Shipping and Logistics Efforts Pertaining to Renewable Energy Power Sources

MBA in Shipping & Logistics Class of 2011 Thomas Poulsen

A Plan for Wallenius Wilhelmsen Logistics to Grow the Company’s Presence in the Renewable Energy Vertical Market Segment With Focus On Wind Energy

Integrated Strategy Project

“How Government Driven Demand is Dramatically Impacting the Renewable Energy Supply Chain Management Landscape”

Full Deliverable

WWL new generation Mark V vessel

Coaches: Prof. Dr. Robert Austin Asst. Prof., Dr. Niels G. M. Rytter

Author: Thomas Poulsen (thpo10ab) Version: Final Version Date: July 22, 2011

MBA in Shipping & Logistics Class of 2011 Thomas Poulsen

Table of Contents Table of Contents ...... 2

Preface ...... 7

Introduction to the Integrated Strategy Project ...... 9

1 Problem Formulation, Deliverables, Structure, and Methodology ...... 10

1.1 Purpose and Overall Objectives ...... 10

1.2 Integrated Strategy Project Deliverables ...... 10

1.3 Integrated Strategy Project Structure ...... 11

1.4 Methodology Applied ...... 12

1.4.1 Referencing ...... 12

1.4.2 Integrated Strategy Project Organizational Structure ...... 13

1.4.3 Interviews with Company Personnel (Meetings and Site Visits) ...... 13

1.4.4 External Interviews ...... 14

1.4.5 Academic Learning Materials and Models ...... 17

1.4.6 Scoping and Wind Market Modeling ...... 19

1.4.7 Methodology Summary...... 20

2 Industry Analysis and Critical Success Factors ...... 21

2.1 Market Segments ...... 21

2.2 Overall Energy Market ...... 21

2.3 The Renewable Energy Sub-Sector of the Overall Energy Sector ...... 24

2.3.1 High Level Understanding of Renewable Energy Power Sources ...... 24

2.3.2 Scoping of the Integrated Strategy Project Industry Analysis ...... 25

2.4 The Wind Energy Market ...... 26

2.5 Wind Energy Logistics Market Sizing - Wind Scenario Model ...... 28

2.5.1 The Wind Market Development up to 2050 ...... 29

MBA in Shipping & Logistics Class of 2011 Thomas Poulsen

2.5.2 Process Mapping Methodology to create Logistics Cost “Buckets” ...... 35

2.6 The Flows ...... 37

2.6.1 Inbound Assembly Flow (Nacelle) ...... 37

2.6.2 Outbound Turnkey Flow (Onshore) ...... 38

2.6.3 Outbound Turn-key Flow (Offshore) ...... 41

2.7 Different Logistics Cost “Buckets” in the Supply Chain ...... 46

2.8 Technology Drivers and The Offshore Wind Opportunity ...... 49

2.9 Net Present Value of the Total Wind Logistics Market up to 2050 ...... 57

2.10 Wind Industry Contracting Set-up Overview ...... 57

2.10.1 Role of Governments ...... 58

2.10.2 Role of the Operators ...... 58

2.10.3 Role of the Utilities ...... 58

2.10.4 Role of the Engineering, Procurement and Construction companies ...... 59

2.10.5 Role of the Original Equipment Manufacturing companies ...... 59

2.10.6 Role of the Transport/Shipping/Logistics/Supply Chain companies ...... 60

2.11 Logistics and Supply Chain “Eco-System” ...... 61

2.11.1 Freight Forwarders with Project Cargo focus ...... 62

2.11.2 Ocean Shipping Transportation and Ocean Related Providers ...... 62

2.11.3 Ports ...... 63

2.11.4 Warehouse/Yard/Storage Area/Silo operators ...... 63

2.11.5 Rail operators ...... 63

2.11.6 Specialty Truck companies ...... 64

2.11.7 Land-based Crane operators ...... 65

2.11.8 Utilities ...... 65

2.11.9 Original Equipment Manufacturers ...... 65

MBA in Shipping & Logistics Class of 2011 Thomas Poulsen

2.11.10 Engineering, Procurement, and Construction companies ...... 65

2.12 Transport/Shipping/Logistics/Supply Chain Market Competition ...... 66

2.12.1 Ocean Transportation capabilities ...... 67

2.12.2 Land Side capabilities...... 67

2.12.3 Value Added Services ...... 68

2.12.4 End-to-End Supply Chain Management capabilities ...... 68

2.12.5 Project Cargo Forwarding/Management Turn-key capabilities ...... 68

2.13 Critical Success Factors of Winning Companies ...... 69

2.14 Industry Analysis Part Conclusion ...... 71

3 Company Analysis including Gap Analysis ...... 73

3.1 Ownership and Structure ...... 73

3.2 WWL Financials ...... 74

3.3 WWL Strategy ...... 80

3.4 WWL Business Model ...... 85

3.5 Resource Based View ...... 88

3.5.1 High Level Look at WWL’s Resources and Capabilities ...... 88

3.5.2 Information Technology Resources ...... 89

3.5.3 WWL’s Ability to create New Service Products and Teams ...... 90

3.5.4 Strategic Infusion of Resources and Capabilities via Acquisition ...... 92

3.6 Related Parties via Respective WWL Owners ...... 92

3.7 Wallenius Wilhelmsen Logistics Strategic Groups Competition Analysis ...... 94

3.7.1 Wallenius Wilhelmsen Logistics’ Own Market Position ...... 95

3.7.2 Global Freight Forwarders with Project Cargo focus ...... 95

3.7.3 Companies Viewed by Wallenius Wilhelmsen Logistics as Main Competitors ...... 95

3.7.4 Regional Forwarders...... 95

MBA in Shipping & Logistics Class of 2011 Thomas Poulsen

3.7.5 New Entrants with Different Allegiances ...... 96

3.7.6 Not Included In Scope ...... 96

3.8 Wallenius Wilhelmsen Logistics Five forces analysis ...... 96

3.8.1 Barriers to Entry ...... 97

3.8.2 Threat of Substitutes ...... 100

3.8.3 Bargaining Power of Buyers ...... 103

3.8.4 Bargaining power of suppliers ...... 105

3.8.5 Rivalry Among the Existing Players ...... 107

3.9 Niche focus ...... 109

3.10 Strengths, Weaknesses, Opportunities, Threats Analysis ...... 110

3.10.1 Strengths and Weaknesses ...... 110

3.10.2 Opportunities and Threats ...... 112

3.11 Gap analysis between Company Analysis and Critical Success Factors of Industry Analysis ...... 113

4 Strategic Issue Analysis ...... 116

4.1 “Catalogue” of Strategic Issues Identified and/or Discussed ...... 116

4.2 WWL Renewable Energy SCM Strategic Issue Analysis Topics ...... 117

4.3 Selection of One Single Strategic Issue for Analysis ...... 124

4.4 Strategic Issue Analysis – Part Conclusion ...... 125

5 Implementation Plan ...... 126

5.1 Project CANDY Background and Fit ...... 127

5.2 Possible Deal Structure ...... 129

5.3 Valuation ...... 132

5.4 Joint-Venture Objectives and Management Structure ...... 134

5.5 Next Steps ...... 136

6 Conclusion ...... 140

MBA in Shipping & Logistics Class of 2011 Thomas Poulsen

6.1 Integrated Strategy Project Findings ...... 140

6.2 Author Discussion Regarding the Integrated Strategy Project ...... 142

6.3 Recommendation ...... 143

References ...... 145

Appendix 1 – Renewable Energy Market Background ...... 149

Appendix 2 – Analysis Of Select Renewable Energy Types ...... 168

Appendix 3 - Industry Critical Success Factors (Detailed) ...... 174

Appendix 4 - Company Background And Context ...... 179

Appendix 5 – Additional Company Analysis Information ...... 190

Appendix 6 – Additional Opportunity Catalogue Information...... 198

Appendix 7 – Additional Charts, Figures, and Illustrations ...... 202

Appendix 8 – Trip Schedule and Site Visits ...... 207

Appendix 9 – Detailed List of External Interviewees ...... 212

Appendix 10 – Key WWL Meetings and Constituencies ...... 217

Appendix 11 - Involved WWL Personnel ...... 220

Appendix 12 – Interview and Site Visit Protocols ...... 224

Appendix 13 – Key Site Visit Photos and Commentary ...... 225

Appendix 14 – Wind Scenario Model ...... 226

Appendix 15 – Empirical Data Gathering Effort Examples ...... 227

Appendix 16 – Author M&A experience ...... 233

Appendix 17 – List of Abbreviations and Terminology ...... 239

Endnotes: Quotes and references to quotes ...... 243

MBA in Shipping & Logistics Class of 2011 Thomas Poulsen

Preface This Integrated Strategy Project (“ISP”) has been crafted by the participant (the “author” of this ISP) of the Executive MBA in Shipping and Logistics (the “Blue MBA”)i from January to July, 2011. The author has his own consulting company based in Hong Kongii, however, the ISP has been written for Wallenius Wilhelmsen Logistics (“WWL” or “the company”) of Oslo, Norwayiii. In his consulting company, the author generally works alone on assignments for companies in the transport/shipping/logistics/supply chain management (“SCM”) sector, however, sometimes the author would deploy with other consultants on a contractor basis. The idea for this ISP was conceived as part of the Blue MBA module 05 Operations Management (“OM”) assignment writing process with 3 fellow student colleagues: A comparison of two transport alternatives (sea and rail) was made for on-going shipments of wood pellets for Swedish utility company Vattenfalliv from Latvia to the company’s 8 power plants in the center of Berlin. This assignment was truly what sparked the author’s interest and focus on renewable energy transport/shipping/ logistics/SCM in general and the topic of this ISP specifically. It seemed that within this – in many cases - fairly nascent and still developing industry, a number of “basic issues” of transport/shipping/logistics/supply chain nature were not as maturely dealt with as is the case for other industries that the author has been exposed to during his 20+ year career in this field. In addition, a lot of the different items shipped are big, heavy, and/or bulky.

MBA in Shipping & Logistics Class of 2011 Thomas Poulsen

Illustration 1: ISP focus - big, heavy, and bulky wind power source logistics/SCM

MBA in Shipping & Logistics Class of 2011 Wind turbines T. Poulsen

Source: Siemens Wind Power, ISP illustrations, July 22, 2011 A2SEA, Danny Cornelissen, Windtec, and author analysis Source: Siemens Wind Power, A2SEA, Danny Cornelissen, Windtec, and author Therefore, the author saw the renewable energy vertical as a possible future income stream, either as a consultant or in a more corporate role. However, to write the ISP about the author’s own consulting firm was not a very viable way forward given the modest size and scope of his own company. Therefore, an option was sought to find a third-party company with a mutual interest in the renewable energy market and an “appetite” for using the ISP effort to learn about the renewable energy logistics/SCM market. Such a company was found through the Blue MBA in WWL.

______Thomas Poulsen Copenhagen, July 22, 2011

MBA in Shipping & Logistics Class of 2011 Thomas Poulsen

Introduction to the Integrated Strategy Project Wallenius Wilhelmsen Logistics committed to working with the author by early February, 2011. When the author started working on this ISP, the author had never before been associated with WWL nor been exposed to its’ core area of business, the Roll-On/Roll-Off (“RO/RO”) segment of the ocean shipping industry. In addition, the author had never before spent any significant time on the renewable energy part of the transport/shipping/logistics/SCM market. Therefore, this ISP has very much been a learning effort on the part of the author. Since the kick-off in February, discussions with WWL have intensified resulting in a global travel program to various WWL offices and external parties in Europe, Asia, and the Americas. Besides the theoretical models applied in this ISP submission as well as the literature used to learn the renewable energy market segment, more than 100 interviews/site visits have been conducted by the author as part of empirical data gathering process included in this ISP effort. A total of 11 different countries have been visited during some 28 individual travel trips and out of the 17 port facilities inspected globally, site extensive visits to 7 integrated WWL port/terminal/value added service (“VAS”) sites were part of the empirical data gathering efforts. This research was necessary in order to understand the WWL’s business, integrated service offerings, and the renewable energy industry segment. The ISP counts 25,224 words in the core submission (excluding appendices, text boxes, footnotes, end-notes, references, and the Preface/Introduction sections)1.

1 Based on Microsoft Word word count function

MBA in Shipping & Logistics Class of 2011 Thomas Poulsen

1 Problem Formulation, Deliverables, Structure, and Methodology

1.1 Purpose and Overall Objectives From a WWL perspective, the company wishes to2: 1. Grow the break-bulk segment substantially on the back of an overall capacity increase of new vessel additions to the fleet. 2. Find opportunities to expand the present break-bulk business model to also include VAS/end-to-end (“E2E”) SCM type solutions. The company has a strong environmental image and reputation in the market and with that as a backdrop, senior management of WWL believes that the area of renewable energy may present an opportunity to: 3. Increase the overall volumes of break-bulk cargoes carried on the WWL vessels due to the expanding renewable energy sub-sector in general. 4. Further enhance the already strong environmental image and reputation in the market through transport and logistics solutions for “green cargo”. Specifically for renewable energy vertical with renewable energy power sources or “green cargo”, WWL would like for the author to identify: 5. New client segments and/or clients that the company does not have access to at present. 6. New renewable energy commodity segments which the company does not focus on today.

1.2 Integrated Strategy Project Deliverables Through this ISP, WWL first wishes for the author to investigate the overall market and trends for renewable energy SCM, apply company related constraints basis the non-container RO/RO based assets operated by the company, and subsequently quantify the volumes attainable for WWL including the identification of the actual commodities shipped, by trade.

2 A comprehensive background on WWL and the context of this ISP has been provided in appendix 4 below

MBA in Shipping & Logistics Class of 2011 Thomas Poulsen

Second, WWL wishes for the author to analyze the company in order to find out which strategic issues the company faces in order to be able to expand its’ presence in the renewable energy SCM market segment. These issues could be hard business issues such as the need for additional or different assets/capabilities but could also be softer issues related to for example organization and/or cultural patterns. Third, WWL wishes for the author to craft a strategy and implementation plan for one of the strategic issues the company faces.

1.3 Integrated Strategy Project Structure In illustration 2 below, a graphical overview of the key ISP sections has been provided. Illustration 2: The key sections of the ISP

MBA in Shipping & Logistics Class of 2011 T. Poulsen

ISP Structure & Contents

 Preface, Introduction,  Strategic Issue Analysis: Problem Forumlation:  Issues WWL faces in the  Background/Methodology Industry  Industry Analysis:  Implementation:  Wind Energy logistics/SCM  Live M&A opportunity Market “Project CANDY”  Company Analysis:  Conclusion:  Wallenius Wilhelmsen  Summary and Conclusion Logistics of ISP

ISP illustrations, July 22, 2011 Source: Author analysis

Source: Author analysis

MBA in Shipping & Logistics Class of 2011 Thomas Poulsen

The ISP is structured in such a way that section 1.4 will provide background on the methodology used. Section 2 contains the Industry Analysis which culminates with the definition of a series of Critical Success Factors. Subsequently, section 3 contains the Company Analysis including the company’s competitive situation and this section leads to the gap analysis identifying the strategic issues the company is facing. The chosen Strategic Issue is dealt with in section 4 which contains the Strategic Issue Analysis part of the ISP. Section 5 contains the Implementation Plan and finally, section 6 contains the overall ISP conclusion. After the ISP text, a comprehensive list of references has been provided. This is followed by the appendices which support the different findings, list out all the people interviewed, outlines the travel schedule associated with the ISP, contain interview notes, provide a series of site visit reports with photos, and finally detail further graphs/tables/charts/illustrations used to support the core text conclusions and provide additional information. Towards the end of the document, an appendix with a comprehensive list of abbreviations and terminology has been provided along with the end notes (end notes situated at the very end of the document).

1.4 Methodology Applied

1.4.1 Referencing Referencing has been done using three different systems:  Details of high relevance to the main text body have been included on the respective page as footnotes.  Information of relevance but of more “nice to have” nature has been included as end notes with details contained at the very end of the document, after the appendices.  The references to academic literature, theoretical models, and other materials referenced in the ISP have been described immediately after the core ISP text, before the appendices.

MBA in Shipping & Logistics Class of 2011 Thomas Poulsen

1.4.2 Integrated Strategy Project Organizational Structure As can be seen in illustration 3 below, an ISP organizational structure has been defined jointly on a project basis with WWL in order to facilitate best possible and most efficient dialogue between the company and the author3. WWL has willingly worked with the author to make information available about the company although the author is as such a contractor to WWL and not an employee of the company. Illustration 3: ISP organizational structure

MBA in Shipping & Logistics Class of 2011 T. Poulsen ISP organizational structure

M&A team Arild Iversen - WWL CEO

Steering Committee

Thomas Poulsen Odd Egil Borgen - ISP author - WWL Lead

Advisory Group

Teresa Lehovd - WWL GMI

Niklas Carlen Scott Gibson - WWL GMI Head - WWL SCM VP

ISP illustrations, figures, and graphs

Source: Author basis personnel assigned from company

1.4.3 Interviews with Company Personnel (Meetings and Site Visits) Information about WWL has been obtained through discussions with company personnel during a total of five visits to the Central Office in Oslo as well as site visits to relevant company offices, operational sites, and other premises4. An overview of

3 For a list of the key company constituencies involved in this ISP, please see appendix 11 below 4 See appendices 8 and 11 below for a list of company interviewees and site visits 13

MBA in Shipping & Logistics Class of 2011 Thomas Poulsen the extent of the WWL organization subjected to interviews/site visits as part of the ISP process can be viewed in illustration 4 below where the offices and key sites visited have been marked in green. Illustration 4: Overview of WWL offices and sites visited as part of ISP efforts

MBA in Shipping & Logistics Class of 2011 Interviews and site visits T. Poulsen - internally within WWL Central Office = Not visited (Oslo) = Visited

Region Europe Region Oceania Region Asia Region Americas (Stockholm) (Sydney) (Tokyo) (Woodcliff Lakes)

Bremen Singapore Baltimore (office) (office) (office)

Bremerhaven Shanghai Baltimore (terminal) (office) (terminal)

Antwerp Shanghai Galveston (office) (terminal) (terminal)

Zeebrugge Tianjin Colon/Manzanillo (terminal) (terminal) (terminal) Direct WWL interviewees and key site tour facilitators: • 42 interviews with 49 key employees of WWL and 5 key WSS employees

ISP illustrations, figures, and graphs

Source: Author basis personnel assigned from company

1.4.4 External Interviews During the ISP effort, a total of 66 external interviews/site visits involving 116 people have been conducted with constituencies outside the WWL organization. These interviews and site visits have been conducted when and where relevant information and/or points of view to contribute to this ISP have been deemed relevant by the author5. Most of the interviews were conducted face-to-face as a stand-alone

5 For a list of the external constituencies interviewed, please see appendix 9 below and for interview notes and findings from the interviews and site visits, please see appendix 12 below 14

MBA in Shipping & Logistics Class of 2011 Thomas Poulsen meeting or as part of a site-visit to inspect renewable energy SCM facilities, assets, and/or operations. In illustration 5 below, the scope and scale of the empirical data gathering efforts have been visualized. Illustration 5: Overview of empirical data gathering efforts (external to WWL)

MBA in Shipping & Logistics Class of 2011 External interviews T. Poulsen and site visits (non-WWL) Interview types Freight forwarders 15 External interviews - geographical distribution OEM's (wind/hydro/grid) 11 Ports, canals, and related 9 Policy makers/lobbying 8 Shipping 4 Academia 3 Land-based transport 3 Railroads/rail forwarders 3 15 Denmark Energy companies/utilities 3 Ship's supplies/consulting 3 24 Renewable energy trading 1 Balance Europe Offshore wind installation 1 Offshore O&M shipping 1 Asia 28 individual trips 10 Denmark: 12 Latin America Norway: 5 USA: 2 Germany: 2 North America Sweden: 1 8 9 Belgium: 1 Singapore: 1 PRC: 1 Philippines: 1 Holland: 1 Panama: 1

ISP illustrations, July 22, 2011

Source: Author analysis Using 28 individual short or long trips to conduct the site visits and interviews, approximately half of the external interviews took place in Europe and the balance across Asia (especially China, or “PRC”) and the Americas (USA and Panama). A wide selection of constituencies within the market have been interviewed with freight forwarders, Original Equipment Manufacturers (“OEM’s), policy makers/lobbyists, and shipping organizations having the most interview occurrences. Basis their status as frontrunners within renewable energy in general and wind power in particular, the share of Danish based interviews (and trips) is high.

MBA in Shipping & Logistics Class of 2011 Thomas Poulsen

Table 6: Overview of external interviewees

Who Company/organization Geography Niels Ladefoged EU Directorate-General Climate Action Europe Julian Flores DHL Global Forwarding Industrial Projects Latin America Weizhi Dong Siemens Wind Power Europe Dick Metzler Greatwide Logistics Services North America Various Trans-Pacific Maritime conference North America Jim Gill California Cartage Company North America Ole Ingrisch/Soeren Clemmensen Port of Esbjerg Europe Joergen Hougaard/Alex Olsen Baltship division of Seatainers Europe Soeren Olsson Global Green Invest Europe Jesper Nielsen DHL Global Forwarding Europe Tore Karlsson Vatttenfall Europe Michael Raeuber Royal Cargo Group Asia-Pacific Lars Karlsson PortHow Europe Lars Poulsen Waterfront Communications Europe Luke Lynch California Cartage Company North America Tim Schmidt/Tim Johansen DHL Global Forwarding Industrial Projects Europe Sofie Ambeck Siemens Wind Power Europe Connie Hedegaard EU Directorate-General Climate Action Europe Maite Bolivar Nordana Europe Soeren N. Thomsen/Ole Ditlev Nielsen Esvagt division of Svitzer/A.P.Moller-Maersk Europe Various Danish Wind Energy Association (annual meeting) Europe Ole Olesen/Charlotte Muff Thygesen DONG Energy Europe Mette Heileskov Bülow Vestas Wind Systems Europe Mikael Pedersen Wave Star Energy Europe Carsten Borchers Delta Marine Terminal/Bargeline Today Europe Monique de Moel Havenbedrijf Rotterdam Europe Martin van Velzen/Bart Post Kuehne+Nagel Projects/Oil+Gas, Seafreight Overland Europe Roger Iliffe Beluga Shipping/Hansa Heavy Lift/Oaktree Capital Management Europe Peder Jensen DHL Global Forwarding Renewable Energy Europe Laura Bolton/Kevin Bennett The Sustainable Supply Chain Center Asia Pacific Asia-Pacific Alfred E. Zhao Chinese Wind Energy Association Asia-Pacific Hu Zheng Rong/Koichi Hashimoto Shanghai Toshiba Logistics Asia-Pacific Shu Hang (Kelly) GE Energy Asia-Pacific Logistics/SCM Asia-Pacific Dorthe Hasselgaard Hansen Siemens Wind Power Turbines (Shanghai) Asia-Pacific Jens Meilvang BBC Chartering Europe Laurent Marquis Wave Star Energy Europe Peter Karnoe Copenhagen Business School Europe Michael Wede DSV Denmark Europe Gert Petersen Seatainers Group Europe Jens W. Bonefeld DONG Energy Europe Kaj Lindvig A2SEA Europe Rosa Cline/Debra Orr/Cheryl Owens Panalpina Panprojects North America Ted Turner GE Energy North America Mike Yovanovic/David Lopez Kuehne+Nagel Projects North America Gary W. Strom Bechtel Corporation North America Franziska Inman/Denise Arnold/Lisa Riley/Katy McIntosh Agility Project Logistics North America Toni Harrison DB Schenker Projects North America Chris Riddle/Mark Kvintus BDP Project Logistics North America Julian Flores/Stacey/Danielle Edwards/Orlando/Eduardo/Ivar/Linda DHL Global Forwarding Industrial Projects North America Justin Hewitt/Dick Metzler BNSF Logistics North America Tracey Bintemire/Barbara R. Preising/Charles Keyser Siemens Wind Power North America Carl Anderson/Jangwon Lee Siemens Energy North America Orlando Allard/Richard Cedeno Mare Mundi Consulting Latin America Rommel Troetsch Panama Ports Company Latin America Diego F. Porras/Guillermo Manfredo/Octavio A. Stagg Panama Canal Authority Latin America Rodolfo R. Sabonge Panama Canal Authority Latin America Nidal Hachem Association of Free Trade Zone Users, Colon Free Zone Latin America Enrique Clement/Jorge Mandiola Manzanillo International Terminal Latin America Juan Carlos Croston Manzanillo International Terminal Latin America Milton McKay Panama Canal Railway Company Latin America Erik Moller Nielsen Centralam Panama Latin America Keld Hansen/Philip Bronee Motorships Europe Andreas Nielsen/Patrick Duemer CBS Asia-Pacific Per Krogsgaard BTM division of Navigant Consult Europe Soeren N. Jepsen Baltship division of Seatainers Europe Soeren Kristoffersen/Rasmus A. Kristensen Danish Embassy Beijing Asia-Pacific Source: Author analysis 16

MBA in Shipping & Logistics Class of 2011 Thomas Poulsen

Key input for the Industry Analysis, the Company Analysis, the Strategic Issue Analysis, and Implementation segments of this ISP have been assembled through this external empirical data gathering process (and of course supplemented by the parallel internal WWL empirical data gathering process as well). Table 6 above lists the external interviewees. Interview planning, interview protocol, as well as distillation of the empirical information through the analysis protocol was largely done using the directions of Kvale & Brinkmann (2009) – detailed methodology overview is available in chart 7 below. Chart 7: External interview and site visit empirical data gathering methodology

MBA in Shipping & Logistics Class of 2011 T. Poulsen Empirical Data Gathering Interview Methodology

 A total of 60+ non-WWL interviews have taken place so far  Most have been done face-to-face, some as part of site visits  Some have been done using email/phone with face-to-face follow- up planned  Interview methodology based on Kvale & Brinkmann (2009)  Discussions have mainly taken place during January through July of 2011, however, a few discussions took place already in 2010  A total of 40+ internal WWL interviews/site visits were conducted to improve the empirical data mass  Trend crystallization and summaries have been provided ISP illustrations, July 22, 2011

Source: Author analysis

1.4.5 Academic Learning Materials and Models The key academic learning materials utilized within this ISP are a combination of different books, articles, and presentations utilized by the various lecturers during the

MBA in Shipping & Logistics Class of 2011 Thomas Poulsen

8 modules of the Blue MBA as well as other materials specifically procured during the Blue MBA modules and/or for the purpose of supporting this ISP. Illustration 8: Overview of key ISP academic models and literature

MBA in Shipping & Logistics Key ISP Models, Class of 2011 T. Poulsen Literature And Theory Industry Analysis Company Analysis - Renewable energy (Stern, 2006,Gore, - Financial analysis (Allen et. al., 2009, Kemp, 2009, McKinsey 2009) 2008, Alizadeh & Nomikos, 2010, and - Platform Leadership (Gawer & De Wit & Meyer, 2004) Cusumano, 2002) - Resource Based View (Wernerfelt, - PESTLE (Lynch, 2009) 1984) - Logistics/SCM (Kotzab et. al., 2007, - Five Forces Model (Porter, 1980 and Christopher, 2010, Byrnes, 2010, Sheffi, De & Meyer (2004) 2010, Gattorna, 2010) - SWOT (Humphrey, Smith, Christensen & Andrews 1950’s up to Implementation 1970’s) - Middle-up-down management (Nonaka & Takeuchi, 1995), Hoshin Empirical data Kanri (Jackson, 2006, Ghavami, 2008) - Interview protocol and analysis - M&A (Haspeslagh & Jemison, 1990, protocol (Kvale & Brinkmann, 2009) Elson & Lajoux, 2000)

General support for ISP models - Rosenø (2011) and De Wit & Meyer (2004)

Source: Author analysis ISP illustrations, July 22, 2011

Source: Author analysis Specific literature pertaining to the environment and renewable energy include books by Stern (2006/2008), Gore (2009), and Kemp (2009). Key literature about logistics/SCM includes Kotzab et.al. (2007), Christopher (2010), Sheffi (2010), Byrnes (2010), and Gattorna (2010). Key academic models utilized include the theory on platform leadership (Cusumano & Gawer, 2002), the PESTLE framework (Lynch, 2009), the financial tools (Allen et.al., 2008, as interpreted by Alizadeh & Nomikos, 2010, and supplemented by De Wit & Meyer, 2004), and the resource based view (“RBV”) basis Wernerfelt (1984), Barney (1991), and Selznick (1957). In addition, the SWOT analysis (Humphrey) is used, the five forces model (Porter, 1980), the competition strategic groupings (Porter, 1980), mergers & acquisition

MBA in Shipping & Logistics Class of 2011 Thomas Poulsen

(“M&A”)/post-merger integration (“PMI”) literature (Haspeslagh & Jemison, 1990 and Elson & Lajoux, 2000), and the Hoshin Kanri strategy implementation framework (as interpreted by Jackson, 2006 and Ghavami, 2008). Many of the models and much of the literature utilized have been supplemented with commentary on use from De Wit & Meyer (2004) and overall strategic ISP guidance obtained from Rosenø (2011). In general, the author has used a combination of academic models derived from academic literature and empirical data gathered from discussions and site visits with both company personnel and external interviewees deemed to be of relevance to this ISP in order to arrive at the conclusions.

1.4.6 Scoping and Wind Market Modeling Initially via the Industry Analysis, the author has established that there is a politically driven demand for renewable energy which is likely to grow exponentially during the coming years6. Within the sub-segments of wind, solar, geothermal, hydro, and biomass renewable energy sources, the author has determined what commodities are attainable for WWL in the respective sub-segments. However, in terms of market quantification for the entire renewable energy market, the task proved too big during the ISP effort and the general renewable energy research work has been moved to appendices 1 and 2 below. Instead, the wind energy market segment was selected together with WWL. With the selection of the wind segment for a deep-drill7, a comprehensive wind prediction and scenario model tool (the “wind scenario model”) was created by the author (attached in appendix 14 below). Within this tool, actual industry data could be compiled (up to 2010) for triangulation, fairly reliable market predictions could be obtained from independent sources and triangulated (up to 2030), and ultimately three scenarios were created by the author for the outer years (up to 2050). Empirical data from several participants and constituencies of the wind sub-segment was utilized, however, details obtained from several of the market

6 The geopolitical developments are covered to a great level of detail in the appendices 1 and 2 7 This scoping process is discussed in detail in the Industry Analysis section below 19

MBA in Shipping & Logistics Class of 2011 Thomas Poulsen influencers/leaders8 was used to assume more specific wind market developments, market shares, and market trends. Again based on the empirical data gathered, various methods were applied to convert the wind segment market information to logistics/SCM market, volume, and flow projections.

1.4.7 Methodology Summary For overview purposes, illustration 9 (below) graphically depicts the relation between the WWL objectives, the ensuing ISP deliverables, and the methodology applied by the author as described above. Illustration 9: Overview of problem formulation, methodology, and ISP outcome

MBA in Shipping & Logistics Class of 2011 Problem formulation, T. Poulsen WWL objectives & ISP methodology WWL LTS objectives relevant for ISP: Renewable energy SCM - Grow break-bulk segment market and trends - Expand break-bulk business model to include value added services / SCM as “glue” Apply WWL constraints WWL renewable energy SCM growth survey objectives: (no containers, RO/RO) - Expand break-bulk volumes with renewable energy shipments - Enhance strong environmental image and reputation of WWL through WWL attainable market transport and logistics solutions for “green cargo” (commodities, trades, hubs) - Find clients and commodities not yet in focus and analyze how to secure Expand WWL presence in renewable energy SCM market ISP purpose: - Identify Strategic Issues WWL is faced with if WWL wishes to grow its’ presence in the renewable energy SCM market segment WWL Company Analysis ISP outcome: - Detailed analysis and implementation plan for one Strategic Issue WWL Strategic Issues (assets, capabilities, organization, cultural patterns)

Methodology: - Internal WWL interviews and site visits Strategy and - External industry interviews and site visits implementation plan for - Academic models and knowledge one Strategic Issue

Source: Author analysis ISP illustrations, July 22, 2011

Source: Author analysis basis dialogue with WWL constituencies

8 Courtesy BTM Consult ApS division of Navigant, Emerging Energy Research, Global Wind Energy Council, Chinese Wind Energy Council, Siemens Wind Power (“SWP”), A2SEA, Baltship, Port of Esbjerg, PortHow, DHL Global Forwarding (“DGF”), and Vestas (SWP, A2SEA, Baltship, Esbjerg Havn,DGF, and Vestas information strictly private, proprietary and confidential) 20

MBA in Shipping & Logistics Class of 2011 Thomas Poulsen

2 Industry Analysis and Critical Success Factors

2.1 Market Segments Three market levels have been considered as illustrated in figure 10 below: Figure 10: ISP market scoping effort to get to wind power source logistics/SCM

MBA in Shipping & Logistics Class of 2011 Market levels T. Poulsen (industry attractiveness)

Total energy sector

Nuclear Power Plant Renewable energy sub-sector

2. Biomass

Solar Panel Farm Wave Power Plant

Hydro Power Plant Wind Turbine Farm Geothermal Power Plant Fossil Fuel Power Plant

13 ISP illustrations, July 22, 2011 Source: Author research

Source: Author analysis 1. The overall energy market (very high level only). 2. The renewable energy sub-sector of the overall energy market (high level only). 3. The renewable energy logistics/SCM market (key market to be considered in this Industry Analysis part of the ISP), leading to the wind power source sub-segment.

2.2 Overall Energy Market As global energy demand grows over the coming years, the focus on green house gas (“GHG”) emissions and the environment may very well ensure that the use of

MBA in Shipping & Logistics Class of 2011 Thomas Poulsen fossil fuels and nuclear energy may not grow proportionally as much as renewable energy. Chart 11 below shows that the International Energy Agency’s (“IEA”) World Energy Outlook (“WEO”) 2010 report predictions: Coal, gas, and nuclear energy sources will continue to grow in absolute terms and global importance up to 2035, however, oil will diminish in importance, relatively. The major growth will come from renewable energy sources and WEO highlights the importance of especially hydro, wind, and biomass in their forecast. Chart 11: Relative development in energy sources by 2020/2035 versus 2008

Source: International Energy Agency, World Energy Outlook, 2010 report Another point of view can be obtained in chart 12 below from the Energy Information Administration (“EIA”) division of the US Department of Energy (“DOE”). The US DOE’s EIA predicts for nuclear to have the least radical growth through to 2035 but their prediction is that basically all other energy sources grow quite significantly across the board, including renewable energy. Their International Energy Outlook (“IEO”) 2010 report does, however, not break down the renewable energy estimate in to different renewable energy sources at the macro level. Generally, the IEO reports are more conservative when it comes to renewable energy than the WEO reports. This has to do with the strong US-based lobby for the fossil fuel types oil and coal.

MBA in Shipping & Logistics Class of 2011 Thomas Poulsen

Chart 12: World energy use by fuel type (quadrillion British Thermal Units, “qBTU”)

Figure 16. World marketed energy use by fuel type, 1990-2035 quadrillion Btu 250

Projections

200

150

100

0 1990 2000 2007 2015 2025 2035 Source: US Department Of Energy, Energy Information Administration, International Energy Outlook 2010 report The IEA’s WEO 2010 report furthermore measures another important factor illustrated in chart 13 below: The annual global subsidies expected for renewable energy (split between biofuels and other energy sources). Chart 13: Annual global subsidies for renewable energy

Source: International Energy Agency, World Energy Outlook, 2010 23

MBA in Shipping & Logistics Class of 2011 Thomas Poulsen

The subsidy discussion is most relevant and important as it is ultimately tax payer money which finances the government drives towards a more sustainable energy supply situation.

2.3 The Renewable Energy Sub-Sector of the Overall Energy Sector In terms of the renewable energy sub-sector of the energy sector in general, the US DOE’s EIA division defines renewablev as outlined in illustration 14 below: Illustration 14: Energy market definitions

MBA in Shipping & Logistics Class of 2011 T. Poulsen

Renewable energy definition

 Wind Land based and offshore  Solar  Geothermal  Hydro Dams, wave, tidal  Biomass Organic waste, ethanol, biodiesel, wood

 Fossil fuels Coal, oil, natural gas  Nuclear

Source: US Department of Energy EIA ISP illustrations, July 22, 2011 division, author summary

Source: US Department of Energy, Energy Information Administration, author analysis  Scoping part conclusion number one: Both the traditional non-renewable fossil fuel driven energy market (oil, coal, natural gas) and the nuclear energy market are deemed to NOT be in scope for this ISP.

2.3.1 High Level Understanding of Renewable Energy Power Sources A high level understanding of the key renewable energy sub-sector power sources is important in order to understand exactly what underlying commodities, parts, components, and modules make up the renewable energy supply chains. In terms of

MBA in Shipping & Logistics Class of 2011 Thomas Poulsen the total possible scoping of the renewable energy supply chain including biomass fuel supply for power plants, see illustration 15 below. Illustration 15: Total possible renewable energy ISP scoping

MBA in Shipping & Logistics Class of 2011 Scoping of supply chain T. Poulsen Solar Panel Farm

1. 2. Wind Turbine Farm

Construction Global /assembly Module & of power source Parts Suppliers e.g. solar panel or Hydro Power Plant Wave Power Plant wind turbine Legend

1. = Inbound parts supply flow

Geothermal Power Plant 2. = Outbound part and module turnkey flow

3. = Continuous biomass supply flow

Nuclear Power Plant Wood pellets Wood Chips 3. Power Plant

ISP illustrations, July 22, 2011 Source: Author analysis

Source: Author analysis

2.3.2 Scoping of the Integrated Strategy Project Industry Analysis This ISP deals mainly with wind energy logistic/SCM only. However, the ISP effort started out by the author reviewing all parts of the renewable energy market. An excerpt from the detailed scoping process has been included in appendix 2 below along with a high level description of a select number of renewable energy types. This analysis was mainly derived from Kemp (2009) and supplemented from Gore (2009). Based on the scoping of renewable energy power sources, it was further considered whether to include a couple of additional relevant parts of the renewable energy supply chain:

MBA in Shipping & Logistics Class of 2011 Thomas Poulsen

 Electrical cars  Equipment used to connect to the grid As illustrated in illustration 16 below, the ultimate focus of this ISP is on the transport/shipping/logistics/SCM involved with wind energy power sources: The market of electrical cars is already understood very well by WWL and inasmuch as the connection to the grid is of interest for the wind segment, this can be considered, however, is not of primary interest for this ISP and WWL. This does not mean that other market segments are not of interest: Appendix 7 contains information about for example wave power which also looks promising in general and for WWL. Illustration 16: Outcome of scoping efforts - wind power source logistics/SCM

MBA in Shipping & Logistics Class of 2011 T. Poulsen Industry Analysis: Result of scoping effort with WWL

Wind Hydro Solar Geothermal Biomass

Connection to grid

Electrical cars

Wind

ISP illustrations, July 22, 2011 Source: Author analysis

Source: Author analysis

2.4 The Wind Energy Market In order to be able to effectively project future volumes, flows, and trades within the wind energy market, a number of different factors must be considered. At a macro- economic level, many key factors have been discussed above. In order to be able to

MBA in Shipping & Logistics Class of 2011 Thomas Poulsen arrive at information about the wind energy market which can be used for transport/shipping/logistics/SCM, a much more granular view of both supply and demand trends now and going forward must be generated. When reviewing different available sources, a lot of information exists about the market itself and the rapid development it is going through. Different sources researched include FACTIVAvi, Emerging Energy Researchvii, The EICviii, Global Wind Energy Council (“GWEC”)ix, and the BTM division of Navigant Consultingx. Using examples of Eastern Europe (Factiva, 2010) and Europe (Factiva, 2011), the data captured and published on overall power plant projects is very time consuming and challenging to navigate for somebody who is not a subject matter expert for several reasons: The information is extremely comprehensive, vast, and technical whilst at the same time, strong understanding of the underlying commodities, components, modules, and parts is required in order to accurately translate this into forecasted demand. Other sources analyze more specific trends for wind turbines with results displayed in a very useful manner: Regional demand shifts predicting that Asia will become a much larger overall consumer of wind turbines globally over the coming years (Emerging Energy Research, 2011) along with global demand forecasting and trends (GWEC, 2010). However, a broader search effort can of course also be rendered such as the London Array example above or ad-hoc review of projects like utility company Vattenfall and Stadtwerke Muenchen’s DanskTysk offshore wind farm scheduled for production from 2012xi or the first Dutch offshore wind farm project with OEM Vestas and EPC provider Ballast Nedam, called Egmond an Zeexii. In addition, on-going renewable energy SCM break-bulk information is, however, being crystallized and subsequently distilled by author through various sources such as www.breakbulk.com and UBM News’ so-called “breakbulknewswire” offeringxiii. However, not much information has been generated in terms of transport/shipping/logistics/SCM. In the ideal scenario, information about the overall flow should be available all the way from at least tier 1/tier 2/tier 3 sub-suppliers and all the way up until a wind turbine has been erected at the end user site, either onshore or offshore. Therefore, empirical information gathering through dialogue with

MBA in Shipping & Logistics Class of 2011 Thomas Poulsen

WWL employees has of course provided critical and useful information. Such examples have been outlined in chart 17 below: Chart 17: Examples of good wind market intelligence obtained from WWL

MBA in Shipping & Logistics Class of 2011 Useful empirical data T. Poulsen from internal WWL interviews  OEM GE Energy switching their components production from Spain to much more SCM cost competitive PRC  A significant amount of wind turbine projects awaiting approval based on the much debated carbon tax possibly to be implemented in Australia1)  The REpower division of OEM Suzlon’s projects in Canada and the US being supplied from South Korea (towers) with the balance via chartered vessel from Germany.  OEM Nordex preferring to ship wind turbines from the port nearest to them (Rostock) as opposed to more traditional German renewable energy ports like Bremerhaven or Hamburg2) 1) For additional information on the political turmoil surrounding Australia’s possible carbon tax implementation scheduled for July, 2012, see for example http://www.theaustralian.com.au/news/opinion/no-happy-ending-for-carbon-tax-fairytale/story-e6frg6zo-1226014940249 (accessed on March 4, 2011 at 16:26 PM CST) 2) Based on highly sensitive internal company dialogue quotes provided by WWL Global Market Intelligence on March 4, 2011 Source: Author analysis ISP illustrations, July 22, 2011

Source: WWL information, author analysis Finally, the empirical data gathering effort of the 60+ external non-WWL interviewees evidenced that different supply chain constituencies see things different from the company - and also sometimes disagree with each other.

2.5 Wind Energy Logistics Market Sizing - Wind Scenario Model In order to achieve these objectives, the author has assembled an extensive MS Excel based model (attached in full in appendix 14 below) with key contents outlined in illustration 18 below.

MBA in Shipping & Logistics Class of 2011 Thomas Poulsen

Illustration 18: Basic structure and mechanics of wind scenario model

MBA in Shipping & Logistics Class of 2011 T. Poulsen Wind Scenario Model  Main structure  Model mechanics • Using >20 different, independent, • Starts by outlining the total MW and verified sources per year • Core data • Up to and including 2010, fairly • Hypothesis accurate actuals could be generated • Triangulation • From 2011 through 2030, a good market estimate is available • Calculates total shipping / logistics • From 2031-2050, three different / supply chain spend up to 2050 scenarios were created • Supply chain split into different sub- • Views MW data in different ways segments • By country/region (geography view) • Contains additional information • Onshore versus offshore • Profiles of OEM’s and operators • Number of wind turbine units • OEM data by market/market share • By OEM • Listings of key suppliers • Technology / R+D • Logistics flows and hubs • Market value ISP illustrations, July 22, 2011 Source: Author analysis

Source: Author analysis This model (hereinafter referred to as the “wind scenario model” bridges the market information with transport/shipping/logistics/SCM details required for this ISP effort. The following sections analyze the wind market using the wind scenario model.

2.5.1 The Wind Market Development up to 2050 As also discussed in appendix 1 below, the EU and many countries are now in the process of creating legislation which sets targets for renewable energy - including wind - up to 2050. This has been done both for reasons of geopolitical and macro- economic nature but also due to the fact that countries and organizations need to be able to make long-ranging investments and know that the political environment is

MBA in Shipping & Logistics Class of 2011 Thomas Poulsen stabile9. A few macro-economic drivers are contained in the wind scenario model and should be highlighted upfront:  As a front-runner within the legislative environment, EU’s clear 20-20-20 targets very much impact behaviour across Europe now and going forward (see chart 19 below)10. Chart 19: EU’s binding 2020 legislation setting out renewable energy targets

MBA in Shipping & Logistics Class of 2011 EU 20-2020 T. Poulsen

Per Cent EU 20-20-20 Renewable Energy Legislation 60.00%

50.00%

40.00%

30.00%

Actual 2005 20.00% Target 2020

10.00%

0.00%

Italy

Spain

Malta

Latvia

France

Cyprus

Poland

Austria

Finland

Estonia

Greece

Sweden

Belgium

Bulgaria

Slovenia

Hungary

Portugal

Romania

Denmark

Germany

Lithuania

Netherlands

Luxembourg

Ireland (Rep.)Ireland

CzechRepublic Slovak Republic

ISP illustrations, July 22, 2011 Source: Author analysis

Source: European Commission - COM (2008) 19, final, Brussels, January 21, 2008, author analysis  The total wind power potential has been included in the model based on the US DOE EIA’s IEO report, 2010: Total renewable energy power projected until 2035

9 Key driver behind EU’s recent “2050 roadmap” and very much on the agenda of Commissioner Hedegaard as evidenced in the interview with her conducted by the author as part of the empirical data gathering efforts 10 When looking at the chart, it is important to note that the EU target of using 20 per cent renewable energy by 2020 is an average target across all member nations and as such, each country had different starting points and targets with some being well above the overall 20 per cent goal already 30

MBA in Shipping & Logistics Class of 2011 Thomas Poulsen

has been compared to the wind scenario model market prediction and scenarios from 2011 through 2035 (see appendix 7 for details).  Like any other industry, the history and prospects of the wind energy industry contain many and varied events, data points, facts, and opinions. However, a point of view gathered mainly from the vast empirical interview mass of this ISP has been included in table 20 below. Three main stages of development are outlined and at present, the industry is undergoing serious transformation: The key change is that demand is being fulfilled in a more regional/local manner due to increasing requirements pertaining to local content, local tax contributions, local employment, and government subsidies. Furthermore, the industry is maturing in terms of quality, economies of scale, and best practices. A large amount of new entrants are emerging at all levels of the market. Going forward, the future will revert to a more normalized supply/demand driven market, however, this is not estimated to happen until 2025-2030 at the earliest. Table 20: Wind energy market over time – three stages of development

Past (up until 2008/2009) Present (2009-2010 and ahead) Future (from 2025-2030 and beyond) # of factories Few Many Temporary manufacturing sites will have closed down # of OEM's Few Many Consolidation will have incurred Industry status Nascent, trial and error More mature, best practices Mature Government intervention No A lot (local content/employment rules, subsidies) No, regulated by supply/demand Sourcing Local industry near OEM's Global sourcing Low cost country sourcing Key manufacturing hubs Europe, Japan, USA Globally China, India (plus Mexico/Brazil/Russia) Assembly Near factories At destination At manufacturing location Demand Small, few pioneering countries Broad, driven by legislation, many countries Big, global, older and smaller turbines to developing nations Supply Small, few OEM's Broad, regional/local supply Cheapest countries will prevail Offshore Sporadic, test Starting to take off, Europe as lead Global demand Offshore components Manageable Getting exponentially bigger Too big, built near ports, only shipped by ocean Offshore markets Few European countries Many European countries, China Europe will be saturated, key markets PRC/Korea/USA/Canada/Other Source: Empirical data, author analysis With this in mind, the wind scenario model has been developed to create an overview of the wind market up to 2050. Most data referenced above including IEA’s WEO 2010 report and the US DOE EIA’s IEO 2010 report only project out until 2035.

