Ørsted has signed an agreement to sell 50% of Walney Extension, a 659-MW UK offshore wind farm project to a consortium consisting of PKA and PFA, two leading Danish pension funds. Each investor will obtain a 25% ownership interest in the project. Walney Extension, which is currently under construction, will be the world’s largest offshore wind farm when commissioned in the second half of 2018.
Ørsted is set to construct the wind farm under a full-scope EPC contract. They will also provide long-term operations and maintenance services from its O&M base in Barrow-in-Furness and provide a route to market for the power generation from Walney Extension.
“We’re delighted to welcome two Danish pension funds as co-owners of Walney Extension,” said Henrik Poulsen, Ørsted CEO. “We already have a strong partnership with PKA on three other offshore wind farms and we look forward to building an equally long-lasting relationship with PFA on what will be the world’s biggest wind farm when completed. Both partners are committed to the green energy transition and I’m pleased that our offshore wind assets continue to be attractive to institutional investors.”
The total sales price comprises the acquisition of a 50% ownership share and the commitment to fund 50% of the payments under the EPC contract for the entire wind farm (including the transmission assets) and amounts to approx. GBP 2.0bn, which will be paid during 2017 and 2018. Ørsted has hedged the GBP proceeds a which currently has a market value of approximately DKK 2.0bn.
“With this investment, we take yet another step into the renewable energy market which is actively contributing towards the green transition,” says Allan Polack, Group CEO, PFA. “We are proud to do so together with our business partner Ørsted, which is a front-runner in this field and which has accumulated great expertise when it comes to establishing efficient offshore wind farms. The investment fits perfectly into our strategic work with focus on alternative investments that contribute to providing our customers with reliable and stable long-term returns.”
The divestment fully confirms Ørsted’s expectations of the value creation in the project. The transaction price is another proof that the market shares the same view regarding the value of its projects.
“This is the sixth offshore wind farm PKA invest in since 2011,” added Peter Damgaard Jensen, CEO, PKA, We focus on this type of investments because we continue to see interesting opportunities in combining good returns to our members and at the same time supporting mitigation of climate changes. Investment in offshore wind farms has so far made two-digit returns and we are pleased to see this investment underlining our climate strategy. For us, it is good business and common sense.”
Following the farm down of 50% of Walney Extension, Ørsted will increase its EBITDA guidance for 2017 from DKK 17-19bn to DKK 19-21bn. Although the farm-down was expected in 2017, the transaction has resulted in a higher share of the total EBITDA gain on Walney Extension to be realized in 2017. The gain on the share purchase agreement (SPA) is expected to be booked in Q4 2017 and make up more than 75% of the total expected EBITDA contribution from the transaction.
The remaining part will be booked as EBITDA from construction contracts, of which Ørsted expects around 25% in 2017 and the remainder in 2018. Expected gross investments remain unchanged at DKK 18-20bn.
The transaction is subject to approval by relevant competition authorities and is expected to be completed by Q4 2017.