Singapore-based conglomerate Keppel Group is investing €305 million (US$314.38 million) to acquire a 50.01% stake in a special purpose vehicle (SPV) that holds 50% of Borkum Riffgrund 2 (BKR2), an offshore wind farm in Germany.
The SPV is currently wholly owned by Gulf International Holding, a subsidiary of Gulf Energy Development PCL (Gulf), one of Thailand’s largest private power producers.
After the acquisition, Gulf will retain a 49.99% stake in the SPV. Denmark’s Orsted, the world’s largest developer of offshore wind power, owns the remaining 50% stake in BKR2.
The investment is being made through Keppel Corporation and Keppel Infrastructure Fund Management, the trustee-manager of Keppel Infrastructure Trust (KIT). KIT and Keppel Corporation will hold an effective stake of approximately 20.5% and 4.5% in BKR2 respectively. These stakes are held through an 18:82 joint venture between Keppel Renewable Investments, a wholly owned subsidiary of Keppel Corporation, and KIT.
The deal is expected to be completed in the fourth quarter of 2022.
Fully operational since 2019, the 465-megawatt BKR2 is located 59 kilometres off the coast of Lower Saxony in the North Sea, which is an area with high wind availability as reflected in the high average historical capacity factors of more than 40%.
The region is next to the Wadden Sea, a Unesco World Heritage site. Hence, it is unlikely for wind farms to be built at the Wadden Sea, mitigating potential reduction in wind availability for BKR2.
BKR2 operates under the German EEG 2014 market premium mechanism, which has an attractive feed-in tariff and guaranteed floor price until 2038, providing strong cash flow visibility for the project. This arrangement de-risks the asset.
The project also holds a 20-year power purchase agreement and a 20-year operations and maintenance agreement (OMA) until 2038 with Orsted. The long-term OMA has a largely fixed operational cost base which provides significant cost certainty and cash flow visibility. As the 50% shareholder of BKR2, Orsted will continue to operate BKR2 with a strong alignment of interest.
Rapidly growing market
To meet its climate commitments, Germany has been rapidly growing its renewable energy market, and has committed to phasing out coal and nuclear power. In February this year, Germany brought forward its 100% renewables target by 15 years to 2035, and announced the country’s plan to triple the pace of capacity expansion for wind and solar.
In view of this, and the growing electricity demand resulting from the decarbonization and electrification of key sectors, the price outlook for renewable energy in Germany is expected to be favourable, Keppel says.
On July 13, Keppel Corporation and KIT also announced an investment in onshore wind farm assets across Sweden and Norway. The latest deal further accelerates the growth of the group’s exposure in renewable energy assets. It also underscores the group’s commitment towards Keppel’s Vision 2030, which sees renewables, clean energy and decarbonization solutions playing increasingly integral roles in its pursuit of sustainability.
Upon the completion of the latest investment, the group will have a total renewable energy portfolio of approximately 2.2 gigawatts, including assets under development. The deal will also contribute to KIT’s target of increasing exposure to renewable energy assets by up to 25% of equity-adjusted assets under management by 2030, increasing KIT’s exposure from 4% to 11%.
Keppel Corporation chief executive officer Loh Chin Hua says: “The demand for renewable energy is expected to intensify as the world journeys towards its net-zero goal. We are pleased to strengthen our partnership with best-in-class partners such as Gulf and Orsted through this transaction, and look forward to future collaboration opportunities.”