MBA in Shipping & Logistics Class of 2011 Thomas Poulsen

Some data sources do not detail out the different types of renewable energy power sources. Therefore, other methods of triangulation have been used comparing 20+ data sources, some of which are empirical in nature (see chart 21 below). For the shipping industry in particular, looking at figures projected out to 2050 is of utmost importance as a vessel is usually depreciated over 20, 25, or 30 years, depending on the type. Binding legislation up to 2020 does therefore not give enough opportunity for the industry to plan and make the significant investments that are required to support renewable energy in general and wind energy in particular. Chart 21: Total wind market development 1998-2050 (in mega watt “MW”)

MBA in Shipping & Logistics Class of 2011 Market Development (MW) T. Poulsen

Total Cumulative MW Cumulative MW (Actuals, Market Predictions, and Scenarios) 10,000,000

9,000,000

8,000,000

7,000,000

6,000,000 Actual Market predictions 5,000,000 Base case scenario 4,000,000 Low scenario 3,000,000 High scenario

2,000,000

1,000,000

- 1990 2000 2010 2020 2030 2040 2050 2060

ISP illustrations, July 22, 2011 Source: Author analysis

Source: Author analysis When looking back (as illustrated in chart 22 below), we can derive from the install volumes on an annual basis - as well as the cumulative install base - that wind power sources are slowly but surely becoming a force to be reckoned with in the overall energy market place. With more than 200,000 MW (200 giga watt, “GW”) worth of

MBA in Shipping & Logistics Class of 2011 Thomas Poulsen capacity installed globally by the end of 2010, wind power is still very small but it is now starting to make a difference. Chart 22: Globally installed wind power generation capacity up to 2010

MBA in Shipping & Logistics Class of 2011 Installed Already (MW) T. Poulsen

ISP illustrations, July 22, 2011 Source: Author analysis

Source: Author analysis Fairly good market predictions are available through 2030 and have been included in the wind scenario model after extensive use of triangulation between multiple data sources and empirical data cross-checking. For 2031 up to 2050, three scenarios have been developed by author (see chart 23 below). Several data pointers are available through different empirical data sources, however, as these are scenarios, a certain error margin may of course incur.

MBA in Shipping & Logistics Class of 2011 Thomas Poulsen

Chart 23: The three different scenarios developed for 2031-2050

MBA in Shipping & Logistics Class of 2011 Scenarios T. Poulsen

Per cent Cumulative Percentage Increase (Scenarios) 200.00

180.00

160.00

140.00

120.00

100.00 High Scenario Base Case Scenario 80.00 Low Scenario 60.00

40.00

20.00

2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 2040 2041 2042 2043 2044 2045 2046 2047 2048 2049

ISP illustrations, July 22, 2011 Source: Author analysis

Source: Author analysis In order to illustrate the cumulative percentage difference between the “high scenario” and “low scenario”, please refer to chart 24 below. Chart 24: Cumulative percentage spread between high and low scenarios

Per cent Cumulative Spread Percentage 180.00

160.00

140.00

120.00

100.00 High vs Low 80.00 Scenario

60.00

40.00

20.00

2036 2037 2038 2039 2040 2041 2042 2043 2044 2045 2046 2047 2048 2049 2050 2032 2033 2034 2035 2031 Source: Author analysis

MBA in Shipping & Logistics Class of 2011 Thomas Poulsen

To cover this market, a number of OEM’s exist. The market used to be dominated by a few OEM’s like Vestas, Bonus (now Siemens Wind Power, “SWP”), Gamesa (previously partly owned by Vestas), GE Energy, and Enercon. Today, the market is, however, comprised of more than 110 OEM’s globally of which more than 60 are from PRC. A list of the top OEM’s globally has been outlined in illustration 25 below. Illustration 25: Top 15 global wind energy source OEM’s (end 2010 ranking)

MBA in Shipping & Logistics Class of 2011 Installed Wind Capacity T. Poulsen Globally (end 2010) Market Share 2010 - Top 15 Global OEM's Percentage split Market Share – Top 15 Global OEM’s (based on MW) Cumulative Install Base184 GW (out of 200 GW total)

Vestas

GE Wind (incl. ScanWind)

Enercon

Gamesa

Suzlon Group (incl. REpower) Others

Siemens Wind Power

Sinovel

Goldwind

Nordex

15442 Dongfang Electric Mitsubishi

United Power

Mingyang

XEMC (incl. Darwind)

SEwind ISP illustrations, July 22, 2011 Source: Author analysis

Source: Author wind scenario model, author analysis

2.5.2 Process Mapping Methodology to create Logistics Cost “Buckets” Through the empirical data gathering process, the author has developed an understanding of the wind turbine transport/shipping/logistics/SCM process. This has been necessary in order to quantify the total market value in terms of spend, now and in the future, as part of the wind scenario model. To support the empirical data gathering process, the author developed a series of process mapping charts (Slack

MBA in Shipping & Logistics Class of 2011 Thomas Poulsen et.al, 2010) which were then further refined throughout the empirical data gathering process11. From an overall supply chain perspective, the transport/shipping/logistics process was broken down into two main pieces: Inbound assembly parts (mainly for the nacelle assembly/manufacturing) and outbound turn-key flow from manufacturing site(s) to the erection/install site. The outbound flow is, however, significantly different for onshore versus offshore installations and when offshore is involved, the costs increase significantly as it is generally more expensive to perform logistical tasks offshore due to labour time, adverse weather down-time, and expensive costs of vessels and equipment. When reviewing the renewable energy logistics/SCM flow in more detail, the inbound assembly flow involving large break-bulk type wind components like hubs are discharged e.g. via the port of Esbjerg in Denmark for exampled destined for the SWP nacelle production facility in Brande, Denmark for the further assembly/manufacturing process12. Many logistical challenges exist within this inbound wind supply chain and some are even related to the transport equipment utilized for shipment of these different components, items, and parts13. Within the outbound flow, different wind turbine modules and components are shipped from the place of manufacture to the site of installation of the wind energy power source. In the case of offshore wind turbine farms, ports like Esbjerg and Cuxhaven act as key operating centers for manufacturers like SWP and BARD Offshore when it comes to the wind farms being developed in the North Sea14. The foundations/monopoles/jackets and transitions pieces needed to go on to the sea bed and protrude out over the sea level are generally an extra component and much more extensive compared to what is observed for land destined wind turbines15.

11 See appendix 15 for examples of actual process mapping charts used during interviews 12 Based on interviews with the Port of Esbjerg, Denmark and PortHow, Sweden (see appendix 12 for details) 13 Based on interviews with Siemens Wind Power, Brande, Denmark (see appendix 12 for details) 14 Based on interviews with the Port of Esbjerg, PortHow, and site visit to Cuxhaven with Global Green Invest and Vattenfall (see appendix 12 for details) 15 As observed during the Cuxhaven site visit on February 22, 2011 where AMBAU units were on display at the port area (see the Global Green Invest/Vattenfall interview notes in appendix 12 for details) 36

MBA in Shipping & Logistics Class of 2011 Thomas Poulsen

2.6 The Flows

2.6.1 Inbound Assembly Flow (Nacelle) When considering the inbound assembly flow, a number of tier 1/tier 2/tier 3 suppliers are involved, especially when assembling the nacelle. The bill of material (“BOM”) for a nacelle is generally ranging for some 1,500 to 5,000 parts depending on which kind of MW output and what technology is applied. A simplified flow has been outlined in illustration 26 below. Illustration 26: Inbound assembly part flow – nacelle example

MBA in Shipping & Logistics Class of 2011 T. Poulsen Wind Logistics Flow Process Mapping: Nacelle Inbound

Flow of assembly parts, components, and modules ILLUSTRATIVE ONLY Bed plate Start Origin Destination Hub Start Yaw/gear box Vessel Start loading, Parts, Port area shipping, Port area components, Break unit storage storage Assembly Trucking unloading Trucking modules Start End Generator Start Cooler unit Legend : Start = Start/end Canopy = Process flow Start = SC navigation

Source: Author analysis ISP illustrations, July 22, 2011

Source: Empirical data gathering, Slack et.al. (2010), author analysis Today, the most commonly used technology involves a gearbox to generate power from the wind via the rotor-blade and this increases the complexity of the nacelle and number of parts used (as opposed to the emerging direct drive, or “DD”, often magnet based technology where the number of assembly parts can be reduced by

MBA in Shipping & Logistics Class of 2011 Thomas Poulsen

30-50 per cent16 compared to nacelles with gear technology). Different OEM’s have different definitions about what major components constitute the nacelle but in general, the nacelle is built on a bed plate/bed frame and the key assembly components consist of the gearbox (including the yaw gear), the break unit, the generator, a cooler unit, and other parts17 on top of which the house or canope is then placed. For some DD units, the generator is mounted on to the nacelle itself. Costs associated with inbound transport/shipping/logistics/SCM make up a considerable part of the price of the wind turbine itself, however, as the OEM’s are presently buying most of their parts on a DDU basis, it has been difficult to get an exact overview of the total supply chain spend in terms of the inbound process18. In addition, the different OEM’s assemble for example the nacelle using different degrees of vertical integration: Some are happy to buy e.g. the generator fully assembled from a sub-supplier whereas others consider it part of their unique value add and tool to create platform leadership (Gawer & Cusumano, 2002) to build up the generator itself. The same goes for other components like the cooler unit, the break unit, transformers, and so forth. On this basis, the logistics spend for all inbound assembly parts have been excluded in the scope of the wind scenario model. This means that the total E2E logistics costs are even higher than what is described below.

2.6.2 Outbound Turnkey Flow (Onshore) In terms of the outbound turnkey flow for onshore wind turbine installations, the wind turbine erection process must first be understood: Initially, a foundation is made and the tower put into the foundation. The nacelle itself is then put on top of the tower and the hub is put on to the nacelle (or mounted on the generator for some DD units). Finally, the blades are then affixed to the hub and the wind turbine connected

16 According to empirical data gathering efforts with especially Siemens Wind Power 17 For example the electronic boxes containing various control systems, converters, transformers, power units, transfer units, a small crane for operations/maintenance, and so forth (depending on each OEM) 18 The DDU term means that freight/shipping/logistics costs are for account of the suppliers who sell their components fully delivered to the OEM. This made analysis difficult as all the different types of suppliers would have had to be interviewed as part of this ISP and that was not possible within the time frame of this ISP 38

MBA in Shipping & Logistics Class of 2011 Thomas Poulsen to the grid. Usually, the foundation is made locally in the region/country/area of the ultimate erection site and in some cases, the tower is also produced nearby due to the local content/local tax/local employment rules applied by governments many places19. OEM’s have different ways of working when it comes to crafting the different, key modules: Some OEM’s believe that platform leadership (Cusumano & Gawer, 2002) can only be achieved through full vertical integration and control over all parts of the value chain20. Other OEM’s only wish to control the parts of the value chain where most value is added, i.e. for example the production of the critical nacelle unit21. In terms of the logistical set-up, similar kinds of company policies (derived from platform leadership strategies) exist and two major schools of thought prevail: a) A full wind turbine unit is shipped on a single vessel including tower, nacelle, hub, and blades22. For larger wind farm projects, it is customary to ship for example lots of 10 wind complete turbines using chartered 10,000 DWT vessels or more wind turbines on correspondingly larger vessels. To illustrate this, please refer to illustration 27 below.

19 For details on local content/tax/employment issues, please refer to appendix 1 below 20 Based on the empirical data gathering process, the author learned that Siemens Wind Power is an example of a fully vertically integrated company. 21 From the empirical data gathering process, the author observed that companies like GE Energy and Goldwind fall under the category of OEM’s who outsource non-critical components to sub-contractors. 22 As part of the empirical data gathering efforts and author research, it was determined that a number of companies are working on developing two-blade wind turbines. When compared to the more commonly used three-blade turbines, being able to use one blade less would of course decrease overall costs, including logistics costs. For key empirical data gathered on this topic, please refer to interview notes from A2SEA and the Chinese Wind Energy Association). 39

MBA in Shipping & Logistics Class of 2011 Thomas Poulsen

Illustration 27: Outbound onshore logistics flow – turbine shipped as a “full set”

MBA in Shipping & Logistics Class of 2011 T. Poulsen Wind Logistics Flow

Process mapping: Outbound onshore (1)

Flow of finished wind turbine components ILLUSTRATIVE ONLY Origin Destination Foundation components Start

Towers Start Vessel Trucking loading, Wind Port area shipping, Port area Turbine storage storage Nacelles Trucking unloading Trucking Components Start End

Erection Hubs at site Start Legend : = Start/end Blades = Process flow Start = SC navigation

Source: Author analysis ISP illustrations, July 22, 2011

Source: Empirical data gathering, Slack et.al. (2010), author analysis b) Each major component of the wind turbine is shipped separately and on different vessels. For larger wind farm projects, this means that the arrival timing must be coordinated so that the foundation is made first, the towers arrive thereafter but before the nacelles/hubs/blades, and so forth. To graphically depict this, illustration 28 has been included below.

MBA in Shipping & Logistics Class of 2011 Thomas Poulsen

Illustration 28: Outbound onshore logistics flow – turbine component shipping

MBA in Shipping & Logistics Class of 2011 T. Poulsen Wind Logistics Flow

Process mapping: Outbound onshore (2)

Flow of finished wind turbine components ILLUSTRATIVE ONLY Origin Destination Foundation components Start

Port area Vessel loading, Towers Trucking storage shipping, unloading Trucking Wind Start Port area Turbine storage Port area Vessel loading, Trucking Components storage Nacelles Trucking shipping, unloading End Start Erection Port area Vessel loading, at site storage Hubs Trucking shipping, unloading Start Legend : Port area = Start/end Vessel loading, storage Blades Trucking shipping, unloading = Process flow Start = SC navigation

Source: Author analysis ISP illustrations, July 22, 2011

Source: Empirical data gathering, Slack et.al. (2010), author analysis

2.6.3 Outbound Turn-key Flow (Offshore) The offshore turnkey flow can be segmented into two overall sections: The turnkey installation of the wind turbines in an offshore wind farm and the connection of this wind farm to the grid. Both sections are gigantic tasks when considering the size of the individual pieces involved as well as the often adverse weather conditions at sea in the areas suitable for wind farms, i.e. far away from land with lots of wind. Regarding the installation of the wind turbines, an underwater foundation must first be installed. During the early days of offshore wind, the wind farms were installed near to the shore in shallow waters using a monopole system where a single pile was hammered into the seabed below. However, at present, wind farms are installed further from shore with water depths reaching as much as 30, 40, or up to 45 meters. The wind turbines themselves are now capable of generating two, three, four, five,

MBA in Shipping & Logistics Class of 2011 Thomas Poulsen and often six MW of power. This means that for the bigger ones, the foundation (or “jacket”) for each wind turbine weighs up to 900 tons, is 60 meters tall, and boasts a diameter of 30x30 meters at the highest point above the waterline. Illustration 29 below shows the trend in terms of offshore rotor-blade sizing from the first projects and up to present. Illustration 29: Offshore wind rotor-blade diameter increases (hub and blades)

Source: Empirical data gathering effort with A2SEA, author analysis These massive installations are necessary in order to accommodate the size and scale of wind turbines generating 6 MW of output. On top of the foundation, a transition piece or transition tube is then mounted and then the tower can be erected. The nacelle is ultimately put on top of the tower and finally, the hub and blades are installed before connecting the wind turbine to the grid. In terms of the logistical set- up, two different processes are commonly observed: a) Just like we observed it for onshore, some OEM’s wish to ship a full wind turbine to the offshore site as a single shipment and this flow has been depicted in illustration 30 below.

MBA in Shipping & Logistics Class of 2011 Thomas Poulsen

Illustration 30: Outbound offshore logistics flow – turbine shipped as a “full set”

MBA in Shipping & Logistics Class of 2011 T. Poulsen Wind Logistics Flow

Process mapping: Outbound offshore (1)

Flow of finished wind turbine components ILLUSTRATIVE ONLY Foundations monopiles Origin Destination

Start Port area Vessel storage barge Wind Trucking Port area Erection Transition loading, Turbine storage at sea site Pieces shipping Components Start Vessel End loading, Towers shipping, W.I.Vessel Wind Barge Erection unloading loading, Turbine Start storage at sea site Port area or trans- shipping Components storage Nacelles Trucking shipment End Start Hubs Legend : Start = Start/end = Process flow Blades = Optional Start = SC navigation

Source: Author analysis ISP illustrations, July 22, 2011

Source: Empirical data gathering, Slack et.al. (2010), author analysis For this purpose, very expensive and custom-built wind turbine installation vessels (so-called “WTIV” or “WIV” vessels) are utilized. These are very expensive to charter and scarcity has been experienced during 2009/2010 when the offshore wind market has spiked. The foundations and transition pieces/transition tubes are usually handled in a separate logistics flow where they are shipped directly to the offshore installation site well and installed in advance of the wind turbine components. So-called “offshore bases” ashore and near the installation site23 are sometimes used in order to create a hub of the different components to be used and in order to have a site where different value added

23 Offshore bases are especially used in the UK and Ireland as no skilled labour/equipment exists there and none of the suppliers are based there. Everything has to be arranged from other countries, especially Denmark and to some extent Germany/Holland

MBA in Shipping & Logistics Class of 2011 Thomas Poulsen

type of activities can take place prior to final installation24. However, in some cases, all components are shipped directly to the site without using a “second port”. b) As was also the case for onshore, other OEM’s ship the different wind turbine components separately to the offshore site, again possibly via an offshore base port. As can be seen in illustration 31 below, the foundations and transition pieces/transition tubes are usually handled separately, also in this flow. Illustration 31: Outbound offshore logistics flow – turbine component shipping

MBA in Shipping & Logistics Class of 2011 T. Poulsen Wind Logistics Flow

Process mapping: Outbound offshore (2)

Flow of finished wind turbine components ILLUSTRATIVE ONLY

Foundations Origin Destination monopiles Trucking Vessel loading, shipping, unloading, or transshipment Vessel Wind Start Port area Erection loading, Turbine storage at sea site Transition Port area shipping Components storage Pieces Trucking End Start Wind Towers Trucking Vessel Barge loading, Turbine Erection Start storage shipping Components at sea site Nacelles Trucking End Start Legend : Hubs Trucking = Start/end Start = Process flow Blades Trucking = Optional Start = SC navigation Source: Author analysis ISP illustrations, July 22, 2011

Source: Empirical data gathering, Slack et.al. (2010), author analysis Finally, in terms of the connectivity to the grid, larger wind farm projects have a substation installed offshore where a first step power consolidation and conversion is

24 Based on empirical data mainly from interviews with DONG Energy, Port of Esbjerg, and A2SEA, the offshore base port VAS include mounting of the blades into the hub to create a single rotor-blade piece for shipment and completion of the tower which is often arriving to the offshore base in different segments

MBA in Shipping & Logistics Class of 2011 Thomas Poulsen performed from the wind farm. A substation is usually comprised of a transformer station which is put on top of a foundation. The transformer itself often weighs 2-300 tons whereas the foundation (the “top side”) weighs 1,000-1,200 tons25. One or two underwater cables then lead from the substation to shore where another transformer station is usually located. This flow can be illustrated as outlined in illustration 32 below: Illustration 32: Outbound offshore logistics flow – offshore substation

MBA in Shipping & Logistics Class of 2011 T. Poulsen Wind Logistics Flow

Process mapping: Offshore (3)

Connecting-to-grid is an important logistical task as well ILLUSTRATIVE ONLY

Origin Destination Installation Transformer Port area Vessel loading, Transformer at onshore storage station Trucking shipping, unloading Trucking station site Start End

Port area Vessel loading, Offshore Cables Trucking storage shipping, unloading Cables and substation installation Start End

Port area Legend : storage Vessel loading, Substation Trucking shipping, unloading = Start/end Start = Process flow = SC navigation

Source: Author analysis ISP illustrations, July 22, 2011

Source: Empirical data gathering, Slack et.al. (2010), author analysis

25 Empirical data gathered in interviews for example DONG Energy on June 10, 2011. In the case of their London Array project, two separate substations form part of the project offshore which is supplemented by another installation ashore containing two additional transformer units

MBA in Shipping & Logistics Class of 2011 Thomas Poulsen

2.7 Different Logistics Cost “Buckets” in the Supply Chain Based on the process mapping efforts, different assumptions were made, as outlined in table 33 below. Table 33: Different assumptions made to calculate logistics cost “buckets”

Cost of turn-key wind turbine: - Onshore versus offshore - Western pricing versus China Cost of wind turbine itself Cost of other costs excluding turbine Logistics costs compared to total costs: - Onshore versus offshore Freight forwarders/intermediaries Ports Land Ocean shipping Different scenarios - Shortsea versus inter-continental - Offshore single port versus double port Source: Author analysis The wind scenario model is able to calculate different cost “buckets” using the above high level assumptions coupled with a number of detailed assumptions outlined in illustration 34 below (appendix 7 contains additional details, confirming some of the key assumptions regarding short-sea versus inter-continental shipment length span based on actual data from the harmonized tariff system “HTS” from three countries). Illustration 34: Detailed wind scenario model logistics/SCM cost calculation drivers

MBA in Shipping & Logistics Class of 2011 Wind Scenario Model T. Poulsen Supply Chain Cost “Buckets”

Key Model Assumptions Drivers Of Assumptions  Shipping/logistics costs as  Inbound parts logistics a per cent of wind turbine flow excluded market price  For onshore, shipments  Different cost picture for within a region versus onshore versus offshore inter-regionally  Linkage of multiple modes  For offshore: of transport:  Shipments using 1 or 2  Land ports  Ocean  Installation versus shipment  Ports (between land/ocean) of key components ISP illustrations, July 22, 2011 Source: Author analysis

Source: Author analysis 46

MBA in Shipping & Logistics Class of 2011 Thomas Poulsen

On this basis, the wind scenario model can split the supply chain up in different “buckets” and estimate costs going forward. This has been done up to 2050 and the market information can be depicted in absolute numbers or net present value (“NPV”). When segmented into key “buckets”, chart 35 below depicts the four overall cost elements of intermediaries, ports, land, and ocean in the wind power source supply chain. Chart 35: Four overall logistics cost elements in the wind turbine supply chain

MBA in Shipping & Logistics Global Wind Logistics Class of 2011 T. Poulsen Supply Chain Cost “Buckets”

EUR Millions Relative Split (Per Cost Type) 90,000

80,000

70,000

60,000 Intermediary 50,000 Ports 40,000 Land 30,000 Ocean 20,000

10,000

- 2011-2020 2021-2030 2031-2050

ISP illustrations, July 22, 2011 Source: Author analysis

Source: Author analysis The different cost “buckets” change in relative size during the life span of the wind scenario model as the market changes. The wind scenario model considers that for example, less inter-continental transport by ocean will incur as markets move towards further regionalization/localization. Furthermore, the model considers efficiency gains on the part of the OEM’s in terms of wind turbine manufacturing costs which similarly lowers the average logistics spend as total logistics cost is

MBA in Shipping & Logistics Class of 2011 Thomas Poulsen computed as a function of the wind turbine market value. However, the model also considers that when subsidies gradually phase out and market forces take over in the outer years (not expected until 2025-2030), manufacturing will center around the low cost countries where sourcing is cheaper. This will again impact the cost “buckets” by adding more ocean freight related costs. As ocean shipping makes up a very large portion of the overall cost picture, a further break-down of the ocean shipping portion has been depicted in chart 36 below. Chart 36: Break-down of the ocean shipping part of the total wind logistics spend

MBA in Shipping & Logistics Global Wind Logistics Class of 2011 T. Poulsen Ocean Shipping Split Ocean shipping part of total costs

EUR Millions 40,000 35,000 30,000 25,000 20,000 15,000 10,000 5,000 - 2011-2020 2021-2030 2031-2050 EUR Billion = Divide by 1,000

Onshore Offshore

Shortsea Intercontinental Components Installation 2011-2020 11,294 13,131 11,878 27,716 2021-2030 12,315 21,111 12,777 29,812 2031-2050 16,918 13,465 15,507 36,184

ISP illustrations, July 22, 2011 Source: Author analysis

Source: Author analysis In terms of land based costs, it is expected that legislation and public opinion will continue to force an agenda of cleaner transports. This will drive down the use of trucks and instead increase the use of rail and barges to provide the lowest possible transport carbon footprint, especially for the “green energy” power sources. An

MBA in Shipping & Logistics Class of 2011 Thomas Poulsen overview of the different measures dealt with by the wind scenario model has been provided in illustration 37 below. Illustration 37: Market trends 2011-2030 in the wind energy logistics/SCM market

MBA in Shipping & Logistics Class of 2011 Global Wind Logistics T. Poulsen Trends: Present Market (through 2030)

Domestic/regional manufacturing - Long distance ocean transport - Short distance ocean transport - Long distance land transport - Short distance land transport - Environmentally friendly transport requirements - Use of rail - Use of barges - Use of trucks Size of components - Use of ocean freight transport in general - Use of land transport in general

ISP illustrations, July 22, 2011 Source: Author analysis

Source: Author analysis

2.8 Technology Drivers and The Offshore Wind Opportunity The wind scenario model supports the strong empirical data materials gathered that offshore wind is about to expand significantly as a market. Not only are the research and development (“R+D”) efforts within the area quite significant, however, as shown in chart 38 below, also the absolute number of projects are on the rise. In the past, the offshore wind logistics/SCM industry has been challenged because the number of installations varied very much: As chart 38 shows, some years had no installations at all. This made it difficult to invest and expand in terms of shipping/logistics capacity. However, over the past two years, demand has outstripped supply and this

MBA in Shipping & Logistics Class of 2011 Thomas Poulsen has made the utility companies, the wind farm operators, the Engineering/Procurement/Construction (“EPC”) companies, and the OEM’s quite nervous about safety of supply. This has created an in-sourcing trend among all of the aforementioned players, discussed in detail in appendix 1 below. The first bar diagram shows the offshore installations up until the end of 2010 compared to what is yet to come. Chart 38: Past and future offshore wind energy development

MBA in Shipping & Logistics Class of 2011 The Offshore Wind Opportunity T. Poulsen

Offshore Wind - Actual/Projected Annual offshore installed MW 1,800 1,600 1,400 1,200 -> 2010 1,000 800 Total MW per year 600 2011-2020 400 200 2021-2030 -

2031-2051

Offshore installations over time Offshore projects per annum

2.35% 12 16.20% 10 1991-2000 2001-2005 8 Number of annual 42.39% 5.40% 2006 6 offshore 2007 projects 5.47% 4 2008 2 2009 9.40% 0 2010

18.80%

ISP illustrations, July 22, 2011 Source: Author analysis

Source: Author analysis When we consider the innovation, the output of the offshore wind turbines is projected to increase dramatically over the coming 40 years. Most prominently, approx. 40 companies are cooperating to generate a 20 MW wind turbine within the “UpWind” project under the EU’s so-called “6th Framework Programme”xiv. The wind scenario model contains a section pertaining to offshore wind and another section pertaining to key R+D efforts within the wind industry in general and it is key to note

MBA in Shipping & Logistics Class of 2011 Thomas Poulsen that many different projects are under way (select initiatives have been graphically depicted in illustration 39 below). Illustration 39: Select offshore wind turbine R+D efforts

Offshore Wind Technology Development Companies Race to Build World's Largest Offshore Wind Turbine

20 MW 15 MW Gamesa 10 MW Sinovel Clipper 7 Vestas MW Emerging technologies Goldwind •Floating turbines; WindFloat 6 Alstom Doosan •Underwater Tide turbines MW Siemens •Direct drive transmission 5 REpower Dongfang MW Siemens GE 2,5 Vestas MW Goldwind

1,5 MW 2008 2009 2010 2012 2014 2016 2018 2020

Prototype Under development Commercialzsed

WWL Global Market Intelligence Source: WWL Global Market Intelligence However, when the wind turbine output grows, the wind turbine itself grows in size and the different components used to assemble the wind turbine also grow. Below, table 40 shows the correlation between increases in output and the weight of the different components to be installed. Table 40: Weight increases, key components (increased offshore wind MW output)

Weight (ton) Hub+blades OEM MW Hub Blades (w/Generator) Nacelle Tower Total Vestas 2.0 40.0 9.0 67.0 70.0 110.0 247.0 Siemens Wind Power 2.3 32.3 9.2 60.0 82.0 130.0 272.0 Vestas 3.0 45.0 11.0 78.0 80.0 130.0 288.0 Siemens Wind Power 3.6 42.4 17.2 95.0 125.0 180.0 400.0 Areva (Multibrid) 5.0 62.0 49.5 111.5 233.0 200.0 544.5 Suzlon (REpower) 6.0 84.0 72.0 156.0 316.0 285.0 757.0 Source: Empirical data gathering efforts (SWP, A2SEA), author analysis 51

MBA in Shipping & Logistics Class of 2011 Thomas Poulsen

Weight wise, this translates into some quite daunting prospects for the industry as sizes will continue to increase. When looking at the tripling of output from the 2 MW offshore wind turbine to the present cutting-edge 6 MW wind turbines being installed, table 41 below shows the impact. Table 41: Triple output increases weight exponentially (from 2 MW to 6 MW) 3x output (increase in weight factor calculation) Hub+blades Hub Blades (w/Generator) Nacelle Tower

2.10 8.00 2.33 4.51 2.59 Source: Author analysis This again has quite an effect on the BOM used e.g. for manufacturing/assembling the nacelle. Examples of different assembly parts used in a 3.0 MW nacelle have been depicted in illustration 42 below. Illustration 42: Example of assembly part assortment for 3.0 MW nacelle

MBA in Shipping & Logistics Class of 2011 Enormous parts – big/heavy T. Poulsen

Simens Wind Power

• Assembly parts 3.0 DD: • Yaw rings • Bed frame • Canopy • Hubs

Source: Siemens Wind Power ISP illustrations, July 22, 2011 and author analysis

Source: Empirical data gathering efforts (SWP), author analysis 52

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However, the different parts such as the nacelle get exponentially bigger in size as output is increased as can be evidenced by illustration 43 below. Illustration 43: Output increase from 3.0 to 6.0 MW triples the size of the nacelle

MBA in Shipping & Logistics Class of 2011 And… Getting bigger! T. Poulsen Simens Wind Power (proprietary, private, and confidential) • As output requirements increase, sizes dramatically increase • The SWP 6.0 DD machine will be 3x the size of the 3.0 DD machine

• Massive canope • Huge direct drive generator • Bedframe (25T) • Transformer (14T) • Very big cooler unit

Source: Siemens Wind Power ISP illustrations, July 22, 2011 and author analysis

Source: Empirical data gathering efforts (DONG Energy, A2SEA, Esbjerg Havn, DHL Global Forwarding, SWP, private and confidential), author analysis As the individual assembly parts are getting much bigger, maintaining platform leadership in the logistics/shipping industry is therefore a much different conundrum than what Cusumano & Gawer (2002) described in their case studies for companies like Intel (small microchips), Microsoft (software), and Cisco (network infrastructure): When wind turbine output goes up through R+D, the transport infrastructure will either be obsolete or in need of serious innovation/R+D efforts both in terms of the inbound assembly parts supply chain but also for the outbound supply chain to the offshore site. Table 44 below illustrates some key components and detail how these components vary for a 3.0 MW wind turbine compared to a turbine generating twice the amount of output, 6.0 MW.

MBA in Shipping & Logistics Class of 2011 Thomas Poulsen

Table 44: Key wind turbine components in 3 MW versus 6 MW wind turbine

Source: Siemens Wind Power (proprietary, private, and confidential) 54

MBA in Shipping & Logistics Class of 2011 Thomas Poulsen

As discussed by Cusumano and Gawer (2002), this type of technological advancement in both the technology of the platform leaders (the OEM’s) and the technology of the “external complementors” (such as the suppliers and the logistics/shipping support industry) will continue to be required in order for the wind industry to further mature: This is one of the four “key levers” the authors discuss. And to reach the targets predicted by the market and calculated by the author in the wind scenario model, the wind scenario model calculates (illustrated in chart 45 below) that an S-curve type development will occur where several yet-to-happen technology leapfrogs are required. Chart 45: Technology S-curve and leapfrog wind scenario model

MBA in Shipping & Logistics Wind Technology Class of 2011 T. Poulsen Average MW Output

MW Wind Turbine Output (S-curve) = Technology Onshore leaps Actual 25.00

Onshore Market 20.00 Estimate

Onshore Scenarios 15.00

Offshore 10.00 Actual

Offshore 5.00 Market Estimate

Offshore - Scenarios 2000 2010 2020 2030 2040 2050 2060

ISP illustrations, July 22, 2011 Source: Author analysis

Source: Author analysis Worth noting is that China’s offshore market is expanding rapidly with some 30 GW to be installed between now and 2020. This presents a huge logistical challenge as the install base up until now is practically non-existent. However, as the Chinese

MBA in Shipping & Logistics Class of 2011 Thomas Poulsen government is driving the 30 GW-goal hard through their 12th 5 year-plan26, a large number of Chinese OEM’s, wind farm operators, utilities, and provincial governments have now embarked on the offshore quest. Chart 46 below gives an impression of the Chinese wind market in terms of number of active OEM’s as well as an overview of the high number of native PRC OEM’s actively involved in the offshore segment already. Chart 46: OEM’s in China and number of native Chinese OEM’s involved in offshore

MBA in Shipping & Logistics Class of 2011 The China Wind Market T. Poulsen

80+ OEM's in PRC

Native PRC OEM's involved in offshore wind

Chinese OEM 2 9 Foreign OEM (JV) Foreign OEM (WOFE)

8 Install base Prototype W-I-P Not involved

ISP illustrations, July 22, 2011 Source: Author analysis

Source: Empirical data gathering (Duemer/Nielsen, CWEA), author research, author analysis The wind scenario model contains an extensive section on the Chinese market including company profiles of Chinese OEM’s and operators.

26 The 12th Chinese 5-year plan and it’s environmental focus is discussed in more detail in appendix 1 below

MBA in Shipping & Logistics Class of 2011 Thomas Poulsen

2.9 Net Present Value of the Total Wind Logistics Market up to 2050 The total market NPV (future market as of today, duly discounted back) is estimated through the wind scenario model to be just above EUR 200 billion up to 2050 for the outbound wind power driven renewable energy supply chain logistics costs only27. This ought to leave ample room for additional investment and further R+D efforts for the different constituencies in the transport/shipping/logistics/SCM market.

2.10 Wind Industry Contracting Set-up Overview A typical contracting set-up review for renewable energy wind projects will be provided in the following and can be viewed graphically in illustration 47 below. Illustration 47: Typical wind industry contracting scenario

MBA in Shipping & Logistics Class of 2011 T. Poulsen

RE project contractual set-up example

Up to 345 wind turbines 245 km2 area The Marketing 50 % 30 %

20 %

51 % 49 %

ISP illustrations, July 22, 2011 Source: Author analysis

Source: Author research and analysis

27 This number excludes transport/shipping/logistics/SCM costs involved in manufacturing/assembling the individual pieces for the outbound onshore and offshore supply chains. Total end-to-end logistics spend including flows of tier 1/tier 2 suppliers is therefore a lot higher

MBA in Shipping & Logistics Class of 2011 Thomas Poulsen

When it comes to contracting within the renewable energy supply chain, it is important to bear in mind that it is a fairly young and at the same time very dynamic industry where e.g. the first commercial offshore wind turbine installation only commenced operations less than 10 years agoxv.

2.10.1 Role of Governments Governments play a major role in the policy setting, legal rules creation, and concessions management/awarding of major renewable energy projects (as e.g. documented in the megaforces examples above and through the London Array offshore wind farm contract structure as well as other examples reviewed below).

2.10.2 Role of the Operators Once projects are awarded through – often complex – tender/concession processes, consortia are formed to develop, own, and operate the renewable energy power source. The consortia often include governments and/or government entities but can be organized in many different ways and with different participants as can be seen in the examples outlined below. The consortia (the “operator”) will coordinate the overall construction of the renewable energy source and be responsible for all planning and execution ultimately leading to the turn-key project installation effort before the renewable energy power source can go live and start to contribute energy to the overall grid.

2.10.3 Role of the Utilities The energy companies (the “utilities”) are often owned in part or in full by country governments as is the case when it comes to e.g. Vattenfall (“Vattenfall” or the “Vattenfall Group”), DONG Energy, and EDF as described in appendix 1. As such, the utilities are often parties to a consortium which is the ultimate renewable energy project owner and referred to as the “operator” (for example in the case of London Array depicted in the chart above where both E.On and DONG Energy are involved, the Vattenfall and DONG Energy jointly-owned Horns Reef 1 wind farm, as well as the DanskTysk wind farm site referred to below where Vattenfall is involved). In many cases, the utilities have a legally binding and government enforced duty to

MBA in Shipping & Logistics Class of 2011 Thomas Poulsen supply a certain portion of energy by a certain time. Usually, a certain part of the utility’s total energy supply would have to derive from renewable energy sources, by different deadlines. Especially with the aforementioned shortages in supply (of both assets and skilled personnel) for the offshore wind logistics industry following the high number of installations in 2009/2010, the energy companies are therefore taking a more active role in the renewable energy supply chains. This is evidenced by Vattenfall’s establishment of VT Shipping and DONG Energy’s joint acquisition of offshore wind turbine installation specialist provider A2SEA together with SWP, as documented further below.

2.10.4 Role of the Engineering, Procurement and Construction companies EPC (or “EPCM”xvi) companies are often contracted by the wind farm operator to carry out the overall construction project management and coordinate the wind farm engineering and construction execution. In some cases like the Dutch Egmond an Zee case discussed below, the EPC company is also one of the renewable energy project owners.

2.10.5 Role of the Original Equipment Manufacturing companies The OEMs constructing the wind renewable energy power sources (e.g. GE, Vestas, SWPxvii, Gamesa, or Sinovel) can be limited in scope to just provide the wind turbines for installation either onshore or offshore. However, the OEM’s can be vertically integrated to varying degrees (e.g. full one-stop wind park shop providers like SWP28), arrange for financing/buy-back schemes (as is often witnessed with often cash-rich Chinese OEM’s29), or be one of the project owners like for example the Dutch Egmond an Zee project described below where Vestas is partnering with the EPC company. In the quest for companies to achieve platform leadership (Cusumano & Gawer, 2002) and market dominance, several players are now emerging where both utilities, operators, and OEM’s belong to the same group (e.g.

28 Information obtained from Siemens Wind Power as part of the empirical data gathering process 29 As advised by CWEA and confirmed by Duemer/Nielsen during empirical data gathering process 59

MBA in Shipping & Logistics Class of 2011 Thomas Poulsen

Spanish energy conglomerate Acciona Group or Chinese utilities groups Guodian and Datang30).

2.10.6 Role of the Transport/Shipping/Logistics/Supply Chain companies An important part of the overall project management for renewable energy projects is of course the transportation and logistics associated with the turn-key project installation of the renewable energy power source at the future energy production site. The contracts for transport and logistics related tasks can be awarded by most of the players mentioned above such as operators, utilities, EPC companies, and/or OEM’s. As documented above, many of these players act as several kinds of constituencies at the same and/or at different times - in different situations AND in different renewable energy projects. Therefore, the renewable energy SCM contracting structure is not very transparent/intuitive and can at best be classified as being “ad-hoc”, depending on each individual wind farm project and its’ structure/set- up. A number of different transport/shipping/logistics/SCM players do service this market in a more or less comprehensive, integrated, and E2E type logistics/SCM manner as outlined in the renewable energy logistics/SCM “eco system” section below. The legal supply obligation of the utilities with ensuing penalties from governments for non-conformance versus the lack of e.g. offshore transport and logistics reliability are paradigms that are presently driving an in-sourcing trend amongst energy companies and energy source providers (for example the DONG Energy and SWP acquisition of A2SEAxviii and the VT Shipping division of Vattenfallxix). These types of efforts further challenge the overall market transparency and makes it hard for all players to be efficient (OEM’s Enercon and Suzlon have chartered own vessels31 and this must be considered fairly far from their original core competence of building wind turbines).

30 A full overview of these types of vertical integration is part of the wind energy model and has been assembled and triangulated using the 20+ sources utilized to build the wind scenario model 31 Information obtained and triangulated from various empirical data gathering sources 60

MBA in Shipping & Logistics Class of 2011 Thomas Poulsen

A fairly typical contracting set-up is the one pertaining to UK’s London Array offshore wind farm project discussed and illustrated above. The operator is a consortium consisting of Denmark’s DONG Energy, Germany’s E.On, and Abu Dhabi based Mubadala sovereign wealth fund (“SWF”)32 owned Masdarxx. On an area of 245 km2, a total of 345 offshore wind turbines will be erectedxxi basis a 50-year lease agreement between The Crown Estate and the consortiumxxii. From a shipping and logistics perspective, the offshore base will be the UK port of Ramsgatexxiii but in terms of the offshore wind turbines to be delivered by SWP out of Brande, Denmark, the shipments have commenced in July, 2011 from the Danish port of Esbjerg33.

2.11 Logistics and Supply Chain “Eco-System” Chart 48: The transport/shipping/logistics/SCM renewable energy “eco-system”

MBA in Shipping & Logistics Class of 2011 T. Poulsen Logistics/SCM “eco system” Freight forwarders: • Global • Regional • Local Ocean transportation and related: • RO/RO • LoLo • Regional operators • Short-sea operators • Barge operators • Floating cranes • Landing crafts (“LCT”) • Container vessel operators •Special vessels like offshore wind turbine installation Ports Storage: Rail Specialty trucks Land based cranes • Warehouses •Yards • Storage areas • Silos Utilities Operators OEM’s EPC companies

ISP illustrations, July 22, 2011 Source: Author analysis

Source: Author analysis

32 Following Norway’s sovereign wealth fund’s (“SWF”) entry into the renewable energy market sector, several other countries have followed as part of the typical “lemming-effect” described by Weiner, 2010 33 Based on discussions with the Port of Esbjerg, Denmark (see appendices 9 and 12 for details) 61

MBA in Shipping & Logistics Class of 2011 Thomas Poulsen

When considering the renewable energy logistics/supply chain business system where freight is transported from point A in the supply chain to point B, a very complex “eco-system” of intermediaries and constituencies emerges. In the following, an outline of the key renewable energy transport/shipping/logistics/SCM players can be provided. For a graphical overview, please refer to chart 48 above.

2.11.1 Freight Forwarders with Project Cargo focus The freight forwarders can be categorized as global, regional, and local in terms of scale and scope of operations. The forwarders often specialize in different industry verticals and a number of them have now established rather focused renewable energy vertical industry groups. Using their project cargo management skills, the forwarders compete for total project control and when it comes to onshore wind farms, the market is rather forwarder dominated. For offshore, the forwarders have not yet gotten involved to the same degree as for onshore projects. There is a tendency for OEM’s to in-source some of the freight forwarder tasks and make their own agreements with underlying transport companies such as truckers, shipping companies, etc.34

2.11.2 Ocean Shipping Transportation and Ocean Related Providers A number of different types of companies exist such as full service providers, RO/RO operators, LoLo operators, regional players, short-sea operators, barge operators, floating crane operatorsxxiv, landing craft (“LCT”) operators, container vessel operators, and operators of other special vessels such as offshore wind turbine installation vessels (“WTIV”). These types of companies either offer just a sliver of the overall supply chain or have varying degrees of VAS, SCM, and project cargo forwarding type capabilities to add to their core service product thus tying the assets closer to the end customers and control over the freight volumes.

34 This hypothesis was backed up through interviews with for example Baltship, DHL Global Forwarding, Vestas, A2SEA, and DONG Energy (as part of the empirical data gathering process) 62

MBA in Shipping & Logistics Class of 2011 Thomas Poulsen

2.11.3 Ports Different ports are emerging as contenders for renewable energy hub port status including e.g. Rotterdam, Esbjerg, Cuxhaven, and Ramsgate35. Ports require substantial investment, available land, and knowledge expertise to serve as the crucial connection point in the supply chain, linking ocean transportation/offshore activities to land side operations.

2.11.4 Warehouse/Yard/Storage Area/Silo operators Depending on whether shelter is needed and/or if renewable energy power sources like biomass require silo storage, storage will be done in warehouses, in yards, in large land storage areas, and/or silos for wood pellets and/or wood chips. Wind turbine equipment and components are normally stored in the open, without shelter.

2.11.5 Rail operators Rail is an increasingly important mode of transport which is more environmentally friendly than truck as far as land transport is concerned. Traditionally, coal has been shipped using rail when inland transport is required, however, renewable energy sources like wood chips/pellets can also be successfully shipped by rail36. Within wind logistics, the US is a pioneer in terms of rail and for example Vestas is far ahead of the other OEM’s when it comes to rail transport of towers and wings by rail37. Also in the US, rail operator BNSF has a logistics subsidiary which specializes in wind turbine transports by rail38 as evidenced in illustration 49 below.

35 The wind scenario model contains a section on hubs, ports, trades, and flows – now and in future 36 Please refer to author’s Blue MBA module 05 OM assignment where an option to ship wood pellets from Latvia to Berlin by rail was compared to shipping the wood pellets using ocean transportation 37 Information obtained regarding Vestas US operations from Mette Heileskov Buelow as part of the empirical data gathering process 38 See interview notes from discussions with BNSF Logistics in appendices 9 and 12 for details 63

MBA in Shipping & Logistics Class of 2011 Thomas Poulsen

Illustration 49: Examples of BNSF Logistics rail based multi-modal wind solutions

MBA in Shipping & Logistics Class of 2011 USA: Rail based T. Poulsen multi-modal solution

ISP illustrations, July 22, 2011 Source: BNSF Logistics, author analysis

Source: BNSF Logistics, author analysis When reviewing the rail set-up in important transit nation Panama, rail transport of wind equipment had not yet been considered39.

2.11.6 Specialty Truck companies Many of the renewable energy shipments require specialty truck services where special equipment is required. One such example is Greatwide Logistics Servicesxxv who acts as the de-facto land-based project cargo forwarding provider for small to medium sized freight forwarders in the US and Canada40. In Denmark, Vamdrup Specialtransportxxvi has built a strong niche basis the Vestas and SWP wind exports.

