Swedish utility bets big on British wind -- Vattenfall continues purchase spree and links arms with Iberdrola

Swedish energy group Vattenfall is continuing its expansion into the UK wind market with ambitious plans for offshore development. Two recent project acquisitions, plus further plans to bid into Britain's third and biggest round of concessions for offshore wind farm development, signal the group's determination to become the fastest growing wind power developer and operator in northern Europe. Vattenfall sees wind power as playing a significant part in its aim to be carbon dioxide neutral by 2050.

Currently the world's sec-ond largest operator of offshore wind, Vattenfall's latest UK acquisition is the 300 MW Thanet project off Margate, Kent, in the outer Thames Estuary east of London. It bought the project from hedge fund Christofferson Robb and Company (CRC) for £35 million. The price may have been a loss for the seller. It is rumoured that CRC paid developer Warwick Energy £47 million for the project in 2007.

CRC's original intention had been to project finance the construction of Thanet, borrowing money from a consortium of lenders. But with the credit crunch drying up the market for project finance, CRC put the wind farm up for sale this summer. As more than one market commentator has pointed out, only companies with strong balance sheets will be able to build large offshore projects under current market conditions.

Vattenfall says it competed against other energy companies to secure the rights to Thanet. The total investment for completing the project will amount to £780 million. Construction will now be overseen by Vattenfall's north European team, which worked on the utility's Lillgrund project -- made up of 48 Siemens 2.3 MW turbines erected last year in the strait between Denmark and Sweden -- and the Horns Rev projects in the Danish North Sea, the second of which is under construction, also using Siemens turbines. For Thanet, however, Vattenfall is using Vestas 3 MW turbines with a five year operations and maintenance contract attached to the order.

Vattenfall is retaining the major contractors and consultants who have long been involved in Thanet. But Warwick Energy, which had been managing the construction program for CRC, will see its role significantly reduced to one of advice and support. With construction work on Thanet put on hold during the sale of the project, its completion has been delayed from 2009 to 2010.

Britain's energy and climate change minister, Mike O'Brien, says: "I am pleased Thanet wind farm will be able to proceed under its new owner, Vattenfall. This proves the UK is still a good place to invest in offshore wind despite the current economic difficulties."

The purchase of Thanet came just a week after Vattenfall concluded a deal to buy British company Eclipse Energy, which is developing the 150 MW Ormonde wind farm off north-west England. The wind farm is part of what is planned to be the world's first hybrid wind and gas generation project.

Between them, Thanet and Ormonde make Vattenfall one of the UK's biggest players in the wind sector. Vattenfall already owns the 90 MW Kentish Flats wind farm off Whitstable, operational since 2004, and in October acquired north of England wind project developer AMEC Wind and its 570 MW portfolio of projects.

Linking with Iberdrola

In addition, Vattenfall is teaming up with the world's largest wind farm operator, Iberdrola of Spain, to bid for sites in the UK's Round 3 of offshore wind development. The partners, in the form of a consortium of Vattenfall and the British offshoot of Iberdrola Renovables, ScottishPower Renewables, aim to build 6 GW of wind capacity by 2020. They will be up against fierce opposition in the scramble for sites.

Ninety-six companies registered their interest in Round 3 and many are now teaming up with partners to apply for zones under the current bidding process which ends at the beginning of March.

Round 3 is the UK government's most ambitious round of offshore development concessions so far and has the potential to deliver up to 25 GW of offshore generating capacity. Added to wind farms built under the first two offshore rounds, it could see a total of 33 GW of offshore wind -- essential for the UK to meet its 2020 renewables target.

Development in Round 3 will take place in nine zones around the British coast, some of which will be able to accommodate several large wind farms. But under plans by seabed owner The Crown Estate, only one company or consortium will be granted exclusive development rights to each zone. The Crown Estate will be looking for financial strength and a track record in building offshore wind plant from prospective bidders.

"Combining the experience and knowledge of Vattenfall and ScottishPower Renewables will create an extremely strong and successful partnership," claims Xabier Viteri, CEO of Iberdrola Renovables. "Round 3 is a very important part of the UK's renewable aspirations and this consortium has the skills and determination to play a key role in this process."

From Vattenfall Wind Power AB, Anders Dahl says that the partnership offers the company a good opportunity to achieve its goal of increasing its output of electricity from wind from some 1.5 TWh today to 50 TWh by 2030. The UK is an important growth market for the group, he adds. "Great Britain is ideal for wind power with good wind conditions and a long coastline." Vattenfall long ago declared its intention to be the major wind power player in its home market of Sweden (Windpower Monthly, June 2006).