The deal marks the investment firm's entry into the global offshore wind market.
The 1.2 GW Hornsea One project is located 80 miles off the Yorkshire coast in the North Sea and comprises 174 Siemens 7MW turbines. The project entered into commercial operation in Dec’2019, and benefits from an inflation-linked Contract-for-Difference (CfD) until 2035. Orsted, which owns a 50% stake in the project, will continue to provide operation, maintenance, and management services to the wind farm.
Orsted led the development and construction of Hornsea One, buying out the equity from Mainstream Renewable Power and Siemens in Feb’15. Construction of the project was supported by Orsted’s sale of a 50% stake to Global Infrastructure Partners (GIP) in Nov’18 for $5.86bn. The wind farm, which is estimated to cost $7.7bn, was traded at an enterprise value (EV) of $11.7bn (on a 100% basis), excluding the transmission assets, which were sold separately for ~$1.65bn.
Daiwa Infrastructure’s entry into Hornsea One follows similar recent moves made by other investment firms, who have acquired stakes in the project at implied EV multiples of greater than $9mn/MW. Partners in the project include Octopus Energy, GLIL Infrastructure, TRIG, Equitix, and Greencoat, who farmed in through separate acquisitions in 2022. GIP is the investor that monetized its stake through the deals. The transaction EV multiples represent the highest deal metrics for renewable energy generation assets in Europe and are believed to be driven by the CfD contract linked to the project. The contract provides for a tariff of 197.84/MWh for the first 15 years of operation, marking a significant premium to the tariffs awarded to offshore wind projects in subsequent CfD rounds. In comparison, the 1.3 GW Hornsea 2 project secured a strike price of $83.12/MWh in 2021, with the 2.9 GW Hornsea 3 wind farm receiving a record-low price of $45.28/MWh in 2022. The awarded tariffs have challenged the economic viability of these projects, specifically due to supply chain constraints and rising steel prices, which have inflated the construction cost. Additionally, volatile power prices in Europe have made it difficult for developers and off-takers to agree on long-term power purchaser agreements (PPAs) at prevailing tariffs. These factors have contributed to the high transaction EV of Hornsea One, compared to Hornsea 2, which traded at a deal multiple of ~$6mn/MW in Mar’22, when AXA Investment Managers and Credit Agricole acquired a 50% stake in the project.
The above analysis is proprietary to Enerdatics’ energy analytics team, based on the current understanding of the available data. The information is subject to change and should not be taken to constitute professional advice or a recommendation.
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