its lifetime

• Assists with lobbying for Observatory funds

ESONIM Model Screen Grab

Infrastructure Capital costs (indicative)Unit Quantity Rate (€) Total (€) VAT Rate Cap Allowance

Engineering & Project Mgt / System Acceptance & Commissioning 6,423,563 17.5% NBackbone Submarine Cable 12,802,552 17.5% YBackbone Wet Plant (Repeaters & Equalizers) 3,945,940 17.5% YBackbone Marine Operation (without survey) 10,096,297 17.5% YLand Cable, Civil Works & Shelter with energy 2,686,506 17.5% YShore Station Equipment 2,214,894 17.5% YTelecom Shore Station Equipment & Network Mgt System 1,297,057 17.5% YTraining & Documentation 224,652 17.5% Y

Wet Plant & Marine Operation from BU to TRF Sites 5 2,419,643.40 12,098,217 17.5% Y

Sub-total 51,789,678

Contingencies 15% 7,768,452 17.5% Y

Total 59,558,130

Infrastructure Capital Costs

Indicative cost ~ €60M

Node Deployment Costs

Deploy Date Depoly Year End Total (€) VAT Rate Cap AllowanceNode 1 (less than 3,500m water depth) 01-Dec-09 31-Dec-09 3,000,000 17.5% YNode 2 (less than 3,500m water depth) 01-Dec-09 31-Dec-09 3,000,000 17.5% YNode 3 (less than 3,500m water depth) 01-Dec-10 31-Dec-10 3,000,000 17.5% Y

Node 4 (less than 3,500m water depth) 01-Jun-11 31-Dec-11 3,000,000 17.5% Y

Node 5 (less than 3,500m water depth) 01-Dec-11 31-Dec-11 3,000,000 17.5% YNode 6 (more than 3,500m water depth) 01-Sep-12 31-Dec-12 5,000,000 17.5% YNode 7 (more than 3,500m water depth) 01-Dec-12 31-Dec-12 5,000,000 17.5% Y

Total 25,000,000

Days per Node Deployment 10Deployment Vessel cost per day (<3,500m) 25,000Deployment Vessel cost per day (>3,500m) 65,000Deployment Cost per Node (<3,500m) 250,000Deployment Cost per Node (>3,500m) 650,000

Node Deployment Costs

Indicative Cost €25M

Cost of finance (debt)Start of Construction Jan-08Period (mths) 24Construction Completed Dec-09

Initial Drawdown Payment 25%Payment on Completion 25%

Facility Arrangement Fee 1.00%Facility Commitment Fee 0.50%

Interest Rate 4.00%IDC Margin 1.00%

IDC Interest Rate 5.00%

Infrastructure Facility

Facility Arrangement Fee 1.00%Facility Commitment Fee 0.50%

Interest Rate 0.00%Deployment Phase Facility Margin 0.00%

Deployment Phase Interest Rate 0.00%

Facility Amount (€) - Infrastructure 3,505,438Facility Amount (€) - Deployment 1,187,272Rebate Period (mths) 3Arrangement Fee 1.00%Commitment Fee 0.25%VAT Facility Margin 0.50%VAT Facility Rate 4.50%

VAT Facility

Node Deployment Facility

Senior Debt % 30%Senior Debt Term (yrs) 20Term Beginning 31/12/2010Swap Rate 4.50%Bank Margin 1.50%Senior Interest Rate 6.00%

Minimum DSCR 1.15x

Grant Aid Payment - Infrastructure 31/12/2007

Senior Debt Facility

Capital Grant

Operating and Maintenance costs

Power Consumption:kW per Node 10Hours per year 8,760Load Factor 50%Cost per kWh (€) 0.10

Telecom: Waterville-Marine Institute (€) 100,000Rental from Marine Institute (€) 20,000Data Archiving & Retrieving (€) 100,000

Alcatel Helpdesk (€) 25,000 31/12/2013

Annual Maintenance Voyage - Backbone:Days at sea 10Cost per day (€) 65,000

Annual Maintenance Voyage - Nodes:Days at sea 10Cost per day (€) 25,000

Operating & Maintenance Costs

Scenario 1: 70% Grant Aid, 30% debt, Scientists fund instruments from project budgets

Required Revenue

0

500,000

1,000,000

1,500,000

2,000,000

2,500,000

3,000,000

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

2024

2025

2026

2027

2028

2029

€

Required Revenue to meet Debt ServiceRequired Revenue to meet O&M Costs

Required vs Potential Revenue

0

2,000,000

4,000,000

6,000,000

8,000,000

10,000,000

12,000,000

14,000,000

16,000,000

18,000,000

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

2024

2025

2026

2027

2028

2029

€

Required Revenue (Nominal) Potential Revenue (Nominal)

Potential Node Revenue Profile following Deployment

0

2

4

6

8

10

12

1 2 3 4 5 6 7 8 9 10

Year

Scenario 2: 100% Grant Aid, No debt, CeltNet funds 30% of instrument costs

Required Revenue

0

500,000

1,000,000

1,500,000

2,000,000

2,500,000

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

2024

2025

2026

2027

2028

2029

€

Required Revenue to meet Debt ServiceRequired Revenue to meet O&M Costs

Required vs Potential Revenue

0

500,000

1,000,000

1,500,000

2,000,000

2,500,000

3,000,000

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

2024

2025

2026

2027

2028

2029

€

Required Revenue (Nominal) Potential Revenue (Nominal)

Potential Node Revenue Profile following Deployment

0

2

4

6

8

10

12

1 2 3 4 5 6 7 8 9 10

Year

Legal WP addresses issues including:

•Structures•Procurement•Risk•Environmental and planning•Permits•Contracts•Warranty•IP•Etc..…and has generated legal template documents

National marine agencies and other partners

D+C Contractor Operator

Porcupine SPV

ESONIM Foundation

Marine Institute

Heads of Agreement

Shareholders Agreement(project–specific)

Appointment of Agent

Legal WP: Partnership Structure

Linkage to EU Initiatives: (Individual Implem. Plans)

• ESONIM model– Science/

stakeholders– Engineering design– Financial model– Legal/contracts

ESONET NoE Implementation Plans

– Mediterranean – Atlantic

(CeltNet)– Stand-alone

(acoustically linked site)

EMSO European

Marine Seas Observatory

Core Body

11 ESONET

SitesAvailable September 2007 2007-20082008-2012

Final Thoughts

• ESONET Science and Societal Case Proven• Engineering Solutions available• Significant Europe wide co-operation• Time for incremental step – development of

robust business case and push for national and Commission funding to roll out infrastructure

Thank You

Thank you

Partners

European Commission - particularly Alan Edwards and Witold Cieslikiewicz

Many others who have advised and helped with particular thanks to Chris Barnes, Peter Phibbs and the Neptune Team