39 Interview notes from Panama visit June 30 through July 6 in appendix 12 refer 40 See external interview notes from meeting with Greatwide (please see appendices 9 and 12 for details) 64

MBA in Shipping & Logistics Class of 2011 Thomas Poulsen

2.11.7 Land-based Crane operators Land-based cranes are required in order to handle both parts/modules coming off vessels at ports but also the erection process of for example a land-based wind farm.

2.11.8 Utilities The examples outlined above of Vattenfall getting involved in shipping through VT Shipping and DONG Energy’s acquisition of offshore wind farm special vessel handling provider A2SEA show that players who have traditionally been either operators or the end producers of energy are now actively getting involved in the renewable energy logistics/SCM arena. Basis the initial discussion with EU’s DG Climate Action41, this trend is a result of “hesitation” and “lack of trust” on the part of the shipping and logistics industry when it comes to renewable energy and ensuing investments required to support this emerging sub-sector of the overall energy market.

2.11.9 Original Equipment Manufacturers SWP’s partial acquisition of A2SEA with DONG Energy (discussed above) illustrates that also the energy source providers are mobilizing to be active participants within the renewable energy logistics/SCM market place. Trends in China also lead OEM’s towards the next frontier in the battle of platform leadership (Cusumano & Gawer, 2002) moving towards the logistics/SCM arena42.

2.11.10 Engineering, Procurement, and Construction companies As evidenced through the Dutch EPC Ballast Nedam example above, German EPC Hochtief’s Joint-Venture (“JV”)xxvii with LoLo operator Hansa Heavy Lift (formerly Beluga Shipping) to jointly operate a WTIV vessel, and Danish based EPC Aarsleff’s JV with German shipping company Bilfinger Berger for the London Array projectxxviii, also the EPC companies are starting to enter the wind logistics/SCM market directly with asset based investments.

41 Interview notes with DG Climate Action referenced in detail in appendix 1 as well as the interview notes in appendix 12 below 42 Empirical data gather efforts with DONG Energy, A2SEA, Vestas, CWEA, and Duemer/Nielsen 65

MBA in Shipping & Logistics Class of 2011 Thomas Poulsen

2.12 Transport/Shipping/Logistics/Supply Chain Market Competition In the following, the competitive situation of the renewable energy logistics/SCM market will be described. Using the Porter (1980) framework of strategic groups (with support from De Wit & Meyer, 2004), the renewable energy logistics/SCM market can be subjected to a number of key competition attributes43 which will then later be used to place key perceived and real players within the market into strategic groups. For an overview of the competition attributes, please see illustration 50 below. Illustration 50: Overview of key competition attributes

MBA in Shipping & Logistics Class of 2011 T. Poulsen Competition attributes

Ocean Transportation: Landside capabilities: • Cranes? • Immediately adjacent to vessel • Single lot? • Quay-to-vessel and vice-versa •Tramp versus liner service? • Stevedoring • Size and structure of cargo holds? • Additional inland services • On-going project involvement versus •Warehousing case-by-case? • Pre-distribution/distribution • Rail • Barge •Truck

Value Added Services

Supply Chain Management solution capabilities

Project cargo forwarding/turn-key transportation focus

Source: Interviews, and ISP illustrations, July 22, 2011 author analysis

Source: Empirical data gathering process, author analysis

43 This information has mainly been derived from various empirical data gathering discussions with almost all parties interviewed (see appendix 9 and appendix 12 below for details) 66

MBA in Shipping & Logistics Class of 2011 Thomas Poulsen

2.12.1 Ocean Transportation capabilities A number of factors exist within the ocean transportation service segment which jointly determine the ability of being able to compete:  Whether vessels have own cranes (Lift-on/Lift-off or “LoLo” capabilities), or not (for example RO/RO or container vessels).  Whether vessels can be fully utilized for a single project and thus “swoop up” all the cargo of the project in one single lot, or if the vessels are also loaded with other cargo.  Whether the vessels can be directed from a particular load port to a particular discharge port (tramp service) or whether the vessels are deployed in a fixed liner scheduled service rotation.  Whether the vessels are equipped with big cargo holds that can contain broad/wide/deep/heavy cargo. Or if the vessels are loaded in different manners like for example RO/RO where rolling stock is driven into the vessel and only the weather deck is available for loading of freight which is not rolled on and rolled off.  Whether the vessel operator can be involved in an on-going project on a continuous basis, or if the vessels can only be involved on a case-by-case basis. Based on the above mentioned competitive attributes, key market players are seen as LoLo operators Hansa Heavy Lift (formerly Beluga Shipping)xxix, BBC Charteringxxx, Clipper Projectsxxxi, Rickmers Liniexxxii, and COSCOxxxiii. However, also NYKxxxiv is seen very much an “up-and-coming” player who has started to closely also get into integrated RO/RO type offerings besides the company’s container and LoLo capabilities. Gearbulkxxxv, MOLxxxvi, “K”Linexxxvii, and Maersk Linexxxviii/SafMarinexxxix are “ad-hoc” players in the market basis an inconsistent market approach generally driven by the availability of specialized transport equipment like flat rack containers.

2.12.2 Land Side capabilities The land side services are also critical and the ability of being able to “tie in” the land side services with an ocean transportation service offering will both yield additional

MBA in Shipping & Logistics Class of 2011 Thomas Poulsen revenues and “glue” the customer closer to the market contender. The land side services can be segmented into two different service product categories:  Services immediately adjacent to the vessel operations such as transport from the quay to the vessel and vice versa as well as stevedoring.  Additional inland services such as warehousing and pre-distribution/distribution by truck, rail, or barge.

2.12.3 Value Added Services Different VAS are offered within the overall supply chain. Different kinds of storage and warehousing of either inbound assembly parts or outbound finished components are important parts of the overall logistical set-up. However, all kinds of other services are required within the chain such as sub-assembly, kitting, readying of larger pieces, and different repair/welding/cleaning type services.

2.12.4 End-to-End Supply Chain Management capabilities A seamless E2E SCM service can be categorized as a full-fledged E2E turn-key service where a single service provider company manages all parts of both the domestic/international supply chain with full Supply Chain Visibility (“SCV”). Essentially, these kinds of offerings are somewhat similar to project cargo forwarding/management type offerings discussed below.

2.12.5 Project Cargo Forwarding/Management Turn-key capabilities A project cargo forwarding capability/project transportation turn-key focus is often required in order to obtain awards of full project management control over a given turn-key project from a shipping/logistics/SCM/VAS perspective. Project cargo forwarders have this as their exclusive focus and capability, often applying a very asset-light model where no ships/airplanes/barges/trucks/trains/warehouses are owned: All is sub-contracted and simply managed by the project cargo forwarder who specializes in coordinating all tasks between all the different players in the value chain44.

44 Please refer to for example the interview with external constituency DHL Global Forwarding (see appendices 9 and 12 below) 68

MBA in Shipping & Logistics Class of 2011 Thomas Poulsen

In some cases, project cargo forwarders compete in a much smaller local market and use certain assets like for example heavy lift cranes and/or landing craft vessels as their local “niche” enabling them to compete when it comes to getting projects awarded, either in part or in full45. The project cargo forwarders in control of the entire supply chain will then sub- contract different parts of the physical transportation and logistical tasks to various players. In this way, the freight forwarders have ample choice and would often view the services of several companies to be immediately replaceable by those of other companies in the market place46. If the overall project turn-key transportation management is not outsourced to a freight forwarder, either the wind farm operator, the utility company, the OEM, and/or the EPC provider could “chunk up” the supply chain in different pieces and retain overall project control internally.

2.13 Critical Success Factors of Winning Companies In this section, an outline of key factors for success (Critical Success Factors, “CSFs”47) will be provided basis De Wit & Meyer (2004), Stern (2006), Kotzab et.al. (2007), Gore (2009), Kemp (2009), Christopher (2010), Gattorna (2010), Sheffi (2010), and Byrnes (2010). CSFs are essential factors which - at the industry level - comprise critical skills, attributes, and resources required from a company to be successful in the market place of that industry. The CSF’s discussed below are related to the wind energy logistics/SCM industry at large and are therefore not likely to create a differentiator for individual companies engaged in the logistics/SCM market place as each company’s history/situation/vantage point is unique and bespoke. The CSFs of winning companies within the wind logistics/SCM market are many, varied, and extensive. A more comprehensive listing has been included in appendix 3 below, however, a number of critical factors to achieve platform leadership will be

45 Please refer to for example the interview with external constituency Royal Cargo (see appendices 9 and 12 below) 46 Please see interview notes with DHL Global Forwarding Industrial Projects (available in appendix 12 below) 47 Key factors of success are sometimes referred to as key success factors or critical success factors (CSF). CSF as a term was originally introduced by D. Ronald Daniel of McKinsey & Co. in 1961 69

MBA in Shipping & Logistics Class of 2011 Thomas Poulsen discussed in the following similar to the framework of Cusumano & Gawer (2002) reviewed above. The total universe of CSF’s can be outlined using a graphical overview as portrayed in illustration 51 below where the green arrows mark the CSF’s of particular interest. Illustration 51: Categories of CSF’s for the wind shipping/logistics/SCM market

MBA in Shipping & Logistics Wind Logistics/SCM Class of 2011 T. Poulsen Critical Success Factors

Service product attributes: Technology factors: • Global scope, local reach • Key assets • Flexibility • IT systems • Transit time • Service quality Service production factors: • Economies of scale Competencies, skills, and capabilities: • Low product design/engineering costs • Talented and knowledgeable work force • High utilization of fixed assets • Innovate • Quality control of know-how • Design and “packaging” of service products • High degree of customization to specific customer • e-Commerce capabilities needs • Competitive capabilities

Network: Marketing and market achievements: • Truly global coverage • Breadth of service product mix/selection • Highest service levels • Brand • “Glue”/linkage between multiple service products • Reputation • Marketing of assets directly and/or through other • Advertising industry players • Technical services/assistance • Ease-of-doing business with company • KAM/customer service

Other factors: • Convenient locations • Good financial condition • Good after sales service • Environment focus • Strong balance sheet • Patents

ISP illustrations, July 22, 2011 Source: Author analysis

Source: Author analysis The overall scope and reach of the company must be determined initially: It must be considered whether the player in the wind logistics/SCM market wishes to compete globally or develop a niche, for example in China offshore wind. The service product(s) must be designed and “packaged” in a manner that is appealing to the end clients, for example OEM’s, operators, utilities, and EPC companies. When designing the service offerings, it is a prerequisite to use the industry jargon/terminology to demonstrate knowledge of the market. At the same time, it is useful to tailor-make the services to the perspectives of the different target

MBA in Shipping & Logistics Class of 2011 Thomas Poulsen clients because an OEM will see the service offering in a different manner than an EPC company. If assets are deployed, the industry change drivers outlined above should be fully understood, i.e. that the weight of a wind turbine increases by a factor four when output is tripped and that a nacelle will triple in size when the output is doubled. This means that transport/shipping/logistics/SCM assets would need to be acquired/designed with this kind of development in mind and business planning done accordingly. A strategy where assets no longer suitable in one market are redeployed to an emerging market could be considered after a certain time lapse. Finally, it is important that clients are “tied” to the services on offer by “gluing” as many and varied services together in a seamless E2E solution as this will increase the perceived complexity on the part of the client and make them less likely to switch service providers. By getting “hooks” like electronic data interfaces (“EDI”) into the client IT platform, barriers to exiting the relationship will be higher for the client.

2.14 Industry Analysis Part Conclusion Chart 52: Industry analysis summary - PESTLE model

MBA in Shipping & Logistics Industry Analysis Class of 2011 T. Poulsen PESTLE Chart Summary Political Technological • UNFCCC (Kyoto Protocol, Conference of • Economies of scale (onshore/offshore) the Parties • Increased output requirements • EU (20-20-20, New DG Climate Action, • Exponential growth in parts and components Roadmap 2050) • Containerization (McLean, 1956( • Reduce dependency on the Middle East • Direct Drive (oil/gas) • Increasing industry consolidation (vertical • Tiananmen Square/Berlin Wall fall (1989) expansion) • Rare Earth Oxides Wind Legal Economic Energy • Country legislation (Denmark 2050, USA tax credits, PRC 12th 5-year plan, India NEAMA, • Subsidies Source Panama & Philippines empirical efforts) • Localization (taxes/employment/content) • Energy market deregulation (exceptions with • Spending power (shift to Asia) Transport / government owned entities/investments) • Volatility index (supply chain contingency • Logistics/SCM rules deregulation (exceptions DP planning) Shipping / DHL and DB Schenker) • Government investments (EDF, DONG Logistics / Energy, Vattenfall, Datang, Guodian) Environmental: SCM • Reduce GHG globally Social/cultural Industry • Reduce dependencies on fossil fuels (oil/gas/coal) • Digitization (HSE, HSEQ, trail/event • Global warming (Gore, 2009, Stern, 2006, tracking) McKinsey, 2009) • Demography (aging population, growing • “Peak Oil” population, lifestyle shift with more energy • Corporate Social Responsibility (triple bottom line) consumptions) • Nuclear perception (Japan earthquake/tsunami) • Urbanization • Rising oil prices (Middle East/Africa unrest 2011)

ISP illustrations, July 22, 2011 Source: Author analysis

Source: Framework by Lynch (2009), author analysis

MBA in Shipping & Logistics Class of 2011 Thomas Poulsen

This part of the ISP can be best summarized in a PESTLE analysis (displayed in chart 52 above). Each item contained in the PESTLE analysis has either been described above or in appendices 1or 2 below. Basis the general expansion of the wind market and the massive expansion of the offshore wind segment in particular, the total NPV of the wind logistics/SCM related costs up to 2050 have been projected at just above EUR 200 billion. The time therefore seems to have come to more aggressively invest in the renewable energy logistics/SCM market.

MBA in Shipping & Logistics Class of 2011 Thomas Poulsen

3 Company Analysis including Gap Analysis

3.1 Ownership and Structure WWL is a joint operating company (“JOC”) and was formed in 1999 through the merger of Wilhelmsen Lines and Wallenius Lines to manage their respective RO/RO vessels in a so-called “pool” arrangement. Included in the company is a long and proud heritage within RO/RO ocean shipping on the part of both owners. Before the 1999 merger, the merging companies had already “absorbed” major players in the RO/RO industry like NOSAC (1995), ScanCarriers (1989), and Barber Blue Sea. Shareholders of these acquired companies again comprised well renowned European ship owners such as East Asiatic Company (Denmark), TransAtlantic/TransOcean (Sweden), Ocean Transport & Trading (UK), Brostroem (Sweden), and Norway America Line (Norway). Illustration 53: WWL ownership structure

MBA in Shipping & Logistics Class of 2011 T. Poulsen WWL ownership structure

Norway Sweden Wilh. Wilhelmsen Holding ASA Wallenius Rederierna AB

72.3 % 100 % Norway Wilh. Wilhelmsen ASA

100 % Norway Wilhelmsen Lines AS

100 % Malta Sweden Wilhelmsen Ships Holding Malta Ltd. Wallenius Logistics AB 50 % 50 %

ISP illustrations, figures, and graphs

Source: WWL annual report 2010, Wilh. Wilhelmsen Holding ASA annual report 2010, Wallenius web site, and author analysis 73

MBA in Shipping & Logistics Class of 2011 Thomas Poulsen

WWL owned in 50/50 JV by Wilh. Wilhelmsen Group of Oslo, Norway and Wallenius Rederierna of Stockholm, Sweden. WWL operates all RO/RO assets of the two respective owners. From the annual report of WWL48 and the author’s research, the more exact ownership structure can be derived from illustrations 5.1 and 5.2 in appendix5 below. The two owners are, however, different in terms of size, structure, scope, and ownership49. Both WWL parents are essentially family-owned companies, however, the Wilhelmsen side needs to be sensitive to the Oslo Stock Exchange (“OSE”) requirements originating from its’ public listing. In addition, Wilhelmsen is more diversified than Wallenius especially through its’ Maritime Services business area which is quite expansive and has little or no overlap with Wallenius. This means that the two owners share many similarities, however, at the same time, the owner companies are also very different. This affects the company culture and behaviour within WWL. A detailed background on the company and the context of this ISP has been provided in appendix 4 below.

3.2 WWL Financials WWL has provided the author with the annual report for 2010 which gives historical information pertaining to financial performance in the years 2009 and 2010. Historical numbers for 2008 and budget figures for 2011-2015 were not provided. This means that some analysis can be on the 2009/2010 performance, however, given that 2008 was generally a good year for the shipping industry up until the financial crisis, a 3-year historic analysis is not possible. In addition, the substantial addition of vessel tonnage during 2011 and 2012 should impact the budgets for 2011-2015 in a material way, however, such forward analysis is not possible due to company policy.

48 Hardcopy version of WWL annual report 2010 obtained from WWL CFO, Chief of Staff, Chief of Strategy Rune Gisvold on April 4, 2011 49 Details on each of the two owners have been provided in appendix 5 below 74

MBA in Shipping & Logistics Class of 2011 Thomas Poulsen

In accordance with Generally Accepted Accounting Principles (“GAAP”) of Norway, WWL reports on its’ core Ocean Transportation business separately (as the “WWL Parent”). Illustration 54: WWL adjusted income statement 2009 and 2010

MBA in Shipping & Logistics Class of 2011 Income Statement T. Poulsen - Adjusted

(USD 1,000) 2009 2010

Gross operating revenue 1,316,717 1,766,684

Direct operating expenses (1,152,614) (1,523,200)

Gross profit 164,103 243,484

Wages and remunerations (overheads) (154,269) (158,219) Other operating expenses (overheads) (56,187) (57,836) Share of income/(loss) joint ventures and associated companies 3,473 4,079 Minority part of the result 37 (1,039) Financial income 2,617 2,055

EBITDA (40,226) 32,524

Depreciation and amortization (17,432) (15,532)

EBIT (57,658) 16,992

Interest (2,810) (3,549) Taxes 15,156 (4,694)

Net result (45,312) 8,749 ISP illustrations, figures, and graphs

Source: WWL annual report 2010 and author analysis The total WWL results including Ocean Transportation and all other services (SCM, Inland Services, Terminal Services, and Technical Services) are reported as well (as the “WWL Group”). In this analysis section, the WWL Group figures have been utilized. The only significant observation as it relates to the WWL Parent numbers is that its’ net operating income figures generate a loss which is compensated by a group contribution internally from the Wallenius Wilhelmsen Terminals Holding AS (amounting to USD 14.5 million in 2010 and USD 3.8 million in 2009). As can be derived from illustration 54 above, the company suffered significantly in terms of financial performance during 2009: The global financial crisis produced

MBA in Shipping & Logistics Class of 2011 Thomas Poulsen negative EBITDA, negative EBIT, and a negative net result50. To improve financial performance, WWL took a number of “extraordinary initiatives” during the global financial crisis51 and this coupled with generally improved market conditions during 2010 resulted in the improved financial results for 2010 over 2009. However, during WWL’s annual Long Term Strategy (“LTS”) process52, further initiatives and improvements are agreed in order to improve results and get return on capital employed (“ROCE”) back to the 10 per cent minimum required by the owners53. The “extraordinary initiatives” and improved market conditions resulted in increased gross operating revenue. As can be derived from table 55 below (developed basis Allen et.al., 2008 and Alizadeh & Nomikos, 2010), an improvement in the gross profit margin (from 12 to 14 per cent) and turn-around in terms of both EBITDA and EBIT margins from negative to positive were achieved in 2010 over 2009: The total overheads as a share of gross profit again got below the 100 per cent mark which in itself was a healthy achievement financially. Table 55: Key financial ratios basis adjusted Income Statement Ratios/analysis 2009 2010 Gross profit margin 12% 14% EBITDA margin -3% 2% EBIT margin -4% 1% Overheads/Gross profit 128% 89%

Source: WWL annual report 2010 and author analysis Some key developments which can be seen in the balance sheet for 2010 over 2009 as depicted in illustration 56 below. As can be derived from the balance sheet information, key developments include a fairly large increase in accounts receivables (bad for cash flow), an increased cash/cash equivalents position (good for cash

50 The Income Statement as provided by WWL (before author adjustment for analysis purposes) can be found in illustration 5.3 in appendix 5 below 51 Per author’s interview with Rune Gisvold on April 4, 2011 52 Takes place every year during Spring. For the 2012-2016 LTS, WWL Group Management reviewed the plan in June, 2011. The WWL Board of Directors will sign off on the plan in August, 2011 53 As per the WWL Corporate Long Term Strategy 2011-2015 (“LTS”) excerpt provided in hardcopy to author by Rune Gisvold on April 4, 2011 76

MBA in Shipping & Logistics Class of 2011 Thomas Poulsen flow), and the conversion of a USD 50 million loan from the owners mainly to equity (USD 40 million) and current liabilities due to owners’ companies. Illustration 56: Balance Sheet as provided by WWL

MBA in Shipping & Logistics Class of 2011 Balance Sheet T. Poulsen - Provided by WWL (USD 1000) 2009 2010 (USD 1,000) 2,009 2,010

- Intangible assets 41,240 40,860 Paid in capital (share capital) 76,638 116,638 - Tangible fixed assets 103,281 96,848 Retained earnings (other equity) 8,735 15,544 - Financial assets 43,319 48,189 Retained earnings (minority) 2,844 3,822

Total fixed assets 187,840 185,897 Total equity 88,217 136,004

Receivables Allocation for liabilities - Inventory 45,975 48,186 - Pension liabillities 31,907 29,050 - Accounts receivable 98,813 146,326 - Deferred taxes 5 7 - Receivables owners' companies 2,725 3,332 - Other short-term receivables 22,206 22,303 Other long-term liabilities - Subordinated loan 50,000 - Cash and cash equivalents 72,580 83,604 - Long-term interest-bearing liabilities 87,046 74,280 - Other long-term liabilities 9 528 Total current assets 242,299 303,751 Total long-term liabilities 168,967 103,865 Total assets 430,139 489,648 - Bank overdraft 41,537 33,341 - Accounts payable 53,393 65,230 - Liabilities to owners' companies 1,487 17,143 - Tax payable 1,214 4,053 - Next year's installment long-term liabilities 3,164 12,061 - Provisions 7,283 10,881 - Other short-term liabilities 64,876 107,070

Total current liabilities 172,954 249,779

Total liabilities 341,921 353,644

Total equity and liabilities 430,138 489,648

ISP illustrations, figures, and graphs

Source: WWL annual report 2010 and author graphics Some additional items have been highlighted with green (good) and red (bad) in illustration 57 below displaying the adjusted balance sheet for analysis purposes in order to illustrate key asset/liability/equity movements for 2010 over 2009. These include an increase in next year’s long-term liabilities (bad for cash flow), an increase in accounts payables (good for cash flow), and a significant increase in “Other short- term liabilities” (bad for the balance sheet). The significant increase in “Other short- term liabilities” mainly has to do with a large increase in accruals of direct operating expenses.

MBA in Shipping & Logistics Class of 2011 Thomas Poulsen

Illustration 57: Adjusted Balance Sheet for analysis purposes

MBA in Shipping & Logistics Class of 2011 Adjusted Balance Sheet T. Poulsen - With Ratios (USD 1,000) 2009 2010 Change $ Change %

Non-current assets - Intangible assets 41,240 40,860 (380) -1% - Tangible fixed assets 103,281 96,848 (6,433) -6% - Financial assets 43,319 48,189 4,870 11% Total non-current assets 187,840 185,897 (1,943) -1%

Net working capital - Inventory 45,975 48,186 2,211 5% - Accounts receivable 98,813 146,326 47,513 48% - Receivables owners' companies 2,725 3,332 607 22% - Other short-term receivables 22,206 22,303 97 0% - Accounts payable (53,393) (65,230) (11,837) 22% - Tax payable (1,214) (4,053) (2,839) 234% Total net working capital 115,112 150,864 35,752 31%

Net debt Cash and cash equivalents 72,580 83,604 11,024 15% - Subordinated loan (50,000) - 50,000 -100% - Long-term interest-bearing liabilities (87,046) (74,280) 12,766 -15% - Other long-term liabilities (9) (528) (519) 5767% - Bank overdraft (41,537) (33,341) 8,196 -20% - Liabilities to owners' companies (1,487) (17,143) (15,656) 1053% - Next year's installment long-term liabilities (3,164) (12,061) (8,897) 281% - Provisions (7,283) (10,881) (3,598) 49% - Other short-term liabilities (64,876) (107,070) (42,194) 65% Total net debt (182,822) (171,700) 11,122 -6%

Other balance sheet items - Pension liabillities (31,907) (29,050) 2,857 -9% - Deferred taxes (5) (7) (2) 40% Total other balance sheet items (31,912) (29,057) 2,855 -9%

Net assets (equity) 88,218 136,004 47,786 54% ISP illustrations, figures, and graphs

Source: WWL annual report 2010 and author analysis When reviewing several key ratios developed basis Allen et.al. (2008), Alizadeh & Nomikos (2010), and based on the framework of De Wit & Meyer (2004) as illustrated in the financial analysis table 58 below, a number of themes appear. Table 58: Financial analysis – additional measures

Ratios/analysis 2009 2010 Debt ratio 66% 43% Current ratio (with cash) 140% 122% ROA N/A 1% WACC (Assumed) 10% 10% ROCE -28% -6% Interest cover (14.32) 9.16 Source: WWL annual report 2010 and author analysis  WWL has decreased its’ debt ratio in 2010 over 2009 by converting most of the USD 50 million loan from the owners to equity (share capital) and this is good for solidity and gearing purposes.

MBA in Shipping & Logistics Class of 2011 Thomas Poulsen

 Due to the relatively higher increase in accounts receivables (bad for cash flow) compared to the increase in accounts payable and cash/cash equivalents (good for cash flow), WWL’s current ratio (with cash) has worsened slightly but it is still positive (above 100 per cent).  The Return on Assets (“ROA”) measure does not make that much sense for comparison reasons as we do not have 2008 figures, however, we can determine that a 1 per cent ROA for 2010 is very low.  Assuming a WACC of 10 per cent, ROCE is negative for both 2009 (-28 per cent) and 2010 (-6 per cent) respectively and thus not in line with the requirement of 10 per cent from the two owners.  WWL’s interest cover was negative in 2009 (-14.32x) but basis improved earnings before interest, taxes, and amortization (EBITA) became positive in 2010 (9.16x) which means that for 2010, the company’s earnings were again strong enough to amply cover the interest expenses due. Figure 59: Regional WWL revenue development

MBA in Shipping & Logistics Class of 2011 T. Poulsen Revenues by region (voyage start)

Geographical revenue split

45% 40% 35% 30% 25% 20% 2009 15% 10% 2010 5% 0% Asia Europe Oceania Americas Charter 2009 27% 44% 2% 21% 5% 2010 34% 39% 2% 20% 5%

ISP illustrations, figures, and graphs

Source: WWL annual report 2010 and author analysis 79

MBA in Shipping & Logistics Class of 2011 Thomas Poulsen

Organizationally, the annual report determines that the different regions within WWL account for different shares of the gross operating revenue and this is illustrated in figure 59 above. It is clear that whereas Oceania and the Americas remain fairly constant, the importance of Asia is clearly increasing whereas Europe’s share is declining.

3.3 WWL Strategy Within WWL, an annual strategy session is conducted during spring time. The strategy looks 5 years ahead and for the 2012-2016 strategy, preparations are under way and the review by the Global Management Team took place in June, 2011 with sign-off by the Board of Directors in August, 2011. Chart 60: Macro view of the WWL LTS plan

MBA in Shipping & Logistics Class of 2011 Long Term Strategy T. Poulsen High Level Summary

Owners and corporate policy Response to global financial crisis

 >10 per cent ROCE to owners  A number of initiatives to improve revenue  Support owners’ drive to achieve synergies and reduce cost to be implemented between operating companies  Lower vessel running costs  Lower fuel consumption  Maintain overall WWL tonnage market  Flexible business model (global financial crisis) share (12%)  Return T/C vessels to owners  Environmental leadership  Return own vessels to owners (scrap)  Deploy modern tonnage in profitable trades  Partnerships and M&A strategy: Aims to have 100% control  Deploy old tonnage in new and low profit trades

Client focus Go-to-market approach  Corporate accounts (auto and H&H)  WWL as a Logistics Service Provider  28 clients  “Factory to dealer solutions” remain core focus  80 per cent of revenue  Auto and H&H positions: Maintain  20 per cent of profits  Drive the strategy  Break-bulk segment: Grow  Drive tonnage deployment  Emerging markets (BRIC): Grow

ISP illustrations, figures, and graphs

Source: WWL Corporate LTS 2011-2015, author analysis (strictly confidential)

MBA in Shipping & Logistics Class of 2011 Thomas Poulsen

In order to facilitate the Company Analysis, WWL shared an excerpt of the latest WWL Corporate LTS 2011-2015 with author54. The key themes as seen from the owners’ perspective/a corporate policy point of view have been presented in chart 60 above. As can be seen from the chart, a summary of the key responses to the global financial crisis have been provided along with some background on how WWL lets their key Corporate Accounts drive the overall company strategy including vessel deployment. Finally, the chart also summarizes the company’s high-level go-to- market strategy which highlights the desire to grow the break-bulk segment as well as the BRIC country geographies55. Illustration 61: Poor 2009 result had unexpected impact on WWL’s balance sheet

MBA in Shipping & Logistics Class of 2011 Long Term Strategy T. Poulsen Business model & financials

Original WWL business model Altered WWL business model  Pool company  WWL takes the risk for the  Objective was to operate vessels, not owners owners’ vessels  Additional cash-flow from:  Thin capital base  Charter vessels  “Outside vessel operations”  Cash-flow transfer to areas like Terminal Services, owners on a bi-weekly basis Inland Distribution, Technical Services, SCM

2009 negative result = Reduced earnings/reduced solidity

WWL equity ratio <20% compared to peer group average of >45%

Balance sheet improvement needed ISP illustrations, figures, and graphs

Source: WWL Corporate LTS 2011-2015, author analysis (strictly confidential)

54 Provided by Rune Gisvold, CFO on April 4, 2011 in Oslo basis strict confidentiality 55 BRIC countries are Brazil, Russia, India, and People’s Republic of China 81

MBA in Shipping & Logistics Class of 2011 Thomas Poulsen

Due to the poor results of 2009 resulting from the global financial crisis, the LTS mentions that WWL only expects revenues to be back at 2008 levels by 2015 and at the same time, the LTS discusses that the 2009 losses had an unexpected impact on the company’s balance sheet in terms of debt/equity ratio. A summary of this discussion has been provided in illustration 61 above: It summarizes that the LTS goes back in time to compare the overall WWL business model from before the company got involved in chartering vessels and rendering additional services to compliment the key Ocean Transport product. Figure 62: Implementation of the WWL LTS

MBA in Shipping & Logistics Class of 2011 Long Term Strategy T. Poulsen Implementation Customer Strategies

Proven Processes Service product business plans Terminal & Ocean Inland SCM Transport Services (incl. forwarding) (incl. Technical Services)

Regional business plans

Americas Europe Asia Oceania

Support divisions business plans Individual Objectives Budgets

Individual objectives

ISP illustrations, figures, and graphs

Source: WWL Corporate LTS 2011-2015, author analysis (strictly confidential) As the business model changed, the capital base was not adjusted and the 2009 results therefore caused a need to strengthen the balance sheet. This was the strategy driver of the conversion of the USD 50 million loan partially to equity as mentioned in the financial analysis above. When it comes to implementation of the

MBA in Shipping & Logistics Class of 2011 Thomas Poulsen

LTS plan, WWL has significant experience and the Central Office Management Team (“CMT”) and Global Management Team (“GMT) apply a proven process to perform the implementation. As can be derived from figure 62 above, WWL uses a set of proven processes starting – logically - with the customer needs which are to be matched by the WWL service product business plans. The product strategies are then cascaded down to the regional level and support division business plans. Finally, this is translated into budgets and at this time, budgets are linked to individual objectives of the WWL personnel. Illustration 63: Drivers behind WWL desire to grow break-bulk and positioning

MBA in Shipping & Logistics Class of 2011 LTS: Grow break-bulk T. Poulsen Why?  Strengthen revenue base  Improve profitability  Optimize use of new RO/RO and LCTC tonnage / capacity  Reduce dependency upon auto and H&H segments

Competition (LoLo) External position (market) Vessels: Larger, more powerful, and with heavier deck cranes Schedules: Liner-like products  Fragmented market, highly attractive Pricing: Rate differential increases with weight & size of cargo  Segment growth estimated by WWL to have 14% CAGR (2011-2015)  WWL is a niche player  Freight forwarders control increasing Internal position (WWL) portion of the market and cargo (%) 2010 2015 LT*  Increasing level of complexity (bigger  Cargo volume share 6 9 and heavier cargo)  Ocean revenue share 13 18 20  Increasing presence of BRIC based Break-bulk NetCon Average USD 97/CBM OEM’s and contractors *Note: LT means “Long-term”

ISP illustrations, figures, and graphs

Source: WWL Corporate LTS 2011-2015, author analysis (strictly confidential) From a break-bulk perspective, the LTS plan provides the different drivers behind why WWL wants to grow this segment. In addition, the WWL LTS provides a general description of how WWL views the break-bulk market and competitive situation.

MBA in Shipping & Logistics Class of 2011 Thomas Poulsen

Together with the relative internal position of break-bulk within WWL, these factors have been depicted in illustration 63 above. Chart 64: Key objectives for WWL to meet break-bulk growth targets

MBA in Shipping & Logistics Class of 2011 WWL LTS break-bulk objectives T. Poulsen WWL Plan  Go-to-market: Consistent and on-going market approach to build trust -Direct with OEM’s Tailor-made solutions - Energy, mining, railcars, and aviation verticals - With forwarders Build relationships with selective target forwarders - With NVOCC’s Build relationships with selective target NVOCC’s  Sales: Target new cargo Door-to-door solutions for existing WWL clients  Organization: Strengthen sales and provide innovative sales tools Strengthen operations and operational competence Strengthen project management competence to match need for tailored solutions  Operations: New Mark V vessels will increase lifting capacity Deployment of suitable vessels in BB trades - Key BB trades: Trans-Pac, Oceania, Asia/Europe, Trans-Atlantic, Intra-Asia Expand terminals & VPC’s to handle BB SCM for select clients More operational equipment Quality performance and handling  Strategic: Allocate space for BB Expand geographic coverage Increase sales efforts in BRIC countries ISP illustrations, figures, and graphs

Source: WWL Corporate LTS 2011-2015, author analysis (strictly confidential) Based on the break-bulk growth target and competitive/market situation, the LTS plan devices a number of objectives necessary to reach the growth targets. When reviewing the different components that are mentioned in the LTS plan, the specific break-bulk objectives can be divided into focus areas pertaining to go-to-market strategies, sales, organization/HR, and operations. In addition, a number of more strategic drivers have to be in place on the part of WWL overall in order for the break-bulk strategy to be realistic. A summary of all of these different objectives and drivers has been provided in chart 64 above and it should be noted that quite a number of these items figure prominently as “Strategic Issues” identified by the author in the dialogue with internal and external constituencies in terms of what the

MBA in Shipping & Logistics Class of 2011 Thomas Poulsen company has to resolve in terms of how it wants to play in the renewable energy market segment: What this means is that a significant number of these issues are either still outstanding or in the process of being addressed. It is therefore important for the Strategic Issue Analysis section 4 below to distinguish between what constitute “general break-bulk strategic issues” that the company has to deal with as opposed to strategic issues specifically pertaining to the company’s desire to increase its’ market share with the renewable energy break-bulk sub- market segment.

3.4 WWL Business Model In addition to the historic view of changing business models within WWL provided as part of the LTS review above, it is important to point out that in its’ current form, the WWL business comprises several different business models. From a legal entity set-up, the company is organized in a matrix manner where operating entities exist in the different countries of operation and for the different types of service such as Ocean Transportation, Terminal Services, Inland Distribution, Technical Services, and Supply Chain Management. Chart 65 below illustrates the different WWL legal entities and is broken down into fully owned/majority owned companies, JV’s, associates, and companies within which an investment in shares has been made.

MBA in Shipping & Logistics Class of 2011 Thomas Poulsen

Chart 65: WWL legal entity overview

Legal entities

# Company name Country Activity Share % Partners

Group/Parent

1 Wallenius Wilhelmsen Logistics AS Norway Group/Parent

Offices and subsidiaries

2 Wallenius Wilhelmsen Logistics (India) Private Limited India Country office 41.87 3 Wallenius Wilhelmsen Logistics (Thailand) Co., Ltd. Thailand Country office 4 Wallenius Wilhelmsen Logistics Australia Pty Ltd Australia Country office 5 Wallenius Wilhelmsen Logistics China Ltd. PRC Country office 6 Wallenius Wilhelmsen Logistics Germany GmbH Germany Country office 7 Wallenius Wilhelmsen Logistics India Holdings AS Norway Country office 8 Wallenius Wilhelmsen Logistics Kotka Oy Finland Country office 9 Wallenius Wilhelmsen Logistics Ltd. (Russia) Russia Country office 10 Wallenius Wilhelmsen Logistics Singapore Pte. Ltd. Singapore Country office 11 Wallenius Wilhelmsen Freight Forwarding Shanghai Ltd. PRC Forwarding 12 Wallenius Wilhelmsen Logistics Realty Americas LLC USA Real estate 13 Wallenius Wilhelmsen Logistics Americas, LLC USA Regional 14 Wallenius Wilhelmsen Logistics Holdings Americas LLC USA Regional 15 Atlantic Ro-Ro Stevedoring, LLC USA Terminal 16 Mid-Atlantic Terminal, LLC USA Terminal 17 Pacific Ro-Ro Stevedoring, LLC USA Terminal 18 Pyeongtaek International RORO Terminal Company South Korea Terminal 50/60 19 Wallenius Wilhelmsen Logistics Zeebrugge N.V. Belgium Terminal 20 Wallenius Wilhelmsen Terminals Americas LLC USA Terminal 21 Wallenius Wilhelmsen Terminals AS Norway Terminal 22 Wallenius Wilhelmsen Terminals Central AB Sweden Terminal 23 Wallenius Wilhelmsen Terminals Holding AS Norway Terminal 24 Wallenius Wilhelmsen Terminals Korea AB Sweden Terminal 25 Wallenius Wilhelmsen Terminals North AB Sweden Terminal 26 Wallenius Wilhelmsen Terminals South AB Sweden Terminal 27 Wallenius Wilhelmsen Terminals UK UK Terminal 28 Pacific Vehicle Processors, LLC USA VPC 29 WWL-GZL Logistics Co., Ltd. PRC VPC 55 30 Wallenius Wilhelmsen Industrial (Baltimore) LLC USA 31 Wallenius Wilhelmsen Logistics AB Sweden 32 Wallenius Wilhelmsen Logistics Services LLC (Delaware) USA 33 Wallenius Wilhelmsen Solutions LLC USA

Joint-ventures

34 CAT-WWL Logistics (PTY) Ltd. South Africa Country office 50 With GroupeCAT 35 Port Newark Auto Terminal USA Terminal 50 36 2W Americas Holdings LLC USA 50

Associates

37 Agencie Maritime Holdings Limited New Zealand 50 38 Armacup Marime Services Limited New Zealand RO/RO carrier 50

39 TPG Global Ro-Ro Terminal Co. Ltd. PRC Terminal 6.39 TPG, NYK 40 Tianjin Port RORO Terminal PRC Terminal 6.39 TPG, NYK 41 Shanghai Haitong International Automobile Terminal Co. Ltd. PRC Terminal 5 SAIC, SIPG, NYK 42 Helssingin Autoalo Oy Finland 1 Source: WWL annual report 2010 and author analysis (strictly confidential) The different business models differ in several ways as seen in illustration 66 below. The many different legal entities are generally organized by service product and then region. The management focus is based on both the size of the investments

MBA in Shipping & Logistics Class of 2011 Thomas Poulsen involved, the geographical scope, the customer base, and how the business is optimized. Illustration 66: Attributes of different WWL service products

MBA in Shipping & Logistics Class of 2011 T. Poulsen WWL business models

Attributes of different service products and impact on personnel/focus Ocean transportation SCM Terminals/VPC Inland Services Technical Services Investments Large Small Medium Small Small Scope Global Global Local Local Local Timeframe Long term Medium term Short term Short term Medium term Focus Long term yield Medium term Throughput Throughput Throughput contracts Optimization Long term yield Overall supply chain Unit costs, stand- Unit costs, brokering Unit costs, stand costs, all services alone business business alone business Customers Mainly WWL WWL customer tied WWL and third party WWL and third party WWL customers tied to ocean to ocean transportation transportation Interests Ocean focus E2E supply chain Terminal part of Inland services part Technical services scope supply chain of supply chain only Personnel Big picture, big E2E thinkers, total Local business Local brokering Local business numbers supply chain focus managers business managers

ISP illustrations, figures, and graphs

Source: Company information, author analysis/graphics This means that on one hand, part of the company is focused on operating very costly assets (fleet of expensive vessels) with a long-term perspective in mind (depreciated over 30 years and generally never put up for sale in the second-hand market56). On the other hand, another part of the company is engaged in running local and very entrepreneurial business units (terminals, vehicle processing centers (“VPCs”)/equipment processing centers (“EPCs), inland distribution, services, and technical services) where short-term profit optimization is critical. Finally, the SCM team needs to be able to “think across” the entire supply chain in an E2E manner,

56 Source: Interview with Rune Gisvold, CFO, April 4, 2011 87

MBA in Shipping & Logistics Class of 2011 Thomas Poulsen across all service products with a long-term perspective in mind for the SCM product itself and a more short-term approach for the emerging freight forwarding product. These three distinctively different business models create both some challenges and opportunities for WWL. In terms of people management, cross training and staff interchanges are difficult issues to tackle from a mindset perspective. P&L wise when managed properly, the company can be very profitable not only in terms of the “main bread winner” being the Ocean Transportation product.

3.5 Resource Based View The academic thoughts pertaining to resources based view (“RBV”) were developed basis Hunt & Morgan (1955), Selznick (1957), Penrose (1959), and Andrews (1971). The term RBV was originally coined by Wernerfelt (1984). RBV was further expanded upon by several other academics but most notably by Barney (1991) and Sheffi (2007) with Barney developing the VRIS framework57 which was developed both basis Wernerfelt’s prior research but also based upon Porter’s value chain framework (1985). The VRIS framework aims at quantifying the earnings potential of a company through four factors which are all based on the magnitude of the company’s advantage coupled with the company’s ability to sustain this advantage. Generally, these theories share the point of view that a company’s strategy should be developed in order to yield sustainable competitive advantage in the market based on what the company is skilled at (sometimes referred to as the inside-out point of view). Skills and know-how possessed by a company is based on resources which Barney (1991) defines as “…all assets, capabilities, organizational processes, firm attributes, information, knowledge, etc. that enable a firm to conceive and implement strategies”.

3.5.1 High Level Look at WWL’s Resources and Capabilities Wernerfelt (1984) argues that by looking at a company’s resources, various immediate insights can be gained. When WWL’s resources and capabilities are

57 “VRIS” refers to four drivers namely value, rareness, limitability, and sustainability 88

MBA in Shipping & Logistics Class of 2011 Thomas Poulsen analyzed58, it becomes clear that WWL is primarily an ocean transportation company engaged in shipping of cars and high and heavy (“H&H) agriculture/excavation equipment. Over time, some of the vessels operated by WWL have been equipped with enforced decks and very wide ramps able to sustain heavy cargo load. This has enabled a strong build-up of break-bulk shipping services where break-bulk cargo is either shipped on so-called “roll-trailers”, “mafi-trailers”, or statically tied on to the decks using various kinds of fittings, blocks, beams, and chains. In order to be able to better control the operations and quality, several investments have been made in terminals in either emerging markets like China or key hub areas like Zeebrugge. Over time, WWL has then entered into additional complimentary service areas like for example storage of cars and H&H equipment at strategic locations (VPC’s/EPC’s), the brokering of inland transportation services, some freight forwarding services, various degrees of technical value adding services, and most recently also a factory-to-dealer E2E SCM service. However, the key focus area of the company internally still remains the ocean transportation services and the optimization of the company’s vessel assets. So, whereas the company wishes to be a Logistics Service Provider59, it still remains a shipping company and its’ main activity remains ocean transportation. For those clients making use of some of the other service products60 or the client base taking advantage of the SCM product, this may be a different story61. However, for 2010 the share of Ocean Transport revenue covered by SCM was a mere 8 per cent62.

3.5.2 Information Technology Resources Given that WWL is a service company, IT is a very important factor to consider in terms of resources and capabilities. However, the author has not been able conduct

58 Analysis performed mainly through author’s extensive internal WWL interview process including site visits, author’s analysis of WWL’s financials, and author’s analysis of WWL’s Long Term Strategy plan (2011-2015) 59 Mentioned in internal WWL interview with Kai Kraass, COO, Ocean Services, Oslo, February 16, 2011 60 Not quantified by WWL 61 The author has not performed a survey of WWL’s existing client base to any meaningful extent (only a handful of WWL clients were met by the author and most appointments have been made on a neutral basis directly by the author without mentioning the WWL connection) 62 Source: WWL Long Term Strategy plan (2011-2015) 89

MBA in Shipping & Logistics Class of 2011 Thomas Poulsen an in-depth analysis of the WWL IT systems, however, a high level analysis summary has been included in appendix 5 below. From the mainly empirical data gathered63, the following high level conclusions can be made:  The company is in the process of reviewing its’ IT platform overall and this effort will last 3-4 years64 and include significant investments65.  Several efforts and initiatives are presently on-going within different service products such as an evaluation of the SCM IT software and an effort to implement a single freight forwarding software66.  From a data quality and internal user perspective, WWL’s different software do not appear to be best in class and a lot of re-keying takes place as the data model is not shared between applications67.

3.5.3 WWL’s Ability to create New Service Products and Teams Wernerfelt (1984) furthermore argues that the profit potential of a company’s resources and capabilities can be appraised and that the company should find a balance between exploitation of existing capabilities and resources versus the development of new ones. When WWL’s ability to develop new competences and capabilities is analyzed, the following insight was obtained through the interviews with WWL personnel:  The latest attempt to build a new department with new skills organically was WWL’s entry into SCM. The build-up of the SCM product and systems was cited as “quite a nightmare”68 and being “a painful build-up”69.

