Driving sustainable energy growth with Wood Thilsted

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Audio Transcript

Tim Smallbone

Hello and welcome to Inflexion Point, the podcast that explores those crucial moments in a company's journey that change the trajectory of success. Through conversations with business founders and entrepreneurs, we'll explore what those moments look like and how to recognise and harness them.

Alastair Muir Wood

It was so clear to us that our industry could not survive on just using 1950’s design techniques. We had to change.

Stuart Robinson

We loved it because backable team, differentiated product, very long-term growth market and high barriers to entry.

Tim Smallbone

I'm Tim Smallbone and in my 20 years as a partner at Inflexion, I've been lucky enough to witness a huge number of those moments that are a part of every success story. In today's episode, we're exploring the rise of leading offshore wind energy consultancy, Wood Thilsted. Inflexion invested when the company's founders were looking to bring on board a partner that could add value beyond capital, whilst allowing them to retain control. And I'm delighted to be joined by one of those founders today, Alastair Wood. Also in the studio with us is Stuart Robinson, who led Inflexion's investment in the business in 2022 and has been on the board ever since. Welcome to you both. Thanks for joining me. Shall we start off? Just tell us a little bit about what the company does.

Alastair Muir Wood

Yeah, so if you're building a wind farm, then you'll go and buy the wind turbine from Siemens or GE or Vestas, but you need to put it on something. The turbine is identical across every single location, but the foundation has to be unique for every single location because the water depth changes, the wave height changes, the wind changes. So we design the foundation. So the white bit you buy from a factory if you'd like, and then the yellow bit is the bit we design going down into the ground.

Tim Smallbone

It's a sheet of steel, it's a roll of steel.

Alastair Muir Wood

It's a roll of steel, enormous steel tube, or it can be a lattice of steel, but typically, yeah, the majority are these monopiles which are a huge, so 8 metre diameter, the height of a house, and then it's banged into the ground with a very large hammer.

Tim Smallbone

It's literally just thumped into the ground.

Alastair Muir Wood

Yeah, with a crazy, crazy hammer.

Tim Smallbone

And for Wood Thilsted it's all offshore.

Alastair Muir Wood

Yeah, we only do offshore projects. We have done a few onshore, but yeah, really it's offshore projects.

Tim Smallbone

And that's why?

Alastair Muir Wood

I think that the projects offshore have a significant scale and significant complexity, whereas an onshore project is much, much smaller and it can be sort of wrapped up as a EPC contract.

Tim Smallbone

2015 is when the company started. Let's roll back and perhaps talk about your journey to actually creating the business.

Alastair Muir Wood

2007, I was actually building the BBC Broadcasting house just there.

Tim Smallbone

You were building it. Hard hat on.

Alastair Muir Wood

Hard hat on. I was the lead year technical engineer. It's on top of all the Victoria lines and the Bakerloo line underneath it. Fantastic project. My company then got bought by the Danish company Ramboll. And so I went across to Denmark, part of their exchange of people to get the Danes to talk to the Brits. And they said, do you speak Danish? And I said, no. So we'll have to go and work in offshore wind then, because that was where you put all the difficult English-speaking people. So the Danes have always had this lead in offshore wind. And Christian was then at the same time completing a PhD on how can we design better wind turbines. And we met at his PhD defence and realised we got along.

Tim Smallbone

So Christian's not here, but meeting Christian was an inflection moment for me.

Alastair Muir Wood

That was definitely an inflection moment for me.

Tim Smallbone

Can you remember when you met?

Alastair Muir Wood

Yeah, so he was presenting his PhD to a public audience.

Tim Smallbone

Including you.

Alastair Muir Wood

Including me. And then afterwards, he had a reception and it was a classic sort of, by about 9pm most people drifted away and then you decide to have a second party at the pub. And yeah, we just met and carried on.

Tim Smallbone

I just started off as a social natter. And did you find that you had a shared interest? How did you then go from that sort of initial conversation?

Alastair Muir Wood

So from that initial conversation, we both wanted to be doing things better. It was so clear to us that our industry could not survive on just using 1950’s design techniques we had to change. And we both had the same ideas as to how to get those out there technically. I think we then had the sort of “how do you bring the world with you?” moment.

Tim Smallbone

But the genesis was you both had a vision for doing these foundations better.

Alastair Muir Wood

Yeah.

