Offshore Capital Winds of Change

U.S. investor Blackstone has become the first to finance a large offshore German wind park solely with private capital.
The fresh breeze of private equity blowing.

Meerwind Südost is one of Germany’s most ambitious offshore wind parks. Eighty giant wind turbines, anchored in the North Sea some 23 kilometers north of Heligoland island, will be able to provide up to 360,000 households with electricity.

On Monday, Sean Klimczak from the U.S. investor Blackstone and his partners, officially dedicated the new wind park.

“Meerwind is the first large offshore park in the German North Sea built in a timely manner and on budget,” said Sean Klimczak, managing director of Blackstone, at a dedication ceremony. “We are seeing more and more investment in offshore wind parks.”

Meerwind is the first large-scale German offshore project to be financed solely with private capital. Blackstone and seven commercial banks invested €1.3 billion ($1.62 billion). Germany’s KfW state development bank and the Danish Export Credit Agency EKF provided additional funding.

For Mr. Klimczak, the Meerwind project is just the beginning. “We want to invest in further German offshore wind parks,” he said. “We are currently talking about several projects.”

Mr. Klimczak expects a decision to be made within the next 18 months.

One of these projects is the Nördlicher Grund wind park off of the North Sea island of Sylt. But Blackstone still lacks approval to connect the wind park to the power grid.

“We will build the wind park Nördlicher Grund as soon as we have approval,” Mr. Klimczak said.

The growing profitability of offshore wind parks should attract more investors.

In Germany, offshore wind power generation is now slowly gaining momentum, after the sector struggled in the beginning with numerous delays, some of them construction related. For environmental protection reasons, wind parks are built far offshore, where the water is deeper and the wind is rougher. Anchoring and connecting them to the power grid has proven more complex than initially assumed.

As a result, the German government has lowered its targets for 2020 from 10 to 6.5 gigawatts.

Currently, German wind parks are generating about 900 megawatts of electricity. New wind farms in the planning will add capacity for 2,400 megawatts in the comming years, according to Foundation Offshore Wind Energy.

 

Germans Energy shift-01 (3) germany energiewende

At the beginning of August, the energy companies Vattenfall and Stadtwerke München announcedt their decision to invest in the construction of the offshore wind park Sandbank. Together, the companies plan to invest about €1.2 billion.

Sandbank is the second largest offshore wind park after Dan Tysk that the two companies aim to develop together.

RWE, a large energy company in western German, is also pushing forward with its offshore business. It will soon start construction of its long delayed Nordsee Ost windpark, together with a Canadian partner.

Many financial investors are tracking the progress made by offshore wind plants. Although Allianz remains cautious, the Munich-based insurer  is investing in renewable energy. On Monday, the company announced plans to invest €2 billion in wind and solar parks.

Lower operating costs could also boost profitability, which in turn could attract even more investment, according to Mr. Klimczak citing larger turbines from the Meerwind Park as an example. “If instead of 3.6-megawatt turbines we could use ones with an output of 6 megawatts, then we could reduce the costs per megawatt by 25 percent,” he said.

 

Georg Weishaupt covers the energy sector for Handelsblatt. To contact the author: [email protected]