INTERVIEW: Dong’s wind boss

Dong Energy is looking for private investors to buy up to half of its 582MW Gode Wind 1 and 2 offshore projects in the German North Sea.

“We have done Gode Wind 100% on the Dong balance sheet,” Lars Thaaning Pedersen, Dong’s head of European wind development, told Recharge in a recent interview.

“As a strategy, we want to divest up to 50% of it,” said Pedersen, noting that Gode Wind will represent the largest single investment Dong has ever made.

The company last month announced its final investment decision for the two projects set around 45km from the German coast, simultaneously giving Siemens a massive order for 97 of its 6MW offshore turbines.

Unlike large German utilities, whose finances suffer from loss-making gas-fired power plants and nuclear decommissioning, Dong’s balance sheet position is so healthy that it doesn’t require any project financing for its rather large offshore projects.

Dong had written off some gas activities, and above all profits from the recent $2bn capital injection from Goldman Sachs and Danish pension funds. This gives it a much larger financial flexibility than other utilities have. With it comes the uncommon capacity to spur ahead with pricey offshore developments even before finding partners for them.

Dong is talking to a “quite broad range of investors” for the Gode Wind stakes and has held some initial meeting with them, Pedersen says.

“We have not set a deadline for this,” he said. But “we’ve seen a good response so far.”

Dong’s Gode Wind negotiations include German investors, with Pedersen saying the utility is talking to both private German companies and insurance firms.

For its 277MW Borkum Riffgrund 1 project, Dong had managed to line up Lego parent Kirkbi and Denmark’s William Demant Invest. But German private company investors so far have been more hesitant than their peers in Denmark.

“Denmark just has a longer track-record with offshore wind,” Pedersen acknowledges.

The search for co-investors isn’t limited to Europe.

“We have Asian investors in, we have continental European investors, British, American investors. We are globally active. It’s very much large infrastructure funds, institutional investors, private companies, etc.”

Exceeding 6.5GW?

Once the Gode Wind duo comes online, scheduled for the second half of 2016, Dong will have reached 3.5GW of its 6.5GW 2020 target.

Pedersen is optimistic that his company won’t have trouble achieving the remaining 3GW of the target.

“We have probably the best pipeline of any offshore developer in the world. So we have more opportunities than anyone, and we could build more than 6.5GW,” he affirms.

“Maybe 6.5GW is in the lower range of what’s realistic.”

After the coalition poised to form Germany’s next government recently said it wants to prolong it successful “compression model” for offshore feed-in tariffs (FITs) for two more years, and the UK yesterday announced major changes to increase support for offshore wind, Pedersen’s statement becomes even more believable.

In Germany alone the company has a massive pipeline, with at least one project – the 300MW Borkum Riffgrund 2 - ready to go for a final investment decision.

Due to regulatory uncertainty, Dong had been holding back the investment decision for the project, also in Germany’s North Sea, that had already been ready for a financial close last year.

But Borkum Riffgrund 2 only got a grid connection pledge for late December 2017. The date was too close to the previous end-2017 deadline for the compression model to end for Dong to risk committing a large sum to it.

But with the compression model prolonged until end-2019, the company should now feel freer to spend the more than €1bn needed for it.

Dong’s pipeline also includes the Gode Wind 3 and 4 projects that combined also will have a 300MW capacity.

Pedersen in the interview also said that Dong is open to use 7MW or even 8MW machines in future offshore wind parks.

For Godewind 1 and 2, Dong had run a turbine tender, in which “Siemens had the most competitive offer,” Pederson says.

Yet, the German industrial giant doesn’t have 7MW or 8MW machines on offer so far, which could give other offshore manufacturers a chance to gain a piece of Dong’s large offshore pie.

The larger machines could come into use in Germany as early as in 2016, or even earlier in the UK, Pederson estimates.