Tim Smallbone

A much more engineered solution than a basic solution, which is what they were using at the time.

Alastair Muir Wood

Yeah.

Tim Smallbone

And what was the advantage of that?

Alastair Muir Wood

It's just cost. So if you're trying to build a wind farm, you want to make it as cheap as possible. You've got a big CapEx cost up front. And so we did a presentation last week, actually, at a big international conference on our journey over the last 20 years and we reckon from a geotechnical perspective we've taken about a third of the cost out since 2007.

Tim Smallbone

Which adds up to a lot of money.

Alastair Muir Wood

Which adds up to a huge amount of money across all these different projects.

Tim Smallbone

And suddenly a wind farm may not be feasible now, it's feasible because the cost.

Alastair Muir Wood

That's exactly the case. And so we've all heard about the cost. wind coming down over the last 20 years, and a lot of that's been due to scale as you get bigger turbines, but there's also been this technical improvement that we're now designing things properly.

Tim Smallbone

So you'd met, you were both working in wind farm engineering, but what then caused you to go out and create your own business?

Alastair Muir Wood

I think there were two parts of it. One was the fact that we like doing things well, and we felt very much to go up in the ladder you had to hire lots of people underneath you. And our view was you didn't need to hire people, you just needed to use computers to do things better. So we had a sort of, we weren't going to go anywhere if we just sat there. The second part was then the sort of pull. We had a number of clients who we knew from the projects that we'd be doing in the industry. And they made it pretty clear that there was space for another consultancy out there, and particularly someone who is specialist in offshore wind.

Stuart Robinson

You told me that an amusing anecdote about you and Christian driving through the night in Germany culminating in why are we doing this?

Alastair Muir Wood

Yeah, no, it was, there was a volcanic, there was an Icelandic volcano which grounded all the flights.

Tim Smallbone

I remember, yeah.

Alastair Muir Wood

And for some reason, Christian and I were driving through Holland. I guess he must have been in the UK or something. And we were being called to a project in Germany, to a board meeting, the project was going wrong and they wanted our advice on how to solve it.

Tim Smallbone

You had to go there by car because you couldn't fly.

Alastair Muir Wood

We couldn't fly. So we're driving through the night and it's about 1:00 in the morning and Christian was driving and I was sat in the passenger seat making all the slides ready for the morning. And you know, we just looked at each other and said, “why are we doing this?”

Tim Smallbone

A really brave moment. So you then made the decision there in the car that day. We were going to do our own thing.

Alastair Muir Wood

Yeah, no, it was it was it was a little bit crazy.

Tim Smallbone

But you had some clients. You had this.

Alastair Muir Wood

We had some potential clients. So I'd run something called the Pisa project, which had been getting all the different developers together to actually really try and make a change to the world. And that finished in 2015. And through that project, I'd met a lot of our today clients.

Stuart Robinson

I think one of the things you said there, Alastair, that I thought was quite interesting was when you set out, and you said some customers were saying there's space for another. Is that because it was an interesting time in the sector that you had a few people, it was still very much emerging, it wasn't a closed shop at that point because people didn't have an exhaustible experience from the past so there was actually an opportunity to move into the sector in a way, even as a tiny two-man band startup. Whereas now, that would be very hard.

Alastair Muir Wood

I think it's a lot harder now, and I don't quite see how we could have hit that wave in today's market.

Stuart Robinson

Or anybody else could.

Alastair Muir Wood

Or anybody else?

Tim Smallbone

There was a moment in the early.

Alastair Muir Wood

There was a moment and it was the start of this competitive auction process. So until 2015, the projects were almost sort of given to people. Whereas from.

Tim Smallbone

By projects, you mean the development?

Alastair Muir Wood

Of the global plants. Yeah. Whereas from 2015, actually, you started to get a competition.

Tim Smallbone

Run by governments.

Alastair Muir Wood

It's been run by governments and you know, an auction can be a fantastic opportunity for a consultant because if you can help them win, then they want to work with you.

Tim Smallbone

And then you employed someone. That must have been an exciting moment.

Alastair Muir Wood

Yeah, that was a very scary moment. Another inflection point. It was actually only, the company is only three months old, so it didn't take very long. But yeah, I think that was when you realized that actually, yeah, you couldn't stop things.

Tim Smallbone

You have to be a proper business.

Alastair Muir Wood

You have to be a proper business and you have to actually have policies and you have to have procedures.

