Renewable Energy M&A: Orsted divests the remaining 25% stake in the 630 MW London Array offshore wind farm for $922mn

published on 25 July 2023

Deal details: Orsted has entered into an agreement with Schroders Greencoat to divest its remaining 25% stake in the London Array offshore wind farm located ~20 km off the Kent coast in the UK. The wind farm began its commercial operation in 2013. While the project is contracted to secure two renewables obligation certificates (ROCs) per MWh of energy produced till 2033, it had previously entered into short-term power purchase agreements (PPAs) with E.ON and Statkraft to sell part of its power production.

The lease for the project was initially secured by Shell in 2006, but ownership was later acquired by E.ON (50%) and Orsted (50%) in 2008. Subsequently, E.ON's ownership was transferred to RWE in 2019, while Orsted sold 25% of its share to Caisse de dépôt et placement du Québec (CDPQ) in 2014. With this recent transaction, Orsted is now fully divesting its ownership in the project, and Schroders will join RWE, CDPQ, and Masdar as shareholders of the London Array offshore wind farm.

Deal rationale: With this deal, Orsted is divesting from a project it deems non-strategic for its future offshore wind plans. The decision is primarily due to the company not having any operation and maintenance (O&M) responsibilities for the asset, as RWE will be managing the O&M for a period of 10 years starting in 2022. Orsted deems it financially unviable to retain a minority stake in the project without the revenue generated from O&M operations. The proceeds from the sale will be utilized to prioritize growth in emerging offshore wind markets and advance its offshore wind ventures in those regions. This includes focusing on 5 GW of projects in partnership with ESB in Ireland, the 1.1 GW Ocean Wind 1, and 4 GW of offshore wind lease area in the US, where the company has consolidated ownership. Additionally, Orsted will maintain its partnership with Copenhagen Infrastructure Partners for ~5.2 GW of assets in Denmark. The company will also retain its ownership in over 15 offshore wind farms that it currently operates in the UK.

Meanwhile, the acquisition will grant Schroders Greencoat access to a matured project with a proven track record and high revenue, ~$152/MWh based on the 2023-24 buyout price for ROCs released by the UK’s Office of Gas and Electricity Markets (Ofgem). This addition will complement Greencoat’s existing ownership in the ~1.2 GW Hornsea 1 offshore wind farm in the UK, along with the Butendiek offshore wind farm in Germany.

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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