British Offshore Wind Project Draws Investment Heavyweights
February 6, 2018 by Reuters
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Photo: Shutterstock/Teun van den Dries
reuters logoBy Nina Chestney and Christoph Steitz LONDON/FRANKFURT, Feb 6 (Reuters) – British offshore wind project Triton Knoll has attracted the interest of several large investment funds, according to three sources familiar with the matter, in a sign of the growing competition for assets in the fast-changing sector.
German energy group Innogy , owner and developer of the planned 2-billion-pound ($2.8 billion) farm off the coast of eastern England, is looking for partners to get it off the ground.
The project has drawn interest from a number of infrastructure and pension funds, including Australia’s Macquarie , Switzerland’s Partners Group and Denmark’s PFA Pension, the three sources told Reuters.
Innogy, Macquarie, Partners Group and PFA all declined to comment on Triton Knoll. Offshore projects of this size typically have more than one investor alongside the developer.
The demand for the 860-megawatt (MW) Triton Knoll is indicative of the wider interest in offshore wind projects among funds. The returns on offer – typically 6-9 percent –
outstrip interest rates, while competition has been heated up by the fact the number of profitable new projects becoming available is declining because fewer can secure government subsidies.
New data from industry group WindEurope, provided to Reuters ahead of its publication, reflects this rising institutional investor interest, as well as the decline in the building of offshore farms.
Infrastructure funds, pension funds and asset managers accounted for 35 percent of offshore M&A activity in Europe in 2017, up from 27 percent in the previous year, according to the data. At the same time, spending on new offshore capacity in Europe declined by 60 percent to 7.5 billion euros ($9.3 billion) last year, the first annual fall since 2012.
“There is definitely competition. The larger the project, the larger the investors which look at them,” said Oldrik Verloop, head of client advisory services for real assets at Aquila Capital, which manages 3.6 billion euros of renewable assets.
MEGATURBINES The wind sector is undergoing structural change that is altering the calculus for investors.
While returns on offer beat interest rates by a wide margin, they are still lower than the double-digit percentage returns projects yielded before governments across Europe started to cut the generous subsidies that have cradled the wind power sector since its inception in the early 1990s.
Last year, auction systems were introduced which involved lower government handouts and drove down margins for projects.
The reason investment funds remain interested lies in the long-term revenues and stable cash flows wind farms generate, much like other infrastructure projects, plus the fact that technological advances are bringing down costs.
In the last decade, turbines have grown larger, with some now standing taller than the giant London Eye Ferris wheel which graces the skyline of the British capital –
and even larger “megaturbines” are in the works. Bigger turbines sweep a larger area and harness more wind, cutting costs per megawatt.
Full article:http://gcaptain.com/british-offshore-wind-project-draws-investment-heavyweights/