Tim Smallbone

And all forwards, you've developed clients now all over the world. You've have many offices.

Alastair Muir Wood

Yeah, so we've grown with our clients effectively. So our strategy has been very much as our clients have expanded globally, we followed them. And often they've been the phone call starts saying, I found a piece of seabed off the coast of America, can you build a wind farm there? And so we'll go, oh, I don't know, let's go and find out.

Tim Smallbone

Somebody else surveys the ocean floor, presumably, and we work out how much steel is it going to take to build a wind farm there.

Alastair Muir Wood

Yeah, and what's your process going to be to go through that? So I think one of our strengths is our software platform that enables us to turn around our designs incredibly fast. So what that means is we can put all the inputs that we know in there, do a design and then you can look at it and go, well, what's controlling my design? So you might find, oh, hang on, it's the waves from the northeast direction which are really dominating this project. And then you go, well, do I know anything about those waves? No. So then you plan a survey to go and measure the waves, but particularly focused on those waves from the northeast. And then if you can really understand those statistically, you can then push that into your design. And that's, it's these little increments that then make huge, huge savings and differences to what you end up with in the end.

Tim Smallbone

Otherwise you put an extra 100 tons of steel on it.

Alastair Muir Wood

Or you just put an extra 100 tons of steel on it and. So that's not going to make a cheap project.

Tim Smallbone

It costs a lot of carbon to put one in the ground. Presumably, you're going to tell me that over the lifetime it is carbon efficient, is it?

Alastair Muir Wood

Yeah, over the lifetime it pays itself back pretty quickly actually in terms of carbon. And one of the things we now try and do in part of our sort of trying to get the world to really think about their carbon is calculate the energy returned on the energy invested for all of our projects. And you typically find a wind farm, you'd be paid for your carbon in a year or sometimes a lot less.

Tim Smallbone

So the business was developing nicely and Inflexion came along. How did that come about, Stu?

Stuart Robinson

The first proper meeting we had was the Institute of Directors, wasn't it?

Alastair Muir Wood

Civil Engineers.

Stuart Robinson

Institute of Civil Engineers, where we had a full sort of full court press with Alastair and Christian and they took us through the entire story and we spent a lot of time, you know, just sort of discussing it. And I think we came out, we actually came out of that and went to the pub, Tim. But the metaphoric, yes, we stayed in the pub and had a very nice time there as well.

Tim Smallbone

All the big inflection points happened there.

Stuart Robinson

Well, you know, it's important, these things, Tim, it's important. And, but sort of when we regrouped after the meeting and we sort of reflected on how do we feel about this opportunity, our sort of our headlines, I guess, would have been, two very compelling individuals. Clearly, you don't have to spend long with Alastair and Christian to see the domain knowledge is extraordinary. So we were very convinced by that. But also relevant to that was they didn't want to sell their company, they wanted a minority investor. So they were obviously still committed and felt that there was a lot to go for. So those were all excellent signs for us.

Where we then went from a sort of investment perspective and what were the key things that lodged in our minds. We looked at the, and they'd shown us and we looked at and we'd also had some market research done, you don't see often long-term growth forecasts like there are in the offshore wind industry. And it was really quite compelling. Now, there's been some, you know, hindsight will say there's been some turbulence related to, you know, Ukraine spiking energy prices, Trump's resistance to offshore wind in the US. But nevertheless, even now, there's still an industry that's forecast to grow 20% plus. And that is essentially driven by everyone gets very carried away with net zero and climate change. Well, actually, the reality is offshore wind is cheaper than fossil fuels and nuclear. So it's got, there's a real fundamental underpinning for the future of renewables. So we really like that backdrop because lumpy, small consultancies are, not without risk. But interestingly, in this circumstance, one of the reasons why we don't like small, lumpy consultancies, you can always be undercut, somebody else can start one up and it's, you know, they can be quite risky, your assets in the people walk out the door every day. However, here we had a company which, because it had started in the vanguard, it had got in while the industry was still sort of sorting itself out, as it were. And it felt to us like it was much more of a closed shop now because if you're a large developer who's putting billions, literally billions into this, one of these projects, do you want to use somebody who's done one before? Or do you want to use someone who hasn't done one of these before? And the answer is kind of obvious. And Wood Thilsted had got, despite being only two people, had got itself into that sort of very small group of four players who had the sort of the license to compete in this space. So in short, we loved it because backable team, differentiated product, very long-term growth market and high barriers to entry.