63 It should be noted that author’s analysis does not include systems demos and detailed systems reviews 64 Source: Internal WWL interview with Erik Nyheim, COO, Terminal & Inland Services, Oslo April 6, 2011 65 Source: WWL Corporate Long Term Strategy 2011-2015 plan 66 Source: Internal WWL interviews with Erik Bjoerkman, Supply Chain Analyst, Logistics Management, Region Europe, Stockholm, April 18, 2011, Frank Grunau, General Manager, Head of Finance and Business, Germany, Bremen, April 19, 2011, and Thomas Minnen, Benelux Customer Care Manager, Antwerp, April 21, 2011 67 For example, no interface seems to exist between FQS and SAGA, key NetCon (financial net cargo contribution) measurement not available to field sales/customer care personnel, profitability for a single client across multiple service products is not available, and a lot of coding/configuration from the software company is required to set-up a new SCM client within the ProAct SCM software application 68 Source: Internal WWL interview with Thomas Minnen, Benelux Customer Care Manager, Antwerp, April 21, 2011 90

MBA in Shipping & Logistics Class of 2011 Thomas Poulsen

 The creation of WWL’s present (and limited freight forwarding capability) was originally started in Germany in 1985. At that time, the forwarding activity was started within the agency appointed to handle the company’s vessels in Germany and has been contained within WWL itself since 1999. Today, the German freight forwarding offering of WWL comprises 6 staff70. Only in the second half of 2009 was the freight forwarding offering regionalized for WWL in Europe (monthly conference call but still very different offerings across the 3 main countries offering forwarding services in the region, Germany, Belgium, and UK)71.  When a Japanese client requested a LoLo shipment from Asia to Turkey, the company used its’ vessel chartering and operations experience to charter LoLo capacity and move the cargo. However, this was “very costly” as the WWL personnel are “not experts”72.  When discussing whether for example the Technical Services product could be “bent” and converted into an offering for renewable energy products like for example wind turbine parts in for example Esbjerg, the different components of the service product was discussed: Paint/rust/repair type work, mechanical work/repairs, bodywork, and light assembly. It was generally found that if the contract duration was long enough, this would indeed be feasible73. At the same time, it should be noted that key emerging markets like China do not yet have this type of services available as it is very hard to sell and implement74. Based on the above findings, it would be recommendable for WWL to infuse renewable energy sector expertise/talent from the outside and consider an M&A

69Source: Internal WWL interview with Tom Solberg, Head of Global HR, Oslo, April 4 and April 11, 2011 70 Internal WWL interview with Frank Grunau, General Manager, Head of Finance and Business, Germany, Bremen, April 19, 2011 71 Internal WWL interview with Frank Grunau, General Manager, Head of Finance and Business, Germany, Bremen, April 19, 2011 supplemented by internal WWL interview with Thomas Minnen, Head of Customer Care Benelux, Antwerp, April 21, 2011 72 Internal WWL interview with Johan Mattson, Head, Global Trade & Operation, Ocean Division, Oslo, April 6, 2011 73 Internal interview with Erik Nyheim, COO, Terminal & Inland Services, Oslo, April 6, 2011 74 Internal interview with Paul Lam, Inland Products Director, China, Shanghai, May 6, 2011 91

MBA in Shipping & Logistics Class of 2011 Thomas Poulsen driven strategic acquisition process for both the project cargo management/freight forwarding capabilities and LoLo vessel capabilities discussed in section 6 below.

3.5.4 Strategic Infusion of Resources and Capabilities via Acquisition Wernerfelt (1984) argues that the addition of resources and capabilities through strategic M&A efforts constitute a “…purchase of a bundle of resources in a highly imperfect market”. The break-bulk market is one such market and the renewable energy market segment is indeed very much imperfect and in constant development. Consequently, academic literature supports a focused M&A driven expansion within the areas of project cargo management/freight forwarding and LoLo when it comes to WWL’s strengthened renewable energy break-bulk service offering.

3.6 Related Parties via Respective WWL Owners As can be seen in illustration 67 below, a number of related parties impact the WWL competitive situation based on ownership by the respective WWL owners, either in part or in full. Whereas this very extensive “related parties groups” joint capability is of course interesting at first glance, it adds significant complexity in the day-to-day work life in the regions and local offices of WWL75. The different related parties outlined above have been described further in appendix 5 below. The Central Office in Oslo is almost 100 per cent focused on the financials, strategies, goals, and objectives of WWL. However, already at regional level and especially at local country level, significant dilution of accountabilities and performance criteria are experienced76.

75 Empirical evidence gathered basis author internal WWL interviews and site visits 76 As observed during author’s global empirical data gathering efforts internally within the WWL organization 92

MBA in Shipping & Logistics Class of 2011 Thomas Poulsen

Illustration 67: Related parties impacting WWL competitive situation

MBA in Shipping & Logistics Related parties Class of 2011 T. Poulsen - via respective owners

Subsidiary of American Shipping & Logistics - car carrier with break-bulk capability 100 per cent owned by same owners as WWL US flagged vessels Main focus government and military cargo (USA/Middle East niche) Non-military/government space utilized by WWL

Car carrier with break-bulk capability 80 per cent owned by same owners as WWL Strong focus on Korean market Main focus Hyundai/Kia car segment Slowly getting into break-bulk segment Car carrier with ability to do break-bulk (limited capacity) 50 per cent owned by Wallenius in Sweden Intra-European short sea focus

Car carrier with break-bulk capability 50 per cent ownership by WWL Originally started as Japan/New Zealand used car focus Now upgraded fleet and Asia/Oceania focus

Fairly newly started car carrier expected to have break-bulk capacity 15 per cent owned by Wilhelmsen in Norway Strong focus on Korean market Main focus on Hyundai/Kia car segment Global ship's agent network with additional capabilities such as spare parts supply 100 per cent owned by Wilhelmsen in Norway Logistics Department with "Green Energy" division focusing on wind turbines

Source: Company web sites, ISP illustrations, July 22, 2011 WWL interviews, author analysis Source: Company information, author research/analysis/graphics The Wilhelmsen Ships Service (“WSS”) division of Wilhelmsen conducted a break- bulk study in 2010. This resulted in WSS setting up a “green cargo” project team responsible for renewable energy type freight volumes. So far, their main focus has been on wind turbine logistics/SCM and Portugal and Belgium the key markets served. Against an original revenue target for 2010 of USD 700,000.- and without much of an incremental investment, the WSS “green cargo” project team has produced good results as depicted in table 68 below. However, WSS acts mainly in a freight forwarding capacity and unfortunately, no synergies have been achieved with WWL in terms of WSS putting freight volumes on to WWL vessels77.

77 Information obtained during empirical data gathering efforts in Oslo on May 30-31, 2011 involving both WWL and WSS constituencies

MBA in Shipping & Logistics Class of 2011 Thomas Poulsen

Table 68: WSS actual 2010 results from “green cargo” project initiative

Bulgaria / Country Portugal Germany Belgium UK Total Romania Total operating income $ 2 338 000 $ 393 148 $ 8 602 $ 1 075 000 $ 12 000 $ 3 814 750

Total operating expenses $ 1 600 200 $ 79 642 $ 6 256 $ 891 000 $ 8 000 $ 2 577 098

Operating result (EBIT) $ 737 800 $ 313 506 $ 2 346 $ 184 000 $ 4 000 $ 1 237 652

Margin 32 % 80 % 27 % 17 % 33 % 32 % Source: WSS (proprietary, private, and confidential)

3.7 Wallenius Wilhelmsen Logistics Strategic Groups Competition Analysis Chart 69: Strategic groups competition analysis and WWL relative position

MBA in Shipping & Logistics Class of 2011

Strategic Groups T. Poulsen Extensive

Cars

Medium H&H Extent and scope of service scope offering of service and Extent Wind Limited SCM VT Shipping

Sub-contractor Some control Full control Degree of overall project control Source: Michael Porter’s framework ISP illustrations, July 22, 2011 (1980), company discussions, interviews, and author analysis Source: Michael Porter framework (1980), interviews with WWL personnel, interviews with external interviewees, author analysis Based on the Industry Analysis section above pertaining to the competitive attributes of the different players in the renewable energy supply chain, the company itself as well as a number of strategic groups of competitors can be defined as follows (see chart 69 above) for an overview.

MBA in Shipping & Logistics Class of 2011 Thomas Poulsen

3.7.1 Wallenius Wilhelmsen Logistics’ Own Market Position  Within wind logistics/SCM, WWL is depicted in the lowest left corner of the chart as the present focus is only on ocean transportation services and all cargo control given to the freight forwarders.  For the cars/H&H segments, WWL is depicted in the middle of the chart due to a wider service range (land-based services, VAS, and SCM) and more cargo control (however, no project cargo forwarding organization/skills).

3.7.2 Global Freight Forwarders with Project Cargo focus  This group of freight forwarders offers dedicated E2E SCM project cargo management services for all parts of any renewable energy logistics/SCM freight movement opportunity. These companies would often control the nomination of underlying sub-contractors such as WWL for the actual execution of the different transport tasks. According to one of the external interviews conducted, the services of WWL “…can also be performed in an identical manner by NYK and COSCO” and whereas WWL is indeed a carrier utilized by that external interviewee’s company today, other carriers utilized would include Hansa Heavy Lift (formerly Beluga Shipping) and BBC Chartering78.

3.7.3 Companies Viewed by Wallenius Wilhelmsen Logistics as Main Competitors  This group of companies is mainly LoLo providers but includes major PRC shipping/logistics conglomerate COSCO and emerging competitors like the NYK Group (Japan) and the AP Moller-Maersk Group (Denmark).

3.7.4 Regional Forwarders  The market for small to medium sized forwarders involved in the RE SCM value chain is vast and specialists have emerged in many markets79. A number of them have been included in this overview but a few Denmark based forwarders have

78 For further details, please see interview notes with DHL Global Forwarding Industrial Projects in appendices 9 and 12 below 79 See for example external interview notes for Royal Cargo in appendices 9 and 12 below 95

MBA in Shipping & Logistics Class of 2011 Thomas Poulsen

been highlighted as they cleverly grew their specific wind turbine project cargo competences on the back of the development of the Vestas and Bonus (now SWP) wind energy sub-sector focus in Denmark.

3.7.5 New Entrants with Different Allegiances  As discussed above, initiatives like Vattenfall’s VT Shipping set-up as well as DONG Energy and SWP’s joint acquisition of A2SEA are marking a new in- sourcing trend amongst energy companies and producers of energy sources. As such, Vattenfall, DONG Energy, and SWP have been included in a gray tone due to their involvement in VT Shipping and A2SEA respectively.

3.7.6 Not Included In Scope Not included in the discussion within this section are the following players:  Further upstream in the supply chain like the SWF’s, EPC companies, wind farm operators.  Further downstream in the supply chain like the so-called execution operators such as crane, barge, rail, truck, and special vessel (landing craft, short-sea, etc.) operators.  In addition, container shipping lines are involved in the parts of the overall project shipment supply chain for renewable energy which can be shipped in ocean containers, however, the logos of companies such as NYK, “K”Line, MOL, and Maersk Line depicted in the chart reflect their break-bulk/multi-purpose vessel (“MPV”) focus, not their container line focus (container lines have not been included in the chart).  Numerous small to medium sized forwarders around the world have not been included in this chart. Finally, the companies included in the analysis and chart do not represent an exhaustive nor prioritized list.

3.8 Wallenius Wilhelmsen Logistics Five forces analysis With the competition attributes discussed in the Industry Analysis section above in mind as well as the competitor strategic groups framework just reviewed, an analysis

MBA in Shipping & Logistics Class of 2011 Thomas Poulsen of the competitive environment will now be performed using Porter’s (1980) five forces framework (the five forcer framework has been used with support from De Wit & Meyer, 2004 and can be illustrated graphically in a generic manner in Chart 70 below. Chart 70: The Porter Five Forces framework

MBA in Shipping & Logistics Class of 2011 T. Poulsen Five Forces Model Porter’s Framework

Substitute products

Suppliers Rivalry Buyers

Potential New entrants

Source: ISP illustrations, July 22, 2011 Michael Porter (1980)

Source: Michael Porter, 1980

3.8.1 Barriers to Entry The first force measures how easy or difficult it is for new entrants to enter into the market of the company. First, we must look at the company overall and how it is characterized (see illustration 71 below):  Financially stabile company with two very financially strong parent companies as “backers”.  Extensive investments in both vessels (60), terminals (11), VPC’s/EPC’s (50), other assets like trucks (mainly Europe and PRC), as well as rolling/static transport equipment (for loading/unloading/transit of break-bulk cargo).

MBA in Shipping & Logistics Class of 2011 Thomas Poulsen

 Long-standing customer relationships with strong client loyalty and long-term contracts.  Strong and well recognized brand name.  Excellent reputation including leadership position within environmentally friendly vessel operations.  Global coverage in terms of vessels, liner routes, and ports served.  Strong network with extensive sub-contractor set-up including local authority relations in all ports served on a global basis.  Strong additional services like land-based services, VAS such as technical services, and SCM (key drivers for having these service offerings are to tie in the customer more closely and to protect the core investment in vessels for ocean transportation).  No real freight forwarding capabilities and fairly strong dependency upon freight forwarders as customers. Illustration 71: WWL barriers to entry force analysis

MBA in Shipping & Logistics Class of 2011 T. Poulsen Five Forces Model (2)

WWL overall: WWL wind logistics/SCM: • Financially stable • Small volumes • Extensive investments • Limited experience/track record (onshore wind energy • Longstanding customer relations only) • Strong brand • Limited or no active relations with • Good reputation OEM’s/operators/utilities/ • Recognized environmental focus • Reliance upon freight forwarders (price/transit time • Global coverage (vessels/routes) sensitive, low degree of loyalty • Strong network • No “glue”/linkage between ocean transportation and • Additional services (VAS, land-based, SCM) VAS/SCM • No freight forwarding • Limited cargo acceptance • No project forwarding • Fixed schedule constraints (opportunities?) • Dependence on freight forwarders • No cranes (higher costs loading/discharging) • RO/RO as opposed to big cargo holds

• Not easy to copy overall WWL set- Potential up New entrants • Relatively easy to emulate WWL’s wind logistics/SCM footprint

MBA in Shipping & Logistics Class of 2011 Thomas Poulsen

When it comes to the renewable energy sub-sector of the company’s business with break-bulk focus in general and focus on wind in particular, the picture is, however, rather different:  Rather small/insignificant volumes.  Onshore wind energy market segment only experience base (no offshore experience).  All shipments obtained via freight forwarders only who are very price/transit focused and not particularly loyal in nature; only few active commercial relations to other players in the market (OEM’s, operators, utilities, EPC’s, and SWF’s).  No track-record of linking ocean transportation with VAS and/or SCM to provide further “glue” holding customer base close.  Cargo acceptance limited to freight which can fit RO/RO vessel design (as well as limited weather deck storage) and fixed schedule liner service between pre- determined ports of call.  No cranes on board ships which means cranes must be rented for loading/unloading costs if cargo not able to be rolled on/off the vessels.  No big cargo holds for single lot big shipments on tramper basis directly from port of nearest the place of manufacture to port nearest place of consumption. Basis the above points, it can therefore be concluded that it is not easy to enter this market from scratch and build a service portfolio which is similar in scale and scope to that of the company. This would take a lot of capital, significant time to order/have vessels delivered, and significant human resources/knowledge. However, the role which the company plays the renewable energy sub-sector in general and the wind logistics/SCM market can rather easily be emulated. For a graphical depiction of some of WWL’s past wind logistics/SCM experience, see illustration 72 below80.

80 Additional information about WWL’s wind experience is contained in appendix 7 below

MBA in Shipping & Logistics Class of 2011 Thomas Poulsen

Illustration 72: Past WWL experience in the wind logistics/SCM market

MBA in Shipping & Logistics Class of 2011 Wind experience T. Poulsen

47 Source: Company information, author ISP illustrations, July 22, 2011 graphics

Source: Company information, author analysis/graphics

3.8.2 Threat of Substitutes The second force has to do with how easily the company’s product can or cannot be substituted. Basis the largest global forwarder’s perspective already quoted above from empirical data collected above, two competitors (shipping conglomerates COSCO and NYK) offer the same services and the global forwarder often uses other shipping company services (LoLo operators Hansa Heavy Lift and BBC Chartering) instead of the services of WWL81. This means that price and transit times become key competitive parameters when this forwarder selects sub-contractors. That being said, the freight forwarder only considers a small number of global competitors to exist (Hansa Heavy Lift, BBC, Clipper Projects, Rickmers, and COSCO) wherefore

81 Please refer to external interview notes with DHL Global Forwarding in appendices 9 and 12 below 100

MBA in Shipping & Logistics Class of 2011 Thomas Poulsen customer choice is not vast. Additional and critical competitive parameters are the service quality and underlying skills of the company as the individual modules/pieces shipped are usually of very high value and handling requirements very delicate. Illustration 73 below provides a rather high level view of the types of skills and capabilities the company possesses in terms of being able to fit general break-bulk cargo on to the vessels: A wide range of rolling equipment and cranes are utilized to get the break-bulk cargo either rolled on/off the vessels and/or on to the weather deck. Illustration 73: WWL general break-bulk capabilities, experience, and skills

MBA in Shipping & Logistics Break-bulk Class of 2011 T. Poulsen Skills and Quality

48 Source: Company information, author ISP illustrations, July 22, 2011 graphics

Source: Company information, author analysis/graphics WWL is known to provide a service of very high quality in the break-bulk segment82 which is seen by the company as a “ticket to entry” into the market place: The key WWL competitors also have good service records. WWL can, however, load and discharge under any weather circumstances and this is a clear differentiator from the

82 Damage ratio of less than 0.1 per cent according to company information provided by Odd Egil Borgen 101

MBA in Shipping & Logistics Class of 2011 Thomas Poulsen key LoLo competitors83. Basis the quality and weather considerations combined, there is clear a price-performance trade-off where pricing is sometimes less important than handling quality because of WWL’s general break-bulk track record and reputation. Chart 74 below provides a summary/overview of the threat of substitutes force. Chart 74: Competition threat of substitutes force analysis

MBA in Shipping & Logistics Class of 2011 T. Poulsen Five Forces Model (3)

Substitute • Easy to substitute • All weather conditions loading / products discharging as key differentiator

Pros: Cons: • Not a vast supply of vessels able to handle BB • Easy to substitute cargo • Transit time may be longer due to liner • Prerequisite for being able to compete: High service quality services (damage ratio < 0.1 per cent) • RO/RO limitations on quantity and size of • Ability to load/discharge in all weather cargo

Source: Michael Porter’s framework, ISP illustrations, July 22, 2011 company discussions, interviews, and author analysis Source: Michael Porter’s framework, empirical data gathering efforts, author analysis WWL is sometimes at a disadvantage against the LoLo operators due to the fact that WWL only offers RO/RO service on a fixed liner schedule. This can impact both transit time and ability to accept a high quantity of very oddly shaped pieces of

83 According to information from company’s Odd Egil Borgen, strong wind or heavy rain can delay loading/discharging operations of LoLo operators and increase amount of damages faced by LoLo operators 102

MBA in Shipping & Logistics Class of 2011 Thomas Poulsen cargo84. Should transit time or ability to handle a big enough lot be deemed to be less than optimal e.g. by a freight forwarder in charge of the overall E2E SCM function, WWL’s services will not be utilized and another provider used instead. In some instances, the same can be the case in terms of pricing should the price charged by WWL is too high.

3.8.3 Bargaining Power of Buyers The third force considers whether customers of the company can organize themselves to pressurize the company in terms of for example margins or service scope. Again, we must distinguish between the overall business of the company based on the cars and H&H segments and the wind energy logistics/SCM market. For cars and H&H, it is clear that since these market segments drive the company overall with more than 85 per cent of total revenues, several factors are effectively impacted by the buying power of the cars and H&H customers:  Vessel design: For example, WWL vessels are designed so that decks can be lowered and lifted in order to accommodate more/less cars versus H&H respectively.  Design and location of terminals: For example, WWL operates terminals near major ports of manufacture or major ports of consumption.  Ports of call: WWL has designed its’ liner service in such a way that transit times are most optimal for cars and H&H points of consumption compared to major points of manufacture.  VPC’s/EPC’s operated by WWL: VPC’s/EPC’s are located either near ports, near points of car/H&H manufacture, and/or near major points of consumption.  Organization: The organizational skill set of WWL is very much oriented towards having a thorough understanding of the cars and H&H segments including the cars and H&H products themselves, the involved terminology, the trends/industry

84 With the new Mark V vessels being introduced by WWL, the ability for WWL to accept wind turbine and related cargo will improve. Further information has been included in appendix 7 below

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developments, as well as where and how the process of manufacturing takes place on a global basis. This deep specialization on the part of WWL has created the long-standing as well as loyal customer relationships in the cars and H&H segments discussed above. At the same time, the deep integration with the customers especially through extensive offerings such as the “factory-to-dealer” type E2E SCM solutions within the cars/H&H segments has been the enabler of the long-term customer contracts also discussed above. Chart 75: Competition power of buyers force analysis

MBA in Shipping & Logistics Class of 2011 T. Poulsen Five Forces Model (4)

WWL cars and H&H: • Deep specialization: • Vessel design • Design and location of terminals • Ports of call/liner service rotation • VPC/EPC locations • Organization • SCM E2E “factory-to-dealer” solution Buyers

• Little or no Wind logistics/SCM: significant influence • Less brand recognition exercised on the • Smaller scale of operations part of the buyers • Pricing constraints (extra loading/unloading costs vs LoLo operators) • Transit time (fixed liner schedule)

Source: Michael Porter’s framework, ISP illustrations, July 22, 2011 company discussions, interviews, and author analysis Source: Michael Porter’s framework, empirical data gathering efforts, author analysis Within the renewable energy logistics/SCM break-bulk sub-sector, much less brand recognition exists and much less loyalty can be found in the market due to the smaller overall scale of the business at present. Given that it is hard to match break- bulk cargoes to the fixed schedule of WWL’s services globally, the chances of being able to provide a timely quotation with attractive price points and transit times

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MBA in Shipping & Logistics Class of 2011 Thomas Poulsen become remain rather challenging. Therefore, in the wind logistics/SCM segment, there really is little or no significant influence exercised on the part of the customer as illustrated in chart 75 above.

3.8.4 Bargaining power of suppliers The fourth force relates to what the company’s suppliers can do in their relationship with the company. Here we must first analyze who the key suppliers of the company are as follows:  Shipyards design and construct the vessels of the company. In the case of the new Mark V vessel, the company has partnered with Mitsubishi Heavy Industries in Nagasaki and jointly, the safest, most cost efficient, and most environmentally friendly series of RO/RO vessels in the market has been designed. The company has a long-term relationship with this shipyard and in general, the price of the vessels fluctuates with general demand for vessels across all types, the price of steel, and the individual order book of each yard. With the first vessel being delivered in August, 2011, these vessels were ordered in 2008. The company prefers to deal with high-quality Japanese shipyards and a number of yards are indeed available. Also the Korean and to some extent the Chinese yards are improving their quality and could be competitors to the Japanese yards in the not too distant future.  Other major suppliers are the landowners of the various plots of land utilized to operate terminals (11) and VPC’s/EPC’s on a global basis. These sites are, however, located in different geographies and as such, no single supplier holds a very favourable position towards the company.  On a more daily basis, the company uses a wide range of quay-to-vessel, vessel-to-quay, and stevedoring companies in the various ports of call on a global basis. These relationships are very localized and long-term in nature, however, quite a number of such service providers do exist in each port. Therefore, no single supplier has a very advantageous position towards the company.

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 In terms of providers for other land-based services like warehousing/storage area/yard providers and/or onwards distribution using trucks/trains/barges, a wide variety of sub-contractors are utilized on a global basis with local and very longstanding relations in place. Again, the supply side is very broad and as such, it is easy for the company to replace suppliers if required. In conclusion, no present supplier holds a very advantageous position towards the company in any market segment or any geography (please refer to chart 76 below). Chart 76: Competition bargaining of suppliers force analysis

MBA in Shipping & Logistics Class of 2011 T. Poulsen Five Forces Model (5)

Shipyards: Medium

Land owners: Medium

Quay-to-vessel/vessel-to-quay + stevedoring: Low

Suppliers Land-based services: Low • Warehousing • Storage areas • No present • Yards supplier holds dominating Onwards distribution: Low position • Truck • Trains • Barge

Source: Michael Porter’s framework, ISP illustrations, July 22, 2011 company discussions, interviews, and author analysis Source: Michael Porter’s framework, empirical data gathering efforts, author analysis Further analysis is required in order to determine whether the existing suppliers can perform the land-based services, VAS, and other E2E SCM type services needed if a stronger wind logistics/SCM product is to be taken to market by WWL.

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3.8.5 Rivalry Among the Existing Players Finally, an analysis of the level of competition between existing players in the industry will be performed. When we look at the renewable energy logistics/SCM competition situation within the break-bulk market, the strategic groups identified above do not consider the “usual suspects” in terms of the cars and H&H competition such as Höegh Autoliners, “K”Line, Hyundai, MOL, and NYK85. The key rivalry within the break-bulk segment in general is mainly between WWL and the 5 core competitors Hansa Heavy Lift (Beluga), BBC, Rickmers, Clipper Projects, and COSCO. WWL sees the core rivalry to center around vessels, vessel types, and vessel capacity (see table 77 below for a high level overview). Table 77: Key internal WWL competition review criteria – assets

MBA in Shipping & Logistics Class of 2011 T. Poulsen The hardware

Key competitors Player Number of vessels Key types WWL 60 RO/RO Beluga Group*) 72*) LoLo BBC Chartering 120 LoLo Clipper Projects 35 LoLo Rickmers Linie 13 LoLo COSCO 100 RO/RO, LoLo

*) Basis current bankruptcy proceedings and restructuring for Beluga to become Hansa Heavy Lift, it is estimated that the company now operates approx. 30 vessels

Source: Company discussions, ISP illustrations, July 22, 2011 interviews, and author analysis

Source: Internal WWL empirical data gathering efforts, author analysis

85 These types of players do not have the capability to accept wind turbine break-bulk cargo, see appendix 7 for WWL experience with wind cargo on previous vessel types, examples from the US

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When it comes to cargo in and out of the very important PRC market, COSCO is very dominating whereas on a global basis, BBC Shipping has the most ships. Also Hansa Heavy Lift (formerly Beluga) and Clipper Projects are generally considered strong “full package” LoLo strong players. Rickmers is a smaller player but the Rickmers Group as such owns in excess of 150 vessels and has chartered many out to other players at this time. A number of ad-hoc and regional competitors also exist along with smaller, local operators. As a whole, the market is quite fragmented. The WWL business model of linking the ocean transportation to dedicated terminals, VPC’s, inland transport, and VAS in an E2E SCM solution is to quite some extent in the process of being emulated slowly. With its’ broad and diversified infrastructure and set-up, COSCO is already there when it comes to the key PRC market. NYK is in the process of setting a similar structure up86. Chart 78 below provides a high level summary of this section. Chart 78: Competition rivalry among competitors force analysis

MBA in Shipping & Logistics Class of 2011 T. Poulsen Five Forces Model (6)

Differentiator: Degree of project cargo forwarding capability??? Largest VAS and amount of E2E SCM vessels

Small but part of a big group

Rivalry Good, brand/reputation damaged from recent bankruptcy/name change

Emerging, emulating WWL Dominates Good PRC market

86 According to internal WWL empirical data gathering efforts (see appendix 11 for a listing of WWL personnel) 108

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According to WWL87, LoLo providers Hansa Heavy Lift (Beluga), BBC, Rickmers, and Clipper Projects as well as shipping conglomerates COSCO (and to some extent emerging NYK) are all considered global in scope and all have the “full package” in terms of services on offer. This means that even though they may not control their own terminals or trucking assets, they are still able to offer a full E2E SCM solution to their clients. Owning assets, offering a full package type service could to some extent pose a bit of a challenge because key customers of the vessels are often the forwarders. Asked how they tackle the forwarders having both the role of customer and competitor at different times, Clipper Projects responded that “…certain big and global forwarders are not taken on “head on” and collaboration is sought”. But for other regional forwarders, Clipper Projects are “…not afraid of competing also within project cargo freight forwarding type services”. In certain cases where a strong local tie-in is required, Clipper Projects would “…not go into competition with a very local forwarder and rather collaborate instead”88. But project cargo forwarding capabilities would seem to be a most important differentiator. Rivalry among competitors pertains to the break-bulk cargo in general and as such not only renewable energy/wind logistics/SCM freight because in the case of WWL, the competition attributes outlined in the Industry Analysis above limits the attainable market: Not all cargo can fit the vessels and thus not all cargo is relevant to compete for/attainable.

3.9 Niche focus Given that WWL is a niche operator doing both RO/RO based shipping activities coupled with landside logistics services including terminal management/port operations, WWL already has a specialty niche carved out within which the company operates. However, the involvement in the wind logistics/SCM sector is so far quite limited (wind turbines for onshore installation only) and the unique competitive

87 Discussions with company representatives Teresa Lehovd and Odd Egil Borgen 88 Response provided to author’s direct question by Michael Kraefting of Clipper Projects during CBS Blue MBA company visit to Clipper head offices in Copenhagen on Tuesday, January 11, 2011 109

MBA in Shipping & Logistics Class of 2011 Thomas Poulsen advantage of linking the ocean transportation to the rest of the service offerings has not yet been realized by the company within the break-bulk SCM market.

3.10 Strengths, Weaknesses, Opportunities, Threats Analysis In the following, a Strengths/Weaknesses/Opportunities/Threats (“SWOT”) analysis89 covering WWL’s position in the renewable energy SCM market has been produced (applied with support from De Wit & Meyer, 2004).

3.10.1 Strengths and Weaknesses Chart 79: Strengths and weaknesses of WWL (Company Analysis)

MBA in Shipping & Logistics Class of 2011 T. Poulsen

“SW” part of SWOT analysis

Strengths: Weaknesses: • Part of financially stable owner groups • Small and declining renewable energy volumes • Longstanding customer relationships • Limited renewable energy SCM track record • Strong brand name (especially cars and H&H) (land-based wind energy and hydro only) • Good reputation and recognized as • Fixed schedules and limited cargo acceptance forerunner regarding environmental focus • No on-board cranes (higher costs) and no big • Global coverage with strong network cargo holds • Additional service products like terminals, •Transit times may be longer due to liner VPC’s, inland, technical, forwarding, and SCM service operations • Strong experience and heritage handling • RO/RO limitations in terms of quantity, break-bulk cargo weight, volume, and size of shipments • Low damage rate (< 0.1 per cent) • Pricing constraints (loading/discharging costs • Deep cars and H&H specialization compared to LoLo) • Low dependence on suppliers • No in-house LoLo capabilities • Experience from the energy sector and • Limited forwarding capabilities and no project renewable energy sub-sector cargo management/freight forwarding skills •Very qualified organization with global •Track record to organically build up new presence competences is not good ISP illustrations, figures, and graphs

Source: SWOT framework, author analysis

89 The exact origins of the SWOT analysis tool are not completely documented: Stanford professor Albert Humphrey is sometimes accredited as the inventor of SWOT. Another opinion is that the tool was first created in the 1950’s and 1960’s by Harvard Business School (“HBS”) Professors George Albert Smith Jr. and C. Roland Christensen and then later perfected to what we know today by HBS Professor Kenneth Andrews

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The strengths and weaknesses part of the SWOT analysis pertain mainly to internal issues within WWL and an overview has been included in chart 79 above. Key points to highlight include WWL’s truly global scale, strong break-bulk tradition, and the unique niche position with ocean transport services linked to VAS like terminals, VPC’s/EPC’s, inland distribution, technical services, freight forwarding, and SCM. In chart 80 below, the company’s break-bulk capabilities and service quality have been ranked. Chart 80: WWL break-bulk capabilities and overall break-bulk service quality

MBA in Shipping & Logistics Class of 2011 T. Poulsen

Break-bulk service ranking

1-10 scale* Handling option

10 With roll-trailer (e.g. mafi)

7 Loose break-bulk with forklift loading (static cargo)

4 Weather deck loading (LoLo)

* NOTE: 10 considered excellent, 1 considered bad

ISP illustrations, figures, and graphs

Source: Internal WWL interview with Henrik Meyer90 on April 18, 2011 and author analysis A number of inherent weaknesses in terms of break-bulk operations do arise from the RO/RO liner structure of the WWL vessels compared to main LoLo competition (Chambers et.al., 2010).

90 Capt. Henrik Meyer is Head of Cargo Quality globally within WWL

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3.10.2 Opportunities and Threats The opportunities and threats part of the SWOT analysis pertain mainly to external issues faced by WWL and an overview generated mainly from the Industry Analysis has been included in chart 83 below. Chart 81: Opportunities and threats of WWL (Industry analysis)

MBA in Shipping & Logistics Class of 2011 T. Poulsen

“OT” part of SWOT analysis

Opportunities: Threats: • Add “glue”/linkage services like forwarding / • Break-bulk cargo control not in-house: technical / inland / terminal / VPC / SCM to tie- • Limited freight forwarding capabilities in the clients to core ocean break-bulk product • No project cargo management / freight • Exploit the fact that there is not a vast supply forwarding capabilities of vessels able to handle break-bulk cargo • No LoLo capabilities and high risk that LoLo • Further utilize owners’ group companies operators “sweep” large break-bulk volumes • Capitalize on delicate handling requirements • High dependence on freight forwarders who needed by direct shippers / beneficiary cargo are very price/transit time focused owners / OEM’s as a result of high value cargo •This client segment treated with great • Highlight exceptional quality services, low ambiguity which decreases loyalty damage ratio, and differentiating ability to load / • Limited relations to renewable energy SCM discharge in all weather conditions direct shippers / beneficiary cargo owners / • Embrace freight forwarder client segment OEM’s / project departments of forwarders • Develop stronger alliances with suppliers, • Fairly easy to substitute current renewable possibly on a global basis energy SCM ocean transportation services • Add project cargo forwarding capability to be with handful of other “full package” suppliers in control of own destiny • Strong RO/RO and LoLo competitors

ISP illustrations, figures, and graphs

Source: SWOT framework, author analysis A number of key points can be highlighted as follows:  The whole area of freight forwarding is viewed with much ambiguity internally within WWL. On one hand, the forwarders are an integral part of day-to-day operations in the different countries91. On the other hand, freight forwarders are

91 For example, close inland distribution partnership with Panalpina Munich, selling alliance with K+N in Bremen, technical understanding of WWL vessels available with Fracht and UTC in Germany, close cooperation with DHL Global Forwarding in Benelux for account Caterpillar, and close relationship with CEVA Benelux for Hyster via another broker (Nacco) 112

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generally viewed as “…a necessary evil” by many people within WWL92. This should be contrasted to WWL’s own fairly limited freight forwarding capabilities and non-existent project cargo management/freight forwarding capabilities: This means that majority of break-bulk cargo control has effectively placed in the hands of the freight forwarders.  The many different companies owned by the two owner groups Wilhelmsen and Wallenius ought to put WWL in a leadership position if utilized and structured in an easy and straight-forward manner. However, as discussed above, this is not the case: In some instances, the complex structure seems to dilute and confuse the personnel operating in the field on a day-to-day basis. The analysis performed by the author did not review end client perception of this matter, however, that could be an interesting subject to analyze further.

3.11 Gap analysis between Company Analysis and Critical Success Factors of Industry Analysis Illustration 82: Gaps Industry Analysis critical success factors/Company Analysis

MBA in Shipping & Logistics Class of 2011 T. Poulsen Gap analysis RE growth: Industry Analysis CSF/Company Analysis

LoLo capability Deep (M&A) vertical 5. knowledge 1.

2. 4. Outside Freight renewable forwarder energy “subject “charm matter offensive” 3. Project cargo expertise” management / project infusion cargo freight forwarding capability (M&A)

ISP illustrations, figures, and graphs

Source: Author analysis

92 Discussed broadly during all internal WWL interviews across all locations 113

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The key gap analysis components can be outlined basis Christopher (2010), Gattorna (2010), and Kotzab et.al. (2007) and depicted graphically as done in illustration 82 above. When comparing the Critical Success Factors93 from the Industry Analysis to the Company Analysis, a number of key gaps will emerge in terms of WWL’s journey towards playing a larger role within the renewable energy SCM market in general and the wind logistics/SCM market in particular. 1. WWL possesses deep knowledge of the automotive and H&H industries including terminology, trends, OEM’s, suppliers, strategies, makes/models, issues, trade flows, supply/demand, and other key factors for the WWL organization to be “credible” in the eye of the clients. A similar knowledge is required for the renewable energy sub-sector and the wind market in order for WWL to be credible in front of clients. 2. WWL should infuse outside renewable energy/wind energy logistics/SCM vertical “subject matter expertise” and focus into the organization and possibly supplement this knowledge base with internal break-bulk handling expertise in order to achieve a good balance between vertical knowledge and WWL service product knowledge. 3. In order to meet the ambitious LTS break-bulk growth targets based on the new tonnage getting deployed, WWL should create an in-house project cargo management/freight forwarding capability. Based on previous experience discussed as part of the RBV analysis above, it is not recommended to build this organically: A strategic M&A driven effort is recommended. 4. The freight forwarders will take market share in the renewable energy SCM market segment and WWL should acknowledge this and immediately start a “charm offensive” to obtain synergies with freight forwarders. At present, the perception of freight forwarders within WWL is ambiguous at best and this must be addressed immediately, top-down. 5. The LoLo operators are “sweeping” large renewable energy break-bulk volumes in the market and this hurts WWL’s ability to cargo-mix: It is in WWL’s interest to

93 Industry Analysis Critical Success Factor chart can be found in appendix 3 below 114

MBA in Shipping & Logistics Class of 2011 Thomas Poulsen carry exactly those renewable energy SCM break-bulk cargoes that are considered “sweet-spot” for WWL. Therefore, WWL should optimize its’ ability to cargo-mix by adding LoLo capabilities via strategic M&A driven expansion.

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4 Strategic Issue Analysis

4.1 “Catalogue” of Strategic Issues Identified and/or Discussed During the work with this ISP, a number of strategic issues surfaced. In order to best process and review the different issues, illustration 83 below shows that the different strategic issues were compiled into a so-called “opportunity catalogue” divided into issues of general nature, break-bulk specific issues, and renewable energy SCM issues. Many renewable energy SCM issues actually pertain to some broader break- bulk specific type issues which again sometimes really pertain to issues of more general nature for WWL. Therefore, the different groupings of the opportunity catalogue can be seen as somewhat overlapping with a few items somewhat repeated between categories. Illustration 83: Strategic issues sorted by opportunity category

MBA in Shipping & Logistics Class of 2011 Opportunity Catalogue T. Poulsen Strategic Issues identified

Analysis: - Open General nature - Completed 8x Further investigation / Break-bulk specific efforts 8x Included in LTS - Yes - No Renewable energy Renewable 17x SCM energy impact - Yes - No

ISP illustrations, figures, and graphs

Source: Author analysis

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The opportunities in the catalogue have been further classified in terms of whether the analysis of the issue at hand remains open or has been completed. The catalogue references instances where further investigation is needed or where further efforts are required. Additionally, the catalogue identifies whether the WWL LTS plan already focuses on the issue/opportunity identified. And finally, a reference as to whether there is a renewable energy SCM impact from this opportunity has been inserted into the catalogue. More details on the opportunity catalogue have been included in appendix 6 below.

4.2 WWL Renewable Energy SCM Strategic Issue Analysis Topics The WWL break-bulk “funnel” metaphor concept crystallized quite strongly from discussions with company personnel and has been portrayed in illustration 84 below. Illustration 84: “Funnel” of break-bulk cargo available to WWL

MBA in Shipping & Logistics Class of 2011 The break-bulk “fit” funnel T. Poulsen

Available break-bulk market

Funnel Criteria

• WWL vessels • WWL trades • WWL vessel rotations • WWL ports of call • WWL vessel break-bulk capacity • WWL space allocation for break-bulk • Terminal capacity (WWL/third party terminals) • Break-bulk equipment  Transit times  Pricing

Break-bulk cargo that fits WWL vessels

Mission critical to WWL: . CONTROL… over the top end of the funnel Project cargo management/forwarding . ENLARGEMENT… of the bottom end of the funnel Additional capabilities/capacity (LoLo) ISP illustrations, figures, and graphs

Source: Discussions with company, author analysis

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The two key opportunities for WWL are to increase control over the break-bulk freight which flows into the top of the funnel through project cargo management/project cargo forwarding capabilities. Such capabilities are limited or non-existing within WWL today and therefore, WWL can either continue to rely on freight forwarders and other intermediaries or take control over this segment in- house. If WWL wants to have project cargo management skills in-house, an organic build option exists alongside with a strategic M&A option to acquire a company with such skills, in part or in full. Illustration 85: Bundled end-to-end renewable energy project structure

MBA in Shipping & Logistics Class of 2011 Renewable energy T. Poulsen Total move concept

Bundled concept

Pick-up Shipping Delivery & Installation

Available break-bulk Project cargo management market M&A Project CANDY

M&A Project VEUVE LoLo Attainable WWL market share ISP illustrations, figures, and graphs

Source: Author analysis To increase the share of break-bulk freight which WWL can attain for its’ vessels, the funnel needs to be expanded at the bottom so that a larger portion of available cargo can be carried. This will allow WWL to cargo-mix and have a better chance at selecting the freight WWL is able to and wishes to carry. The best option to expand

118

MBA in Shipping & Logistics Class of 2011 Thomas Poulsen the bottom of the funnel would be to secure some additional LoLo tonnage to supplement the WWL RO/RO tonnage. Today, such LoLo tonnage does not exist within the WWL fleet, however, the chartering team has had some – but very limited - experience with this in the past and feed-back was that it has not been easy. Therefore, this type of competence/capability can again be built either organically or strategically by acquisition. The fact that ocean shipping is just a very small part of the overall and bundled effort is particularly true for renewable energy type shipments. In illustration 85 above, a typical wind turbine inter-continental shipment project is depicted in a simplified overview graphics. Prior to the shipping activity is the physical activity of getting the cargo from the place of manufacture or storage to the port and on board the vessel(s). Upon arrival to the port of discharge, the discharge operations, transportation efforts to the installation site, and actual installation are typical tasks which the overall project cargo management company takes an active part in. Some parts of the total cargo volume may move in containers. Other parts will move as break-bulk94 and in some cases, shipping costs per unit will be the overarching criteria which may result in one or more LoLo vessels getting chartered in full to move either parts of or the full project in one single go. With WWL’s desire to carry wind turbine parts such as nacelles, towers, and hubs, it is not always feasible for WWL to be a player within the transport as WWL faces difficulties with the blades and has a limited capacity per sailing. Without the project cargo management residing “in-house” within the WWL organization, WWL is then furthermore at the mercy of third parties in terms of cargo control and selection of the WWL service. On this basis, illustration 52 cements that control with the top of the funnel becomes very important as does the expansion of carrying capability at the bottom of the funnel. Irrespective of whether project cargo management/freight forwarding capabilities are expanded within WWL, there is no doubt from the empirical data gathering that the

94 See appendix 13 for site visit photo examples and commentary

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MBA in Shipping & Logistics Class of 2011 Thomas Poulsen freight forwarders continue to get more and more powerful, also within the area of renewable energy. In chart 86 below, a simple 3-step plan has been created in order for WWL to embrace and make greater use of the freight forwarders to fill the vessels. Chart 86: 3-step renewable energy WWL freight forwarder “charm offensive”

MBA in Shipping & Logistics Class of 2011 Freight forwarders T. Poulsen 3-step WWL renewable energy plan

Create a “love all” mindset within WWL

Turn the organization around - “Reversed butterfly” effect - Corporate Account type coverage

SELL!!! Existing and new forwarding customers! ISP illustrations, figures, and graphs

Source: Author analysis 1. As part of the interview sessions and site visits conducted internally within the company with company personnel, it became clear that forwarders are either loved, hated, or put in a kind of “in-the-middle” box by different WWL personnel in different positions and offices of the company. The forwarders represent a growing force within the shipping community and WWL should actively embrace the forwarders. This is, however, a major mindset change which must be driven top-down within the company.

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2. After that, the forwarders must be analyzed and a plan of attack devised. Here, WWL can make use of its’ Corporate Account sales and customer service strategy: Also for forwarders, a very deep and broad organizational involvement is required. 3. The third and last step is to sell – first to former/existing freight forwarding clients and subsequently also to new forwarders targeted. Chart 87: Negative revenue development since 2008 (energy and wind turbines)

MBA in Shipping & Logistics Class of 2011 Drop in revenues since 2008 T. Poulsen

WWL revenue development 2008 - 2010

6 Energy sector

USD millions USD 4 Renewable energy sub-sector

0 2008 2009 2010 Energy sector 12 5.9 4.3 Renewable energy sub-sector 4.6 0.6 0.4

ISP illustrations, figures, and graphs

Source: WWL data and author analysis For WWL, the energy sector as a whole and the renewable energy sub-sector in particular have faced considerable revenue drops since 2008 as illustrated in chart 87 above. This is a development which WWL should work hard to turn around so that the growing renewable energy sub-sector in general and the wind logistics/SCM market in particular can contribute more to WWL’s ambitious break-bulk growth targets.

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Table 88: Listing of 68 native Chinese wind turbine manufacturers as of May, 2011

No. Chinese Name English Short Name 1 华锐 Sinovel 2 金风 Goldwind 3 东汽 DEC 4 联合动力 United Power 5 明阳 Mingyang Wind 6 湘电风能 XEMC-Wind 7 上海电气 SEwind 8 运达 Windey 9 华创 CCWE 10 北重 BZD/JCNE 11 远景 Envision 12 南车时代 TEG/CSR 13 华仪 HEAG 14 银星 Yinxing Energy 15 海装 CSIC Haizhuang 16 常牵新誉 New Unite 17 天威 BTW 18 航天万源 CASC-Direct 19 锋电能源技术 Sharpower 20 长星风电 Changxing 21 三一电气 SANY 22 汉维 Hanwei 23 国测诺德 GC Nordic 24 中科天道 Tewind 25 许继风能 XJ Wind 26 东方电气新能源 DEC New Energy 27 盛国通元/中科风电 28 兰州电机 LEC Wind 29 宝南机器 Baonan Machine 30 久和能源 Gehoo 31 哈飞工业 Hafei industrial 32 瑞其能 Swiss Electric 33 西船工业 34 太原重工 Taiyuan Heavy Industy 35 天地风能 Tiandi Wind 36 风盈风电 Fengying 37 沈阳远大 CNYD 38 江西麦德 Maide Wind 39 上海万德 Wande Wind 40 中钢西重 41 天洁 Tianjie Wind 42 金港机电 43 苏州特普 44 沈鼓 45 南京瑞风新能源 46 江西格林艾文新能源有限公司 47 福建省南平市南店水电设备制造有限公司 48 南京汽轮机 49 雅图（阳江）风电设备制造有限公司 50 江西文德 51 山东鲁科 Shandong Luke 52 星火科技 53 贵州航空 54 广州英格风电设备制造有限公司 55 四川矿山机器有限责任公司 56 胜利油田北方实业有限责任公司 57 Beijing能优技术有限公司 58 上海尔华杰机电装备制造有限公司 59 沈阳金祥 60 沈阳瑞祥 61 白城通业 62 哈空调 63 河南森源集团有限公司 64 四川风瑞能源事业有限公司 65 国晶电气 66 汇全稀土 67 南京某企业 68 Beijing某企业 Source: Chinese Wind Energy Association, Duemer/Nielsen, author research/analysis 122

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Different pockets of wind turbine expertise/knowledge/competence exists within the company and the level of motivation and enthusiasm to go after this market is very varied: Some internal WWL constituencies feel that the market has peaked long ago and that it has nothing to offer to WWL whereas others feel quite motivated about the opportunities in the wind turbine market. As wind turbine output increases and the different assembly parts increase in weight and size, it is the author’s distinct opinion that the company’s view of the wind turbine segment should be altered: Rather than focusing on the largest and “bleeding-edge” wind turbines, the company should focus on specific sizes up to a certain limit as they will still be installed in many countries after the pioneer countries have moved on to “bigger and better”. Similarly, the assembly parts and components should become a major target for WWL when it comes to the “latest and greatest” mega- turbines: Many of these assembly parts/components will be very attractive freight for WWL. When discussing the wind turbine market with different company constituencies during interviews and site visits, it becomes clear that the major cargo handling and sales experience resides in the Europe region given the history of the industry (Karnøe, 1991) with Germany as a lead WWL wind logistics/SCM knowledge center, commercially and operationally. Comparatively, the WWL China organization is not as focused on renewable energy yet although the country is home to some of the world’s fastest growing and largest wind turbine manufacturersxl (see table 88 above for a listing from the wind scenario model). Similarly, WWL has so far not had any experience with the rapidly growing offshore wind market which is very much global in nature and quickly maturing at present. Illustration 89 below provides a high-level plan for re-vitalizing the WWL wind turbine market focus and beyond what was described in the Industry Analysis above, appendix 13 contains several pictures from site visits that illustrate what kind of cargo is involved.

