Ørsted has signed an agreement with Glennmont Partners, which will be acquiring a 50% ownership share in Ørsted’s 900 MW German offshore wind farm Borkum Riffgrund 3.
The wind farm is expected to be commissioned in 2025, subject to Ørsted’s final investment decision, which is expected by the end of 2021.
The transaction is Ørsted’s first farm-down to an institutional investor to be signed prior to taking a final investment decision on a project.
“We’re delighted to extend our cooperation with Glennmont, who are already partners in Gode Wind 1 and are focusing their entire portfolio on renewable energy infrastructure investments, thereby supporting the urgently needed shift from fossil-based energy sources to energy systems based on renewable energy sources,” says Martin Neubert, chief commercial officer and deputy group CEO at Ørsted.
The total transaction value, at completion of the transaction, is expected to amount to approximately DKK 9 billion, which comprises the price for 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.
Glennmont, which is wholly owned by the global asset manager Nuveen, is a large European fund manager exclusively investing in clean energy infrastructure. Glennmont has structured its investment into Borkum Riffgrund 3 to meet the needs of its institutional investors, including Nuveen’s parent, TIAA.
“This is a landmark investment for Glennmont,” states Francesco Cacciabue, CFO and co-founder at Glennmont. “Since Glennmont’s inception over a decade ago we have sought to establish long-term relationships that we can work with on multiple investments for our clients over time, and we’re very happy to once again work with Ørsted to invest in the energy transition. Our clients show a strong interest to invest in clean energy as they seek solid returns whilst decarbonising their portfolio of investments. This interest is underpinned by their confidence in our expertise and ability to deliver value.”
As part of the agreement, Ørsted will construct the wind farm under a full-scope EPC contract, perform operations and maintenance services for 20 years, and provide a route to market for the power and green certificates generated by Borkum Riffgrund 3. Ørsted has designed a 20-year offtake agreement that provides Glennmont with a combination of fixed price and collared prices for 15 years for the majority of their share of the volumes whilst also leaving certain volumes exposed to market power prices.
Ørsted has so far signed long-term fixed price corporate power purchase agreements (PPA) on Borkum Riffgrund 3 for a total of 450 MW. Following the farm-down and the corporate PPAs that have been signed to date, Ørsted’s merchant exposure in the first 10 years will be limited to the fixed and collared tranche agreement under the offtake agreement with Glennmont. Ørsted is continuing to work on an advanced pipeline of additional PPAs with the aim to further optimize the remaining merchant exposure in the first 10 years and in the later years of the project.
“The new investment with Ørsted exemplifies how Glennmont achieves its strong clean energy investment track record and is an important part of why Nuveen acquired Glennmont earlier this year,” adds Biff Ourso, head of infrastructure for Nuveen. “Nuveen and TIAA have a strong emphasis on responsible investing, and this latest agreement is a tangible step to demonstrate our commitment to decarbonisation.”
Glennmont will partially finance the acquisition and ongoing funding of its 50% share through a financing package that was structured and led by Ørsted, and co-arranged by Glennmont. The long-term senior debt facilities, which include a number of unique features that demonstrate a market-leading approach for merchant-exposed offshore wind financings, will be provided by eight banks: Santander, SEB, Natwest, ING, Bank of China, Helaba, ABN AMRO and Siemens Bank.
The divestment is subject to Ørsted’s final investment decision, which is expected by the end of 2021, and to obtaining project permit and merger and foreign investment clearances. Completion of the transaction is expected in Q4 2021 or Q1 2022.