Tim Smallbone

I can see why it makes sense as an investor. We had already focused on sustainability as a growth area and then we found Wood Thilsted. But Alastair, why did you bring on an investor? What was the thinking behind that?

Alastair Muir Wood

Well, from day one, we had an employee share scheme, and we were massive fans of employee shares, and we think that's a way of getting your company to glue together. And then we started getting speculative offers from a number of big consultancies wanting to swallow us up. And this was flattering. But then when we took those down the line a bit we realised actually they weren't what we wanted. It was going to end up with us sitting in the teeny tiny corner of some enormous organisation. But what these did to us was they meant that every year when we wanted to revalue the company for the employee shares, we had to declare all the offers we've received. And they just made the employee share scheme, you know, it's fine to say, Tim, give me 70p and I'll give you some shares. But now suddenly we're saying, hey Tim, give me £7,000 and I'll give you some shares. And that's not going to work. So we had to restructure things. Now you're right, we could have done that through different classes or something like that. But we knew we had to do something to the company. And it's our accountant who said, well, you don't need to sell at all, you could just sell a little bit. And that will then allow you to bring in that new team to restructure things to have a bit more professional stance yourselves. And so they then ran a process for us.

Tim Smallbone

So you'd reached a scale.

Alastair Muir Wood

So we'd reached a scale where, something needed to be done in terms of structure and I think we talked to 18 different private equity companies in the end. Why did we end up with Inflexion? Fundamentally, we met Stuart and we liked you guys. We weren't just wanting an investor to just come in for money. Christian and I know how to build wind farms, but building companies we'd never done before. And I think we can listen to people who give us good advice. And so, having an investor who is going to come and actually help us along that journey and that's where having the Inflexion Growth team behind us to actually, oh, we've seen this before, do this, or, you need some help here. Let's phone up this consultant and see what we can do.

Tim Smallbone

And focusing on our sustainability, we've managed to achieve B Corp certification.

Alastair Muir Wood

Yeah, we've got a lot of passion in our company for sustainability.

Tim Smallbone

It makes us a vehicle, not just for the creation of profits, we're a vehicle that is focused entirely upon the sustainability agenda and trying to deal with the global warming effect and it's an interesting aspect for our employees, Stuart.

Stuart Robinson

I think that's absolutely right, Tim. I think the, you know, there's obviously a perception that private equity, it's all about pounds, shillings and pence, and there's no other purpose. Well, firstly, that is absolutely not the case. But secondarily, one of the things that's so important is if you have a business which is successful and profitable and growing and can reinvest some of that in the growth of the company to push the boundaries, what's achievable in energy transition, that creates an extraordinarily rewarding place for employees to work in and to pursue their purpose and their passion, which is not building up financial success in the company, but it is accelerating, making a difference and making that energy transition better and quicker.

Tim Smallbone

So we invested in 2022. The whole world was investing in sustainability then something happened in the United States of America, which made life interesting.

Alastair Muir Wood

Well, I think it's Ukraine initially that so the gas, the gas supplies being to Europe being turned off and you could think, well, energy prices going up in itself should be positive for renewables, but actually what it did to interest rates shooting up to control inflation has been what's really suffered. So if you've got these very capital intensive projects, then you add a bit of inflation and the interest rates, instead of being sort of around 1%, are suddenly 4 or 5%, that adds 20%. Changes the economics to the wind farm. So everything's been affected by this. So it's, you know, all energy sources have. And if you look at nuclear, it's the same and gas prices are higher than they were. But I think that the problem with offshore wind has just been how capital intensive it is. And if you had won an auction based upon the old world, you then couldn't deliver that project. So we've had a sort of period of time over the last two years where the projects, one on the old market have then had to rebid into the new markets. I've had a couple of failed auctions in that process, which is just natural.

Tim Smallbone

Not just in the United Kingdom.

Alastair Muir Wood

Not just in the United Kingdom. There's been failed auctions in Denmark and in Germany. And you know, a politician needs a failed auction before they can actually change the approach, because otherwise we'd be saying, well, why are you changing the approach to a commercially successful auction? So I think, you know, failure is part of the course. But then on top of that, we've then had the American political change which, we've been very successful in America, and now the current administration are very much against offshore wind, which is a great shame, because New York State just needs electricity. They're importing it all.

