September 6, 2017 Read More →

Wind-Farm Giant Dong Energy Sees More Investors Taking Equity Positions in Offshore Assets

Bloomberg New Energy Finance:

Dong Energy said it is confident that financial investors will be prepared to buy equity stakes in the 480MW of German offshore wind farms, which the company won the rights to build thanks to record-breaking zero-subsidy bids in an auction in April.

Martin Neubert, chief strategy officer at the wind power division of the Danish company, told BNEF that the three offshore wind projects in the German North Sea would be suitable for Dong’s ‘farm-down’ approach, in which it sells equity stakes pre-construction to outside investors in order to free up its own capital for further projects.

Investors have previously shown they are willing to take on a certain degree of merchant price risk when committing capital to German renewable energy projects, “which typically only had a very short feed-in tariff period compared with the full lifetime of the asset,” he said. And Dong Energy has also shown that asset rotation works with U.K. projects built using Renewables Obligation Certificates that “have a very significant merchant price element”, he added.

The farm-down model, otherwise known as asset rotation or build-sell-operate, involves utilities selling stakes in green power assets to institutional investors seeking long-term, stable yield. In the case of renewable energy, revenues for such projects have, until now, been underpinned by guaranteed subsidies.

By bidding to build two 240MW offshore wind projects with no subsidy on top of the wholesale power price, Dong Energy has demonstrated the vastly improved economics of the technology.

More: Dong Energy’s Zero-Subsidy Offshore Wind Farms Are Ripe for ‘Farm-Downs’

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