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Illustration 89: Plan for how to re-vitalize the WWL wind turbine market approach

MBA in Shipping & Logistics Class of 2011 Re-vitalize wind turbine market T. Poulsen

- New customers OEM’s, forwarders, others

- Inbound assembly parts Nacelle canopy/houses

- Factory-to-factory transfers

- Merge-in-transit finished parts GE Energy vs Vestas/SWP

- Off-shore wind market

- Connect to grid Transformers etc.

ISP illustrations, figures, and graphs

Source: Author analysis

4.3 Selection of One Single Strategic Issue for Analysis The gap analysis between the Industry Analysis and the Company Analysis as well as the Opportunity Catalogue has been reviewed at a high level with WWL during the ISP process, two Strategic Issues were analyzed:  An external company possessing the critical renewable energy project cargo management/project cargo freight forwarding capability was selected for possible acquisition. The author was then appointed initial M&A negotiator and after initial contact with the target company, it has been determined that a deal could indeed be possible. Dubbed “Project CANDY” internally within WWL, discussions are now in progress and author remains “cautiously optimistic” that an agreement can be reached.

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 An external company possessing the critical LoLo competencies and assets was selected for possible acquisition. The author was appointed initial M&A negotiator and after initial contact with the target company, it has been determined that a deal is possible, however, not easy to construct. Dubbed “Project VEUVE” internally within WWL, discussions have been temporized to give priority to Project CANDY. At this time, the author remains “neutral” as to whether an agreement can be reached.

4.4 Strategic Issue Analysis – Part Conclusion A number of Strategic Issues important to WWL’s growth in the renewable energy SCM break-bulk/wind logistics/SCM segment have been identified in the Company Analysis based on the Industry Analysis. Summarized in the Opportunity Catalogue, a number of key Strategic Issues have been described at a high level in the Strategic Issue Analysis part of this ISP. Any and all of these items are critical to WWL, however, two strategic M&A related topics have been selected by WWL as being the most important topics at this time. Both projects are presently work-in-progress, however, Project CANDY is deemed to be most feasible and relevant for WWL. Consequently, the implementation plan of the ISP has been tailored accordingly.

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5 Implementation Plan The two key themes which emerged from the Company Analysis and Strategic Issue Analysis as a result of the research conducted were as follows: a) How can WWL gain more cargo control over critical renewable energy break-bulk shipments in order to ensure that a larger portion of the attainable break-bulk market volumes can find their way to the WWL vessels and related infrastructure/service offerings? b) How can the WWL break-bulk commercial team offer to carry a relatively larger portion of the available renewable energy break-bulk freight volumes, including the market segment normally moving on tramper type LoLo type vessels? In internal WWL discussions and as outlined above, the “funnel metaphor” or picture emerged which was subsequently drawn up to aid the thought processes (see illustration 84 above). Initially and based on author’s M&A experience95, two separate M&A investigation efforts were pursued for the above themes. But after a meeting with the CEO, it quickly turned out that the specific LoLo M&A opportunity code named Project VEUVE was less feasible for two key reasons: 1. The target company was very internally focused due to the challenges experienced in the wake of the global financial crisis. 2. The “company culture” change for WWL to get directly involved in the LoLo segment would be too extensive according to most WWL sources included in peripheral discussions about the topic. This means that within WWL, no internal “ambassador” or “change agent” came forward to enable the M&A effort to be moved forward within the WWL organization. A single solution has, however, been found to address both of the key Company Analysis/Strategic Issue Analysis themes in combination: This proposed solution will be the key “strategic issue” of the academic ISP deliverable. The solution is a

95 To demonstrate author’s knowledge and experience within the logistics, supply chain, freight forwarding, and shipping industry, an excerpt of author’s Blue MBA module 02 assignment about this topic has been enclosed in appendix 16 below

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MBA in Shipping & Logistics Class of 2011 Thomas Poulsen proposed acquisition of a project cargo freight forwarding company active in the renewable energy break-bulk market segment and with own in-house LoLo chartering capabilities. In the following, the M&A efforts pertaining to acquiring this company, the M&A process, and the company itself will sometimes be referred to with a code name as “Project CANDY” for confidentiality reasons. The company may also be referred to as “the target company”.

5.1 Project CANDY Background and Fit The ISP research effort has made use of empirical data gathering methodologies consisting of internal WWL as well as external “outside-in” type interviews/site visits. During the external interviews organized by the author, it became possible to create an overview of companies involved in project cargo forwarding market segment and to evaluate whether a fit with WWL would exist at a high level: The right target company would not be too big and it would have a very strong focus on renewable energy break-bulk SCM and wind logistics/SCM. From one such interview with one of the recognized market leader niche project cargo forwarders, it became clear that an opportunity could exist for a third party to possibly acquire the project cargo freight forwarding company being interviewed, possibly through several possible deal structures. As the two key themes described above emerged almost simultaneously with this finding, the opportunity was quickly played back to WWL and it was agreed that the author be given a mandate on behalf of WWL to pursue further dialogue with the target company; on behalf of WWL but without revealing the identity of WWL. The relationship with the target company has been built up since the first contact was established early February, 2011. A series of face-to-face discussions have taken place, culminating in a meeting between the Chairman of the Board and the author on June 9, 201. At the June 9 meeting, the opportunity was crystallized and can be presented as outlined in chart 90 below.

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Chart 90: The CANDY Group has 4 divisions with different activity levels CANDY Atlantic Agency for freight forwarder Atlantic Forwarding CANDY Agency Agency for freight forwarder Expeditors International CANDY Renewables Renewable energy focused project cargo forwarder CANDY Land Trucking/warehousing business, serving other divisions Source: Author empirical data gathering efforts with target company, author research, author analysis  The Atlantic divisionxli represents approx. 20,000 TEU per annum of containerized imports to the target company’s region, primarily from Asia. Key underlying shipping lines utilized are Maersk and MSC.  The Agency division presently works with US based Expeditorsxlii to terminate the agency set-up with CANDY and create a separate Expeditors presence in the target company’s geography. This is desired on the part of Expeditors in order to create a stronger and more integrated go-to-market approach (this was recently done in Norway where the former agent was terminated). A possible minority shareholding could be an option for CANDY Group going forward if/when the new local company is created.  The CANDY land division has made quite substantial losses in 2009/2010 (a total of approx. USD 5-6M) on primarily its’ warehousing activities which suffered as a result of overcapacity caused by decreased demand arising from the global financial crisis.  The CANDY Renewables division is the most interesting to WWL as seen from a renewable energy break-bulk cargo perspective. This division is a project cargo forwarding company. As such, the revenue base is made up from individual projects which are often committed through complex tenders using individual project contracts well in advance of the time of shipment. The CANDY Group is owned by four private individuals of whom one is the widow of a former member of the management team as outlined in chart 91 below. The widow of a former owner of the CANDY Group would like to “cash out” her share of the CANDY Group and essentially, this is for this reason that the Project CANDY

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MBA in Shipping & Logistics Class of 2011 Thomas Poulsen opportunity has arisen: The other owners would like to “buy out” the widow and re- organize the ownership structure of the company. Chart 91: Ownership structure of the CANDY Group parent company – 4 individuals

CANDY Group Widow of a former owner (K family) 33.33% GP 33.33% PN 16.67% JH 16.67% 100.00% Source: CANDY Group information, author analysis

5.2 Possible Deal Structure Illustration 92: Matrix outlining the different deal options available to WWL

MBA in Shipping & Logistics Class of 2011 CANDY – deal options T. Poulsen

Full 4. Full 2. CANDY Renewables CANDY Group

acquisition acquisition Full (subsidiary)Full

Partial acquisition 3. Partial acquisition of 1.

Ownership Ownership degree of entire

CANDY Renewables CANDY Group Partial (JV) Partial

CANDY Renewables only Entire CANDY Group

Scope of acquisition Source: Discussions with CANDY, author ISP illustrations, July 22, 2011 analysis

Source: Author discussions with target company and author analysis The owners of CANDY Group view each division on a separate basis and as such, they feel confident that for example the challenges in the CANDY Land division are

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MBA in Shipping & Logistics Class of 2011 Thomas Poulsen pretty much behind them. In terms of valuation, they therefore do not wish to be “punished” for the warehousing challenges faced in the CANDY Land division previously – then they would rather wait and keep the business or transact this part at another time in the future. Similarly, they feel that it should be understood that whereas there is a “going concern” within the CANDY Agency business today, this may look radically different if/when Expeditors decide to set up their own company representation. And finally, the owners realize that CANDY Renewables does have a substantial value on a “stand-alone basis” and a spin-off could therefore be an option. The owners are open to several deal structure options which they openly discussed with the author. Illustration 92 above graphically illustrates the four options: Options 1 and 2 pertain to an acquisition in part or in full of the CANDY Group. This would yield the acquirer a strong presence in the freight forwarding market with agency representation set-ups of two leading global freight forwarding companies as well as the Group’s own “native” CANDY Renewables set-up. In addition, the CANDY Land set-up with road freight, trailer operations, and warehousing offerings would supplement the other divisions in a “horizontal manner”. Several synergies could be realized: - An entity like Wilh. Wilhelmsen’s WSS subsidiary could possibly work with both Atlantic and Expeditors to set up additional agencies based on the existing model in locations where WSS is present but where Atlantic respectively Expeditors are not. An easy-to-use framework set-up could be pursued separately with both forwarders. This could create a win-win for both WSS-WWL/Atlantic-Expeditors. - A fifth division of CANDY Group could be organized with participation from WSS in which own representation is organized for WWL/EUKOR/other related group companies: WWL/EUKOR volumes are presently handled by an external agent in the country where CANDY is headquartered and this agent could possibly also be offered a minority share going forward. WSS has two offices in the country where CANDY Group is located and serve 64 of ports in the country from those offices.

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Options 3 and 4 pertain to an acquisition in part or in full of the CANDY Renewables division only. This would provide WWL with a focused entry into the renewable energy project cargo forwarding market. In many ways, this would be a “cleaner” solution because it would eliminate the need for WWL having to deal with the more traditional land/sea/air based freight forwarding businesses which are less of a core competence to WWL96. A partnership agreement could, however, still be made with CANDY Land for CANDY Land to render services to CANDY Renewables going forward, as needed. Synergies could still be pursued with Atlantic and Expeditors to some extent, assuming that good relations are maintained to CANDY Group (even if CANDY Renewables was ultimately bought in full). On this basis, options 3 or 4 are preferable to WWL over options 1 and 2. However, if any of the options 1 through 4 were to be executed, an inherent and built-in “strategic conflict” would arise because WWL is a liner shipping company: 1. If it was known in the market that WWL took an ownership stake in CANDY Renewables (options 3 or 4), it could possibly become difficult for CANDY Renewables to obtain vessel capacity from other shipping companies because of the affiliation to a competitor (retaliation against WWL). 2. If it was known in the market that WWL took an ownership stake in CANDY Renewables (options 3 or 4), it could possibly become difficult for WWL to obtain freight volumes from other freight forwarders. This could be the case not only in the renewable energy vertical market segment (retaliation by those forwarders against WWL because of WWL’s entry into “their” freight forwarding business). In other words, these conflicts arise because WWL is a shipping company which is perceived in the market to have very little or no freight forwarding activities. If WWL acquired a freight forwarder, other shipping companies might try to “punish” that forwarder by “blacklisting” them. Similarly, forwarders who support WWL might no

96 During a meeting with the WWL M&A team in Oslo on July 18, 2011, it was confirmed that WWL would prefer to only get involved with CANDY Renewables as the general freight forwarding capabilities and alliances with Expeditors and Atlantic would be viewed as being “too far from the core business”

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MBA in Shipping & Logistics Class of 2011 Thomas Poulsen longer consider WWL “neutral” in the market place and therefore ship with other shipping companies where possible - instead of shipping with “a competitor”. With this in mind, a JV would be the best option (option 3) and on this basis, a 40 per cent share holding in CANDY Renewables was recommended to WWL97. From this point forward, such a 40/60 JV will be pursued as Project CANDY. It has subsequently been re-confirmed that the sellers are interested either in selling a minority shareholding position (for example 40 per cent) so that they retain control or to sell CANDY Renewables in full (100 per cent) thus relinquishing control to the acquirer. On this basis and given WWL’s policies98 and track record to wish to acquire external parties in full, it is recommended that a 40 per cent stake be acquired at this time with a 3-year option to acquire the remaining 60 per cent using earn-out type targets over the coming 3 years through end of 2014. This of course needs approval within WWL.

5.3 Valuation In the freight forwarding industry, valuations are generally based on a multiplier of the past 3 years’ EBITDA (see for example Haspeslagh & Jemison, 1990, Elson & Lajoux, 2000, and Kotzab et. al, 2007). Basis author’s M&A focus in his consulting business, most similar deals have been done at the 6x multiplier range over the past 12-18 months. If deemed more strategic in nature, multipliers of up to 8x or 10x have been witnessed. However, given the global financial crisis, such valuations have been rare (for general M&A theory, see Haspeslagh & Jemison, 1990). Again basis

97 Although WWL prefers to have control in JV’s, the Project CANDY acquisition is part of the renewable energy strategy which is new for WWL and as such not yet fully agreed within the company. Only by end of September/early October, 2011 will the company’s future direction within renewable energy SCM break-bulk be agreed when the author presents this ISP project to WWL top management. The JV option is therefore the more prudent way forward at this time basis discussions with the WWL M&A team in Oslo on July 18, 2011 98 M&A policy explained to author by WWL Corporate CFO during interview session in Oslo on April 4, 2011 132

MBA in Shipping & Logistics Class of 2011 Thomas Poulsen author’s experience, sellers generally expect a 6x – 10x range at this time and buyers generally try to pay 5x - 6x99. If the past performance of CANDY Renewables is considered, the depicted in table 93 below have been provided by the company (not yet subjected to any type of due diligence). Table 93: CANDY Renewables net result before taxes (historic, current, projected)

CANDY Renewables division Timing (USD millions) 2006 2007 2008 2009 2010 2011 (exp) 2012-16 (Budg)

Net result before taxes (before DD) 5 7 9 6 3 2 - 3.5 4 - 5 Source: CANDY company data (proprietary, private, and confidential), author analysis

In the following, figures from table 94 below will be used to discuss valuation: On average, the results before taxes over the past 3-5 years has been approx. USD 6 million whereas going forward, some USD 4-5 million can be projected by CANDY management given the current market situation. The expectation expressed by the sellers is an EBITDA multiplier of 8x – 10x in terms of forward results which is a bit unusual because the industry practice is to use past results. However, as the forward results are lower than the actual average results achieved over the past 3 years, it works well for the acquirer in this case. In the following, the sellers’ expectation is compared to “usual industry practice” of looking back for 3 years to generate an average EBITDA range (different valuation techniques are discussed by De Wit & Meyer, 2004). This means that the “normal” valuation for the entire company would be around the USD 50 million mark whereas the expectation indicated by the sellers is in the USD 31-48 million range.

99 In a live M&A transaction involving author’s consulting firm from middle of 2010 through March, 2011, a deal was finally not consummated due to “bid” versus “ask” perception discrepancies. With EBITDA of EUR 7 million on average over the past 3 years, the potential acquirers initially offered 6x but target company owners wanted minimum 8x average trailing 3-year EBITDA. The target company owners did not wish to initiate detailed due diligence efforts unless an initial indication of interest in the 9x multiplier range was received from the potential acquirer. The deal fell through in April of 2011.

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Table 94: Components for valuation calculations and estimates (USD millions) Average result last 3 years 6.0 Average result last 5 years 6.1

Sellers' expectation (min) 8x Sellers' expectation (max) 10x

Sellers' expectation result range (low) 4 Sellers' expectation result range (high) 5

Market valuation (6x EBITDA average last 3 years) 48 Sellers' expectation (lower end) 32 Sellers' expectation (higher end) 50 Source: Target company P&L information, author analysis Given that the numbers displayed have not been subjected to due diligence, it is fair to assume that the actual valuation would be lower as adjustments to the P&L would commonly be made based on due diligence findings (for input on due diligence efforts, see Elson & Lajoux, 2000). It would therefore seem realistic to estimate that the final deal amount would be in the USD 25-35 million range for the entire company. Acquiring a 40 per cent stage would thus cost some USD 10-14 million. It is estimated that this type of “cash infusion” by an outside entity to the CANDY Group ownership team would be sufficient to make the ownership changes caused by the passing of one of the owners and subsequent hand-over of shares to his widow. Therefore, the transaction would seem likely to consummate.

5.4 Joint-Venture Objectives and Management Structure Given that this ISP effort is performed by the author for WWL, WWL is the “driving force” behind the acquisition of the 40 per cent stake in the target company. However, it is also possible that WSS/Wallenius would be the executing party just given the different focus and ownership structures of the various entities involved. On this basis and also basis the WSS “green cargo” initiative discussed above, it would make sense that the JV governance be performed by a “joint team”.

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It is suggested that a Green Cargo Cockpit (“GCC”) be established which would be allowed to work across all Wilh. Wilhelmsen/Wallenius units to create a concerted and coordinated approach to the “green cargo” renewable energy/wind logistics/SCM market place. Basis the CANDY Renewables JV, such a GCC set-up should be located in Scandinavia. One option could be Oslo to be close to both Wilh. Wilhelmsen/WSS, WWL, and UECC. Another option could be Stockholm in order to be closer to Wallenius. A more “neutral” location could be Copenhagen basis Denmark’s relatively strong track record within renewable energy (wind, wave, etc.). If Copenhagen was chosen, it would be “natural” to simultaneously replace the Denmark agency representation and establish a WWL presence in Denmark directly. In doing so, it would be possible to “gather” both the WSS, WWL, and GCC activities within one geographic location. If based in Copenhagen, GCC could be set up as a separate company. Basis a 40 per cent ownership stake, CANDY Renewables would continue to operate as hitherto and CANDY Group would remain fully in control. However, GCC could then appoint a neutral and non-Wilhelmsen/Wallenius representative to be on the board of CANDY Renewables. GCC would be the day-to-day liaison to CANDY Renewables and focus on the following: - GCC could impact the strategy and development of CANDY Renewables to ensure that the strong focus on wind energy and offshore is developed further to also include a broader renewable energy scope. - GCC could impact CANDY Renewables to set up a division to focus on inbound assembly parts as these are suitable for the WWL vessels and the wind turbines grow in size and the different components/parts get bigger. - GCC could generate synergies in terms of matching break-bulk cargo opportunities with actual vessels in the combined fleet, using WWL as the vessel entry point. - GCC could coordinate training of CANDY Renewables personnel in terms of the specific vessel types, routings, and overall fleet opportunities/constraints. - GCC could be the conduit between CANDY Renewables and the extensive WWL organization/WSS freight forwarding and project cargo forwarding network

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spanning the globe. Many touch-points, synergies, and collaboration opportunities exist.

5.5 Next Steps The target company representatives have been very adamant that if a process is initiated, it must be very clear, serious, and fast. In addition, they of course wish to know the identity of the acquirer and understand the overall decision making process/timing. Towards the target, the author has represented WWL towards the target company and an overall process has been outlined as depicted in illustration 95 below. Illustration 95: Overall M&A process explained to target company by the author

MBA in Shipping & Logistics Class of 2011 Phased M&A Process T. Poulsen Three Key Phases

Initial discussions High Level Business Case M&A Process • Panther and the client • Panther to prepare for • Panther involvement? • Role of Panther client • Client M&A team : • Motivation • Key data on Seatainers • Due diligence • Rationale • Financials • Site visits • Strategy of CANDY • Management team • People decisions Group • Services • Clients • CANDY Renewables • Geography • PMI • Discussion re match • Assets considerations • Agreement to proceed? • Clients • M&A/PMI experience • Client internal process • Quick process

Client will quickly reveal identity and take over the process

ISP illustrations, July 22, 2011 Source: Author analysis

Source: Author analysis On the part of WWL, a Q&A session took place in Oslo on July 18-19, 2011 where the author presented further aspects of CANDY for better understanding internally within WWL. 136

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Illustration 96: M&A process, milestones, and timing

Source: Author analysis An internal meeting will take place early August, 2011 and yield a stop/go decision. Subsequently, an initial business planning meeting between CANDY Renewables personnel and WWL will be scheduled during the second half of August. This will enable WWL to produce an internal “high level business case” allowing WWL to obtain Board approval to proceed with due diligence. Due diligence will then commence after which another stop/go decision will take place on the part of WWL. Finally, the final agreements can be drafted. A graphical overview has been displayed in illustration 96 above. The chart reflects that multiple different activities take place in parallel. In addition, if WSS and/or Wallenius are to be involved, coordination would need to be done accordingly. It should be noted that WWL is fairly self-sufficient when it comes to M&A. However, for the due diligence process, WWL would need to engage a certified public 137

MBA in Shipping & Logistics Class of 2011 Thomas Poulsen accountant (“CPA”) firm, a law firm, and other parties required to take part process (e.g. human resources (“HR”), business, and asset valuation type sub-processes). When considering execution of the M&A process and the subsequent post-merger integration process, a key aspect is that the strategies thought out at top management level of WWL and CANDY Group are also implemented on a desk- level within the companies involved in order for the goals of the JV to be achieved. Chart 97: Linkage using X-matrix between Project CANDY strategy/implementation A3X Framework for Project CANDY acquisition Correlation / contribution Accountability Joint strategy setting for CANDY Renewables CANDY Renewables division for inbound assembly parts Focus CANDY Renewables Industry Division on Renewable Energy Training of CANDY Renewables Personnel re WWL vessels Coordination of project cargo generated suitable for WWL vessels Global collaboration across WWL and WSS network Team members

Key strategies Financial Legal Business/HR

(strategies)

IT systems IT

Rune Gisvold, CFORune Gisvold,

Due Dilligence Due

Arild Iversen, WWL CEO WWL ArildIversen,

Employment agreements Employment

Thomas Poulsen,Panther Thomas

Chris Connor, WWL CCO WWL ChrisConnor,

WWL deal drivers deal WWL

Christer C.G. Bonde, WSS (liaison)WSSBonde, C.G. Christer

Strategy, business plan, and CapExandbusiness plan, Strategy,

Key personnel, skills, and knowledgeskills,and personnel, Key

Key balance sheet and cash flow data flowcash and balanceKeysheet

Infuse project cargo management capability management cargo project Infuse

Kibo Bodogaard, WWL VPStrategy/Finance WWL Kibo Bodogaard, VPBusiness Development WWL NickBryan,

Customer contracts and framework agreements framework and contracts Customer

Teresa Lehovd, WWL GMI, H&Hbreak-bulk and GMI, WWL Lehovd, Teresa

Odd Egil Borgen, WWL Commercial, break-bulk Commercial, WWL Egil Borgen, Odd

Obtain/analyze key historical data (last 3-5 years) 3-5 (last historicaldata key Obtain/analyze

Intellectual property rights, procedures, and leasesand procedures, rights, property Intellectual

Ownership structure, loans/covenants, and valuationand loans/covenants, structure, Ownership

Expand attainable market share through LoLo capabilityLoLo through share market Expandattainable

Inter-company agreements CANDY agreements Renewables/Group Inter-company

Sales pipeline, go-to-market strategy, trades, and clientsand trades, strategy, Salespipeline, go-to-market

Profitably grow renewable energy SCM break-bulk presence break-bulk SCMrenewable grow energy Profitably years 5 budgets and YTD2011performance Understand Post Merger Ingegration

2012 2013-2014 Remaining shares (option) 20 per cent 20+20 per cent Earn-out Budgets+synergies Expansion Legend Strategy Inbound assembly Industry division WSS synergies Agency Site inspections New offices Singapore, India US, Brazil, PRC = Strong correlation or team leader Cargo on WWL vessels Education Cargo mixing = Important correlation or core team member Global collaboration Discretely More openly = Weak correclation or rotating team member Full ownership Control Full (end 2014) Correlation / contribution © 2011 rona consulting group Source: Hoshin Kanri A3 suite of planning documents/copyrighted templates under temporary license to author from Thomas L. Jackson/Rona Consulting, author analysis As CANDY Renewables is very much an asset-light people/knowledge business, the “middle-up-down management process” discussed by Nonaka & Takeuchi (1995) is very useful.

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However, the Hoshin Kanri framework derived from the lean/six sigma literature base is more effective as a go-between the strategy and practical execution. Placing ownership with each employee and their managers (middle management), this methodology is very process driven and uses different forms and graphical tools to generate a common understanding and continuous forward movement. Using the X-matrix framework developed by Jackson (2006) and for example used practically by Ghavami (2008), an overview of the M&A process can be rendered as outlined in chart 99 above. The chart outlines the key deal drivers and reduces complexity of the different components of the deal while at the same time highlighting the priority of the individual work streams as well as the key personnel involved. Through this type of tool, a concerted effort and close strategic alignment of the team can be achieved.

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6 Conclusion

6.1 Integrated Strategy Project Findings The Industry Analysis revealed that the renewable energy market is stabilizing and that governments – led by EU’s DG Climate Action - are making serious efforts to create a stabile legislative and political environment stretching up to 2050. This will enable logistics service providers including the asset heavy shipping industry to make solid investments with a 20, 25, or 30 year investment horizon. Most renewable energy market data and wind market analysis tools only stretch out to 2030, or 2035 at the most. And: None of the wind energy data sources present a point of view on transport/shipping/logistics/SCM spend nor does any academic studies or materials seem to exist. This ISP therefore quantified the logistics spend up to 2050 and separated the cost picture into different cost “buckets” which can be used for calculations of attainable market shares in different segments of the total supply chain. This was done through the construction of the wind scenario model on the basis of a market projection for the wind energy industry up to 2050 using more than 20 data sources for triangulation purposes, some of which were empirical in nature100. With a 2011 NPV total wind logistics/SCM market of in excess of EUR 200 billion up to 2050, WWL is in a good position to take advantage of several of the available logistics spend “buckets”. As demonstrated in the Company Analysis, WWL can participate in the ocean shipping “bucket”, especially when it comes to the inter- continental shipment segment. But also in terms of the short-sea segments of both onshore and offshore wind ocean shipping, inducement type ports of calls can be made within the fixed liner schedule and related companies can be utilized, in cases where own WWL services do not suffice. Opportunities within the terminal service offering also exist within the port cost “bucket” and the company’s technical services offering is well positioned to be “bent” slightly from cars/H&H to also be able to serve

100 Empirical data obtained from the ISP empirical information gathering efforts which took place in 11 countries, involved 28 individual trips, and more than 100 interviews with more than 150 interviewees

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MBA in Shipping & Logistics Class of 2011 Thomas Poulsen wind turbine parts and components. However, WWL is limited in terms of the size of assembly parts and components it can physically accommodate on its’ vessels. Therefore, a niche strategy could be pursued in terms of outbound wind turbines where only wind turbines up to a certain mega watt output can be shipped as “sweet spot”. This niche would often be to markets like the strong BRIC country emerging economies. As the technological leapfrogs will be experienced in the wind industry, WWL should look at the industry slightly differently and now also consider shipping the ever growing and ever more heavy inbound assembly parts for example for the offshore market. Several Strategic Issues of importance to WWL were discovered in the Strategic Issues Analysis. Some of these were general in nature, some had to do with the break-bulk commodity segment which was a focus area of the ISP, and some issues again had to do with WWL’s position within renewable energy/wind power logistics/SCM. The issues were assembled in an opportunity catalogue which will be discussed with WWL in detail after the submission of this ISP. However, the key issues of the ISP were determined to be related to a question of cargo control: How does WWL gain control over the freight when it can lift only a relatively small portion of a total project? Two strategic themes became the focus of discussion around this, i.e. whether the company could either gain cargo control through an in-house project cargo management/forwarding capability and/or whether the cargo could expand its’ relative share of cargo it can lift by adding an in-house LoLo type capability. The resource based view analysis had revealed that WWL does not have a good track record building such capabilities organically and the author was therefore mandated to pursue two acquisition opportunities identified by the author. One M&A project referred to as Project VEUVE has been temporized as it seems to far removed from WWL’s core competencies and the target company is too internally focused at this time. The other opportunity referred to as Project CANDY was investigated further and it was discovered that this effort could yield WWL with both the project cargo management/forwarding skills and a LoLo chartering capability. This project is now “live” and moving towards possible implementation by the end of 2011. If executed, Project CANDY would enable WWL to gain cargo control, get access to a larger

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MBA in Shipping & Logistics Class of 2011 Thomas Poulsen attainable market share, and to access the intermediary supply chain spend “bucket” identified with the wind scenario model.

6.2 Author Discussion Regarding the Integrated Strategy Project When the author wrote the module 05 Blue MBA assignment back in the summer of 2010, it appeared as if the area of renewable energy transport/shipping/logistics/SCM contained an extra-ordinary and somewhat unexplored opportunity basis the niche in which the author’s consulting company has operated since 2003. The ISP was an excellent opportunity to further test out this hypothesis and the author’s expectation has come true – beyond what the author could have possibly imagined: The market for renewable energy itself is really taking off and if the wind power logistics/SCM market can be considered somewhat symptomatic of the entire market, lots of opportunities exist. Beyond the module 05 assignment, the market was virtually “unknown territory” when the ISP effort commenced in January, 2011. WWL was also a company with which the author had absolutely no ties or prior knowledge. Therefore, getting to know WWL whilst at the same time practically realizing the vastness of the renewable energy market was a massive learning experience. However, the subsequent focus on the wind power logistics/SCM market proved very interesting and rewarding as the author was able to concentrate, focus, and really go into an in-depth study of the mechanics and workings of this exciting market. However, the original scope of renewable energy is still very appealing to the author. But much more research is required in order to understand that entire market and the ISP did not yield enough time to do so. A doctorate efforts (e.g. DBA or Ph.D.) type effort would be much more adequate for a full study and this is something the author could be interested in. Within the wind logistics/SCM market itself, the inbound assembly part process largely had to be excluded but presents a huge opportunity to WWL wherefore this would require additional analysis. But also the other renewable energy power sources such as solar, hydro, geothermal, and biomass deserve further scrutiny from a transport/shipping/logistics/SCM perspective. In addition, the process of connecting the power sources to the grid and

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MBA in Shipping & Logistics Class of 2011 Thomas Poulsen related products like electric cars/trucks/busses/trains/etc. would also be most interest areas to subject to additional research. The detailed wind market analysis performed by the author was also not optimal in several aspects: The wind scenario model is quite global in scope, however, the trips to the Asia and Americas regions were largely exploratory in nature. With this as a back-drop, the mechanics and workings of the model would require much more in- depth research on a global basis in order to produce a more regionally or even locally driven model for some of the larger regions and markets like Asia (China/India), the Americas (USA/Canada), and Europe (UK/Germany/Benelux/France/Spain). This would make the model more accurate and create country based assumptions rather than more global/regional generic assumptions as it the case at present.

6.3 Recommendation The author recommends that WWL uses this ISP effort to pursue the renewable energy vertical market in a way which will fulfill all six WWL goals as outlined in section 1 above and thus achieve the purpose of WWL for this ISP effort. Basis WWL’s experience in the wind logistics/SCM segment, the wind market would be an excellent place to start. Dedicated expertise should be infused from the outside and a clear go-to-market strategy be devised as part of WWL’s commercial organization. It is imperative that terminology and marketing materials be directed specifically towards the relevant constituencies in the market, such as the tier 1/tier 2 suppliers, the OEM’s, the EPC companies, the operators, utilities, and/or SWF’s. WWL’s coverage of the market must be expanded to include the many clients and commodities revealed in this ISP to not be effectively served by WWL at present. Not only will this work well in terms of WWL’s LTS goal of growing the break-bulk commodity segment but it will also play well into the strategic goal of growing the company’s presence in the BRIC countries as these emerging markets are strong contenders for the finished turbine outbound niche which WWL can very adequately serve.

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The author furthermore recommends that Project CANDY be executed with the author playing a key commercial role towards the target company. As part of this, the author recommends the creation of a “Green Cargo Cockpit” based in Copenhagen spanning all WWL and group related parties’ efforts and incorporating the Denmark agency business of WWL. This would give WWL a much better chance at gaining cargo control through the partially owned CANDY Renewables outfit which is strong at both project cargo management/forwarding and has an in-house LoLo chartering capability. Finally, the author recommends that further studies are undertaken within the area of renewable energy and that further “green energy sources” are transported on board the WWL vessels going forward. If portrayed correctly in WWL’s marketing materials and general go-to-market materials, the already strong environmental forerunner image can be further substantiated with a positive ripple effect to the overall company image. The author is keen on continuing to play a pivotal role in the implementation of these ISP recommendations, should WWL wish for this to happen.

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References Alizadeh, A.H. & Nomikos, N.K.: Lecture Notes, “Investment Analysis, Finance, and Risk Management”, CBS, 2010 Alizadeh, A.H. & Nomikos, N.K.: ”Shipping Derivatives and Risk Management”, Palgrave Macmillan, 2009 Allen, F., Brealey, R.A., and Myers, S.C.:”Principles of Corporate Finance", 9th Edition, McGraw-Hill International Edition, 2008 Barney, J.: “Firm Resources and Sustainable Competitive Advantage”, Journal of Management, Vol. 17, Issue 1, pp. 99-120, 1991 Brinkmann, S. & Kvale, S.: “Interviews. Learning the Craft of Qualitative Research Interviewing”, Second Edition, Sage, 2009 Brundtland, G. H., et.al.: “The Report of the Brundtland Commission: Our Common Future”, Oxford University Press, 1987 Byrnes, J.L.S.: “Islands of Profit in a Sea of Red Ink”, Penguin Group, 2010 Chambers, S., Johnston, R., Slack, N.: “Operations Management”, Sixth Edition, Prentice Hall, 2010 Christopher, M.: “Logistics and Supply Chain Management, Creating Value-Adding Networks”, Fourth Edition, Prentice Hall, 2010 Christopher, M.: Lecture notes “The Supply Chain of the Future”, CBS, 2010 Christopher, M.: Lecture notes “Managing Risk in the Supply Chain”, CBS, 2010 Clissold, T.: “Mr China: A Wall Street banker, an Englishman, an ex-Red Guard… and $418,000,000 disappearing, day by day”, Constable & Robinson Ltd, 2004 Cusumano, M.A. & Gawer, A.: “Platform Leadership. How Intel, Microsoft, and Cisco Drive Industry Innovation”, Harvard Business School Press, 2002 De Wit, B. & Meyer, R., 2004: “Strategy. Process, Content, Context”, Third Edition, Cengage Learning EMEA Downes, L. & Mui, C.: “Unleashing The Killer App – Digital Strategies For Market Dominance”, Revised Edition, Harvard Business Press, 2000 Elson C.M. & Lajoux, A.R.: “The art of M&A due diligence. Navigating critical steps and uncovering crucial data”, McGraw-Hill, 2000

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Emerging Energy Research: “Asia Wind Turbine Strategies in the Global Market 2011-2025”, 2011 FACTIVA: “EIEE Power Plant Tracker”, April, 2010 FACTIVA: “PIE New Plant Tracker”, January, 2011 Gattorna, J.: “Dynamic Supply Chains, Delivering Value through People”, Second Edition, Prentice Hall, 2010 Ghavami, P.K.: “Lean, Agile & Six Sigma Information Technology Management. New Stratagems to Achieve Perfection”, Peter K. Ghavami, 2008 Global Wind Energy Council: “Global Wind Energy Outlook”, Third Edition, October, 2010 (downloaded from www.gwec.net, accessed March 5, 2011 at 14:15 CST) Gore, A.: “Our Choice. A Plan to Solve the Climate Crisis”, First Edition, Rodale Books, 2009 Harris, A.M.: Lecture notes “Sustainability and Shipping”, CBS, 2009 Haspeslagh, P.C. & Jemison, D.B.: “Managing Acquisitions: Creating Value Through Corporate Renewal”, The Free Press/Simon and Schuster Adult Publishing Group, 1990 Humphrey, A.S.: “SWOT analysis model” (adopted from his SOFT analysis), Stanford Research Institute (exact timing and circumstances not determined) “International Energy Outlook 2010”: Energy Information Administration, US Department of Energy, 2010 “International Wind Energy Development. Global Wind Power Development. A 2030 Scenario”, BTM Consult ApS, 2009 “International Wind Energy Development. World Market Update 2009”, BTM Consult ApS, 2010 “International Wind Energy Development. World Market Update 2010”, BTM Consult ApS division of Navigant Consulting, 2011 Jackson, T. L.: “Hoshin Kanri for the Lean Enterprise: Developing Competitive Capabilities and Managing Profit”, Productivity Press, 2006 Kemp, W.H.: “The Renewable Energy Handbook”, Aztext Press, 2009 Karnøe, P.: “Dansk vindmølleindustri – en overraskende international succes”, Samfundslitteratur, 1991

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Kotzab, H., Mikkola, J.H., Schary, P.B., Skjoett-Larsen, T.: “Managing the Global Supply Chain”, Third Edition, Liber/Copenhagen Business School Press, 2007 Li, X.: “Economy Threatened By Aging Demographic”, China Daily/Business, May 3, 2011 Lundgreen, S.: “Vattenfall Chips In For Liberia”, Financial Times, April 6, 2010 Lynch, R.: “Strategic Management”, 5th Edition, Prentice Hall, 2009 (PESTLE model and driving forces) McKinsey & Co.: “Biomass for heat and power. Opportunities and economics”, McKinsey, 2010 Nonaka I. & Takeuchi, H.: “The Knowledge Creating Company. How Japanese Companies Create the Dynamics of Innovation”, Oxford University Press, 1995 Porter, M.: “Competitive Strategy”. The Free Press division of Simon & Schuster Inc., 1980 (Strategic Groups, Five Forces Model) Rosenø, A.: Lecture notes “Guided Tour of Strategic Management”, CBS, 2011 Sheffi, Y.: “The Resilient Enterprise: Overcoming Vulnerability for Competitive Advantage”, First MIT Press Paperback Edition, Massachusetts Institute of Technology, 2007 Stern, N.: “The Economics of Climate Change. The Stern Review”, Sixth Printing, Cambridge University Press, 2009 (2006) Stopford, M. (2009): “Maritime Economics”, 3rd edition, Routledge - The Taylor & Francis Group Vattenfall (2010): “Mapping of Subsidy Systems and Future Consumption of Biomass”. Vattenfall Reseach and Development AB, Report Number U 10:23 – 2010-02-26. Wernerfelt, B.: “A Resource-Based View of The Firm”, Strategic Management Journal, 5, 1984 Weiner, E.J.: “The Shadow Market. How a Group of Wealthy Nationas and Power Investors Secretly Dominate the World”, Scribner, 2010 “World Energy Outlook 2010”: International Energy Agency, 2010 Available through CBS library at

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Appendix 1 – Renewable Energy Market Background

Introduction – macro view At a macro level, a number of critical megaforces or megatrends are impacting the energy sector in general and in the following, the key megaforces will be described. The renewable energy part of the energy market (the renewable energy sub-sector) is in itself a business area which is rapidly growing primarily due to a global megaforce of very unprecedented strength: Government induced demands to depend less on the oil/gas producing nations of the Middle East, reduce pollution, rely less on fossil fuels, to generate a more sustainable future for coming generations in terms of energy consumption101 on a truly global scale. Illustration 1.1 below outlines a number of such government driven initiatives. Illustration 1.1:

MBA in Shipping & Logistics Class of 2011 T. Poulsen Governments and institutions

Brundtland report 1983-1987

Denmark

USA Kyoto 1988-1989 Protocol

20-20-20

NEAMA India COP 16

2006

ISP illustrations, July 22, 2011 Source: Author analysis

Source: Author research

101 This movement generally started from the Brundtland report (commissioned by the UN in 1983 and published in 1987), was further cemented by the Kyoto Protocol (open for ratification from March 1998 to March 1999), and made more global and popular particularly by Al Gore’s movie, “The inconvenient truth” from May 24, 2006 149

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The illustration depicts the following examples picked out by the author:  Through the UNFCCC originally responsible for the Kyoto Protocolxliii, the UN has now conducted a total of 16 so-called Conferences of the Parties (“COP”). At the latest (COP 16) meeting in Mexico, consensus was reached on a number of different topicsxliv.  At a regional level, the EU has for example agreed on what is called the “20-20- 20 initiative” which sets out targets for all member countries by 2020xlv. Within EU, this is managed by the Directorate General for Climate Action102 and managed by Member of the European Commission, Ms Connie Hedegaardxlvi.  At a country level within the EU, the various countries implement different regulations to improve the environment, e.g. the recently introduced “Energistrategi 2050” presented by the Danish government on February 24, 2011 aiming at devising a plan for how Denmark can be independent of fossil fuels by 2050xlvii.  In the US, tax incentives on different RE sources have been in place for quite some time and as part of the recent global financial crisis alleviation efforts, such incentives were extended and expanded furtherxlviii.  The environment is featuring prominently in PRC’s 12th 5-year plan which was just approvedxlix for 2011-2016.  Also India’s deliberations to create of new body to oversee environmental matters underline that country’s willingness to act further on already existing initiatives to manage and govern the environment and pollutionl.  In developing nations like Panama the Philippines, renewable energy such as wind103 solar powerli is also in focus, however, with execution taking place at a much more modest pace and scale than e.g. in the EU, USA, PRC, or India. However, at a local level e.g. in the Philippines, much effort is poured into looking

102 A telephone conference call has been scheduled between the Climate Action EU Commissioner Connie Hedegaard and the author for March 15, 2011 (pre-call with Niels Ladefoged, Personal Assistant to Commissioner Hedegaard took place on March 10, 2011) 103 As witnessed by the author during his visit to Panama on June 30-July 6, 2011, several wind initiatives are now under way in Panama and the interest level there is quite substantial 150

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towards the future and coming up with recommendations on how to speed up implementation to advance the country104. As can be seen from this range of examples, both in developing countries and industrialized nations, governments are trying to reduce pollution, protect the environment, and reduce the relative dependency on fossil fuels like oil, coal, and natural gas. Whether the fossil fuels will be replaced through nuclear power or renewable energy, governments are driving hard at ensuring the livelihood of future generations in the form of a sustainable environment with less pollution. The emission of green-house gasses (“GHG”) has long been a theme of public debate due to the general consensus that GHG will increase the temperature globally on the planet (Gore, 2009). Country level Illustration 1.2: Renewable energy regulatory environment

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Energy legislative environment

Hydro Power Solar Geothermal Power Plant Wave/tidal Wind

Renewable Energy

Nuclear Power Plant Regulatory Environment Den- mark

NAFTA Nordic Power Plant ASEAN Nordic + Baltic Merco- EU sur Fossil fuels UN Biofuels/biomass

ISP illustrations, July 22, 2011 Source: Author analysis

Source: Author analysis

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The legislative environment for a particular country is neither easy nor transparent when it comes to energy. If using countries like Denmark or Norway as examples, individual countries are in most cases members of sub-regional collaboration forums (like the Nordic or Nordic-Baltic sub-region), country-clusters (like EU), and also face global legislative impact from the UN. Global, regional, and sub-regional legislation can impact a country and a country may of course also legislate on its’ own. As an example, only 7 of EU’s member states are meeting the EU RE investment requirements and are being urged by EU to increase their spending for renewable energy projectslii. Illustration 1.2 above depicts this type of regulatory environment the energy industry is faced with. EU as a front-runner By setting up the Directorate-General Climate Action in 2010, the EU continues to be a global leader when it comes to setting the standards for the GHG emissions abatement dialogue as well as the implementation of real initiatives to actively improve the environment. Whereas the new DG promotes the overall EU laissez- faire attitude about avoiding active EU level intervention where market forces can solve issues that arise, DG Climate Action highlights a number of matters when it comes to renewable energy SCM105:  The area of renewable energy SCM as dealt with in this ISP is generally quite under studied and risk mitigation policies and contingency plans have not really been considered at EU level until now.  The March 8, 2011 Roadmap For Moving To A Competitive Low-Carbon Economy By 2050 (or “Roadmap 2050”) released by DG Climate Actionliii will be utilized by Commissioner Hedegaard to set the agenda for the continued dialogue about the importance of Climate Action within EU and globally following the endorsement by world leaders of the COP15 Copenhagen and COP16 Cancun Agreements.