Tim Smallbone

But elsewhere in the world, plenty of development going on.

Alastair Muir Wood

There's lots of development going on and I think what we're now feeling is the, so on the back of last year's elections, now we're getting the new government starting to get their new processes in place, things have repriced themselves. You know, we can now build a project on today's interest rates and it's just a case of letting that continue to work through the system. APAC, we're seeing very strong growth in Korea, in Japan.

Tim Smallbone

Because all these developed countries that need electricity at an ever-increasing rate.

Alastair Muir Wood

Well, yeah, electricity, the world is electrifying. That's happening even if we don't want it to. More electric cars, data centres, electric heating instead of gas or coal.

Tim Smallbone

And every nation with a coastline, offshore wind is part of their equation.

Alastair Muir Wood

And so, yeah, a nation with a windy coastline, I think you should probably say. And preferably shallow water, offshore wind is then part of your solution.

Tim Smallbone

Life with Inflexion. Has that been fun?

Alastair Muir Wood

It has. It's been really enjoyable, actually. It's not been easy and it's been very different. But I've really enjoyed working with Inflexion. And lots of people say to me, oh, how's Inflexion? And they sort of expect me to give some doom and gloom story about working at private equity and I can't, actually. I say I've really, really enjoyed it. I have an approach which is very much, if I've got a problem, then it's Stuart's problem.

Tim Smallbone

Not wrong. You're not wrong, actually.

Alastair Muir Wood

It costs me a lot. That works very well. And often then Stuart can tell me how to fix it, or he can tell me to stop worrying, which can also be a very successful way of solving a problem.

Tim Smallbone

Yeah, you have a “problem shared”.

Alastair Muir Wood

Yeah.

Stuart Robinson

I think we've got a very open, trusting relationship. Alastair tells me what's bothering him, but we'll talk about it and we always come to a place where we, I think, where we leave the telephone call or the meeting in a position where we both agree on, you know, how we move the ball forward. But I think one of the things, especially when you're doing minority investing, is backing the right people who are respectful and will listen while still retaining majority of the company and ultimately the decision theirs is super important, that we have that working relationship and I found Alastair and Christian to be nothing other than respectful, thoughtful and very considerate of our position.

Tim Smallbone

We've invested, we've worked together on lots of projects, you've opened new offices and we've talked about how the world changes as well, about the politics and events like Ukraine. So tell me about the future.

Alastair Muir Wood

Yeah, the future. I think what we're seeing is offshore wind is going to be part of the future energy solution and that can't be stopped. It is the most, or one of the most economical ways of delivering a huge amount of power. So if you've got the right coastline and you've got the resource, then you will build it. So we see the company growing with that market, and we see ourselves continuing to develop new things in wider fields in that market, and we see a really exciting way ahead.

Stuart Robinson

We would be quite nervous on any investment if there was purely a regulatory and a political driver rather than just an economic driver. But the economic driver is, and the energy security driver, they're utterly irrefutable.

Tim Smallbone

And as long as that remains, there'll be a future for the offshore wind market.

Stuart Robinson

Well, it's cost-effective technology that works, wins. That's the history of the world.

Tim Smallbone

It's been a fascinating story, Alastair. Thank you for sharing it with us. I love hearing about how you first met and how you took that brave step out on your own and you've developed a business which is a force for good in the world. That's it for this episode. My thanks to Alastair and Stuart for joining me. Remember to subscribe to Inflexion Point wherever you get your podcasts so you don't miss an episode. And of course, you can check out our previous instalments too. Thanks for listening.

About the episode

Inflexion Point tells the story of Wood Thilsted, the offshore wind foundation design consultancy, and how two engineers turned a shared frustration with outdated methods into a global specialist. Host Tim Smallbone is joined by founder and chief executive Alastair Muir Wood, who met his fellow founder Christian at a PhD defence and later decided to go it alone on a night drive across Europe, and Stuart Robinson, the Inflexion partner who led the 2022 minority investment and has sat on the board since. They reflect on the moments that shaped it: the conviction that the industry could not survive on 1950s design techniques, the leap from employee to founder when a volcano grounded every flight, hiring the first employee three months in, and following clients around the world as offshore wind scaled. Along the way, they talk about using software to take cost out of foundations, why getting in early built a high barrier to entry, weathering the turbulence from Ukraine and shifting United States policy, and why cost-effective technology ultimately wins.