Acquisition of Stake in Walne

RNS Number : 6230E

Scottish & Southern Energy PLC

23 December 2009

 



ACQUISITION OF STAKE IN WALNEY OFFSHORE WIND FARM

SSE (Scottish and Southern Energy plc) has entered into an agreement with DONG Energy to acquire a 25.1% stake in the 367MW (megawatt) Walney offshore wind farm which is being built 14km west of the Isle of Walney in the Irish Sea. DONG Energy will retain a 74.9% stake.

To acquire the stake in Walney, SSE will pay to DONG Energy a total consideration of up to approx £39m of which approx £17m is subject to the operational performance of the wind farm. As a shareholder in the project, SSE will pay its pro rata share of the construction costs with payments being made when each phase of the wind farm is commissioned.  

Walney will be constructed in two phases, each totalling 183.6MW, with construction of the first phase due to begin in the spring of 2010 and of the second phase in the spring of 2011.The wind farm is therefore expected to enter commercial operation in two phases: during the first half of 2011 and towards the end of 2011.  DONG Energy will manage the construction of the wind farm with Siemens supplying the wind turbines, the second phase of which will feature a new 120 metre rotor. 

The wind farm is expected to have an average load factor of around 43% and produce around 1,300 GWh (gigawatt hours) of electricity in a typical year. Under the UK government's plans for its Renewables Obligation Scheme, this output will qualify for 2.0 Renewable Obligation Certificates per MWh.  SSE and DONG Energy will market the output of the wind farm in proportion to their equity stakes.  

Excluding the connection to the Great Britain electricity network, the cost of constructing Walney is expected to total just under £1 billion.  The project will initially be funded by DONG Energy while SSE will contribute its 25.1% share of the construction cost of the project (just under £250m) in two stages, when each phase of the wind farm is commissioned.  This will be included within SSE's investment programme for the five years to March 2013, with some other projects previously in the programme being delayed.

DONG Energy will be the leading partner in the construction and operational phases of the development, and has provided SSE with financial guarantees relating to the final capital cost of the project and its timely completion.  

The addition of a 25.1% stake in Walney takes SSE's portfolio of onshore and offshore wind farms in operation, in construction or with consent for development in the UK and Ireland to over 2,100MW (excluding the Arklow development opportunity in the Irish Sea).

DONG Energy has a leading position in offshore wind power, with many years of experience. It has a large portfolio of wind farms in operation and under construction and a significant project pipeline focused on Northern Europe, including the UK.

In December 2009, SSE and DONG Energy announced an agreement to form a 50:50 joint venture to develop three offshore wind farms in the Dutch sector of the North Sea with a total capacity of just over 1,000MW.

Ian Marchant, Chief Executive of SSE, said:

"I believe this is an excellent agreement for SSE and for DONG Energy. DONG Energy is one of the world's leading offshore wind farm developers with extensive construction and operational experience.  

"SSE is already the UK's leading generator of electricity from renewable sources, with the largest and most diverse portfolio. The potential for harnessing the energy of the wind off the coast of the UK is vast and the combination of Walney and Greater Gabbard give us a very good offshore wind construction portfolio for the next few years.

"Major offshore wind developments such as Walney benefit from a partnership approach which blends the skills and experience of each party, and this agreement between SSE and DONG Energy does exactly that."

Anders Eldrup, Chief Executive of DONG Energy, said:

"The partnership with SSE in the UK provides an opportunity for DONG Energy, through its reduced share in Walney, to diversify risks and at the same time utilise and further develop our offshore experience.

"The UK is one of the primary markets for DONG Energy's wind development activities now and in the near future. We are, therefore, very delighted with the opportunity to team up with an experienced company like SSE."

 

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