RWE Acquires Three UK Offshore Wind Projects from Vattenfall in $1.2B Deal
Vattenfall has agreed to sell three of its offshore wind farm projects which were in a late stage of development to RWE in a deal that values the wind zone at approximately $1.2 billion. The companies are highlighting it as a positive development for the projects and the UK offshore wind power industry as RWE is committing to continue the development and restart a project Vattenfall walked away from in July 2023.
Vattenfall is saying it believes the agreement with RWE is the best way forward both for the company and for the UK projects. They will continue development efforts on the Norfolk Vanguard West and Norfolk Vanguard East projects pending regulatory approval and closing to the sale expected in the first quarter of 2024. The agreement also includes the Norfolk Boreas project which was previously suspended due to the changing finances of the industry. Vattenfall says it will reverse a previously announced $540 million impairment for abandoning Boreas while the deal will also permit the company to focus on other projects that fit its portfolio and risk appetite.
The agreed sale covers the Norfolk Zone located between approximately 30 and 50 miles off the coast of Norfolk in the North Sea. Each of the projects is projected to have a capacity of 1.4 GW with a total capacity of 4.2 GW making Norfolk one of the largest offshore wind development zones in the world. Vattenfall has spent 13 years developing plans for the projects, which RWE highlights as highly attractive because they are in a late stage of development with grid connections and permits secured.
RWE reports the agreed purchase price corresponds to an enterprise value of approximately $1.2 billion for the Norfolk wind zone. The majority of the purchase price relates to expenses spent to date. The acquisition requires approval from The Crown Estate and regulators.
The Boreas project won its Contract for Difference (CfD) in July 2022 but a year later Vattenfall said inflation and rising costs and challenges in the supply chain made the project unattractive. Vattenfall said it was suspending development but it has continued to pursue the other two projects in the area and was expected to bid for Contract for Difference in the 2024 government auction.
RWE says it looks forward to developing the projects as it believes they can be a key contributor to the UK renewable energy program. Combined they will provide power for approximately four million households. RWE reports it will resume the development of Norfolk Boreas but did not discuss the financial issues with the lower CfD for the project. They highlighted plans to seek agreements for the other two projects in one of the upcoming auction rounds saying that all three of Norfolk's projects are expected to be commissioned in this decade.
Vattenfall emphasized that while it has decided to sell these projects, which were a large portion of its wind portfolio, it will continue forward with offshore wind. It has an installed capacity of 1.1 GW of wind in onshore and offshore projects in the UK and another 500 MW in the pipeline. Beyond the UK, the company recently partnered with BASF for a 1.5 GW cluster off the coast of Germany.
The agreement which provides for the development of the Norfolk wind zone comes a day after Ørsted confirmed that it had decided to make the investment to build the third phase of the Hornsea project which is located in the same region as Norfolk. Hornsea 3 won its CfD in July 2022 in the same auction as Norfolk Boreas. Ørsted is expected to invest as much as $11 billion in the development of Hornsea which also includes a projected fourth phase. When completed, this would be the largest offshore zone generating approximately 7 GW of wind energy for the UK.