105 Basis the March 10, 2011 pre-interview call with Niels Ladefoged, Personal Assistant to the Commissioner, Ms Hedegaard, and Member of Cabinet in advance of the interview with Commissioner Hedegaard which took place on March 15, 2011 (see appendices 9 and 12 below for details)

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 The 1957 Treaty of Rome’s Inner Market provisions called for the Trans- European Network (“TEN”) to set guidelines for transportation, the distribution of energy, and telecommunicationsliv. However, whereas there is a renewable energy section within TEN today, it should be noted that from a transport and energy perspective, the TEN framework deals mainly with the overall transport network and the distribution of the energy itself as opposed to the transportation of the renewable energy power sources and as such not with the renewable energy SCM implications highlighted by this ISP.  An overall initiative to increase public acceptance of renewable energy projects has just been completed (the REshare studylv) in order to ensure that necessary permits are granted timely basis good public understanding of renewable energy benefits (as opposed to cited negative experiences regarding e.g. solar energy within the US due to EPAlvi delays etc.lvii).  Several EU countries are emerging as strong renewable energy infrastructure and logistics investors including: o The Netherlands intends to use Rotterdam as a hub for biomass and biofuelslviii. o The UK’s extensive offshore wind turbine park project mass is driving several ports forward there. o Germany’s Cuxhaven is actively marketing itself as the “Cuxhaven Offshore Base” with several companies getting very engaged106 as evidenced during the site visitlix.  Economies of scale drive the wind turbine industry and with blade lengths constantly increasing, restrictions are now emerging for land-based wind farms due to road logistics constraints. This in turn drives the offshore wind farm market where wind turbines with larger blade/wing spans are generally more logistically feasible to erect.  Subsidies per kilowatt-hour (“kW-h”) produced using solar energy have been very successful in the EU and a strong manufacturing base exists. However,

106 See interview notes regarding Cuxhaven site visit with Global Green Invest in appendices 9 and 12 below

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separately, concern exists that PRC is rapidly taking over the solar manufacturing market.  The supply of biomass to effectively replace coal is being actively considered from a GHG life cycle contribution point of view in terms of transport in order to ensure that the transport of the biomass such as wood pellets and wood chips support the overall energy production in an environmentally accretive manner. That being said, no active EU considerations are being taken in terms of biomass hubs etc. as it is more or less expected that the supply to the power plants will take place mainly using coastal access as has been the case for coal (even though the biomass logistical processes are, admittedly, very different than those for coal). The shipping, transport, and logistics industry sector is generally perceived at EU level to be very much behind the rest of the world when it comes to acknowledging and taking action regarding the environment. A recent survey on the transport industry made by the Carbon Disclosure Projectlx was cited by Commissioner Hedegaard’s Chief of Staff in which the industry as such is not very focused on the environment compared to other industry sectors. In addition, the industry is seen as being “hesitant” and “not committed enough” to invest the funds required to support the emergence of the RE projects: In this respect, DONG Energy’s acquisition of A2SEA was cited as an example of how energy companies must react to the industry not making sufficient investments (in this case in special vessels for the installation of offshore wind farms). Points of view regarding options to abate global warming Many studies reveal that measures need to be implemented now in order to curb this trend and it is widely agreed that global consensus is needed to already start spending part of the world’s total gross domestic product (“GDP”) on reduction of GHG (Stern, 2006 and Gore, 2009). Depending on the methodology applied for calculating the cost of necessary measures, different ranges from 0.5 per cent of global GDP (McKinsey et.al., 2009lxi) to 2 per cent (Stern, 2008lxii) are mentioned by different experts. Detailed plans have been devised accordingly (e.g. Stern, 2006, Gore, 2009, and McKinsey, 2009) and irrespective of what the exact percentage

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MBA in Shipping & Logistics Class of 2011 Thomas Poulsen global GDP spending number is, consensus on a global basis seems to be that something must be done and that it will cost money. Assuming consensus is to prevent the 2 degree Celsius increase in global temperatures sometimes referred to as “global warming”, the McKinsey study outlines that 200 measures at a cost of 0.5 per cent of global GDP could augment this global warming situation if implemented already now. The author especially appreciated the calculation approach of McKinsey as they clearly show the costs of the approx. 200 abatement options investigated in their study whilst they also highlight the effects of not doing anything (business as usual “BAU”) - see illustration 1.3 below. Illustration 1.3: McKinsey (2009) study on global abatement options and cost

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GtCO2e per year - business as usual Power generation abatement options ("BAU") Renewable Energy Other methods Wind Nuclear 2020 Solar PV CCS 2005 Global CO2 emissions Solar concentrated Conversion (coal->gas) 0 20 40 60 80 Geothermal Energy efficiency measures

2005 2020 Biomass Stop continuous remote flaring Global CO2 emissions 45.9 61.2 Small hydro

Abatement potential - GtCO2e by 2020 2005 2020 BAU Abatement 2020 after abatement Improvement 2020 BAU Improvement 2005 45.9 61.2 19 42.2 31% 8%

Global tCO2e per capita per year Abatement costs 600 7.5 532 532 532 532 532 8 7.1 7 500 6 5.2 5 400 CO2 per capita 4 317 317 317 317 317 3 EUR Billions 300 2 Global average Abatement costs 1 200 0 100

0 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Study scope timing

Source: McKinsey (2009) Source: McKinsey & Company (2009), ISP illustrations, July 22, 2011 author summary and graphics

Source: McKinsey (2009), author analysis Change drivers – megaforces and megatrends Exactly due to the fact that the political and legislative environments have such a big impact on the renewable sub-sector, the author has opted to utilize the next section

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MBA in Shipping & Logistics Class of 2011 Thomas Poulsen to go through megaforces and megatrends at a macro level. A summary of what will be reviewed in the following can viewed in illustration 1.4 below. Illustration 1.4: Overview of megaforces discussed

MBA in Shipping & Logistics Class of 2011 T. Poulsen Megaforces Source: Downes & Mui, 2000 Source: Author analysis Globalization Former Communist Transport Deregulation regimes as global trade Digitization enabler ISO 26000

Spending Power Scarce Resources Urbanization Triple bottom line Population Increased Transport Source: Christopher, 2010 costs Source: ISO ISP illustrations, July 22, 2011

Source: Downes &Mui (2000), Christopher (2010), ISO (2011), and author analysis The megaforces/megatrends approach has been crafted basis overall megaforces framework provided by De Wit & Meyer (2004) and Christopher (2010). It has been summarized in the core ISP text above by generating a detailed PESTLE analysis (Lynch, 2009). - Historic megaforces Looking back in terms of a historic context, perhaps the two most important megaforces are the entry of the former communist economies into the world market economies on one hand and the continued development of the global transportation industry enabling world trade on the other:

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 With the Tiananmen Square massacre on June 4lxiii and the fall of the Berlin Wall on November 9lxiv, the year of 1989 was a significant year for global trade as these events essentially marked the beginning of the entry of the communist economies into the world market economies. In effect, this meant that the number of people participating in the global market economy has grown from less than 1 billion to now more than 6 billion.  Within the global transportation industry, the evolution of ocean shipping constitutes the single largest contributor to the affordable transportation of goods produced on a truly global basis (Stopford, 2009), thus enabling global trade. The 1956 invention of modern container transportation by “the father of containerization” Malcolm McLeanlxv is probably the single largest contributing factor to affordable and efficient shipping in a modern transportation context. The dramatically increased number of people participating in the world economy means that a much larger population is now consuming energy at a scope and scale which is unprecedented in the history of the planet. The access to cheaper transportation means that the economy has truly globalized and that manufacturing takes place where it is cheapest, most practical, and most economic to do. From an energy consumption and environment protection perspective, these two factors play a significant role at a macro level. - Globalization, deregulation, and digitization Three megaforces globalization, deregulation, and digitization have been identified as major industry change drivers (Downes & Mui, 2000) and they very much affect the RE industry:  Globalization. Emerging local content rules in terms of components and parts contained in renewable energy power sourceslxvi means that manufacturing efforts are globalizing and that regional/local demand is increasingly satisfied regionally/locally as opposed to how it was done in the past, i.e. from one/few central location(s)lxvii. In addition, for example PRC’s rare earth metal protectionism policy (Zhang, 2010) involving the new direct drive wind turbineslxviii along with heavy government subsidies in return for local/regional tax/employment contributions from the Original Equipment Manufacturers 157

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(“OEM’s”) are some of the many factors causing globalization of renewable energy source production, e.g. wind turbines107.  Deregulation. The trend of deregulation includes the breaking down of trade barriers and creation of equal market access through global organizations like e.g. the WTO. Examples include transportation and logistics across borders as well as inside countries for example through Europe’s postal deregulation effortslxix and ensuing globalization efforts of relevant LSPs108 (for example the global merger & acquisition sprees of DP DHLlxx and DB Schenkerlxxi supported by the German government and approved by the EUlxxii). In addition, the energy sector has also undergone deregulation on a global basis. Within EU, individual countries have implemented this using different measures and for example Denmark’s energy market underwent liberalization in 2003-2004 but the Danish government retaining ownership of the main energy provider in Denmark, DONG Energylxxiii. Similarly, the Swedish government owns Vattenfall, the French government owns 85 per cent of EDF, and so forth. In other countries like PRC, the government is also very involved and on top of that, it remains hard to compete as well as understand local rules and culture (Clissold, 2004) despite the country’s ascension to WTOlxxiv.  Digitization. Increasing requirements in terms of certification, health/safety/environment (“HSE”), and corporate social responsibility (“CSR”)109 characterize the environment in which LSP’s need to compete e.g. within the global wind power SCM market. The term CSR is used broadly and in this context includes increasing requirements to be able to provide SCV and historic event tracking. The objective with organizations like WTO is to ensure trade liberalization on a global basis, deregulation, and equal access to markets. To a large extent, this is

107 The so-called Permanent Magnet Generator (“PMG”) systems of the direct drive wind turbines require varying amounts of the rare earth oxide Neodymium (Nd2Fe14B) 108 Appendix 9 details the author’s knowledge and experience with M&A using a sampling of his Blue MBA module 02 assignment 109 Source: Interview with Baltship (details in appendix 12) 158

MBA in Shipping & Logistics Class of 2011 Thomas Poulsen happening within the energy markets globally, however, a number of de-facto trade protectionism measures still exist such as the “local content” measures discussed above, the rare earth metals issues, and the continued national ownership of energy companies like DONG Energy, Vattenfall, and EDF. Coupled with increasing globalization and digitization, the energy industry as such is undergoing dramatic change and governments are driving the renewable energy agenda on a global basis. - Shifting of the supply chain center of gravity A number of megaforces are shifting the supply chain center of gravity and will change how we think of SCM going forward (Christopher, 2010). These changes very much impact the energy industry:  Changes in population with 9 billion people on earth by 2050 in shifting geographies and age groups (Li, 2011) compared to what we know todaylxxv. Energy consumption per capita will also increase based on the fact that the populations of Brazil, Russia, India, and China are becoming more affluent and want a lifestyle similar to that we have become accustomed to in Europe and the US, i.e. a lifestyle that includes traveling by airplane, having a car, etc.  Urbanization with some 25-30 megacities each with a population of more than 10 million people by 2050. This will change how energy is produced, stored, distributed, and consumed.  Spending power changes with proportionate wealth decreasing in the US and dramatically increasing in Asia as especially India and China increase their GDP and spending power per capital. This will result in a larger proportionate energy consumption in Asia as also documented e.g. by Emerging Energy Research (2011) in their study describing wind turbine developments for Asia through to 2025.  Scarce resources resulting in higher prices and focus on sustainability. For example PRC’s control of rare earth metals, predicted scarcity of water, and the

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“peak oil” scenario110. In terms of the “peak oil” scenario, imbalance between oil supply and demand is expected to drive much higher oil prices and it is furthermore expected that negative repercussions will also emerge from increased use of raw materials and packaging utilized.  Increased focus on companies reporting triple bottom lines focusing on environment, economy, and society (now mandatory in several countries per Warris, 2009) including taking responsibility beyond first tier suppliers in terms of SCM. This will drive a focus on sustainability, environment, and renewable energy in terms of providing visibility for companies to select which partners to do business with from a strategic perspective in the future, i.e. to only do business with companies complying with rules and regulations.  Shift in cost balance where prices to make product will continue to decrease whereas cost of moving the product could start to increase as a result in rising energy prices. These megaforces will force countries, companies, and organizations to re-think how they consume energy and drive up the use of renewable energy in order to stabilize or reduce the dependence and use of fossil fuels. In addition, countries, companies, and organizations will be forced to consider ways to reduce their supply chain resource consumption dramatically, already in the short to medium term. At the same time, companies will be required to do contingency planning regarding being able to run their supply chains at double or triple the energy costs compared to today. - Supply chain volatility, risk, and contingency planning Aiming at providing a broad and varied overview, a recent study (reviewed by Christopher, 2010) performed by two professors at Cranfield and Cambridge Universities in the UK looked at a number of different macro-economic factors from 1970 to 2010 such as exchange rates (EUR/GBP, USD/GBP), commodities (crude oil brent barrel, gold troy ounce, copper grade A 3), the UK clearing banks’ base

110 Concept of peak oil first coined by M. King Hubbert in 1956

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MBA in Shipping & Logistics Class of 2011 Thomas Poulsen rate, the VIXlxxvi from 1986, and the Baltic Dry Indexlxxvii from 1985. The sources used for their study were Datastream, EIA, and the Chicago Board Options Exchange and yearly median coefficients were calculated. Illustraion 1.5: Supply chain risk depicted using the volatility index

MBA in Shipping & Logistics Class of 2011 T. Poulsen Volatility Index

Saudi Global Financial 0.600 no more Swing Crisis Arab Oil 0.500 Oil Production Asian Crisis Currency 9/11 0.400 Black Crisis Iranian Monday & .com Revolution 0.300 Invasion of Kuwait 0.231 0.200 0.165

0.100

0.000

Min-Max CoV interval Median CoV

Source: Professor Martin Christopher * List of constituents: EUR/GBP (WMR&DS) exchange rate; USD/GBP (WMR&DS) exchange rate;Cranfield Crude UniversityOil-Brent FOB U$/BBL; Gold Bullion LBM U$/Troy Ounce; LME-Copper, Grade A 3 Month £/MT; UK Clearing Banks Base Rate - middle rate; VIX from 1986; Baltic Dry Index from 1985; yearly median coefficients ISP illustrations, July 22, 2011 Source: Datastream; EIA (for crude oil data up to 08/2008), Chicago Board Options Exchange (for VIX data)

Source: Christopher,** 1: Arab Oil Embargo; 2010 2: Iranian Revolution; 3: Saudi Arabia abandons swing producer role; The result4: Black (Christopher, Monday; 5: Invasion of 2010) Kuwait; 6: Asian depicted Economic Crisis in ; 7: illus Globaltration Financial Crisis 1.5 above shows that companies must prepare themselves for quite severe supply chain disruptions and create supply chain contingencies as a result of various macro-economic megatrends and events, most often somehow related to oil and energy related matters. This viewpoint is generally shared by Sheffi (2007). The latest examples include the global financial crisis which at the time of writing this ISP has been on-going since September, 2008lxxviii but also the soaring oil prices due to the Middle East/North Africa unrest experienced since February, 2011lxxix.

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- Corporate Social Responsibility Focus An increased focus on social responsibility (sometimes referred to as corporate social responsibility, or “CSR”) is generally prevailing on a global basis. In order to create a common framework, the new ISO 26000 social responsibility standard defines seven core areaslxxx: Organizational governance, human rights, labour practices, fair operating practices, consumer issues, community involvement/development, and the environment. In terms of the environment, several organizations including Lloyds Register are getting actively involved in the implementation of various sustainability efforts for shipping companies (Harris, 2009). Renewable Energy Logistics/Supply Chain Industry trends Besides the overall megatrends and megaforces described in above, the overall wind industry trends will be analyzed in this section. In some cases, the trends within renewable energy will be discussed briefly because massive R+D efforts are presently on-going across the renewable energy industry as a whole. The focus will, however, be the wind energy industry and the expected transportation/shipping/logistics/SCM market trends here. - Consolidation and in-sourcing Based on the relatively short history of the renewable energy logistics/SCM market and the fragmented industry in terms of the renewable energy logistics/SCM “eco system” outlined above, it is fairly obvious that no significant industry consolidation has taken place in this sub-sector of the overall SCM market yet. The trend of both utilities, OEM’s, and EPC companies actively in-sourcing critical service components as discussed above is a sign that key ultimate beneficiaries of the renewable energy logistics/SCM E2E solutions are not happy with the overall service levels available in the market. As also cited by EU’s DG Climate Action and referenced above, the global logistics service providers (“LSPs”) are not yet truly focusing on the renewable energy logistics/SCM market and they seem to concentrate more on the rendering of generic project cargo forwarding services offerings but not particularly on the

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MBA in Shipping & Logistics Class of 2011 Thomas Poulsen renewable energy logistics/SCM market vertical itself111. As evidenced from the review of the offshore market above, this could lead to bottlenecks and challenges in terms of being able to deliver the many renewable energy projects already planned and to be delivered in the decades to come112. Global service levels do not yet seem to be at an acceptable standard when it comes to the linkage between the managerial coordination tasks such as E2E SCM solutions/project cargo forwarding versus the physical asset control, execution, and ownership. Global LSPs will most likely ultimately follow the lead of utilities, OEM’s, and EPC companies in terms of the presently on-going in-sourcing trend and ultimately engage in and allocate investment funds within the renewable energy logistics/SCM market. In conclusion, this means that further industry consolidation in the form of mergers and acquisitions (“M&A”) can be expected in the RE SCM market (De Wit & Meyer, 2004, Kotzab, et.al., 2007). - Changing landscape The renewable energy logistics/SCM landscape is changing fairly quickly: As documented above, the boundaries between different contracting players are getting blurry very quickly and the different parties now take on often several different roles within the supply chain “eco system”. Clear signals are emerging that the renewable energy logistics/SCM market is ready to undergo M&A driven industry consolidation, partly driven by the in-sourcing trend of utilities/OEM’s/EPC companies discussed above. At the same time, globalization is happening with rapid speed whereas at the same time, local content requirements form part of the country political agenda yielding de-facto protectionism mechanisms in some cases as described above. One such example of protectionism which, however, works against globalization – while at the same time propelling China into a more prominent position - is the impact the rare earth metals (rare earth oxides, “REO”) protectionism restrictions emerging in

111 This was confirmed through author’s extensive interview round with local, regional, and global forwarders such as Baltship, DSV, Royal Cargo, DHL Global Forwarding, Panalpina, Agility, Kuehne + Nagel, DB Schenker, BDP on a global basis as part of the empirical data gathering efforts 112 Equilibrium between supply and demand in terms of WTIV’s is expected to be reached in 2012 according to evidence gathered as part of the empirical data gathering efforts with companies A2SEA, DONG Energy, and Esbjerg Havn 163

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China are having on the emerging magnet based DD technology of wind turbines which e.g. SWP and Goldwind are betting heavily on113. This means that production is now increasingly regionalizing and to some extent localized with China taking a much more dominant role in terms of manufacturing on a global scale. If using SWP as a fairly typical case study to that effect114, production has already been expanded/replicated from Brande in Denmark to also include plants in China, India, and the US: Additional expansion is under way in the UK, Russia, Canada, and Brazil as well as capacity expansions in Denmark/US. - So-called “10x changes” When projecting renewable energy freight volumes to 2050 for the globe as has been done in the wind scenario model, the massive volume increases projected are typical “10x changes” to the renewable energy sub-sector which will radically transform the renewable energy logistics/SCM market as we know it today. One such non-wind related example is the Vattenfall/McKinsey biomass study (2010) on wood pellets/wood chips mentioned above and the radical developments within e.g. offshore wind farm development as documented above. Key renewable energy logistics/supply chain market change drivers A number of key change drivers exist at a renewable energy logistics/SCM market/industry level:  Macro factors outlined above including government regulations (UN, EU, sub- region, country, local) impacting both demand and how to supply.  R+D efforts (massive and on-going within all fields of renewable energy in general and wind in particular) such as the UK’s drive towards wave, tidal, and wind energy described above  Other logistics/SCM challenges such as the construction of and transportation of so-called transport equipment used for the safe transportation of parts and modules both locally and internationally. Using SWP as a case study again,

113 This has led to Goldwind integrating even further upstream by acquiring REO mines in China (according to empirical data gathered in interviews with CWEA, SWP, and Duemer/Nielsen) 114 Basis interviews with Siemens Wind Power which please refer to details of in appendices 9 and 12 below 164

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massive challenges with both designing, keeping track of, storing, transporting, and returning the transport equipment exist with a need for reliable E2E solutions to be created115.  Renewable energy logistics/SCM asset light versus asset ownership business models will continue to influence how E2E SCM solutions are provided as well as the global scope and scale of service levels. As documented in discussions with WWL compared to external discussions with select global and local freight forwarders like DP DHL’s DGF and Baltship respectively116, two trends emerge which fundamentally drive different market behaviour: o The asset owners like WWL will need to find ways to deal with the asset light providers (LSP’s/intermediaries/forwarders) and/or create a strong need with the end beneficiaries of the asset based service offerings rendered in order not to be marginalized and “squeezed” within their respective slivers of the renewable energy supply chain overall. o The asset light operators like DGF’s IP group and Baltship will continue to want to be able to have ample asset providers to choose from in order to be as flexible as possible when tailor-making their bespoke/unique renewable energy E2E SCM solutions to their end clients - Future scenarios The original hypothesis going in to this ISP can be outlined broadly as follows: 1. Two major EU staging areas for renewable energy SCM components, modules, parts, and biomass fuels (one in the North/East and one South/West) to be set-up as public private partnership (“PPP”) set-ups. 2. Baltic sea “special coaster” fleet requirement based on wood pellets/wood chips traffic supply/demand imbalance. 3. Offshore wind farm installation vessels shortage basis supply/demand imbalance. 4. EPC renewable energy logistics/SCM in-sourcing trend.

115 Basis interviews with Siemens Wind Power (details outlined in appendices 9 and 12 below) 116 For discussions with the company, see appendix 11 below. For external discussions with DHL Global Forwarding and Baltship, please refer to appendices 9 and 12 below 165

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5. Renewable energy logistics/SCM vertical appetite of global LSP / forwarding / intermediary “majors”. Given that the ISP scope got narrowed considerably from the entire renewable energy scope to just the wind segment during the ISP process, only items 3, 4, and 5 were validated. However, given the global nature of the empirical data gathering efforts, three fairly clear regional scenarios have emerged:  A scenario for Europe  A scenario for Asia  A scenario for the Americas Although the author would like to briefly review each of these scenarios, a full description had not been completed by the time of submission of this ISP due to resource constraints. Part Conclusion (Including Consideration of the Industry Analysis) Demand for renewable energy is dramatically increasing through the encouragement of governments on a global basis - in developed nations as well as developing countries. Protection of the environment, abatement measures pertaining to GHG emissions, and reduction in dependency upon and use of non-renewable energy sources like fossil fuels are critical items on the agenda of organizations, governments, companies, and private individuals globally at this time. The democratization process on-going in North Africa and the Middle East coupled with the adverse effects of the earthquake and subsequent tsunami in Japan have caused a spike in oil prices as well as negative public sentiment towards nuclear energy respectively. This in turn leads to the renewable energy sub-sector of the overall energy sector being in major demand, with extensive R+D efforts and investments on-going on a global level in an unprecedented manner. However, overall profitability of the renewable energy industry as such is still largely being based on government subsidies, tax redistribution programs, and/or tax credit systems. With e.g. the EU’s DG Climate Action continuing to set and further push the global agenda for action regarding the climate, a longer term and detailed view towards 2050 has applied using the wind scenario model as general market information was 166

MBA in Shipping & Logistics Class of 2011 Thomas Poulsen only available up to 2030 or 2035. However, besides this ISP, little or no research seems to have gone in to the area of renewable energy logistics/SCM thus far, i.e. local, regional and/or globally aggregated needs for infrastructure, critical supply chain assets, and reliable service levels from a transport/shipping/logistics/SCM perspective. With investment appetite having decreased as part of the global financial crisis, the global transport/shipping/logistics/SCM industry was already before the crisis seen by for example the EU as being hesitant and cautious in terms of renewable energy logistics/SCM’s perceived longevity and staying power: Consequently, investments have been relatively modest and in-sourcing has started among select SWF’s, utilities, OEM’s, operators, and EPC companies. Examples discussed in the Industry Analysis included e.g. Mubadala, Vattenfall, DONG Energy, Hochtief, Ballast Nedam, and SWP.

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Appendix 2 – Analysis Of Select Renewable Energy Types

Solar  Many different types of solar energy uses exist such as passive solar heating, active solar heating, and solar water heating.  Key technologies include solar heating collectors that warm up fluids running within the collector and photovoltaic (“PV”) cells that convert light from the sun directly into electricity.  Solar power is used both commercially and in private homes but solar power is everywhere: Street signs, calculators, watches, communications satellites, and street signs are examples where solar technologies are utilized. o Japan and Germany are considered the pioneers usage in private homes, USA (California) and Spain is pioneering in terms of commercial use o Major producers are located in the US, PRC, and Germany.  The solar technology can range size wise from very small cells to so-called “thin film” shipped in rolls to larger cells or blocks of solar panels.  Transport wise, solar panels and thin film products are often shipped in ocean containers and as such, it was agreed with WWL that solar will be outside scope for this ISP effort. Wind  Wind turbines generators (“wind turbines”) consist of the foundation, the tower, the nacelle, the generator, the hub, the blades, and a cooling unit  Wind turbines are used both commercially and also privately.  Wind turbines are made both for installation on land (“onshore”) and offshore.  Wind turbines for private use are smaller than those for commercial use and sometimes come with a tail vane and guy wires/tensioners.  An inbound assembly supply chain exists for parts and components used for the construction of the wind turbines.

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 An outbound parts and module turn-key project supply chain exists for the transport and installation of the wind turbines at their operating sites.  A possible cradle-to-cradle closed loop supply chain for wind turbine recycling purposes may exist in the future along with the removal of wind turbines from one location to another in a turn-key project supply chain. Geothermal (heat from earth/heat generated in the ground)  Geothermal energy is generally created through the decaying of radioactive materials deep under the earth’s surfacelxxxi: Decaying materials such as uranium become accessible at the boundaries of tectonic plates. When the tectonic plates rub together or move over/under each other, coloumns of magma break off and are pushed upwards nearer to the earth’s surface, thus creating geothermal reservoirs.  Geoexchange technology is another form of geothermal energy production which is used to access renewable solar energy stored just below the earth’s surface after the energy from the sun’s beams are absorbed into pipes in the ground.  Geothermal energy can be used both to create heat and to warm water.  A geothermal unit usually requires electricity to run.  Geothermal energy is used both commercially and for private purposes.  Geothermal installations are either open loop (heat pumps pump water from which heat is extracted between wells) or closed loop systems (pipes linked to a compressor).  Geothermal power plants are often located where there are tectonic plate boundaries and the largest can be found in Iceland, California, Costa Rica, New Zealand, and the Philippines.  Geothermal power plants generally operate through two wells that are drilled into the geothermal reservoir once located and three different methods are used: o Dry steam: High pressure steam via a turbine to an electrical generator. o Flash steam: Water flashes into low, medium, and high pressure steam.

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o Binary cycle: High temperature geothermal water is used to heat a secondary fluid (usually isopentane or isobutene) which flashes of to a vapour that drives a turbine.  As geothermal installations are mainly linked to residential projects at this time117, it was agreed with WWL that geothermal is kept outside scope of this ISP. Biomass  Waste o Forest waste. o Municipal, agricultural, and industrial waste containing organic materials. o Different kinds of waste like beverage waste, brewery waste, and potato waste can be used for ethanol production. o Other kinds of more ordinary waste which is burned in order generate heat used for energy production.  Biodiesel (generally from vegetable oil or animal fat) o Fatty acid methyl esters (“FAME” or biodiesel) are produced together with glycerin when mainly virgin or recycled vegetable oils or animal-fat residues is reacted with alcohol and a catalyst o Biodiesel is often mixed with fossil fuel diesel (petrodiesel). o Glycerin is used in the food, cosmetic, and other industries. o In addition, biodiesel can also be produced from soybeans and research is on-going in terms of future use of canola seed, used cooking oils (yellow grease) from the restaurant industry, and cooking oil/food products contained in the wash water (brown grease) from restaurants. o Biodiesel is produced using a system of tanks, pipes, and heat coils to extract and separate the biodiesel and glycerin.  Ethanol o The vast majority of ethanol is produced from corn and is as such a very debated and controversial topic as this is a food product.

117 Source is WWL Global Market Intelligence team through empirical data gathering efforts

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o As mentioned earlier, some ethanol is produced from waste products. o Cellulosic ethanol is produced from straw grass, corn stover, and perennial plants like switchgrass. o Research is on-going in terms of the future use of hay and wood- processing byproducts.  On-going supply of wood based products like wood pellets and wood chips o Wood pellets and wood chips are quickly emerging as very solid alternatives to especially coal o Coal burner power plants can be converted to be able to combust both coal and wood pellets/wood chips at an additional investment. Such investments are currently taking place all over Europe (some energy companies are also investing in burners exclusively for wood pellets/wood chips). o As an example, Vattenfall recently collaborated with 3 other parties to have McKinsey produce the so-called “Biomass for Heat and Power” report (2010). The report concluded that whereas biomass holds great potential for the production of heat and power, progress to expand the use of biomass is only being realized at a very slow pace. At the same time, the report concluded that the use of natural wood resources must of course be done in a manner which is indeed sustainable in itself so that the wood energy source remains renewable and is indeed not depleted. o Wood chips, wood pellets, and a lot of the other biomass type commodities are, however, either fluid in form or very dusty/not very clean to transport. Therefore, it was deemed in collaboration with WWL to consider this segment not in scope for this ISP as the cars and H&H market segments require a clean and somewhat dust/dirt free environment for shipping and storage purposes. Hydropower  Dams o This is by far the most common type of hydro power technology.

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o Generation of energy using hydro based technology dates back to ancient times. o Dams are common in many parts of the world, however, the largest hydroelectric dam in the world is the Three Gorges Dam in PRC where 26 major turbines presently generate more than 18,000 MW of powerlxxxii.  Wave (emerging) o The UK is a leading promoter of wave energy technology within the EU due to the fact that the British Isles are surrounded by water and as such, the UK represents some 35 per cent of Europe’s total wave potentiallxxxiii. o This technology is still undergoing serious R+D efforts with approx. 200 “live test sites” globally118 and an advanced test center operates for example in Denmarklxxxiv.  Tidal (emerging) o Tide mills have been used since the Roman times and middle ages across Europe. o Tidal energy is, however, not widely used. o The first major commercial tidal energy production center came into operations as far back as the 1960’s. o Three main technologies exist: . Tidal stream generator: Kinetic energy of moving water to turbines creates energy. . Tidal barrages: Not commonly used but largely function as a dam. . Dynamic tidal power: This type of tidal energy generation is still undergoing tests and has not yet been constructed. Key test areas include UK, PRC, and Korea. o As a lot of the hydro projects are still nascent in terms of R+D, this is definitely a “wild card”. But the most robust technology as applied using

118 Empirical information gathered by the author during site visit and subsequent follow-up visit to Wave Star Energy in Hanstholm and Broendby, Denmark respectively

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dams is now largely a locally sourced119 effort in those countries where dams are still being constructed. Therefore, it was agreed with WWL that hydropower will not be part of the scope of this ISP.

119 According to discussions with WWL Global Market Intelligence team

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Appendix 3 - Industry Critical Success Factors (Detailed)

 Service product attributes o The service product considered should be either niche in a small market or global in terms of scope, however, with a culturally savvy local reach which is highly customized to each customer, market, and segment. o In order to win, a high degree of flexibility must exist in terms of the service portfolio of the company. o The service quality is a prerequisite to be able to compete and this includes being able to measure (hopefully low!) damage rates and being able to operate in all weather conditions, especially for offshore wind.  Competencies, skills, and capabilities o Organizationally, a talented and deeply knowledgeable work force with understanding of the customers’ business is required in order to be able to make the customers feel as if the company speaks “their language”. o Ability to innovate is important given the fast pace of R+D characterizing the wind energy market itself: New transport equipment, new ways to store the products, and ability to customize and tailor-make E2E SCM solutions in a changing setting are critical factors as the different parts and modules grow exponentially in size. o Service product design and “packaging” expertise is highly critical in order to ensure that the wind market is adequately covered, also in terms of industry terminology and established processes. o A culture of empowerment and fast decision making is required in order to be able to properly price, plan, and secure the often very attractive and sought for wind cargoes being offered out directly from OEM’s/EPC companies/operators/utilities, or via freight forwarders. o Strong e-commerce capabilities for communication, ease-of-doing business, and self-service purposes are sought to a larger and larger

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extent by the customer base. Smooth data exchange is critical through EDI, XML, and flat file transfers.  Marketing and market achievements o The breadth of service product mix/selection is important in order to be able to service the different wind market segments, both in terms of the inbound and outbound supply chains respectively. o A well recognized brand and strong reputation easily associated with the high quality service levels and overall capabilities is important in order to be able to be top-of-mind of the existing and potential customers. o Strong and tailor-made advertising and marketing materials in select media and at key conferences/events should be a priority. o A high degree of technical services and technical assistance should be available both in the tendering, shipment, and subsequent installation phases of wind farm projects. o Personalized key account management (“KAM”) and customer service structures are critical components of the customer interface on a day-today and at a more strategic level.  Technological factors o Key assets like vessels, transport equipment, warehouses, yards, storage areas, trucks, rail equipment, barges, cranes, and so forth should match the commodities shipped, be of high quality, and be tailor-made to the wind logistics market. o IT systems must be customer friendly, intuitive, easy to use (browser/cloud based), effective, business enabling, and cost competitive.  Service production factors o Economies of scale and overall low operating costs should be achieved from other non-wind logistics/SCM type service offerings and/or associated service products if at all possible, i.e. sharing costs with other verticals would be ideal. o Low product design/engineering costs should characterize the innovation process surrounding new service products, the R+D/innovation

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efforts as the transported commodities get larger, and the “service packaging”. o Learning curve effects should be prioritized through active knowledge management in order to be able to replicate skills/capabilities across different geographies, to repeat best practices, and avoid making the same mistakes again. o Utilization of fixed assets should generally be as high as possible and go across the highest amount of service products, market segments, commodity types, industry verticals, and trade lanes. When assets become too small for the freight in for example they Europe offshore market, the assets should be re-deployed to e.g. the China offshore wind market. o Quality control of know-how should be a constant focus of the organization either through quality programs, six sigma, and/or knowledge management. Acknowledged institutions like Lloyds of London, Det Norske Veritas, and/or Germanischer Lloyd should be used for process and asset accreditation. o A high degree of customization to specific customer needs should be possible adhering to the customer’s point of view but at the same time using standardized, underlying service products and operating models. o High labour productivity both at the offices, the operational sites, and with sub-contractors is critical to ensure low cost. Business Process Outsourcing to low cost countries is an excellent way to help achieve this goal.  Network o Truly global network coverage in relevant trades or a strong presence in the niche selected, depending on how platform leadership is sought. o Highest service levels on board the vessels, at each port of call, and for all land-based services should be strived for with emphasis on health,

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safety, Corporate Social Responsibility (“CSR”)120, speedy operations, high quality, and low damage rates o Linkage between services such as ocean, ports/terminals, land-based services, VAS, and SCM is critical in order for the individual products not to be commoditized and easy to replicate. o Ability to market transport assets directly and/or through intermediaries, depending on the go-to-market strategy applied and degree of project cargo forwarding capabilities available within the organization. o Ease-of-doing business for the customers including access/navigation using the end customer’s preferred channels, e.g. web site, phone, Skype, face-to-face, social media (Linked-In, FaceBook, Plaxo, Twitter, etc.), IM (gmail, yahoo, MSN, Skype, etc.), and so forth.  Other factors o The offices and operational sites must be at convenient locations in terms of where the customers are based as well as where the cargo is moving from/to, and/or where the cargo is stored. As transport patterns change, flexibility is required in order for offices/sites to be able to move to different locations. o Strong focus on good after sales service such as customer service/KAM/sales follow-up, internal debriefings on critical movements/experiences, and efficient claims handling are necessary factors when trying to ensure repeat customer business and strong maintenance of a good brand/reputation. o A strong balance sheet and good overall financial strength are essential factors in terms of customers’ selection process for doing business with other companies as well as the ability to co-invest along with the customer in new transport equipment, assets, IT needs, and or service product designs.

120 The CSR megatrend is discussed in detail in appendix 1

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MBA in Shipping & Logistics Class of 2011 Thomas Poulsen o A documented and strong environmental focus is quickly becoming a prerequisite in terms of being able to do business with many companies and organizations globally. Being able to measure transport related carbon footprint and having strong policies in this area are critical factors. o Patents documenting the innovative nature of both assets and processes is a strength when competing for new business.

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Appendix 4 - Company Background And Context

The company Wallenius Wilhelmsen Logistics (“WWL” or the “company”) is primarily an asset based shipping company engaged in the Roll-On/Roll-Off (“RO/RO”) segment of international ocean transportation. The high level ownership and group structure has been outlined in figure 4.1 below and will be further discussed in the company analysis section. Figure 4.1: WWL Group structure and ownership

Two strong owners Part of a strong group

EUKOR Car Carriers Inc. 40% 40%

American Shipping 50% and Logistics 50%

Wallenius Lines Wilh. Wilhelmsen 50% 50%

50% 15%

UECCUECC CAT GLOVIS

Source: WWL, author analysis, strictly private and confidential Owned by Stockholm based Wallenius and Oslo based Wilhelmsen in 50/50 JV, WWL operates a fleet of RO/RO vessels owned by the parent companies and deployed by WWL on trade routes as a fixed liner type service globally. The

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MBA in Shipping & Logistics Class of 2011 Thomas Poulsen company is mainly engaged in transportation of auto (or “cars”), rolling construction equipment and agriculture machinery (H&H), as well as breakbulk (break-bulk). Combined, cars and H&H amount to approx. 85 per cent of the company’s revenues and 94 per cent of the company’s volumes.121 For mission, revenue, and staffing details, please see figure 4.2 below. Figure 4.2: WWL mission, revenue, and staffing overview

Mission, revenues, and employees A strong financial and organisational foundation

Mission Statement: We deliver innovative and sustainable global shipping and logistics solutions for manufacturers of cars, trucks, heavy equipment and specialized cargo.

Total 1.8 billion USD in revenues Ocean revenue in 2010, of which per segment 2010: – 1.6 billion USD in Ocean Transportation – 0.2 billion USD in Terminal and Inland Services 3,500 employees globally Rolling equipment 3000 36 %

2500 51 %

2000 Auto

1500 13 % USD,million 1000

500

0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Breakbulk

Inland Logistics Ocean Services

Source: WWL, author analysis, strictly private and confidential As can be derived from the company’s mission statement, WWL has gotten engaged in the rendering of various VAS surrounding the core ocean transportation product in order to deliver on the “shipping and logistics solution” focus contained in the mission statement. The VAS and end-to-end (“E2E”) SCM services do, however, more importantly both tie or ”glue” the customer closer to the company whilst at the same

121 According to company provided information, source Global CFO/company 2010 Long Term Strategy 180

MBA in Shipping & Logistics Class of 2011 Thomas Poulsen time offering protection of the core investment in vessels for ocean transportation122. For a high-level fact sheet of the company, please refer to figure 4.3 below. Figure 4.3: WWL high level fact sheet

Wallenius Wilhelmsen Logistics High level overview

Operating a global ocean- and land-based network of highly effective entities 4.3 million movements of autos, rolling equipment and breakbulk per year – 1.8 million in ocean transportation – 2.5 million in inland transportation 4 million throughput of autos and rolling equipment through Technical Service 60 vessels in fleet 50 vehicle processing centres 11 terminals globally

Source: WWL, author analysis, strictly private and confidential The VAS offered include own terminal operations either near ports or at inland locations (sometimes including VPC’s/EPC’s and Vehicle Logistics Yards), inland distribution services by truck/rail/barge, technical services, and E2E SCM services mainly for the cars and H&H customer base (in select locations including so-called “freight forwarding light” services like customs clearance, certain inland transportation tasks etc.) linked to the core ocean transportation product. An overview of the services can be seen in figure 4.4 below.

122 According to company information from Odd Egil Borgen and other personnel 181

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Figure 4.4: Five main service product pillars of WWL

Products and Services A complete logistics offering - Five main service products

Ocean Transportation Deep sea trades Transhipment services Global network Inland Distribution Multimodal transportation Supply Chain Management Rail Process management Visibility and reporting Truck Supplier management Barge Terminal Services Receiving and delivery Multimodal services Cargo handling services Storage Loading and discharge Inland Distribution Port Services Multimodal transportation Freight forwarding Technical Services Rail Terminal technical Accessory fittings Truck services Repairs - Panel and Paint Barge - Mechanical Multimodal services Storage Management Vehicle preparation Receipt and dispatch - Plant - Port & Railhead - Distribution centre

April 15, 2008 Source: WWL, author analysis, strictly private and confidential Basis the 3 core markets served (cars, H&H, and break-bulk) as well as the service portfolio offered (SCM, Ocean Transportation, Terminal Services, Inland Distribution, and Technical Services), the company increasingly views itself as a Logistics Service Provider (“LSP”) more than a shipping company, especially for the cars and H&H segments where it markets so-called “factory to dealer” SCM concepts. At the time of writing this ISP, the company was in the process of adding significant new vessel capacity in both 2011 and 2012, including 4 of the world’s largest and most advanced RO/RO vessels - the so-called Mark V or “MKV” class vessels (see illustration 4.5 below) – and 6 LCTC vessels (“Large Car and Truck Carriers”).

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Illustration 4.5: New Mark V class vessels

Source: Company information From a strategic business development perspective, the company wishes to grow their smallest market segment, break-bulk. Illustration 4.6: Strategic WWL revenue growth focus - break-bulk with VAS/SCM

MBA in Shipping & Logistics Class of 2011 WWL planned scenario T. Poulsen

Cars 50 %

H&H 30 %

BB (with VAS/SCM) 20 % Growth focus

ISP illustrations, figures, and graphs

Source: Company 2010 LTS, author graphics, private & confidential

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At present, break-bulk accounts for just shy of 6 per cent of the total volume capacity and some 13 per cent of overall revenues and according to the 2010 LTS123 plan, the company wishes to grow the segment to 9 per cent of volumes and 20 per cent of revenues in the future, after adding the increase in capacity (see illustration 4.6 above). To maximize revenue streams and profitability, the company wishes to grow break- bulk by obtaining high-yielding Ocean Transportation freight/cargoes whilst at the same time adding as many VAS revenue streams to this cargo as possible (for the topic of service product revenue streams and company profitability, author applied thoughts of Byrnes, 2010 in discussions with the company). Context Figure 4.7: High level WWL environmental strategy and commitment

An Environmental Forerunner Focusing on the future

Our continued goal is to be an environmental forerunner, and we have developed a strategy and policies to keep us there.

We recognize our activities impact the environment, and so we focus on high impact changes. WWL continues to be accountable and transparent in environmental commitments to customers and stakeholders. We exceed our responsibilities to reduce risk and cost. WWL invests in tomorrow’s technologies today through new vessel designs and supporting early stage technology development. WWL recognizes that active partnerships with stakeholders is key to developing sustainable solutions.

Source: WWL, author analysis, strictly private and confidential

123 LTS reviewed in detail by author with the company’s global CFO, Rune Gisvold, in Oslo on April 4, 2011

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Strategically, WWL focuses heavily on the environment as illustrated in figure 4.7 above. Basis initiatives such as ballast water cleaning and other high-profile industry front- runner positions outlined in figure 4.8 below, WWL enjoys a very good reputation from an environmental perspective. The figure illustrates that WWL has driven forward some key environmental initiatives both when it comes to the future design of ships (the Orcelle) and zero emission terminals (Gastor). Figure 4.8: Examples of WWL environmental leadership in the port/vessel arena

An Environmental Forerunner Vision for a ZERO Emissions Terminal + The Orcelle: Fuel Cell & Solar Panel Technology

Castor Green Terminal

Source: WWL, author analysis, strictly private and confidential The company has been engaged in the energy vertical sector since the company’s inception. At a total of only 0.18 per cent of total revenues in 2010 per illustration 4.9 below, the energy vertical in general does indeed still provide for some but rather small volumes and revenue streams to the company, both in the H&H and break- bulk market segments at present. Within the energy sector, the company is involved

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MBA in Shipping & Logistics Class of 2011 Thomas Poulsen in shipments of parts, components and modules for the oil & gas, coal, and steam markets.

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Illustration 4.9: Breakdown of company revenues (2010) by market segment

MBA in Shipping & Logistics Class of 2011 T. Poulsen Revenue contribution

WWL energy sector revenues (incl. RE) vs. BB and total company revenues (USD) 4,250,494 290,949,506

Energy incl. RE BB excl. Energy Cars and H&H

1,504,800,000 Segments/Sectors Share (%) Cars and H&H 83.60 BB excl. Energy 16.22 Energy incl. RE 0.18 Total company 100

ISP illustrations, figures, and graphs

Source: Company information and author analysis NOTE: In this chart, “RE” refers to renewable energy and “BB” refers to break-bulk cargo The renewable energy renewable energy sub-sector of the overall energy vertical sector is, however, playing a very small role for the company at this time with experience and exposure limited to a small part of the wind and hydro energy markets only. As can be derived from illustration 4.10 below, the renewable energy sub-sector only contributed some 9 per cent of the overall Energy sector revenues, or less than USD 400,000 of total company revenues of USD 1.2 billion in 2010. When performing a customer pareto analysis for the energy sector in total utilizing revenue numbers, 20 per cent of the customers contributed some 73 per cent of the energy sector revenues. Within the top 20 per cent revenue contributors, only a single renewable energy sub-sector customer existed.

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Illustration 4.10: Company energy sector involvement (customer Pareto analysis)

MBA in Shipping & Logistics Class of 2011 T. Poulsen Energy sector analysis

WWL Power Generation Market Segment (USD)

378,232

1,528,607 2,343,656 Transformers Turbines/Generators Wind Power Equipment (RE) Segment Share (%) Transformers 55.14 Turbines/Generators 35.96 Wind Power Equipment (RE) 8.90 Total 100.00

Pareto analysis WWL energy sector revenues

27.34

Top 13 customers (pct) Balance 49 customers (pct) Energy customers Revenues (USD) 72.66 Top 13 customers 3,088,446 Balance 49 customers 1,162,048 Total WWL energy sector revenues 4,250,494

ISP illustrations, figures, and graphs

Source: Company information, author analysis In addition, the company has so far not been able to sell any VAS or SCM add-on services in the energy sector nor the renewable energy sub-sector: All client solutions have been purely based on ocean transportation service offerings only. Therefore, the company wishes to take this opportunity to take a deeper look at the VAS/E2E SCM structure of the renewable energy vertical sub-sector of the overall energy market through the ISP effort. For an overview of the company’s overall sector focus within the break-bulk segment, please see illustration 4.11 below. Whereas the company is highly skilled when it comes to cars and H&H, the company is less skilled within the area of break-bulk in general. However, basis a proud heritage, the company has a strong presence within several of the above mentioned sectors such as for example boats/yachts, railcars/railway equipment, and general project cargo. The company is, however, not in possession of a particularly deep skill-set when it comes to renewable energy.

