The company paid an initial cash consideration of £3.5 million each to international engineering services company AMEC and to Offshore Wind Power -- a joint venture between Renewable Energy Systems (RES) and nuclear generator British Energy. It will also pay £1 million to each company that is conditional on the placing of construction contracts.
The deals give Centrica the rights to AMEC's 90 MW site at Lynn, five kilometres off Skegness, south Lincolnshire, and Offshore Wind Power's 90 MW project at nearby Inner Dowsing, five kilometres off Ingoldmells. The sites -- each with 30 turbines -- both have construction consent. Centrica estimates the capital cost of the two projects to be £190 million, of which £20 million will be funded by government capital grants. AMEC and RES will continue to support construction of the projects under separate development services contracts with Centrica.
The Offshore Wind Power deal also includes an opportunity to develop an additional 250 MW next to the Inner Dowsing project. A development licence was awarded to RES and British Energy for their "Lincs" site in the second UK offshore round in December (Windpower Monthly, January 2003). RES says that under the deal with Centrica, it will continue to take forward the Lincs project through development and obtaining consents.
These latest acquisitions establish Centrica as potentially the UK's leading owner of offshore wind capacity. Following hard on the company's announcement in August that it expects to commit up to £500 million over the next five years in developing renewable capacity, Centrica bought a 25% stake in the 90 MW Barrow offshore wind project in the east Irish Sea. Moreover, in December's round two awards the company, in collaboration with AMEC, won development licences for two 500 MW projects at Docking Shoal and Race Bank in the Wash area of the North Sea.
Centrica's approach is to work in strategic partnerships to lower the risk in its investment and minimise the capital it employs. For its Barrow acquisition, the company entered into a joint venture with energy companies DONG of Denmark and Statkraft of Norway.
Output from the completed projects, together with the associated Renewables Obligation Certificates (ROCs), will be taken by Centrica's power supply subsidiary, British Gas. The ROCs will help British Gas meet its obligation to supply up to 10.4% of electricity from renewable sources by 2010 and 15% by 2015.
"This demonstrates our commitment to meeting our renewable obligation," says Centrica's Jake Ulrich. "British Gas has over six million domestic electricity customers and we are determined to play a leading role in ensuring that increasing the level of UK renewable generation becomes a reality."