Ofgem shortlists four bidders for £2bn offshore wind links

UK energy regulator Ofgem has shortlisted four potential operators for the offshore wind transmission links of three wind farms totalling 2.5GW in capacity and worth an estimated £2 billion (€2.3 billion).

The first of two export cables was installed in June 2021 at the nearshore of Thorntonloch Beach for the Neart na Gaoithe offshore wind farm (pic credit: Peter Devlin)

A new bidder joined three others in the competition to own and operate up to three offshore wind farm transmission assets, in the most valuable offshore transmission owner (OFTO) tender round ever run by Ofgem.

The consortium led by newcomers Gravis Capital Partners joined previous OFTO bidders EKITD Consortium, Diamond Transmission Partners and Transmission Capital Partners. 

The four would-be OFTOs have all successfully passed through the ‘enhanced pre-qualification’ (EPQ) stage. It is the first hurdle for aspiring OFTOs, “whereby they must demonstrate that they are capable of both paying for and operating the OFTO assets”, Ofgem said.

This is the tenth OFTO tender round held in the UK to date. 

The four bidders are competing for the offshore transmission assets of the 1.2GW Dogger Bank A, 448MW Neart na Gaoithe and 882MW Moray (West) offshore wind farms, estimated to be worth a combined total of around £2 billion.

Shortlisted bidders

The shortlisted bidders are: 

  • Gravis-ITOCHU-UKPN Services Consortium (Gravis Capital, ITOCHU Corporation and UK Power Networks Services)

  • EKITD Consortium  (Equitix Investment Management, Kyuden International Corporation and Kyuden T&D Global)

  • Diamond Transmission Partners (Mitsubishi Corporation and HICL Infrastructure) 

  • Transmission Capital Partners (International Public Partnerships and Transmission Capital Partners).

  • They will now go through to the final invitation to tender (ITT) stage for each of the assets and can choose to bid for one, two or all three of them. 

    Ofgem said the ITT stage for the Dogger Bank A project is due to begin imminently, with the remaining two projects to follow in phases. The regulator will appoint a preferred bidder for each link after its respective ITT stage.

    The OFTO for each project will receive a guaranteed revenue stream for up to 25 years under the licence terms, subject to the availability of their assets.

    Hornsea Two asset sale

    The announcement of Ofgem’s tender round 10 follows the recent transaction close of OFTO tender round 8, relating to the 1320MW Hornsea Two, the UK’s largest fully operational wind farm.

    In September 2022, Ofgem selected DTP as the preferred bidder in this round. DTP will own and operate the Hornsea Two OFTO asset for the next 24 years.

    The sale agreement for the Hornsea Two assets was formally signed on 21 July, with Breesea, Soundmark Wind and Sonningmay Wind – a joint venture of Ørsted (50 %) and AXA IM Alts and Crédit Agricole Assurances (jointly 50%) – divesting the assets to DTP. 

    The final transfer value of the assets, including the onshore substation, export cables, offshore reactive compensation substation and offshore substation, is £1.14 billion, according to Ofgem.

    Ørsted will provide DTP with operations and maintenance services for the transmission assets under a long-term agreement.

    Upcoming surge

    Over the next two years there will be a surge in OFTOs coming to market, as the UK works to meet the government’s target of increasing offshore wind generation capacity fivefold to 50GW by 2030, Ofgem said.

    “As we bring greater numbers of larger OFTO assets to market we are seeing increasing interest from investors and new bidding consortia coming forward,” said Ofgem director of networks Rebecca Barnett. 

    “This increasingly competitive field is great for consumers because the extra competitive pressure ultimately helps keep energy costs down,” she added. 

    “With a stream of multibillion pound OFTO assets coming to market over the next few years there are many opportunities for more investors and consortia to come forward and get involved,” Barnett said.