Germany's legal uncertainty holding back EnBW pipeline

Baltic 2 on track but other North Sea developments in the balance

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EnBW, Germany's fourth largest energy company, will hold back on a pipeline of around 1.2GW in North Sea projects until Germany's regulatory framework for offshore wind is completed, the company said on Friday in its 2012 annual report.

The manufacture of components for the 288MW Baltic 2 project in the Baltic Sea is proceeding, but other EnBW projects are not progressing. An investment decision for Hohe See was postponed due to ongoing discussions on changes to the legal framework, including the Energy Act and the Renewable Energy Act.

A revised Energy Industry Act has introduced binding dates for connection of offshore wind farms to the onshore network. These rules "do not alone result in security of planning," EnBW states. "Due to the uncertain framework conditions, there is a risk that the accumulated project expenditure [in Hohe See] until now will have to be written off," it adds.

Baltic 2 could cost more than planned, EnBW warns, with commissioning potentially delayed beyond 2014. A €500m EIB loan was agreed earlier this year, but EnBW said it had not yet drawn on it. Plans to divest stakes in Baltic 2 have also not yet been implemented.

Mirroring the strategy for its 48MW Baltic 1 project, in which around 20 municipal utilities hold 49.68%, EnBW invited municipals in December 2011 to take minority stakes in Baltic 2. EnBW intends to retain a 50.1% share.

One of the 150 municipals that expressed an interest, Stadtwerke Karlsruhe, decided last April that it would take 6.5MW for €14m in 2014, expecting a return on investment of 9-10%. Even if costs rose, it was still expecting returns to be higher than fixed-rate bank investments, it said at the time.

A Stadtwerke Karsruhe spokesman told Windpower Offshore today that, as a "mini investor", it would await to hear from EnBW when the planned initial payment of €0.6m/MW (totalling €3.9m) and the remaining €10m had to be paid, and whether the timing of payments would be renegotiated due to delays with Baltic 2.

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