Vattenfall sells North Sea wind developments to RWE in £1bn deal

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Vattenfall is selling its flagship UK offshore wind developments to rival RWE in a deal worth almost £1bn that highlights the divergent views on the sector following a troubled year. 

The Swedish state-owned company is disposing of the three ventures off the coast of eastern England, five months after suspending work on the most advanced of them, Norfolk Boreas, blaming rising costs. 

Frankfurt-listed RWE said it would resume work on Norfolk Boreas and expected all of the developments to be producing electricity by the end of the decade. The three are designed to have a total capacity of 4.5 gigawatts, enough to supply millions of homes.

Vattenfall said the £963mn sale meant it would reverse the SKr5.5bn ($537mn) impairment charge it booked this year when it suspended work on Norfolk Boreas. 

This leaves it with 1.1GW of installed offshore and onshore wind farms in the UK. It is also developing a 798-megawatt floating project off the Scottish coast and about 500MW of onshore wind.

Anna Borg, Vattenfall’s chief executive, said both the UK and offshore markets were “attractive over the long term” but Vattenfall would “focus our offshore investments in projects which are appropriate to our current risk appetite”.

The global offshore wind sector has struggled this year due to a surge in costs linked to high interest rates and supply chain strains. Ørsted, the world’s largest offshore wind developer, has walked away from two projects in the US and others are trying to negotiate sales.  

RWE’s decision to beef up its UK portfolio comes after the UK government increased the maximum electricity price available to developers through the “contracts for difference” (CFD) subsidy scheme after developers complained it was too low to offset rising costs.  

RWE said it would now try to secure a CFD from the government in the next auction round in 2024. The contracts guarantee developers a certain price for their electricity, but if the wholesale price is higher than the guaranteed price they have to pay back the difference. 

Writing on LinkedIn, Markus Krebber, RWE chief executive, said: “The recent decisions of the UK government on future offshore wind auctions are a positive sign and give us the confidence to make further significant investments.”

The deal means RWE is now developing 10 offshore wind projects in Britain with a total potential capacity of 11.2GW. These include the Sofia project it is building 195km off England’s north-east coast.

Last week, RWE said it planned to invest €55bn globally between 2024 and 2030, with just over one-third of that going to offshore wind. 

Vattenfall’s North Sea projects are well advanced, with seabed rights, grid connections and planning permission secured. 

The deal comes a day after Denmark’s Ørsted said it would press ahead with developing its 2.9GW Hornsea 3 farm off England’s north-east coast, a decision also helped by the increased support on offer from the government.

Duncan Clark, head of Ørsted’s UK operation, said the wind farm was “strategically very significant for the company; we have had it in our sights for a long time”.

Dan McGrail, chief executive of trade group RenewableUK, said Britain was “regaining its position as the leading market for offshore wind investment”.