REG-Centrica PLC Centrica to Invest £725 Million to Build 270MW Offshore Wind Farm and Also Announces Equity Partner and Refinancing of Existing Wind Portfolio
CENTRICA TO INVEST £725 MILLION TO BUILD 270MW OFFSHORE WIND FARM AND ALSO
ANNOUNCES EQUITY PARTNER AND REFINANCING OF EXISTING WIND PORTFOLIO
Centrica plc, the parent company of British Gas, today announced that its 270
megawatt (MW) Lincs offshore wind project has received final investment
approval, and that construction is expected to begin in 2010.
Lincs will be situated eight kilometres off the coast of Skegness next to
Centrica`s existing wind farm developments at Lynn and Inner Dowsing and will
comprise of 75 3.6MW Siemens turbines. Investment in this project is expected to
total approximately £725 million and the wind farm should start generating power
towards the end of 2012. When Lincs is completed, Centrica will have equity
interests in operating renewable energy projects with an installed capacity of
650MW.
Under current UK Government proposals, Lincs will attract two Renewable
Obligation Certificates (ROCs) for every megawatt hour (MWh) produced, following
the UK Government`s decision in April to enhance the level of support provided
for new offshore wind projects.
Centrica also announced that it has agreed the sale of a 50 per cent equity
stake in its Lynn, Inner Dowsing and Glens of Foudland wind farms to the
US-based investment management company TCW for a cash consideration of £84
million, and entered into agreements to raise approximately £340 million of
non-recourse project finance facilities from a consortium of banks for these
assets. The transactions value the wind farms at approximately £460 million in
aggregate. Profit on disposal of this 50 per cent equity stake will be around
£50 million. Reported operating profit in the year ended 31 December 2008 from
these wind assets was £17 million, however, the Lynn and Inner Dowsing wind
farms were not fully commissioned until December 2008.
Centrica is also entering into a joint venture agreement with TCW to govern
their ongoing relationship as co-owners of the Lynn, Inner Dowsing and Glens of
Foudland wind farms. The agreement contains customary rights for each party to
acquire the other party`s shares in the joint venture company at fair market
value following a material default by, or on the insolvency of, the other party.
Through its subsidiary British Gas Trading Ltd, Centrica will also enter into a
15-year Power Purchase Agreement (PPA) to off-take all the electricity
production together with 50 per cent of the ROCs generated by the three
refinanced wind farms.
Financial close on the non-recourse project finance facilities is expected to
occur in November 2009 and the equity sale is expected to close before year end,
conditional on receipt of European Community Merger Regulation (ECMR) approvals.
Sam Laidlaw, Chief Executive of Centrica, said: “Our decision to build Lincs
illustrates our continued commitment to develop renewable generation and
confirms our position as one of the UK leaders in green energy. The Government`s
enhanced financial framework for offshore wind has been fundamental in improving
the overall project economics of this development.
“The refinancing and equity sale of part of our existing wind portfolio
underlines the quality of the operational assets and creates a structure for
recycling Centrica`s capital and mobilising third party funds efficiently. This
is a milestone in our renewables strategy and we look forward to working
together with TCW who bring significant global expertise in energy investments.”
1. Lincs wind farm will be capable of generating electricity for around 200,000
British Gas customers. Centrica has also submitted planning consent applications
for the Docking Shoal wind farm (540MW, submitted in December 2008) and the Race
Bank wind farm (640MW, submitted in January 2009), both situated in the Greater
Wash area.
2. Lincs has planning consent for 250MW with a proposed additional 20MW to be
constructed in the footprint of the Lynn and Inner Dowsing wind farm development
but connected to the Lincs transmission.
3. The wind farms included in the refinancing are currently wholly owned by
Centrica: the Lynn and Inner Dowsing offshore wind farms (each with 97 MW
installed capacity with combined maximum grid export capacity of 180 MW) and the
Glens of Foudland onshore wind farm (26 MW). These wind farms are owned by
Centrica`s subsidiary GLID Wind Farms Topco Ltd.
4. TCW is a subsidiary of Société Générale Asset Management, which has
approximately $400 billion under management. TCW is making the investment in
GLID Wind Farms Topco Ltd through two of the investment funds it manages: the
US$2.6 billion TCW Energy Fund XIV and the €354 million TCW European Clean
Energy Fund.
5. The following lenders form the consortium of banks providing debt finance to
GLID Wind Farms Topco Ltd;
Bank of Ireland, Bank of Tokyo-Mitsubishi UFJ, Bayern LB, BBVA, BNP Paribas
Fortis, Calyon, Dexia, HSBC Bank plc, KfW IPEX Bank, Lloyds TSB Corporate
Markets, National Australia Bank, NIBC Bank N.V., RaboBank, Santander
6. Lincs is expected to be a transitional project for OFTO purposes, which means
that the offshore transmission assets for this project will be built by Centrica
and their cost will be recovered post construction through an auction process.
Centrica expects the costs related to these assets to amount to approximately
£230 million, in addition to its own investment of approximately £725m in the
wind farm itself. The Lynn and Inner Dowsing wind farms are not subject to the
Offshore Transmission Owner (OFTO) regime.
7. Centrica was advised by Bank of Tokyo-Mitsubishi UFJ and Credit Suisse
Securities (Europe) Limited in respect of the refinancing of the Lynn, Inner
Dowsing and Glens of Foudland wind farms and the sale of an equity interest in
GLID Wind Farms Topco Ltd. Slaughter & May provided legal advice to Centrica.
Linklaters provided legal advice to the consortium of banks.