Investing in new wind-power projects pays off for utilities

WORLDWIDE: Developers saw earnings grow as they brought new capacity online and output from existing projects increased.

New capacity… Vattenfall commissioned the 288MW Pen y Cymoedd wind farm in Wales last year (pic: WPM)
New capacity… Vattenfall commissioned the 288MW Pen y Cymoedd wind farm in Wales last year (pic: WPM)

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Offshore wind developer Ørsted (formerly Dong Energy) reported an 18% increase in pre-tax earnings in 2017, with the wind division growing by 74%.

The Danish firm’s operating profit (Ebitda) for the group as a whole was in line with expectations, totalling DKK 22.5 billion (€3 billion) for 2017. The wind division’s Ebitda increased to DKK 20.6 billion for the year, offset partially by higher project-development costs in new markets.

Growth in offshore capacity boosted earnings from operating projects by 45%, the firm said. Ørsted commissioned the 582MW Gode Wind 1 and 2 in Germany and the UK’s 258MW Burbo Bank Extension in 2017.

The 659MW Walney Extension has produced the first power from its second phase, and the developer commissioned the 573MW Race Bank site in the UK in January.

As a result of its strong financial position, Ørsted has also recommended an increase in dividend payments from DKK 6/share (€0.81) to DKK 9/share.

Power generation from Ørsted’s wind assets grew 61% year on year in the fourth quarter of 2017. Wind projects produced 2.9TWh of electricity, compared with 1.8TWh a year earlier, aided by increased capacity and slightly higher wind speeds.

The wind business recorded DKK 5.6 billion (752 million) in revenue, up from DKK 4.4 billion in 2016, while fourth quarter Ebitda in the wind business totalled DKK 12.6 billion, up 149% year on year following the sales in 50% stakes of the Walney Extension and Borkum Riffgrund 2 offshore wind projects in the UK and Germany, respectively.

Martin Neubert took over as Ørsted wind power CEO on 1 February, replacing Samuel Leupold, who stepped down in January.

Ørsted CEO Henrik Poulsen announced the firm would establish a business unit to look at investment opportunities in solar PV and storage, with the chance onshore wind may also play a role, after the firm divested all its onshore interests in 2014.

Swedish utility Vattenfall recorded an annual profit for the first time in five years, with earnings boosted by newly commissioned wind farms.

It posted an SEK 9.57 billion (€970 million) annual profit, up from a loss of SEK 2.17 billion the previous year. Operating profit for the year grew nearly fourteen-fold, from SEK 1.34 billion to SEK 18.64 billion.

Sales from its wind division rose 52% year-on-year from SEK 4.38 billion in 2016 to SEK 6.67 billion in 2017.

This improved financial performance was "as a result of new capacity added in 2017", the company stated. Projects commissioned last year included the 288MW Sandbank offshore development in Germany’s North Sea and the 288MW Pen y Cymoedd wind farm in Wales, UK.

Vattenfall’s wind projects generated 7.6TWh last year, up 31% from 2016. Of the 1.8TWh increase in generation year on year, 1.6TWh was attributable to new capacity, Vattenfall added, with the company installing 600MW in 2017.

The firm now plans to invest SEK 14 billion in renewable energy in 2018-2019, with SEK 13 billion earmarked for wind power.

Generating output

Portuguese developer EDP Renovaveis (EDPR) produced 27.6TWh of almost exclusively wind-generated electricity in 2017, a 13% increase on 2016, thanks to a rise in installed capacity in most of its markets.

The company added 600MW of new capacity last year, with the biggest increases in North America and Brazil.

An additional 424MW in North America boosted output by 20% year on year, while output in Brazil rose by 9% on the back of 127MW of additional capacity.

As of December 2017, a further 828MW of wind capacity was under construction, with North America and Brazil, accounting for almost 75%.

Significantly, EDPR is building 68MW of new onshore wind capacity in Spain, a market that has been stagnant in recent years as a result of the government’s retroactive cuts in renewable support and elimination of feed-in tariffs for new wind projects.

EDPR also put the increase down to a marginally improved load factor at its sites.

Wetter, windier conditions and more operational onshore wind capacity meant UK utility SSE’s wind generation output increased from 3TWh to 4TWh in the nine months to 31 December 2017, while its total renewables output was up by around 14% year-on-year, over the same period.

By 2020, SSE expects its renewable-energy capacity (including pumped storage) to grow by 4.3GW and be capable of generating 12TWh a year, it said in a trading statement for the third quarter of 2017. It produced 6.5TWh in nine months to 31 December.

This increase in capacity could include power from the up-to-1.5GW Seagreen offshore wind farm (Firth of Forth Phase One) in the Scottish North Sea, which it jointly owns with construction company Fluor. Following a judicial review in November, consent for the project was reinstated.

SSE also commissioned 516MW of new onshore capacity in the last nine months of the year, including its 171MW Galway site in western Ireland, and currently has 481MW in construction — both onshore and offshore, it confirmed.

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