Germany – Ørsted has inked an agreement with Glennmont Partners to acquire a 50% stake in Ørsted’s 900 MW German offshore wind project Borkum Riffgrund 3.
The wind farm is expected to be operational in 2025, subject to Ørsted’s final investment decision by the end of 2021. The agreement is Ørsted’s first farm-down to an institutional investor, and it must be inked before the project’s final investment decision is made.
The total transaction value is projected to be around DKK 9 billion upon completion of the transaction, which includes the price for acquiring a 50 percent ownership stake as well as the obligation to fund 50 percent of the payments under the EPC contract for the complete wind farm.
Glennmont, completely owned by Nuveen, a USD 1.3 trillion global asset manager, is one of Europe’s largest fund managers focused solely on sustainable energy infrastructure. Glennmont’s investment in Borkum Riffgrund 3 has been structured to fulfill the interests of its institutional investors, notably Nuveen’s parent company, TIAA.
As part of the arrangement, Ørsted will build the wind farm under a full-service EPC contract, provide operations and maintenance services for the next 20 years, and create a market for the power and green certificates generated by Borkum Riffgrund 3. Ørsted has devised a 20-year offtake deal that provides Glennmont with a combination of fixed and collared prices for the majority of their share of the volumes for 15 years, while leaving certain volumes vulnerable to market power prices.
Ørsted has negotiated long-term fixed-price corporate power purchase agreements for a total of 450 MW on Borkum Riffgrund 3. Following the farm-down and corporate PPAs negotiated to date, Ørsted’s merchant exposure will be confined to the fixed and collared tranche arrangement under the offtake agreement with Glennmont for the first ten years. Ørsted is continuing to work on an advanced pipeline of further PPAs with the goal of further optimizing the remaining merchant exposure in the project’s first ten years and subsequent years.
Glennmont will finance a portion of the acquisition and continued funding of its 50% stake through a financing package prepared and led by Ørsted and co-arranged by Glennmont. The long-term senior debt facilities will be supplied by eight banks: Santander, SEB, Natwest, ING, Bank of China, Helaba, ABN AMRO, and Siemens Bank. They will incorporate a variety of unique characteristics that reflect a market-leading approach for merchant-exposed offshore wind financings.
The disposal is contingent on Ørsted making a final investment decision, which is expected by the end of 2021, as well as securing project permits, merger and foreign investment clearances. The purchase is likely to close in Q4 2021 or Q1 2022.