Keppel Invests In German Offshore Wind Farm

Keppel Invests In German Offshore Wind Farm
Keppel Corporation has decided to acquire a 50.01 percent stake in a special purpose vehicle that owns 50 pct of the Borkum Riffgrund 2 offshore wind farm in Germany.

Keppel Corporation has decided to acquire a 50.01 percent stake in a special purpose vehicle (SPV) that owns 50 percent of the Borkum Riffgrund 2 offshore wind farm in Germany.

Keppel Corporation entered the buy with Keppel Infrastructure Fund Management, the trustee-manager of the Keppel Infrastructure Trust (KIT). The stake was bought for $312.6 million from Gulf Energy Development, one of Thailand’s largest private power producers.

Post-acquisition, Gulf will retain a 49.99 percent stake in the SPV. Ørsted owns the remaining 50 percent stake in Borkum Riffgrund 2. The transaction is expected to be completed in the fourth quarter of 2022.

Fully operational since 2019, BKR2 has an operating capacity of approximately 465 MW and is located 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 percent.

Borkum Riffgrund 2 operates under the German EEG 2014 market premium mechanism, which has an attractive Feed-in-Tariff and guaranteed floor price till 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 until 2038 with Ørsted.

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 percent renewables target by 15 years to 2035 and announced the country’s plan to triple the pace of capacity expansion for wind and solar. Against the backdrop of reduced reliance on coal and nuclear, coupled with an increase in electricity demand due to decarbonization and electrification of key sectors, the price outlook for renewable energy in Germany is expected to be favorable.

Following Keppel's investment in onshore wind farm assets across Sweden and Norway, this transaction further accelerates the growth of the group’s exposure to renewable energy assets. Upon the completion of this investment, Keppel will have a total renewable energy portfolio of approximately 2.2 GW, including assets under development. The transaction will also contribute to Keppel Infrastructure Trust’s target of increasing exposure to renewable energy assets by up to 25 percent of equity-adjusted AUM by 2030, increasing its exposure from 4 percent to 11 percent.

“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 Ørsted through this transaction and look forward to future collaboration opportunities. This transaction is aligned with Keppel’s Vision 2030, which sees renewables, clean energy, and decarbonization solutions playing increasingly integral roles as we make sustainability our business. It also demonstrates how we can harness the Group’s eco-system and business networks to source for and capture opportunities to scale up in our focus areas and grow recurring income,” Loh Chin Hua, CEO of Keppel Corporation, said.

“This transaction marks KIT’s first investment in the offshore wind sector, and our second investment in the European renewable energy market, further reinforcing our strategy to grow our Energy Transition segment and almost tripling KIT’s renewable energy portfolio to over 700 MW. Underpinned by favorable tailwinds such as energy security, electrification, and higher projected demand for green energy in the future, this investment underscores the global acceleration towards decarbonization and net-zero. The Trust will continue to make inroads to capture more opportunities in the renewable energy sector, in support of our ESG target,” Jopy Chiang, CEO of Keppel Infrastructure Fund Management, added.

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