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Illustration 11: Company break-bulk sector focus areas

MBA in Shipping & Logistics Class of 2011 T. Poulsen

WWL BB sector focus

Aircraft parts/modules

Boats/yachts

Mining

Power generation/energy

Railcars and railway equipment

General project cargo

ISP illustrations, figures, and graphs

Source: Company information, author analysis

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Appendix 5 – Additional Company Analysis Information

Ownership Background on the Two Owners In June, 2010, Wilh. Wilhelmsen Holding ASA (the “Wilh. Wilhelmsen Holding Group”) reorganized the company and raised USD 226 million by spinning off 27.3 per cent of its’ Wilh. Wilhelmsen ASA division in an Initial Public Offering (“IPO”) on the Oslo Stock Exchange (“OSE”)124. The spun off entity, Wilh. Wilhelmsen ASA, largely controls the Wilh. Wilhelmsen Holding Group’s involvement in the Shipping and Logistics business areas whereas the Wilhelmsen Maritime Services AS division was retained as a fully owned subsidiary active in the Maritime Services business area. Illustration 5.1: Wilhelmsen structure and activities

MBA in Shipping & Logistics Class of 2011 T. Poulsen Wilhelmsen (Norway, 1861)

Wilh. Wilhelmsen Holding ASA

72.3 % 5-22 % 100 % Shipping Logistics Maritime Services

Wilh. Wilhelmsen ASA Wilhelmsen Maritime Services AS

50 % WWL Kaplan/Qube 100 % Wilhelmsen Ships Service

40 % 50 % EUKOR WWL 100 % Wilhelmsen Ship Management 50 % ARC 50 % American Shipping & Logistics Wilhelmsen 100 % Technical 15 % Glovis 15 % Glovis Solutions

ISP illustrations, figures, and graphs

Source: Wilh. Wilhelmsen Holding ASA annual report 2010, WWL annual report 2010, and author analysis

124 According to the Wilh. Wilhelmsen Holding ASA annual report 2010 downloaded from http://www.wilhelmsen.com/about/invest/reports/Pages/AnnualandEnvironmentalreports.aspx on May 13, 2011 at 14:55 CET 190

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As a result of being listed on the OSE, the Wilh. Wilhelmsen Holding Group is now issuing a very transparent and open annual report and from this report, very detailed information is available about the Group’s more than 200 legal entities, including WWL. An overview of the Wilh. Wilhelmsen Holding Group’s business areas and key investments can be seen in illustration 5.1 above. Illustration 5.2: Wallenius structure and activities

MBA in Shipping & Logistics Class of 2011 T. Poulsen Wallenius (Sweden, 1934) Wallenius Rederierna AB Wallenius Lines AB Wallenius Marine AB Wallenius Logistics AB

Shipping

WWL EUKOR ARC UECC

Terminal Services

Wallenius Wilhelmsen Terminals Holding

Logistics

American Auto Logistics American Logistics Network

ISP illustrations, figures, and graphs

Source: Wallenius web site, WWL annual report 2010, and author analysis However, the other owner, Wallenius, is still a fully privately owned company and as such, they do not publish annual reports nor are they required to be very detail oriented about their business activities on their web site125.

125 For an example of how Wallenius chooses to inform the public about their activities and organization, please see http://www.walleniuslines.com/en/Our-organisation/Wallenius-Lines/ (Accessed on May 13, 2011 at 15:57 PM CET)

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As can be seen from illustration 5.2 above, Wallenius does not disclose as much information publicly as Wilhelmsen. Wallenius simply outlines that they have different legal entities like Wallenius Lines AB and Wallenius Marine AB. From the WWL annual report 2010, additional legal entities such as Wallenius Rederierna AB and Wallenius Logistics AB are mentioned in connection with the WWL ownership structure. In terms of the shipping activities, Wallenius owns a share in UECC (from the WWL company presentation, a share of 50 per cent is mentioned) whereas the balance investments mirror those of Wilhelmsen in Norway (except for Glovis where the 15 per cent ownership stake is maintained by Wilh. Wilhelmsen ASA). It is also interesting to note that the Wallenius investments in non-shipping activities are via WWL (Terminal Services via the WWL subsidiary Wallenius Wilhelmsen Terminals Holding AS) and as a Wilhelmsen co-investment (American Auto Logistics and American Logistics Network are both subsidiaries of American Shipping & Logistics which per Wilhelmsen is owned 50 per cent by Wilh. Wilhelmsen ASA).

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Financial Analysis: Supplementary Information Illustration 5.3: Income statement as provided by WWL in 2010 annual report (USD 1,000) 2009 2010

Gross operating revenue 1,316,717 1,766,684

Direct operating expense (1,152,614) (1,523,200) Wages and remunerations (154,269) (158,219) Depreciation and write-down (17,432) (15,532) Other operating expensen (56,187) (57,836) Share of income/(loss) joint-ventures and associated companies 3,473 4,079

Net operating income/(loss) (60,312) 15,976

Financial items

Financial income 4,706 3,659 Finacial expenses (4,899) (5,153)

Net financial items (193) (1,494)

Net income/(loss) before taxes (60,505) 14,482

Taxes 15,156 (4,694)

Net income/(loss) before minority (45,349) 9,788

Minority part of the result 37 (1,039)

Net income/(loss) (45,312) 8,749 Source: Rune Gisvold, WWL CFO, April 4, 2011 Information Technology: Supplementary Information In illustration 5.4 below, a high level overview has been provided of WWL’s IT infrastructure as shared with author during the empirical data gathering exercise through internal interviews.

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Illustration 5.4: WWL IT infrastructure (incomplete, directional only)

MBA in Shipping & Logistics Resource based view Class of 2011 T. Poulsen - WWL IT architecture

Ocean SCM Forwarding VPC

FQS ProAct DE: Own system SHA: (freight quotation) Off-the-shelf SAGA (booking, documentation, UK: Own system and equipment)

SPS (stowage planning) BE: MS Excel

HRM systems (People finder, Talent Management, Performance Management)

Supplemented by many local systems globally for book-keeping

CODA (global accounting/accruals/expense/outstanding system)

CADENZA (global invoicing system with interface from SAGA)

IT Roadmap Process (Scope: Next 3-4 years)

ISP illustrations, figures, and graphs

Source: Internal WWL interviews, author analysis Related Parties Via Respective Owners: Supplementary Information  EUKOR Car Carriers (“EUKOR”)lxxxv is a company with capabilities and vessels that are fairly similar to those of WWL. The ownership structure is a bit different (80 per cent joint ownership by the same owners as WWL) and the company is generally perceived by WWL to be “very Korean”. EUKOR operates more vessels than WWL and generally, EUKOR’s vessels serve different trade lanes than WWL. EUKOR’s vessels can handle break-bulk and the transport equipment as well as the break-bulk bookings are largely managed by WWL. From a vessel perspective, WWL and EUKOR cooperate on tonnage deployment and swap vessels if/when required. EUKOR largely makes use of the WWL organization to fill and load its’ vessels. As such, EUKOR has an organization in Europe with its’ head office near Frankfurt and which consists of some 15-20 people in total

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whereas comparatively, WWL has 3-400. The European offices of WWL sell both WWL and EUKOR services and are measured on their performance accordingly. In China, the WWL organization is responsible for EUKOR operationally. This again means that the WWL offices in Europe present a “joint product” to their clients whereas WWL and EUKOR are somewhat competing entities in China. Generally, the WWL personnel feels as if the owners of EUKOR and WWL want WWL to “play nice” and teach EUKOR only for EUKOR to then do things independently and in direct competition with WWL.  United European Car Carriers (“UECC”)lxxxvi is a European short-sea RO/RO carrier with its’ head office in Oslo, Norway. It is owned in 50/50 JV between Wallenius in Sweden and key competitor NYKlxxxvii of Japan126. Collaboration between UECC and WWL includes trans-shipment services with on-carriage to different European ports by UECC. UECC’s vessels do have break-bulk capability, although to a limited degree. UECC manages its’ own break-bulk transport equipment. As was also the case for EUKOR, the WWL organization in Europe is responsible for UECC commercial and operational activities. Recently, the perception of WWL personnel is that UECC focuses more on the H&H segment and that UECC’s reputation is getting better in the market place.  American Roll-on Roll-off Carrier (“ARC”)lxxxviii is an American flag RO/RO carrier owned 100 per cent in JV by the same owners as WWL. ARC’s vessels are often deployed to service the US government and/or military. Since 2010, ARC has had its’ own representation in Europe and is no longer served by the WWL organization. Some leasing collaboration regarding break-bulk equipment between ARC and WWL. The perception from WWL was generally that this was done in order for the company to be more independent.  Hyundai Glovis Co., Ltd. (“Glovis”)lxxxix is a fairly new entrant in the RO/RO market and is mainly focused on the Korean auto market. The company is Korean and Wilhelmsen has a 15 per cent share. The company is expected to have break-bulk capacity and no collaboration exists regarding break-bulk

126 NYK is also a JV partner with WWL in port companies in both Tianjin and Shanghai

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transport equipment. The initial Glovis go-to-market focus has been on the car segment and increasingly also on the H&H segment.  ARMACUP Maritime Services (“Armacup”)xc is a 50 per cent owned subsidiary of WWL. Originally trading in the Japan/New Zealand trade, Armacup has now expanded its’ coverage to also include for example China and Australia. Armacup has vessels with break-bulk capabilities and some leasing collaboration exists between Armacup and WWL regarding break-bulk transport equipment. The WWL organization handles sales and operations for Armacup.  Wilhelmsen Ships Service (formerly Barber Wilhelmsen or “BarWil” and now generally referred to as “WSS”)xci is a company engaged in port agency business around the globe. With approx. 300 offices globally, WSS is one of the major players in its’ field and the company has built a major ship’s spares supply operation globally to support the core agency offerings. WSS serves both WWL, other related parties via the WWL owners, and various third party companies on a global basis. WSS performed a study on project cargo management back in 2009. The study was done by the Logistics Department and resulted in a “Green Energy” team being formed, based in Bergen. The focus so far has been on wind turbines and execution of shipments has largely taken place through WWL’s break-bulk department in Oslo127. A key measure used internally for the shipping focused companies within the Wilhelmsen and Wallenius groups remains the vessel hardware. Illustration 5.3 below outlines the relative strength of the individual brands making up the related parties of the Wilhelmsen and Wallenius groups.

127 A meeting is being scheduled in the end May time frame with the relevant personnel to explore potential synergies between this ISP effort, the WSS study, and the WSS “Green Energy” team. 196

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Illustration 5.5: Number of vessels within each of the related parties

MBA in Shipping & Logistics Class of 2011 T. Poulsen Group Related Parties Number of Vessels

90 60 20 8 26 2

Source: Company web sites, ISP illustrations, July 22, 2011 author analysis

Source: Web site of Wallenius, WWL LTS plan, WWL company information, and author research

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Appendix 6 – Additional Opportunity Catalogue Information

From the perspective of the LTS, figure 6.1 shows the number of catalogue items that can be attributed to key LTS focus areas such as revenue growth, cost reduction, BRIC country growth, and management issues. The figure shows the total number of opportunities and provides a view by issue type. Figure 6.1: Strategic issues by LTS work stream

MBA in Shipping & Logistics Class of 2011 Opportunities T. Poulsen - LTS focus areas

General nature Break-bulk specific Renewable energy SCM • Revenue Growth 21 4 6 11 • Management Issues 6 1 1 4 • BRIC Growth PRC 3 1 1 1 India 2 1 1 • Cost Reduction 1 1

ISP illustrations, figures, and graphs

Source: Author analysis When taking a closer look at the strategic issues of general nature summarized in table 6.2 below, it is found that these are generally harder to tackle and will be difficult to resolve as part of a renewable energy SCM focus within WWL: These issues are rather much “larger” than renewable energy SCM and must be dealt with accordingly.

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Table 6.2: Summary of opportunity catalogue strategic issues of general nature # Short name Description Analysis Status Investigate LTS RE

G.1 Out of the box opportunities Iraq Discuss Scott Gibson Open Synergies ARC? No Yes Afghanistan No Yes Military No Yes Government No Yes G.2 How to deal with freight forwarders? Embrace? Charm offensive Completed Yes Yes Compete head on? Treat as corporate accounts Yes Yes Selective collaboration? More aggressive marketing Yes Yes G.3 Organization needs to sell more Too many harvesters Harvesters also have to hunt Completed No Yes Not many hunters Need separate hunters No Yes G.4 Sales organization structure Organized by client type Corporate accounts and key clients need harvesters Completed New CCO org change No No Some product focus Product specialists and SCM/forwarding "horizontal" No Yes Geographical focus Synergies across regions/countries No Yes G.5 India market coverage Modest presence Expansion needed Open Yes Yes G.6 PRC market coverage Sales organization Additional sales coverage needed with marketing support Open Yes Yes Limited space allocation Lower yield than Japan and Korea but investment needed Lower costs needed Yes Yes G.7 Cost structure Front office/back office Need focus on Business Process Outsourcing Open Lower costs needed Yes No Asia head office Should be relocated from Japan to Singapore Lower costs needed Yes No Asia transshipment center Should be done in Singapore rather than Japan Lower costs needed Yes Yes G.8 Organizational focus Central office More or less 100 per cent focused on WWL "perfect world" Closed No Yes Regional offices Unique regional situations (e.g. UECC Europe, ARC Americas) No Yes Local offices Different focus drivers (WWL, EUKOR, and Armacup goals) No Yes

Operating entities Different P&L composition, local market "survival" vs global No Yes Source: Author analysis Similarly, when considering the break-bulk specific strategic issues, it is found that these opportunities are “bigger than” a renewable energy SCM strategy and must be resolved separately by WWL’s break-bulk service product (see table 6.3 below).

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Table 6.3: Break-bulk specific strategic issues opportunity catalogue summary # Short name Description Analysis Status Investigate LTS RE

BB.1 Fix terminology Break-bulk, NCC, mafi, static Different areas use different names for break-bulk Open No No BB.1 Grow break-bulk volumes From 6 to 9 per cent Determine current and future total volume Open Yes Yes BB.2 Grow break-bulk revenues From 13 to 20 per cent Determine current and future totol revenue Open USD 100M initiative Yes Yes BB.3 Break-bulk "glue" and "bundling" Beyond Ocean Transport Find formula to add more value/products Open Yes Yes BB.4 In-house project cargo management Develop organically Existing forwarding "light" product inferior Closed Yes Yes Acquire project cargo forwarding Only way forward (partial/full acquisition) Closed Part of Project CANDY Yes Yes BB.5 Bundled concept movement With pick-up and installation Part of project cargo management/forwarding Closed No Yes Entire shipping task RO/RO liner service supplemented by LoLo Project VEUVE Yes Yes BB.6 Charm forwarders Create "love all" strategy Internal WWL mindset needs to be changed Closed Yes Yes Refresh existing forwarders New vessels, vertical + product focus, services Yes Yes Target and sell to new forwarders Who is WWL, break-bulk service, vertical focus Yes Yes BB.7 Improved OEM focus Refresh existing clients New vessels, vertical focus Open No Yes Sell to new clients Who is WWL, break-bulk service, vertical focus Yes Yes BB.8 PRC operational capabilities More transport equipment Tugmasters, Samson trailers >160T, and RTG's Open Yes Yes Source: Author analysis This sorting effort applied to the strategic issues identified during the ISP allows a narrowed focus on the renewable energy SCM strategic issues which WWL is facing if it wants to grow its’ presence in the market segment. Based on the non-prioritized listing in table 6.4 below, a number of these issues do stand out as being of high importance for WWL.

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Table 6.4: Renewable energy SCM strategic issues from opportunity catalogue

# Short name Description Analysis Status Investigate LTS RE

RESCM.1 New/unknown RE break-bulk customers Review of existing customers Handful of clients are key Closed No Yes RESCM.2 New/unknown RE break-bulk commodities Review of existing commodities Mainly land based wind, some hydro, and grid Closed Yes Yes RESCM.3 RE sub-sector role in overall break-bulk growth Scope attainable market share Opportunities wind, grid, electrical cars Closed Yes Yes RESCM.4 Future growth in RE break-bulk shipping Transport/logistics tasks and players Trades, hubs, tasks, and players changing Closed No Yes RESCM.5 RE "glue" and "bundling" on top of Ocean Transport Project cargo management Critically needed Closed Yes Yes Terminal services All terminals can handle, some need equipment Yes Yes VPC Most have storage areas also fit for break-bulk No Yes Technical services Could be added for example in Esbjerg or "mobile" No Yes Inland distribution Existing teams possess knowledge of operators No Yes SCM Internal WWL definitions are prohibitive Yes Yes Forwarding "Ad-hoc" SCM, very useful, low hanging fruit No Yes RESCM.6 Lingo: "Speak the speak" Organization must be trained in RE lingo Similar to organization's capabilities within auto and H&H Closed No Yes RESCM.7 Balance the knowledge gap Germany very proactive, PRC "behind" A global plan and ensuing task force effort is a must Closed No Yes RESCM.8 Balance the operational experience gap Europe experience, PRC/India "behind" Secure some trial shipments to/from PRC, less NetCon focus Closed No Yes RESCM.9 China is the "big dog" Need focus, marketing, and sales NOW 80 wind turbine manufacturers, 60 already have prototypes Closed Yes Yes "Champions" Sinovel, Goldwind, and Dongfang "going global" Yes Yes Get close, help the players out, and move volumes Yes Yes EVERYTHING is made here Yes Yes RESCM.10 Get going in India Big market, no focus, little presence Input from GE Energy, Siemens Wind Power Closed Yes Yes Suzlon dominant position Yes Yes Suzlon presence in Europe (RePower) Yes Yes RESCM.11 Electrical cars WWL need to focus now, separate LTS area We seem to be "on it" in China Closed No Yes European manufacturers? No Yes Japanese? No Yes RESCM.12 Re-vitalize the wind turbine market WWL revenue dropped in 2009 and 2010 Inbound parts volumes (e.g. nacelle houses) Closed WSS Logistics wind No Yes Factory-to-factory transfers No Yes Merge-in-transit finished parts (GE vs Vestas set-ups) No Yes Off-shore wind market No Yes Connect to grid (transformers etc.) No Yes RESCM.13 Charm forwarders Create "love all" strategy Internal WWL mindset needs to be changed Closed Yes Yes Refresh existing forwarders New vessels, RE vertical + product focus, services Yes Yes Target and sell to new forwarders Who is WWL, break-bulk service, RE vertical focus Yes Yes RESCM.14 Improved OEM/grid/other RE constituencies focus Refresh existing clients New vessels, RE vertical focus Open No Yes Create go-to-market strategy Traditional and "new" players No Yes Target and sell to new clients Who is WWL, break-bulk service, RE vertical focus Yes Yes RESCM.15 Create simple "most difficult" blade cargo cheat sheet RO/RO capability Maximum length of blades and number of blades by vessel Open No Yes Weather deck capability Maximum length of blades and number of blades by vessel No Yes Special Mark V capacity Weight/length/weather stackable height capacity/constraints Yes Yes RESCM.16 In-house RE project cargo management Develop organically Existing forwarding "light" product inferior Closed Yes Yes Acquire RE project cargo forwarding Only way forward (partial/full acquisition) Closed Project CANDY Yes Yes RESCM.17 Bundled concept RE movement With pick-up and installation Part of project cargo management/forwarding Closed No Yes Entire RE shipping task RO/RO liner service supplemented by LoLo Project VEUVE Yes Yes Source: Author analysis

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Appendix 7 – Additional Charts, Figures, and Illustrations

Chart 7.1: Other promising renewable energy commodities (wave)

MBA in Shipping & Logistics Class of 2011 Wild card: Wave energy T. Poulsen

Wave Star Energy

• Vision: Off-shore wind parks • First machine being tested in Hanstholm (see site visit pictures) • 1:1 scale machine will produce 6 MW

Source: Wave Star Energy and ISP illustrations, July 22, 2011 author analysis

Source: Wave Star Energy empirical data gathering efforts, author analysis

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Illustration 7.2: US DOE EIA renewable energy cumulative growth percentage versus wind scenario model (EIA more conservative on renewable energy)

Per Cent Cumulative Percentage Spread 400

350 Total DOE EIA Renewable 300 Energy Potential

250 Wind Market 200 Estimate

150 Wind Scenarios 100

0 2005 2010 2015 2020 2025 2030 2035 2040

Source: Author analysis

Illustration 7.3: Historic harmonized tariff wind turbine export three key countries

USD Total Wind Export Value 2,500,000,000

2,000,000,000

1,500,000,000 Denmark 1,000,000,000 Germany Spain 500,000,000

2000 2001 2002 2003 2006 2007 2008 2009 2010 2004 2005

Source: WWL Global Market Intelligence, author analysis 203

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Chart 7.4: Harmonized tariff actual shipment values 3 key Europe export countries (wind scenario model inter-continental definition)

Inter-Continental Shipments 120%

100%

80% Denmark 60% Germany 40% Spain 20%

0% 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Source: WWL Global Market Intelligence, author analysis

Chart 7.5: Short-sea versus inter-continental wind scenario model splits (historic harmonized tariff shipment value data 3 key European export countries)

All Shipments - Split By Distance 100% 90% 80% 70% 60% 50% Shortsea 40% 30% Inter-Continental 20% 10% 0%

Source: WWL Global Market Intelligence, author analysis

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Chart 7.6: Additional wind turbine experience of WWL (older vessel types, USA)

MBA in Shipping & Logistics Class of 2011 Wind experience (2) T. Poulsen

63 Source: Company information, author ISP illustrations, July 22, 2011 graphics Source: Company information, author analysis

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Chart 7.7: The new WWL Mark V vessel series has not yet been tested re wind turbine loading capabilities under deck/on the weather deck (critical going forward)

MBA in Shipping & Logistics Class of 2011 New Mark V vessel T. Poulsen

64 Source: Company information, author ISP illustrations, July 22, 2011 graphics Source: Michael Porter’s five forces framework, company discussions, author analysis

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Appendix 8 – Trip Schedule and Site Visits

July 8, 2010: Visit to the joint Vattenfall/DONG Energy straw grass pellet facility in Koege, Denmark together with Vattenfall to observe pellet production operations, conveyor operations, and storage facilities

July 30, 2010: Visit to the Proevestenen port area, Copenhagen, Denmark with Vattenfall to observe a coaster vessel discharge wood pellets from Riga, Latvia

December 15-18, 2010: Visit to Manila, Philippines to meet with local project cargo forwarder, Royal Cargo

February 15-16, 2011: Kick-off meeting with WWL in Oslo, Norway where extensive dialogue with most key WWL constituencies took place including advisory group and one steering committee member

February 20-21, 2011: Visit to Bremen, Wilhelmshaven, Bremerhaven, and Cuxhaven with Vattenfall and team behind GGX. During visit, we saw the new APMT/Eurogate container terminal facilities in Wilhelmshaven, the Conoco Philips refinery in Wilhelmshafen, the GDF Suez Wilhelmshafen power plant including on- site plant logistics service provisions of Rhenus Logistics, the container terminal and WWL/EUKOR vessel operations at Bremerhaven, and the Cuxhaven offshore wind turbine activities of BARD Offshore/Cuxhaven Steel Construction as well as AMBAU Offshore

March 5, 2011: Visit to Dallas, Texas. Met with the VP of Sales, Marketing, and M&A of specialty trucker Greatwide Logistics Services.

March 7-8, 2011: Attendance of the Trans-Pacific Maritime conference with focus on the Asia/North America trade hosted by JOC in Long Beach, California

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March 8, 2011: Visit to RE storage and warehousing sites operated by Cal-Cartage in Long Beach, California

March 22, 2011: Follow-up visit to WWL in Oslo to meet with the Steering Committee and report back the Industry Analysis feed-back from the faculty.

March 24, 2011: Visit to Esbjerg Havn to view especially land wind turbine export shipments and offshore wind turbine preparation operations in Esbjerg, Denmark

March 24, 2011: Visit to Siemens Wind Power’s production facilities to see both inbound parts warehouses/storage areas, production lines for land based wind turbines / offshore wind turbines, and outbound storage areas in Brande, Denmark

March 31, 2011: Attendance of the Danish Wind Power Organization’s 30th anniversary conference with representatives from energy companies, energy source manufacturers, suppliers, shipping companies, freight forwarders, ports, and politicians related to the wind turbine market segment in Aarhus, Denmark

April 4-6, 2011: Visit to Oslo to meet with WWL Central Office constituencies and collect data for primarily the Company Analysis.

April 12, 2011: Visit to Vestas’s head office in Randers, Denmark to discuss logistics / transportation / supply chain matters with their global head of logistics operations

April 13, 2011: Visit to the Wave Star Energy wave power test site in Hanstholm, Denmark to observe the 1:2 scale prototype wave power plant located off the coastal area

April 14-15, 2011: Visit to the greater Rotterdam area, Holland. Inspected the Delta Marine Terminal with extensive barge operations and on-site wind turbines in

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Moerdijk. Met with the Port of Rotterdam Authorities to discuss their involvement in the Rotterdam Climate Initiative. Also met and interviewed the Netherlands Kuehne+Nagel (“K+N”) Projects and Oil + Gas personnel.

April 17-18, 2011: Visit to Stockholm, Sweden. Went to the Wallenius head office which also houses the WWL Region Europe offices. Met with and interviewed a number of WWL Region Europe personnel as well as a WWL global operations team located in Stockholm

April 19-20, 2011: Visit to Bremen and Bremerhaven. Met with and interviewed key WWL Germany personnel and inspected WWL facilities at the Bremerhaven port. Met with newly constituted CEO of ailing LoLo carrier Beluga. Met with and interviewed DHL Global Forwarding’s global head of their renewable energy industry vertical sector (established in 2009)

April 21-22, 2011: Visit to Antwerp and Zeebrugge. Met with key WWL Belgium Personnel and inspected WWL facilities at the Zeebrugge port.

April 25-29, 2011: Visit to Singapore. Met with WWL’s office manager there and Program Directors from the National University of Singapore’s initiative called Sustainable Supply Chain Center Asia Pacific under The Logistics Institute Asia Pacific

May 2-7, 2011: Visit to the People’s Republic of China. Met with WWL personnel in Beijing, Tianjin, and Shanghai. Conducted site tours to the WWL port and VPC operations in TEDA (Tianjin/Bohai) and Shanghai (Waigaoxiao, Pudong). Met the Chinese Wind Energy Association in Beijing, conducted an extensive site visit of the Toshiba Transformer campus in Changzhou, and met GE Energy Asia-Pacific Logistics as well as Siemens Wind Power Nacelles in Shanghai

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May 10, 2011: Met with DONG Energy at their head office in Fredericia, Denmark. Met the manager of their logistics department along with one of his staff

May 11, 2011: Visit to Aarhus, Denmark. Had a follow-up meeting with the owner/Director of Baltship who joined a meeting with a Denmark based BBC Chartering EVP responsible for renewable energy and with focus on break-bulk shipments of wind energy related cargo

May 12, 2011: Visit to Broendby, Denmark. Had a follow-up meeting with the Technical Director of Wave Star Energy following the April 13, 2011 site visit to Hanstholm to review their prototype

May 12, 2011: Visit to Frederiksberg, Denmark. Met with a professor at CBS who specializes in the wind energy segment of renewable energy

May 30-31, 2011: Follow-up visit to Oslo to meet with WWL. Provided feed-back from faculty from Company Analysis/Strategic Issue Analysis academic deliverable. Met with sister company Wilhelmsen Ships Service to learn about their green cargo initiative.

June 7, 2011: Visit to Horsens, Denmark to meet with the country MD of DSV Air & Sea, Denmark.

June 9, 2011: Visit to Broendby, Denmark. Met with the chairman of the Board of of M&A target Project CANDY.

June 10, 2011: Visit to Fredericia to have a follow-up with the offshore wind project management team at DONG Energy’s head office. Met with the Chief Sales Officer of the A2SEA offshore wind turbine installation provider owned by DONG Energy and Siemens Wind Power in JV.

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June 20-21, 2011: Visit to Baltimore to meet WWL sales personnel and inspect port/related facilities along with relevant WWL personnel

June 22-24, 2011: Visit to Houston together with WWL sales personnel. Met with external interviewees from Panalpina, GE Energy, K+N, Bechtel, Agility, DB Schenker, BDP, and DHL Global Forwarding. Also inspected port/related facilities and met WWL personnel in Galveston

June 25-26, 2011: Visit to Dallas to meet with BNSF Logistics

June 27-29, 2011: Visit to Orlando together with WWL sales personnel. Met with Siemens Wind Power and Siemens Energy

June 30-July 6, 2011: Visit to Panama to meet WWL personnel. Also met representatives from Panama Ports Company, Panama Canal Authority, Mare Mundi Consulting, Colon Free Zone User Association, Wilhelmsen Ships Service/Transcanal Forwarding, Manzanillo International Terminal, Panama Canal Railway Company, and Centralam Panama

July 6-7, 2011: Visit to New Jersey to meet WWL commercial head for Latin America

July 13, 2011: Visit to Copenhagen, Denmark based Danish market agent of WWL, Motorships

July 18-19, 2011: Visit to Oslo, Norway to meet with WWL M&A personnel re Project CANDY and WWL Global Market Intelligence personnel re 2050 wind market estimate model

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Appendix 9 – Detailed List of External Interviewees

 Niels Ladefoged, EU DG Climate Action, Bruxelles, Belgium  Sofie Ambeck, Head Global Material Ops Nacelles, Siemens Wind Power, Brande, Denmark  Joergen Hougaard, CEO, Baltship, Aarhus, Denmark  Soeren Nygaard Jepsen, Wind Division, Aarhus, Denmark  Luke Lynch, CEO, Cal-Cartage, Long Beach, USA  Jesper Nielsen, CEO DHL Global Forwarding Denmark, Kastrup, Denmark  Tore Karlsson, Senior Energy Trader, Vattenfall, Copenhagen, Denmark  Soeren Olsson, CEO, Biofuels Trading/Global Green Invest/GGX, UK/Sweden  Dick Metzler, SVP, Greatwide, Dallas, USA  Julian Flores, VP, Industrial Projects Latin America, DHL Global Forwarding, Houston, USA  Weizhi Dong, SCM Project Leader DD Nacelles, Siemens Wind Power, Brande, Denmark  Jim Gill, VP Sales, Cal-Cartage, Long Beach, USA  Lars Karlsson, CEO, PortHow, Malmoe, Sweden  Michael Raeuber, CEO, Royal Cargo Group, Manila, Philippines  Lars Poulsen, CEO, Waterfront, Copenhagen, Denmark  Tim Schmith, Director, Industrial Projects, DHL Global Forwarding, Kastrup, Denmark  Ole Ingrish, CEO, Port of Esbjerg, Esbjerg, Denmark  Connie Hedegaard, EU Commissioner, DG Climate Action, Bruxelles, Denmark  Alex Olsen, General Manager, Project Industry, Baltship, Aarhus, Denmark  Maite Bolivar, Trade Manager, Nordana, Copenhagen, Denmark  Soeren Noergaard Thomsen, CEO, Esvagt, Esbjerg, Denmark  Ole Ditlev Nielsen, COO, Esvagt, Esbjerg, Denmark  Soeren Clemmensen, Sales Manager, Port of Esbjerg, Esbjerg, Denmark

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 Tim Johansen, Manager, Industrial Projects, DHL Global Forwarding, Kastrup, Denmark  Ole Olesen, Manager Logistics, DONG Energy Power, Fredericia, Denmark  Mette Heileskov Bülow, Vice President, Transport Excellence, Vestas Wind Systems, Randers, Denmark  Mikael Pedersen, Site Manager, Wave Star Energy, Hanstholm, Denmark  Carsten Borchers, CEO, Delta Marine Terminal/Bargeline Today, Moerdijk, Netherlands  Monique de Moel, Senior Advisor, Corporate Strategy, Havenbedrijf Rotterdam, Rotterdam, Netherlands  Martin van Velzen, Manager, Projects/Oil+Gas, K+N, Rotterdam, Netherlands  Bart Post, Manager, Seafreight Overland, K+N, Rotterdam, Netherlands  Roger Iliffe, CEO Beluga Shipping/Hansa Heavy Lift, Vice President, Oaktree Capital Management, Bremen/Manchester  Peder Jensen, Global Sector Head, Renewable Energy, DHL Global Forwarding, Gothenburg, Sweden  Laura Bolton, Program Director (exiting), The Sustainable Supply Chain Centre Asia Pacific, The Logistics Institute – Asia Pacific, National University of Singapore, Singapore  Kevin Bennett, Program Director (joining), The Sustainable Supply Chain Centre Asia Pacific, The Logistics Institute – Asia Pacific, National University of Singapore, Singapore  Alfred E. Zhao, Senior Analyst, Chinese Wind Energy Association, Beijing, People’s Republic of China  Hu Zheng Rong, Manager, Changzhou Office, Shanghai Toshiba Logistics Co., Ltd., Changzhou, People’s Republic of China  Koichi Hashimoto, Logistics Chief Manager, Changzhou Office, Shanghai Toshiba Logistics Co., Ltd., Changzhou, People’s Republic of China  Shu Hang (Kelly), Asia-Pacific Logistics Leader, Global Supply Chain Management, GE Energy, Pudong, Shanghai, People’s Republic of China

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 Dorthe Hasselgaard Hansen, Logistic Development Manager, Siemens Wind Power Turbines (Shanghai) Co., Ltd., Energy Sector, Renewable Energy Division, Lingang, Shanghai, People’s Republic of China  Charlotte Muff Thygesen, Logistics Coordinator, DONG Energy Power, Fredericia, Denmark  Jens Meilvang, EVP, BBC Chartering, Aarhus, Denmark/Leer, Germany  Peter Karnoe, Professor, Copenhagen Business School, Frederiksberg, Denmark  Vidar Hole, Business Director, Maritime Logistics, Wilhelmsen Ships Service, Oslo, Norway  Christer C. G. Bonde, Area Director, Scandinavia, Wilhelmsen Ships Service, Oslo, Norway  Bjoern Palmork, Project Logistics Manager, Wilhelmsen Ships Service, Oslo, Norway  Jonathan Soerbye, Project Logistics Analyst, Wilhelmsen Ships Service, Oslo, Norway  Michael Wede, Country MD Denmark, DSV Air & Sea, Horsens, Denmark  Gert Petersen, Group Director, Seatainers Group, Broendby, Denmark  Jens Wittrock Bonefeld, Senior Director, REN Construction, DONG Energy Renewables, Fredericia, Denmark  Kaj Lindvig, CSO, A2SEA, Fredericia, Denmark  Rosa Cline, Project Manager, Panalpina Panprojects, Houston, USA  Debra Orr, Project Coordinator, Panalpina Panprojects, Houston, USA  Cheryl Owens, Project Coordinator, Panalpina Panprojects, Houston, USA  Ted Turner, Logistics Project Coordinator, Aero, GE Energy, Houston, USA  Mike Yovanovic, Operations Manager, Projects, K+N, Houston, USA  David Lopez, Operations, Projects, K+N, Houston, USA  Gary W. Strom, Vessel Chartering Manager, Bechtel Corporation, Houston, USA  Franziska Inman, VP, Global Oil & Gas, Business Development, Project Logistics, Agility, Houston, USA

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 Denise Arnold, Director, General Forwarding & Value Added Services, Project Logistics, Agility, Houston, USA  Lisa Riley, Pricing Manager, Project Logistics, Agility, Houston, USA  Katy McIntosh, Pricing Specialist, Project Logistics, Agility, Houston, USA  Toni Harrison, Proposal & Implementation Manager, Projects, DB Schenker, Houston, USA  Chris Riddle, Project Coordinator, Project Logistics, BDP, Houston, USA  Mark Kvintus, Senior Project Analyst, Project Logistics, BDP, Houston, USA  Stacey, DHL Global Forwarding Industrial Projects, Houston, USA  Danielle Edwards, Projects Coordinator PDVSA, DHL Global Forwarding Industrial Projects, Houston, USA  Orlando, DHL Global Forwarding Industrial Projects, Houston, USA  Eduardo, DHL Global Forwarding Industrial Projects, Houston, USA  Ivar, DHL Global Forwarding Industrial Projects, Houston, USA  Linda, DHL Global Forwarding Industrial Projects, Houston, USA  Justin Hewitt, Renewable Energy Project Manager, BNSF Logistics, Dallas, USA  Tracey Bintemire, Logistics Operations Manager, Wind Power Americas, Siemens Wind Power, Orlando, USA  Barbara R. Preising, Material Logistics Specialist, Wind Power Americas, Siemens Wind Power, Orlando, USA  Charles Keyser, Material Logistics Specialist, Wind Transportation, Wind Power Americas, Siemens Wind Power, Orlando, USA  Carl Anderson, Siemens Energy, Orlando, USA  Jangwon Lee, Siemens Energy, Orlando, USA  Orlando Allard, President & CEO, Mare Mundi Consulting, Panama City, Panama  Richard Cedeno, Logistics Manager, Mare Mundi Consulting, Panama City, Panama  Rommel Troetsch, Head of Marketing and Customer Service, Panama Ports Company, Balboa, Panama

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 Diego F. Porras, Senior Canal Port Captain, Panama Canal Authority, Balboa, Panama  Guillermo Manfredo, Canal Port Captain, Panama Canal Authority, Balboa, Panama  Octavio A. Stagg, Naval Architect, Panama Canal Authority, Balboa, Panama  Rodolfo R. Sabonge Ch., VP, Market Research and Analysis, Member of Executive Committee, Panama Canal Authority, Balboa, Panama  Nidal Hachem, Board Member, Colon Free Zone User Association, Colon, Panama  Enrique Clement, Customer Service Manager, Manzanillo International Terminal, Colon, Panama  Jorge Mandiola, Ro-Ro Operations Manager, Manzanillo International Terminal, Colon, Panama  Juan Carlos Croston, VP, Marketing, Manzanillo International Terminal, Colon, Panama  Milton McKay, Transportation Superintendent, Panama Canal Railway Company, Balboa, Panama  Erik Moller Nielsen, President & CEO, Centralam Panama, Balboa, Panama  Keld Hansen, Managing Director, Motorships, Copenhagen, Denmark  Philip Bronee, General Liner Manager, Motorships, Copenhagen, Denmark  Andreas Nielsen, Cand.Merc student, CBS, Copenhagen, Denmark  Patrick Duemer, Cand.Merc student, CBS, Copenhagen, Denmark  Per Krogsgaard, Energy section, BTM Division of Navigant Consulting, Ringkoebing, Denmark  Laurent Marquis, Technical Director, Wave Star Energy, Broendby, Denmark  Soeren Kristoffersen, Project Manager (outgoing), RED Project, Danish Embassy Beijing, Beijing, China  Rasmus A. Kristensen, Project Manager (incoming), RED Project, Danish Embassy Beijing, Beijing, China

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Appendix 10 – Key WWL Meetings and Constituencies

Key meetings and site visits:

January 14, 2011: Initial meeting with CEO of WWL in Copenhagen, Denmark

February 15-16, 2011: Kick-off meeting at WWL Central Office in Oslo, Norway. Meeting with Advisory Board and COO.

March 22, 2011: Industry Analysis interim status update at Central Office in Oslo, Norway. Meeting with Advisory Board and head of Commercial

April 4-6, 2011: Company Analysis and Strategic Issue Analysis visit to Central Office, Oslo, Norway. Meetings with CFO, Head Global HR, Head Global Tonnage & Trade, COO

April 17-18, 2011: Visit to partial head office and Region Europe office in Stockholm, Sweden. Meetings with VP Global Operations and all commercial/operational functions within Region Europe

April 18-20, 2011: Visit to Bremen office, Bremerhaven terminal office, sub- contractor Bremerhaven port, and vessel loading inspection visits M/V Tarago as well as M/V Porgy. Meetings with office personnel and operational teams

April 20-21, 2011: Visit to Antwerp office and Zeebrugge terminal/VPC/EPC including vessel loading inspection of M/V Tarago. Meetings with office personnel and operational teams

April 25-27, 2011: Visit to WWL Singapore office. Meetings with office personnel

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May 2-4, 2011: Visit to Beijing and Tianjin/TEDA/Bohai, People’s Republic of China. Site visit/tour of Tianjin terminals/VPC and meetings with office personnel and external parties

May 4-7, 2011: Visit to Shanghai and Changzhou, People’s Republic of China. Site visit/tour of Shanghai terminal/VPC and meetings with office personnel and external parties

May 30-31, 2011: Company Analysis/Strategic Issue Analysis interim status update, Oslo Central Office, Norway. Meeting with Advisory Board and group related company Wilhelmsen Ships Service.

June 20-21, 2011: Visit to Baltimore, MD, USA. Site visit/tour of terminal, on-board visit to M/V Carmen, tour of VPC, EPC, and related areas as well as meetings with office personnel

June 22-24, 2011: Visit to Houston, TX, USA. Site visit/tour of Galveston terminal, VPC, EPC, free trade zone, and meetings with sales personnel/external parties

June 25-26, 2011: Visit to Dallas, TX, USA. Meeting with external party

June 27-29, 2011: Visit to Orlando, FL, USA. Meetings with sales personnel/external parties.

June 30-July 6, 2011: Visit to Panama. Site visit/tour of Manzanillo terminal, VPC, future free zone EPC, and meetings with operations personnel/WSS/external parties

July 6-7, 2011: Visit to Woodcliff Lake, NJ, USA. Meetings with head of commercial activities for Latin America

July 13, 2011: Meeting with Copenhagen based agent for Denmark, Motorships

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July 18-19, 2011: M&A status update meeting (project CANDY) with corporate M&A team and revised Industry Analysis meetings with Global Market Intelligence team at Central Office in Oslo, Norway

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Appendix 11 - Involved WWL Personnel

 Arild Iversen, CEO kick-off meeting on January 14, 2011 (Copenhagen), informal update meeting April 5, 2011 (Oslo)  Odd Egil Borgen, overall WWL ISP responsible (Global Breakbulk and Sponsorships), chief liaison, head of advisory committee, initial meeting February 15-16, 2011 and subsequent meetings/calls/emails, Oslo  Kai Kraass, COO, Ocean and Supply Chain Management, initial meeting on February 16, 2011, Oslo  Teresa Lehovd, advisory committee team member (Chief Analyst, Heavy Equipment Industries, Global Market Intelligence), initial meeting February 15-16, 2011 and subsequent calls/emails/meetings, Oslo  Scott Gibson, advisory committee team member (VP, Head of Supply Chain Management and Network), initial meeting February 16, 2011, update meeting March 22, 2011, Oslo, update meeting May 30, 2011 Oslo,  Niklas Carlen, advisory committee team member (Head of Global Market Intelligence), initial meeting February 16, 2011, update meeting March 22, 2011, update meeting April 4, 2011, Oslo  Rune Grisvold, Head of Global Strategy and Global CFO, interview, April 4, 2011, Oslo  Tom Solberg, Head of Global HR, interview, April 4, 2011, Oslo  Johan Mattsson, Vice President, Global Trade & Operation, Ocean Division, interview, April 6, 2011, Oslo  Erik Nyheim, COO, Terminal, Inland Services, and Technical Services, interview, April 6, 2011, Oslo  Erik Bjoerkman, Supply Chain Analyst, Logistics Management, Region Europe, interview, April 18, 2011, Stockholm  Per Liljefors, General Manager, Head of Key Account Management, Commercial, Region Europe, interview, April 18, 2011, Stockholm

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 Mats Jaederland, Head of Vessel Management, Ocean Operations, Region Europe, interview, April 18, 2011, Stockholm  Henrik Meyer, Head of Cargo Quality, Ocean Operations, Global & Region Europe, interview, April 18, 2011, Stockholm  Goran Soederdahl, Vice President, Head of Ocean Operations, Global & Region Europe, interview, April 18, 2011, Stockholm  Ove Moring, Head of Equipment, Ocean Operations, Global & Region Europe, interview, April 18, 2011, Stockholm  Frank Grunau, General Manager, Head of Finance & Business, Germany, interview, April 19, 2011, Bremen  Henning Bree, Manager, Marketing & Sales, Break Bulk Department, Germany, interview and site visits, April 19-20, 2011, Bremen and Bremerhaven  Timm Hoofe, SCM, Germany, interview, April 19, 2011, Bremen  Abu Nasser, General Manager, Marketing & Sales, Germany, interview, April 20, 2011, Bremen  Rolf Zeichner, Head of Operations, Germany, interview and site visit, April 20, 2011, Bremerhaven  Tomas Minnen, Head of Customer Care, Benelux, interview and site visit, April 21, 2011, Antwerp and Zeebrugge  Sabine Colman, Manager, Sales & Marketing, Benelux, interview, April 21, 2011, Antwerp  Paul Van Heurck, Manager, Sales & Marketing, Benelux, interview, April 21, 2011, Antwerp  Steven Defour, Head of Operations, Belgium, site visit, April 21, 2011, Zeebrugge  Manu Torreele, Assistant Manager, Terminal, interview, April 21, 2011, Zeebrugge  Per Wallmark, General Manager, Operations, South East Asia, interview, April 26, 2011, Singapore  Rider Liu, General Manager, Beijing office & Sales Manager, interview and site visit, May 3-4, 2011, Beijing/Tianjin/TEDA/Bohai

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 Charlie Ge, Sales Manager, interview and site visits, May 5-6, 2011, Shanghai, Changzhou  Xavier Leroi, Managing Director, Head of China, interview, May 5-6, 2011, Shanghai  Richard Ma, Vice President, Head of Commercial & Trade Management (China Area), interview, May 6, 2011, Shanghai  Paul Lam, Inland Products Director, interview, May 6, 2011, Shanghai  Bryan McCausland, General Manager, Head of Regional Supply Chain Management, interview, May 6, 2011, Shanghai  WSS: Vidar Hole, Business Director, Maritime Logistics, interview, Central Office, Oslo  WSS: Christer C.G. Bonde, Area Director, Scandinavia, interview, Central Office, Oslo  WSS: Bjoern Palmork, Project Logistics Manager, Scandinavia, interview, Central Office, Oslo  WSS: Jonathan Soerbye, Project Logistics Analyst, Global Green Cargo Project Manager, Scandinavia, interview, Central Office, Oslo  Mark Barnwell, General Manager, Key / Liner Sales, interview, Baltimore  Tim Orick, General Manager Baltimore, interview, Baltimore  Mike Derby, Head of East Coast Terminals and Environment, interview/port and facility tour, Baltimore  Rod Pickens, Terminal Manager Mid-Atlantic Terminal, interview/site visit, Baltimore  Diego Merida, Project Specialist, Key / Liner Sales, Commercial, interview, Baltimore  Jeff Trask, Account Manager, Key / Liner Sales, interview/sales calls/site visits, Houston  Hank Bivins, Operations Manager, interview/port and facility tour, Galveston  Tracy Murillo, Operations Supervisor, interview, Galveston

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 Joe Marecki, Account Manager, Key / Liner Sales, Commercial, interview/sales calls, Baltimore and Orlando  WSS: Kim Christiansen, VP, Panama, interview, Howard and Panama City  Mary Carmen de Mendoza, Operations Manager, Central America, interview/sales call/site visits, Colon  Carlos E. Percival, EPC Manager, interview/site visits, Colon  Treicy St. John, Logistics Coordinator, Team Leader, interview/sales call/site visits, Colon  Ashley Sanchez, Logistics Coordinator, sales call/site visits, Colon  Flavio Batista, VP, Latin America & Corporate Accounts, interview, Woodcliff Lake  B. Kibo Bodogaard, VP, Commercial Head Break-bulk, interview, Central Office, Oslo  Niels P. Dyvik, Group CFO, interview, Central Office, Oslo  Magnus A.K. Sande, VP Group M&A, interview, Central Office, Oslo

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Appendix 12 – Interview and Site Visit Protocols

This appendix has been crafted as a separate MS PowerPoint file (attached to the core ISP submission).

Table 12.1: Overview of Companies Involved in Interviews and Site Visits

Company 1 A2SEA 2 Agility Project Logistics 3 Association of Free Trade Zone Users, Colon Free Zone 4 Baltship division of Seatainers/Seatainers 2 5 BBC Chartering 6 BDP Project Logistics 7 Bechtel Corporation 8 Beluga Shipping/Hansa Heavy Lift/Oaktree Capital Management 9 BNSF Logistics 10 BTM division of Navigant Consulting 11 California Cartage Company 2 12 Copenhagen Business School 2 13 Centralam Panama 14 Chinese Wind Energy Association 15 Danish Wind Energy Association (annual meeting) 16 DB Schenker Projects 17 Delta Marine Terminal/Bargeline Today 18 DHL Global Forwarding 5 19 DONG Energy 2 20 DSV Denmark 21 Esvagt division of Svitzer/A.P.Moller-Maersk 22 EU Directorate-General Climate Action 2 23 GE Energy 2 24 Global Green Invest 25 Greatwide Logistics Services 26 Havenbedrijf Rotterdam 27 Kuehne+Nagel Projects 2 28 Manzanillo International Terminal 2 29 Mare Mundi Consulting 30 Motorships 31 Nordana 32 Panalpina Panprojects 33 Panama Canal Authority 2 34 Panama Canal Railway Company 35 Panama Ports Company 36 Port of Esbjerg 37 PortHow 38 Royal Cargo Group 39 Shanghai Toshiba Logistics 40 Siemens Energy 41 Siemens Wind Power 4 42 The Sustainable Supply Chain Center Asia Pacific 43 Vatttenfall 44 Vestas Wind Systems 45 Waterfront Communications 46 Wave Star Energy 2 47 WWL 40 48 WSS 2 49 Danish Embassy Beijing Source: Author analysis 224

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Appendix 13 – Key Site Visit Photos and Commentary

This appendix has been crafted as a separate MS PowerPoint file (attached to the core ISP submission).

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Appendix 14 – Wind Scenario Model

This appendix has been crafted as a separate MS Excel file (attached to the core ISP submission).

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Appendix 15 – Empirical Data Gathering Effort Examples

Sample Questionnaire

QUOTE Questionnaire Renewable energy China and Asia Vestas China

Section 1: China

1.1 If a comparison is made to other industries where foreign companies operate in China such as toys (Lego/Barbie), fashion (BestSeller, H&M) or retail (IKEA/Wal*Mart/Auchan), is there a difference in terms of quality, design, and performance between wind turbines sold in Europe and the ones desired by the investors/operators in China? How did the China-specific Vestas V60-850 kW initiative fare? 1.2 Given the strong growth of the China domestic wind market, how is Vestas’s position in the market now compared to when Vestas first entered and the local competitors were less advanced than today? What is the historic and projected market share percentage development and also absolute number of installed units development? 1.3 Given that for example GE, REpower, and Nordex have JV set-ups with more or less prominent Chinese partners in China, will the Vestas business model to operate as a Wholly-Owned Foreign-Entity (“WOFE”) in China continue to be the right strategy going forward for Vestas? Or should a JV be considered in part or in full now that competition is getting more fierce? 1.4 What are the Vestas “unique selling points” in the China market place? How does Vestas “win” in the market place? What sets Vestas apart from competition? 1.5 According to Chinese Wind Energy Association (“CWEA”) numbers, some 46 GW of wind power has so far been installed in China (end 2010) and this number is to grow to 100 GW by 2015 and minimum 200 GW by 2020 in line with the central 5-year plans. How does Vestas position itself to win some of these

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concessions and what is the desired market share of this market opportunity Vestas wishes to obtain? 1.6 Following the first (small) offshore wind park installations in the Bohai bay and near Shanghai, concessions are presently in progress for 4 offshore parks in Jiangsu Provence and a total of 5 GW must be installed offshore by 2015 (and 10 GW by 2020) according to CWEA. How is Vestas positioned to participate in this market development? What kind of market share does Vestas wish to obtain in this market segment? 1.7 How does Vestas see the China market and who are the key players? With more than 50 Chinese OEM’s and a similar number of prototypes already available, how are the Chinese OEM’s positioned now and going forward? With most foreign OEM’s already present in the China market or in the process of setting up, how does Vestas view the foreign OEM’s organizing as WOFE set-ups vs those setting up JV’s? Which of the foreign OEM’s are the most formidable competitors now (e.g. GE/HEPC or Nordex/Ningxia) and which are emerging (e.g. Hyundai/Datang)? 1.8 Given the access of some of the Chinese OEM’s to the fairly inexpensive and somewhat abundant source of capital from the Chinese Sovereign Wealth Fund, how does this affect the competitive situation domestically in China? And outside China where Chinese OEM’s choose to compete? 1.9 When the Danish Government and Danida donate money to joint programs between Denmark and China like the DKK 100 million administered by the Danish Embassy in Beijing together with the Chinese National Energy Administration in Beijing (the socalled “RED Programme” running from January 2009 and 5 years ahead), how does Vestas benefit from this in China? How does Vestas participate in this and other similar programs? 1.10 When the South Korean government decides to invest USD 60 billion in the wind energy segment, what is Vestas’s view on the impact on Korean OEM’s such as Hyundai and Unison in China and their ability to compete locally? In the Korean market place? Within Asia-Pacific? Globally?

Section 2: Asia-Pacific

2.1 How does Vestas see the development opportunities for wind energy in the Asia- Pacific region overall? What is Vestas doing to respond to these development opportunities and trends? 2.2 Strategically, how is Vestas using its’ strong base in China for exports into the Asia-Pacific region versus the China market as such? How does Vestas use its’ balance Asia footprint?

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2.3 According to IHS Emerging Energy Research, Asia will enjoy cumulative CAGR in terms wind energy of 13 per cent from 2011 to 2025 taking the installed onshore wind energy base to beyond 275 GW by 2020 and beyond 400 GW by 2025. By 2025, this means that some 45 per cent of the world’s installed wind base will be situated in Asia. How is Vestas positioning itself to win some of these concessions and what kind of market share does Vestas target going forward? 2.4 According to IHS Emerging Energy Research, Asian OEM’s delivered some 89 and 95 per cent of their production to Asian markets in 2009 and 2010 respectively. However, export to overseas markets is becoming an increasingly important part of the strategy for Asian based OEM’s, especially the large Chinese based “champions”. How does Vestas see this development and what is the response from Vestas? What is the impact of this trend on Vestas? 2.5 Besides China, what are some of the other key markets for Vestas in Asia-Pacific like for example Australia, New Zealand, India, and South Korea? How will Vestas cover the demand from these emerging markets? 2.6 Non-Chinese Asian competitors like Hyundai, Unison, and Suzlon/REpower have strong bases in China and are also emerging as global players. How does Vestas view these players in the short to medium term in their own domestic markets? In China? Globally? 2.7 Given the different access to capital from government-linked Sovereign Wealth Funds and the perceived political importance of the renewable energy segment going forward, does Vestas foresee that some of the key Chinese and other Asian OEM’s will expand using mergers & acquisitions? Which competitors are more likely to grow using M&A and when?

Section 3: Global market

3.1 Based on the global drive towards reducing GHG emissions and OECD countries wishing to become less dependent on fossil fuels, how will the recent sentiment change in terms of nuclear power impact the wind energy growth projections? What kind of increased projections and altered strategies will this result in for Vestas? 3.2 Is it possible to project volumes by 2050 at this time using different scenarios? If available, would you be willing to share your findings? 3.3 Given the traditional wind energy dominance of Europe and the US, how will Asia’s emergence as key manufacturing hub, home of some major OEM brands, and major taker of delivered wind turbine capacity change the industry landscape? How do you see Asia’s OEM’s and their future role in the short, medium, and long term?

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3.4 What will the role of the traditional Denmark based OEM’s be in the future? What should Denmark’s role be – R+D and initial production only? 3.5 What role should Europe play in the market going forward? European OEM’s? How does Vestas see its’ own future? 3.6 Does Vestas expect the trends of localization, local content, and local employment to continue to drive the strategic structure of the wind market? 3.7 Does Vestas predict that the trend from Europe to go for some 30 per cent offshore wind turbine install base “spread” to other parts of the world such as the US, Canada, Japan, and China?

Section 4: Technology

4.1 The current production output size of wind turbines seems to reside between 2- 3.5 MW and 4-5-6 MW. The latest trend is that output is moving upwards towards the latest Vestas offshore turbine announced at 7.0 MW. Enercon’s 7.5 MW onshore prototype and offshore turbine developments by Gamesa and Sinovel to reach 10 MW (and Clipper to head towards 15 MW) support the EU- sponsored Upwind project to try to develop a 20 MW wind turbine. How does Vestas see the output developments in terms of onshore vs offshore over the coming 20-25 years? What are the constraints and challenges? How does the R+D efforts correspond to the need to gain critical production mass of what we can build now and make a profit? 4.2 A number of OEM’s are now moving towards new technology like Direct Drive and gearless power production. How does Vestas view this trend and what is the response from Vestas? 4.3 Does Vestas participate in R+D efforts pertaining to more long-term projects like floating wind turbines? How does Vestas view such technologies? 4.4 Can a trend be imagined where for example underwater tide turbine technology will converge with wind turbines? What is Vestas’s view on this and other peripheral / adjacent technologies?

Section 5: Transport, logistics, and supply chain management

5.1 How is the current transportation, logistics, and supply chain management set-up organized for Vestas in China? In Asia? - Inbound assembly parts sourced locally? - Inbound assembly parts sourced internally from other Vestas plants overseas? - Inbound assembly parts sourced externally from overseas? - Outbound shipments to other Vestas plants? - Outbound shipments to sites for onshore wind projects?

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- Outbound shipments to sites for offshore wind projects? 5.2 What is expected in terms of future developments and trends within transportation, logistics, and supply chain management? - Will you outsource more than what you do today in terms of production? - Will you outsource more than what you do today in terms of transportation, logistics, and supply chain services? - Will the flows be similar compared to today? Or will you do more domestic volumes, intra-Asia volumes, or overseas exports, for example? - Do you expect for the production facilities to remain in the same locations? And if not, what will be the development in terms of your hub locations inland and port wise? 5.3 Who controls the transport/logistics/supply chain decisions – Vestas or your customers? How does Vestas see the trends in terms of buying terms (EXW/FOB vs DDP)? 5.4 Who are your key transport / logistics / supply chain service providers today? What services do you contract from them? How much money do you spend with them? Is this different in terms of inbound vs outbound? 5.5 Where does transport / logistics / supply chain service provider nomination control reside today? Locally with you or centrally in Randers? Or regionally? 5.6 How do you manage the transport equipment needed to ship the end products to the sites or other parties within the supply chain? How do you get the transport equipment back and does it always belong to Vestas?

Thank you for your support and time! UNQUOTE

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Sample Phone Conversation Support PowerPoint Pitch

MBA in Shipping & Logistics MBA in Shipping & Logistics Class of 2011 Class of 2011 Thomas Poulsen T. Poulsen

www.shippingMBA.com Process mapping: Inbound assembly

Flow of assembly parts, components, and modules ILLUSTRATIVE ONLY Origin Destination Generator Start

MBA final thesis Bedframe Start Vessel loading, Parts, Port area shipping, Port area components, storage storage Assembly Transformer Trucking unloading Trucking modules Discussion foils – supply chain sub segments Start End

Cooler unit Start Legend : July, 2011 = Start/end Canopy = Process flow Start = SC navigation

Source: Author analysis 2 Process flow discussion - draft version 3: July 12, 2011

MBA in Shipping & Logistics MBA in Shipping & Logistics Class of 2011 Class of 2011 T. Poulsen T. Poulsen

Process mapping: Outbound onshore (1) Process mapping: Outbound onshore (2)

Flow of finished wind turbine components ILLUSTRATIVE ONLY Flow of finished wind turbine components ILLUSTRATIVE ONLY Origin Destination Origin Destination Foundations Port area Vessel loading, storage Start Foundations Trucking shipping, unloading Start Towers Port area Vessel loading, Start Vessel Towers Trucking storage shipping, unloading loading, Wind Wind Port area shipping, Port area Turbine Erection Start Port area Turbine Erection storage storage at site storage at site Nacelles Trucking unloading Trucking Components Port area Vessel loading, Trucking Components storage Start End Nacelles Trucking shipping, unloading End Start Port area Vessel loading, Rotors storage Rotors Trucking shipping, unloading Start Legend : Start Legend : = Start/end Port area = Start/end Vessel loading, Blades storage = Process flow Blades Trucking shipping, unloading = Process flow Start = SC navigation Start = SC navigation

Source: Author analysis Source: Author analysis 3 Process flow discussion - draft version 3: July 12, 2011 4 Process flow discussion - draft version 3: July 12, 2011

MBA in Shipping & Logistics MBA in Shipping & Logistics Class of 2011 Class of 2011 T. Poulsen T. Poulsen

Process mapping: Outbound offshore (1) Process mapping: Outbound offshore (2)

Flow of finished wind turbine components ILLUSTRATIVE ONLY Flow of finished wind turbine components ILLUSTRATIVE ONLY

Foundations Origin Destination Origin Destination Start Foundations Trucking Vessel Wind Vessel Wind Port area Erection Start Port area Erection Transition loading, Turbine loading, Turbine storage at sea site storage at sea site Pieces Vessel shipping Components Transition Port area shipping Components loading, Pieces Trucking storage Start shipping, End End unloading Start Towers Port area or trans- storage Vessel Wind Towers Trucking Vessel Wind Trucking shipment Barge Erection Start Barge loading, Turbine Erection loading, Turbine storage Components at sea site Start storage Components at sea site Nacelles shipping shipping Nacelles Trucking Start End End Start Rotors Rotors Trucking Start Legend : Legend : = Start/end Start = Start/end Blades = Process flow Blades Trucking Vessel loading, shipping, unloading, or transshipment = Process flow Start = SC navigation Start = SC navigation

Source: Author analysis Source: Author analysis 5 Process flow discussion - draft version 3: July 12, 2011 6 Process flow discussion - draft version 3: July 12, 2011

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Appendix 16 – Author M&A experience

Sampling of Blue MBA Module 02 assignment

QUOTE … Integrator TNTxcii was originally known as PTT Post when they had the Dutch mail distribution monopoly but was privatised in 1989 and renamed KPN. Under the leadership of Ad Scheepbouwer, KPN was very much the “first mover” amongst the integrators from a strategy perspective and executed their 1992 internationalization strategy with the acquisition of TNT in 1996 followed by the 1999 ‘divisionalization’ into 3 distinctively different business units: Mail, Express, and Logistics. The company changed its’ name to TNT Post Groep or TPG and was listed on the Dutch stock exchange. Several acquisitions were made including Jet Services (Express) and Tecnologistica (Logistics). However, a major acquisition in Logistics was US based CTI Logistx (2000) which caused severe post-merger integration challenges but at the same time very much cemented TPG as a solid player within the 3PL arena focusing on several key industry verticals such as automotive. With the acquisition of freight forwarder Wilson (2004), TNT entered the freight management arena and at the same time continued to acquire other companies like for example Transports Nicolas (France) for their Logistics unit. Then in 2005, TNT decided to divest their 3PL unit and this was sold to US based private equity player Apollo in September of 2005 in order for TNT to fund a share buy-back program and expand in their Express and Mail segments. Subsequently, TNT focused on their core competence of building domestic Mail and Express networks in emerging markets and the acquisitions of Hoau (China, 2006), Speedage (India, 2006) and Mercúrio (Brazil, 2007) moved TNT in this direction. The TNT Freight Management business was also put up for sale and on November 16, 2006 it was announced that French freight forwarder GEODIS had acquired this business which was subsequently rebranded Geodis Wilson. With the exit from the 3PL and international E2E SCM business, it is questionable whether TNT can be considered a true integrator at this point in time and this is also reflected in their size which revenue wise is only half the size of FedEx and 20 pct of that of DP-DHL.

4.1.2 Freight forwarders Within the arena of freight forwarding128, or “spedition” as it is often referred to in Europe, the quest to get rapidly bigger has also been on, spurred by what has

128 In this paper, NVOCCs (Non Vessel Owning Common Carriers) are companies like NACA/Vanguard (Brennan / Conterm / DCL), ECU Line, and Shipco Transport who retail their services to other freight forwarders. Such companies do not sell to BCO’s and are definition wise therefore excluded from the scope of this paper. In the 233

MBA in Shipping & Logistics Class of 2011 Thomas Poulsen happened in the integrator sector. In many ways, some of the large freight forwarders are now close to being of the same size and capability scope as some of the integrators, however, with the mail/express segments missing. Many freight forwarders have, however, created fully managed and outsourced courier and parcel services where they “mix and match” the best options available from the integrators as well as the few remaining local niche KEP players. A lot of the freight forwarders have diversified over the years and have both gone global in terms of geographical scope and at the same time added considerable new service offerings such as 3PL services etc. A few have stuck with the core business, freight forwarding, and a few companies like Expeditors International and APEX have decided to NOT join the global acquisition spree and only grow organically. Leading the industry consolidation on the part of the freight forwarders are several global players starting with Swiss based publicly listed, USD 21B revenue, and 50000+ employees freight forwarder and 3PL provider Kuehne & Nagel, or K+Nxciii. In 2000, K+N decided that the 3PL part of the supply chain would be a beneficial catchment segment for their core international E2E SCM business and they therefore entered a strategic alliance with Singapore based SembCorp Logistics who took a 20 pct share in K+N against cash and a 5 pct share swap in SembCorp Logistics. K+N used these funds to acquire US based USCO Logistics in 2001 which marked the entry in to the 3PL (or “contract logistics”129) segment for K+N. Over the coming years, K+N added to this new business segment and acquired a number of companies (see figure 4.1.2.1). Figure 4.1.2.1 K+N 3PL acquisitions CAT Overseas Logistics From French Groupe CAT130 Pracht Spedition + Logistik The renowned German Hapag-Lloyd subsidiary WM Group Germany ACR Logistics Based on merger with Hays Logistics131 Source: Company web site, own analysis In addition, K+N entered in to a JV with FM Logistic which they named Cologic (2004) and at the same time decided with SembCorp Logistics to terminate their alliance after which K+N sold their 5 pct cross shareholding in SembCorp Logistics. Most of these transactions had certain international E2E SCM activities as well but K+N decided that the European overland truck transportation (both full truck loads (“FTL”) and less than truck loads (“LTL”) or “groupage”) would also be an important part of the supply chain. Therefore, a number of companies were acquired in this segment (details in figure 4.1.2.2). Figure 4.1.2.2 K+N trucking acquisitions Alloin Group Trucking in France GT Spedition Trucking in Denmark

North American terminology, the term “NVO” or “NVOCC” is often used in the same way as the rest of the world uses the term freight forwarder which often presents some confusion. 129 Different definitions such as 3PL and contract logistics are discussed further in appendix 2 130 Different from US based CAT Logistics 131 This was K+N’s largest single acquisition to date at that time 234

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Häring Service Company Trucking in Germany Gebr. Mönkemöller Trucking in Germany G.L. Kayser Spediteur Trucking in Germany Cordes & Simon Group Trucking in Germany F. W. Deus Trucking in Germany Source: Company web site, own analysis Especially in Germany, the LTL/groupage market was dominated by a few large players (DP-DHL and DB Schenker) as well as a number of groupage networks and with its’ acquisitions, K+N effectively bought its’ way into the groupage/LTL network called IDS. In the international E2E SCM segment, K+N made a number of bolt-on acquisitions to provide either geographical or niche presence (figure 4.1.2.3). Figure 4.1.2.3 K+N international E2E bolt-on acquisitions Nether Cargo Services Perishables niche in the Benelux Seabrook & Smith Wine & spirits niche Wm. Martin & Co UK wine and spirits niche E.M. Trans Freight forwarding company in Estonia Censped Slovenia (Balkan ocean freight forwarding focus) Ziegler & Co. Scandinavia freight forwarding Romero & McNally US based CHB provider Birkart Fairs & Events German fairs and events niche Orient Transport Comp. Ltd. Saudi Arabia Coiltrans Luxembourg Nacora East Europe Austria based insurance broker Speditøren Norway customs clearance Elite Airfreight US based oil & gas niche specialist forwarder J Martens Norway based with oil & gas/project cargo niches Source: Company web site, own analysis Fueled in part by the war in Iraq and extensive government related contracts, Kuwait based PWC Logistics has since 2003 transformed from a small local Kuwait warehouse company in to a global freight forwarding and 3PL provider with revenues of close to USD 7B and more than 35000 employees spanning over 100 countries globally. The expansion has largely taken place through acquisition of several companies since 2005xciv. The acquisition spree includes Trans-Link (Singapore based project forwarding forwarder), Transoceanic Shipping (US based oil & gas niche provider), US based global freight forwarder GeoLogistics (formerly LEP International), and Cronat Transport Holding (Europe based, trading under the brand Natural). Following the acquisition of Agility Logistics (NZ), PWC Logistics changed name in November 2006 and is now known as Agility Logisticsxcv. Listed on both the Kuwait and Dubai stock exchanges, further acquisitions include WTS (US based project forwarder also trading under the name Global Express Line), Pan Orient Shipping Services (Australia based and trading under the name AFS Projects and Logistics), the logistics and transport activities of Combalia Transportes Internacionales (Spain), Industriaplex (US based company, partial acquisition), Cosa Freight (Hong Kong based Trans-Pac freight forwarder), Geopetrol (Canada), and Baisui Logistics (PRC). In addition to that, several GeoLogistics (LEP International) local JV partners have been bought out over the years on a global basis returning full

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MBA in Shipping & Logistics Class of 2011 Thomas Poulsen ownership to Agility. Recently, Agility has been involved in several lawsuits with the US government which has distracted the management focus of the companyxcvi. Since its’ listing on the ASX in 1993, Melbourne based freight forwarding company Toll Holdings Groupxcvii has expanded globally through acquisition and is today an Asia-Pacific powerhouse with revenues of just over USD 6B and more than 25000 employees in over 40 countries. With a number of acquisitions in the Australia and NZ home market, Toll has cemented their market leader position there (details in figure 4.1.2.4). Figure 4.1.2.4 Toll Holdings domestic acquisitions in Australia/NZ home market Brambles Transport JN Transport IPEC Finemore Holdings Autotrans Car Transport Westfarmers Transport Trans Rail TasRail JD Lyons United Carriers Extra Transport Perkins Shipping Express Logistics Group Patrick Corporationxcviii Primary local competitor 132 Source: Company web site, own analysis Regarding overseas non-Australia/NZ aspirations, Toll has acted on this part of their strategy and acquired a series of companies (see figure 4.1.2.5). Figure 4.1.2.5 Toll Holdings international acquisitions BIC Logistics India ST Anda PRC Deltec Hong Kong, S.A.R., PRC Kwikmail Hong Kong, S.A.R., PRC Skynet Hong Kong, S.A.R., PRC Footwork Express Group Japan Logistics Distribution Systems Dubai, U.A.E. Summit Logistics International USA Source: Company web site, own analysis The most significant international acquisitions made by Toll Holdings were SembCorp Logistics (Singapore) as well as Baltrans (HK). SembCorp Logistics, or SembLog, used its’ Singapore government backing to expand extensively in to PRC and India and in addition, it took a 20 pct shareholding in Kuehne & Nagel as part of 2000 alliance agreement (see above under K+N). Baltrans had started a globalisation processxcix before getting acquired by Toll and companies acquired

132 Toll Hodings acquired Patrick Corporation after a long and intense pursuit

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MBA in Shipping & Logistics Class of 2011 Thomas Poulsen included Jardine Logistics Group (Hong Kong/PRC), Gothenburg Shipping Logistics (Sweden), Outlook Logistics (Dubai), and Clover Cargo. Most recently on February 2, 2010, Toll announced that it has acquired Summit Logistics International based in New Jersey, USA. Freight forwarder Panalpinac has also grown over the past years and as the integrators took freight forwarding market share, Panalpina made a joint-venture with the parent of airline Swissair to cover logistics operations. Through this JV named SwissGlobalCargo, the operations of Swissair’s SAirLogistics and Panalpina’s Air Sea Broker were combined including the activities of Swissair’s Jacky Maeder Group. However, when the parent of Swissair got in to dire straits financially, Panalpina took over the entire JV and renamed it ASB Air. Subsequent to that, Panalpina made several acquisitions especially in the key oil & gas industry vertical/market niche (see figure 4.1.2.6). Figure 4.1.2.6 Panalpina acquisitions International Aero-Sea Forwarders Korea Grampian International Freight Oil & gas niche, UK Overseas Shipping Oil & gas niche, Norway Janco Oilfield Services Oil & gas niche, Singapore Luxairci Luxembourg based airline 133 Source: Company web site, own analysis However, Panalpina has also been distracted having faced first a EUR 15M balance sheet forgery case (2006) that forced then CEO Bruno Sidler to resigncii and be replaced by Ms Monika Ribar and subsequently a massive customs bribery scandal in their most profitable country of operationsciii, the Nigerian oil & gas niche market, which led Panalpina to swiftly withdraw from domestic operations there (after similar allegations against Halliburton/KBR and Siemens). Most recently, Panalpina has been served a statement of objections by the European Commission in a case of alleged anti-competitive activities in the freight forwarding industryciv. Panalpina’s revenues are just shy of USD 9B and the company employs some 15000+ people worldwide.

4.1.3 Asset affiliated providers Initially, a review will be made illustrating how two of the container shipping line affiliated LSPs that have grown through acquisition. Through several acquisitions made by its’ parent company APMM, or by Maersk Line, Damco (previously known as Maersk Logistics or Mercantile) benefited as well. As such, the logistics activities of EAC Ben Line, Sealand Logistics, and PONL Logistics/Damco were integrated in to Mercantile/Maersk Logistics when Maersk Line bought EAC Ben Line, Sealand Services, and P&O Nedlloyd respectively. P&O Nedlloyd operated PONL Logistics and Damco separately and had just finished the acquisition of Gilbert in the US by the time Maersk Line acquired P&O Nedlloyd. On a stand-alone basis, figure 4.1.3.1 shows the companies Mercantile/Maersk Logistics (now Damco) has acquired.

133 Panalpina’s share in Luxair is a strategic minority share only

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Figure 4.1.3.1 Damco stand-alone acquisitions Allfreight US air freight forwarder Hudd Distribution US transload/decon operator O’Neill & Whittaker US CHB provider O’Farrells International Australian freight forwarder D’Click France OY Arealog Ltd. Finland DSL US freight forwarder 134 Source: Company web site, own analysis Originally branded MCC or Mercantile Cargo Consolidators, the company has gone through many transformations and subsequently been known as Mercantile, APM Logistics, Maersk Logistics, AP Moller Global Logistics and rebranded Damcocv in 2009. Revenues amount to in excess of USD 3B and Damco employs more than 10000 people globally. APL Logistics or APLLcvi was formed in 2000 after the 1997 acquisition of APL by Singapore based NOL through the merger of internal logistics and SC units: APL had owned a number of logistics and intermodal type companies such as ACS, BLS, IMS, ALS, StackTrain Services, APT, and the majority of VASCOR Limited. Similarly, NOL had owned a number of Asian based warehousing and forwarding type companies including OCWS, TDPL, SpecCargo, Orient Trucking, and others. All of these entities were merged to form APL Logistics and over the coming years, acquisitions in both the Americas (major 3PL provider GATX Logistics135 in 2001) and Europe (Mare Logistik and the FSG companies) were made along with JV growth in PRC (e.g. the Legend JV and the Ford tier-1 supplier CMWAL JV). … UNQUOTE

134 Tied to the Wal*Mart business relationship 135 In the quest for acquisitions of US based 3PL providers, TNT bought CTI Logistx, K+N bought USCO Logistics, and APLL bought GATX Logistics and as reflected above, the timing was around the same time in 2000/2001 which significantly drove up valuations paid for these companies 238

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Appendix 17 – List of Abbreviations and Terminology

Abbreviations

ARC American Roll-on Roll-off Carrier Armacup Armacup Car Carriers BAU Business as usual BB Break-bulk BCO Beneficiary cargo owner Blue MBA eMBA in Shipping and Logistics Btu Energy use measurement unit - British terminal units CBS Copenhagen Business School CCS Carbon Capture and Storage CEO Chief Executive Officer CHP Combined Heat and Power plant CO WWL Central Office in Oslo COP Conference of the Parties CSF Critical Success Factors CSR Corporate Social Responsibility CWEA Chinese Wind Energy Association DB Schenker Deutsche Bahn Schenker (German government owned global rail and logistics company) DD Direct drive DG Directorate-General DP DHL Deutsche Post DHL (partly listed government owned German global mail and logistics company) DOE US Department of Energy EDF Electricite de France (national French energy company) EIA US Department of Energy, Energy Information Administration EPC Equipment processing center (for H&H equipment)

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EPC company Engineering, Procurement, and Construction company EPCM company Engineering, Procurement, and Construction management EU European Union EUKOR EUKOR Car Carriers EUR Euro currency E2E End-to-end FAME Fatty acid methyl esters GAAP Generally Accepted Accounting Principles GDP Gross domestic product GHG Green house gasses Glovis Hyundai Glovis Co., Ltd. GWEC Global Wind Energy Council HBS Harvard Business School HSE Health, safety, and environment H&H High and heavy kW-H Kilo Watt Hour IA Industry analysis IEA International Energy Agency IEO International Energy Outlook published by the Energy Information Administration of the US Department of Energy IPO Initial Public Offering ISP Integrated strategy project JV Joint-venture KAM Key account manager, key account management LCT Landing craft LCTC Large car and truck carrier vessel LoLo Lift-on/Lift-off LSP Logistics Service Provider LTS WWL Corporate Long Term Strategy plan MPV Multi-purpose vessel M&A Mergers and acquisitions

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Nd2Fe14B Neodymium (rare earth oxide used for direct drive wind turbines) OEM Original Equipment Manufacturer like Vestas, Sinovel, and GE OM Operations Management OSE Oslo Stock Exchange PMG Permanent Magnet Generator PMSG Permanent Magnet Synchronous Generator PPP Public private partnership PRC People’s Republic of China, or China PV Photovoltaic qBtu quadrillion British thermal units QC Quality control R+D Research and development RE Renewable energy REO Rare earth oxides, also referred to as rare earth metals RO/RO Roll-on/Roll-off SCM Supply Chain Management SCV Supply Chain Visibility SWF Sovereign Wealth Fund SWP Siemens Wind Power TEN Trans-European Network UECC United European Car Carriers US/USA United States of America VAS Value added services VP Vice President VPC Vehicle Processing Center WEO World Energy Outlook published by International Energy Agency WOFE Wholly Owned Foreign Enterprise company structure in China WSS Wilhelmsen Ships Service WTO World Trade Organization WWL Wallenius Wilhelmsen Logistics

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Terminology

Offshore Wind turbines installed offshore, in the water/ocean Onshore Wind turbines installed ashore, on land Wind turbine Wind power generation source, wind mill

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Endnotes: Quotes and references to quotes

i For details on the Blue MBA, see www.shippingMBA.com (accessed on February 6, 2011 at 11:10 AM CET) ii www.panther-holdings.com iii For details on the company, see the company website www.2wglobal.com (accessed on February 14, 2011 at 15:14 PM CET) iv http://www.vattenfall.com/en/index.htm v For the US DOE’s EIA definition of renewable energy, please refer to http://www.eia.doe.gov/energy_in_brief/slideshows/renewable_energy.html (accessed on February 25, 2011 at 15:49 PM CST) vi www.factiva.com vii www.emerging-energy.com viii www.the-eic.com ix www.gwec.net x www.btm.dk xi For details regarding Vattenfall and Stadtwerke Muenchen’s offshore wind farm DanskTysk from 2012 supported by http://www.strukton.com/en-us/Pages/HomePage.aspx (accessed on February 12, 2011 at 11:40 AM CET) xii For further information on first Dutch offshore wind farm with Vestas called Egmond an Zee supported by Ballast Nedam, please refer to http://www.ballast-nedam.nl/ (accessed on February 12, 2011 at 14:48 PM CET) xiii www.ubm-news.com xiv For details on the EU sponsored UpWind R+D efforts, please refer to http://www.offshorewind.biz/2011/04/20/upwind-develops-20mw-wind-turbine-denmark/ (accessed on May 15, 2011 at 16:55 CET) xv For more information on the first offshore wind farm Horns Reef 1 which started operating in 2002 off the coast of Jutland in Denmark, please refer to http://www.powergenworldwide.com/index/display/wire-news- display/1347605656.html (accessed on March 4, 2011 at 17:28 PM CST) xvi For definition of EPC/EPCM companies in general, please refer to http://technology.infomine.com/reviews/epcm/ (accessed on February 13, 2011 at 14:44 PM) xvii For details on how Siemens entered the wind turbine business through the acquisition of Brande, Denmark based Bonus in 2004, please see http://www.siemens.com/pool/en/investor_relations/company_overview/portfolio_changes/PG200410002_1 222210.pdf (accessed on February 14, 2011 at 14:39 PM)

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xviii For details on the DONG Energy and SWP acquisition of A2SEA, please refer to the following: a) DONG Energy acquisition of A2SEA http://www.newenergyworldnetwork.com/renewable-energy-news/by- technology/wind/dong-energy-acquires-wind-turbine-manufacturer-a2sea-for-e94m.html and b) Siemens Wind Power (“SWP”) acquisition of 49 per cent stake in A2SEA http://www.nwe.siemens.com/denmark/internet/dk/presse/press/general/Pages/medejer_af_a2sea.aspx (both accessed on February 12, 2011 at 13:50 PM – 14:30 PM CET) xix For more information on Vattenfall’s VT Shipping division, see for example http://www.cisionwire.com/vattenfall/vattenfall-trading-founds-shipping-company (accessed on February 25, 2011 at 16:04 CST) xx For further information on London Array and the consortium behind it, please refer to http://www.londonarray.com/ (accessed on February 13, 2011 at 14:11 PM CET) xxi For London Array facts and figures, please refer to http://www.power-technology.com/projects/londonarray/ and article http://www.dailymail.co.uk/news/article-1180819/Worlds-largest-offshore-wind-farm-built- Kent-coast.html (both accessed on February 13, 2011 at 14:26-14:30 PM CET) xxii London Array 50 year lease agreement London Array consortium from The Crown Estate http://www.londonarray.com/downloads/Non-technical-summary.pdf (accessed on February 13, 2011 at 14:46 PM CET) xxiii For information on Ramsgate as construction and operations base for London Array, please refer to http://www.nce.co.uk/news/energy/london-array-picks-ramsgate-as-operations-base/8600314.article (accessed on February 13, 2011 at 15:10 PM CET) xxiv For information on the “Svanen” floating crane leased to DONG Energy to work on the offshore wind park at Anholt, please refer to http://www.erhvervsbladet.dk/bygge-og-anlaeg/svanen-paa-arbejde-ved-anholt (accessed February 13, 2011 at 10:38 AM CET) xxv https://www.greatwide.com/English/Pages/Default.aspx xxvi For details on Vamdrup Specialtransport, see www.vst.dk and http://www.erhvervsbladet.dk/transport- logistik/fremtidstaenkning-i-specialtransporter (accessed on February 12, 2011 at 16:14 PM CET) xxvii For information on the JV, please see http://www.beluga-hochtief-offshore.com/ xxviii For more information on the JV, please refer to http://www.aarsleff.com/internet/acms.nsf/Webpages/DBA06A6E41AEBC4DC12576630043D241 (accessed on July 17, 2011 at 15:48 PM CET) xxix For details on Beluga (http://www.beluga-group.com/en/) now Hansa Heavy Lift, please see http://www.hansaheavylift.com/index.php?id=2&L=2 xxx http://www.bbc-chartering.com/ xxxi http://www.clipper-group.com/web/projects.nsf/Start/$first?opendocument

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xxxii http://www.rickmers-linie.de/ xxxiii www.cosco.com/en/ xxxiv http://www2.nykline.com/ xxxv http://www.gearbulk.com/ xxxvi http://www.mol.co.jp/menu-e.html xxxvii http://www.kline.co.jp/index_e.html xxxviii http://www.maerskline.com/appmanager/ xxxix www.safmarine.com xl Singapore is also trying to get a share of this market as per article “Singapore rides on Asia’s wind market” in The Straits Times on April 23, 2011 and here, WWL has more experience with wind turbine operations/handling xli See www.atlanticforwarding.com xlii See www.expeditors.com xliii For details on the Kyoto Protocol, please refer to e.g. http://unfccc.int/kyoto_protocol/items/2830.php (accessed on March 2, 2011 at 13:18 PM CST) xliv For an overview of the outcome of UN’s COP 16 meeting in Cancun Mexico in 2010, see http://unfccc.int/meetings/cop_16/items/5571.php (accessed on February 15, 2011 at 9:40 AM CET) xlv The EU “20-20-20” targets can be reviewed at the DG Climate Action’s home page as follows http://ec.europa.eu/clima/policies/brief/eu/package_en.htm (accessed on February 15, 2011 at 08:40 AM CET) xlvi For details on Ms Hedegaard, see for instance http://ec.europa.eu/commission_2010- 2014/hedegaard/index_en.htm (accessed on February 17, 2011 at 15:45 PM CET) xlvii For details regarding Denmark’s “Engergistrategi 2050”, please refer to for example http://www.dbdh.dk/artikel.asp?id=2652&mid=9 (accessed February 25, 2011 at 15:52 CST) xlviii For an example of US tax incentives pertaining to RE, please refer to http://www.eia.doe.gov/oiaf/aeo/otheranalysis/aeo_2009analysispapers/eiea.html (accessed on February 14, 2011 at 16:30 PM CET) xlix Official press release regarding the approval of PRC’s next 5-year plan features environment inside and around China prominently http://english.cntv.cn/program/china24/20101028/100670.shtml (accessed on February 14, 2011 at 15:50 PM CET) l For details on the charter of the proposed NEAMA body in India, see http://moef.nic.in/downloads/public- information/exec-summ-NEMA.pdf (accessed on February 19, 2011 at 2:50 PM CET) li See relevant article on solar power developments in Philippines as follows: http://www.photon- magazine.com/news_archiv/details.aspx?cat=News_PI&sub=asia-pacific&pub=4&parent=2962 (accessed on February 13, 2011 at 14:45 PM CET)

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lii For details on certain EU member states being urged to as much as double their spending on RE projects, please refer to http://www.breakbulk.com/wind-renewables/eu-members-urged-double-renewables-spending (accessed on February 14, 2011 at 13:50 PM CET) liii To download a copy of the DG Climate Action “Roadmap 2050”, go to http://ec.europa.eu/clima/policies/roadmap/index_en.htm (Accessed on March 10, 2011 at 20:55 PM CET) liv For further information on the EU TEN initiatives, please refer to http://ec.europa.eu/ten/index_en.html (accessed on March 10, 2011 at 20:45 PM CET) lv To view the REshare study, please refer to http://www.reshare.nu/en/reshare (accessed on March 10, 2011 at 18:59 PM CET) lvi For details on the EPA, see http://www.epa.gov/ (Accessed on March 10, 2011 at 20:11 PM CET) lvii For an example of the US debate surrounding EPA approvals and delays, please see for example http://www.dtnprogressivefarmer.com/dtnag/common/link.do;jsessionid=C871AEFF5D1C82F08498335E8F1A E772.agfreejvm1?symbolicName=/free/news/template1&forceNavUpdate=false&topic=DTN/Ag/Business/Car bon&vendorReference=fdc743d1-3b0a-4d08-b489-9c5715b22496__1294082931504 (accessed on March 7, 2011 at 17:55 PM CST) lviii For details on the Rotterdam Climate Initiative (“RCI”), please go to http://www.rotterdamclimateinitiative.nl/en/about_rotterdam_climate_initiative/rotterdam_climate_initiativ e/mission_ambition (Accessed on March 10, 2011 at 19:25 PM CET) lix See also activities of Rhenus Logistics at http://www.rhenus.com/rhenus- cuxport/dienstleistungen/offshorebasis-cuxhaven/ (accessed on February 22, 2011 at 20:45 PM CET) lx To download the Carbon Disclosure Project survey, go to https://www.cdproject.net/en- US/Results/Pages/overview.aspx (downloaded on March 7, 2011 at 15:55 PM CST) lxi For details on the McKinsey findings of 0.5 per cent of global GDP required to curb the 2 degree increase in temperatures as a result of increased GHG, download full report at http://www.mckinsey.com/clientservice/sustainability/pathways_low_carbon_economy.asp (accessed on February 25, 2011 at 15:11 PM CST) lxii For details on Stern’s revised estimate of global GDP spending needed for climate change mitigation, please see http://www.guardian.co.uk/environment/2008/jun/26/climatechange.scienceofclimatechange (accessed on February 25, 2011 at 15:03 PM CST) lxiii For details on the June 4 massacre on Tiananmen Square in Beijing in 1989, see for example http://search.japantimes.co.jp/cgi-bin/eo20040915gc.html (accessed on February 25, 2011 at 11:20 AM CST) lxiv For further information on the fall of the Berlin Wall in November of 1989, see for example http://www.dailysoft.com/berlinwall/history/fall-of-berlinwall.htm (accessed on February 25, 2011 at 11:23 AM CST)

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lxv For further details on the invention of the container by Malcolm McLean in 1956, please see http://www.container-transportation.com/malcolm-mclean.html (accessed on February 25, 2011 at 11:12 AM CST) lxvi For examples of PRC local content requirements and background, see for example http://www.greenwindenergy.com/2010/12/made-in-china/ (accessed on March 2, 2011 at 12:56 PM CST) lxvii For examples of early localization efforts in Quebec, Canada, see http://www.energytoolbox.org/gcre/bibliography/67_QuebecCaseStudyJune2006Final.pdf (accessed on March 2, 2011 at 13:03 PM CST) lxviii For further information on rare earth metal rising importance in the direct drive wind turbine industry, see for example http://www.thestar.com/article/929979--rare-earth-metals-not-so-indispensable (accessed on March 2, 2011 at 17:57 PM CST) lxix For further information on the deregulation of national EU postal services see for example http://www.eurofound.europa.eu/eiro/2008/02/articles/eu0802029i.htm and http://www.bloomberg.com/apps/news?pid=20601100&sid=ayv0oEgYy6mc&refer=germany (both accessed on February 25, 2011 at 11:38 AM CST) lxx www.dp-dhl.com lxxi www.dbschenker.com lxxii For a full copy of Bundeskanzlerin Ms Merkel’s speech at BVL’s Logistik-Kongress on October 17, 2007, please refer to http://www.bvl.de/files/2/19/177/24._DLK_Rede_der_Bundeskanzlerin.pdf (accessed on February 25, 2011 at 11:43 AM CST) lxxiii For an example of Denmark’s deregulation of the energy sector in 2003-2004, please see for example http://www.oem.dk/resources/oem/static/publikationer/html/newcons/kap02_1.htm however, the Danish government still owns the major energy provider in Denmark, DONG Energy and will continue to do so until 2025 http://www.bookrags.com/wiki/DONG_Energy (both sites accessed on February 25, 2011 at 11:50-11:55 CST) lxxiv For details on PRC’s ascension to WTO on November 8, 2011, please refer to http://unpan1.un.org/intradoc/groups/public/documents/APCITY/UNPAN002123.pdf (accessed on March 2, 2011 at 19:02 PM CST) lxxv Please refer to for example China Daily article on May 3, 2011 entitled “Economy threatened by aging demographic” lxxvi For details on the VIX, please refer to http://www.cboe.com/micro/VIX/vixintro.aspx (accessed on February 24, 2011 at 12:58 PM CET)

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lxxvii For information on the Baltic Dry Index, please refer to the Baltic Exchange at http://www.balticexchange.com/default.asp?action=article&ID=45 (accessed on February 25, 2011 at 15:09 CST) lxxviii For general information on the global financial crisis, please refer to coverage by for example Financial Times http://www.ft.com/indepth/global-financial-crisis (accessed on February 25, 2011 at 15:12 PM CST) lxxix For events unfolding in the Middle East causing oil prices to soar during February, 2011 please see for example http://www.globalresearch.ca/index.php?context=va&aid=23345 (accessed on February 24, 2011 at 12:24 PM CET) lxxx For details on ISO 26000, please refer to http://www.iso.org/iso/iso_catalogue/management_and_leadership_standards/social_responsibility/sr_disco vering_iso26000.htm (accessed on February 25, 2011 at 15:32 PM CST) lxxxi For further reference on geothermal energy production besides Kemp, please refer to http://www.brighthub.com/environment/renewable-energy/articles/53953.aspx (accessed on March 2, 2011 at 15:40 PM CST) lxxxii For information on COSCO’s participation in the BB transport efforts for the Three Gorges Dam, see for example http://www.cosco.com/en/business_areas/shipspecial.jsp?catId=400&leftnav=/2/1 (accessed on March 8, 2011 at 16:40 PM PST) lxxxiii For further information on UK’s prominent position within wave energy technology, please refer to http://www.europeanenergyreview.eu/index.php?id=2712 (accessed on February 14, 2011 at 08:14 AM CET) lxxxiv For information on the Danish Wave Energy Center in Hanstholm, please refer to http://www.danwec.com/en/be_part_of_the_process/who_is_behind_the_project- /who_is_behind_the_project-.htm (accessed on February 10, 2011 at 11:10 AM CET) lxxxv www.eukor.com lxxxvi http://www.uecc.com/ lxxxvii http://www2.nykline.com/ lxxxviii www.arrcnet.com lxxxix http://www.glovis.net/Eng/index_eng.asp xc www.armacup.co.nz xci http://www.wilhelmsen.com/services/maritime/companies/buss/Pages/buss.aspx xcii www.tnt.com xciii www.kn-portal.com xciv Additional information on initial PWC Logistics (now Agility) acquisitions see www.bgsa.com xcv www.agilitylogistics.com xcvi http://www.alphadinar.com/2009/11/17/agility-indicted-with-8-5b-fraud-by-us/ xcvii www.toll.com.au xcviii For further and more detailed information on Toll Holdings including the Patrick feud, please see http://en.wikipedia.org/wiki/Toll_Holdings

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xcix For the full story on Baltrans’s growth prior to the acquisition by Toll, see http://www.hktrader.net/200609/success/success-AnthonyLau200609.htm c www.panalpina.com ci Panalpina stake in LuxAir http://www.accessmylibrary.com/article-1G1-96255006/panalpina-group-news- briefs.html cii Full story on scandal driven CEO change at Panalpina http://www.handelsblattmachtschule.de/download/download.php?id=318 ciii Full story on Panalpina Nigeria scandal http://allafrica.com/stories/200810270616.html civ Full story on EC statement of objections to Panalpina http://www.eyefortransport.com/content/european- commission-serves-statement-objections-panalpina cv www.damco.com cvi www.apllogistics.com

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