Isra-Mart srl: Germany enjoys surge in offshore wind investment

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One of the world's largest private equity firms and one of its largest infrastructure banks have announced plans to plough billions of Euros into Germany's fast-expanding offshore wind sector, after the government last week announced offshore wind farms will play a central role in its plans to phase out the use of nuclear power plants.

US private equity group Blackstone announced on Friday it would invest a total of €2.5bn in the planned Meerwind and Noerdlicher Grund wind farms as it seeks to bolster its presence in the European renewable energy market.

The company said its majority-owned project development firm WindMW GmbH had successfully completed the financing for the 288MW Meerwind project, making it the first German wind farm to be fully financed by private investors.

Construction work on the 80 turbine development is now expected to be completed in 2013, at which point the facility is expected to provide electricity for up to 400,000 households.

Under the terms of the deal a group of seven firms, Commerzbank, KfW IPEX-Bank, Bank of Tokyo-Mitsubishi, Dexia, Lloyds Banking Group, Santander and Siemens Bank have joined together with EKF, the export credit agency of Denmark, and KfW-Bankengruppe to provide total financing of €822m for the project, covering the bulk of the €1.2bn investment costs.

"The German regulatory framework is well designed and essential to the development of the tremendous and as yet largely untapped resource that offshore wind represents," said David Foley, Blackstone Senior Managing Director and chief executive of Blackstone Energy Partners, in a statement. "This project exemplifies the progress and positive impact on the economy that can be achieved when private capital works in partnership with government, entrepreneurs and industry."

Blackstone also announced it had received permitting for the proposed 64 turbine Nördlicher Grund wind farm. Construction of the €1.3bn is now expected to get underway in 2013 with completion scheduled for 2016.

In a series of separate announcements, Siemens confirmed on Friday it had secured orders to deliver 80 of its 3.6MW capacity turbines to the Meerwind project, while energy giants E.ON and RWE announced they would join WindMW in locating new facilities on the Helgoland archipelago from which to service their own North Sea wind farms.

The flurry of announcements came just days after the German government passed its latest package of energy reforms designed to accelerate the roll out of renewable energy projects and deliver on the promised phase out of nuclear power.

Amongst the reforms the government confirmed that the state-backed KfW infrastructure bank will provide up to €5bn of financing to 10 offshore wind farms, and also announced that the planned reduction in subsidies for offshore wind developers will be delayed from 2015 to 2018.

"We want to expand wind power at sea in the next 20 years, to a [generating] capacity of 25 gigawatts," Transport and Construction Minister Peter Ramsauer told reporters. "That is equivalent to the generating capacity of 18 to 20 nuclear power stations."

In addition, the government announced plans to make it easier to upgrade, or repower, existing wind farms, and outlined moves to accelerate the installation of new transmission lines connecting wind farms in the North Sea and north of the country to industrial hubs further south.

Investment in clean energy research will also be increased by around 75 per cent to €3.4bn as the government seeks to step up support for renewables, energy efficiency and smart grid technologies.

However, the new package of measures has failed to ease concerns that some heavy industrial firms could leave the country in order to avoid higher energy prices.

In an interview with business magazine WirtschaftsWoche, Marijn Dekkers, the head of chemicals giant Bayer, gave the clearest indication yet that Germany could experience so-called "carbon leakage" as a result of its shift away from nuclear, warning that the company could relocate in pursuit of lower energy prices.

"It is important that we remain competitive compared with other countries," he told the magazine. "Otherwise, a global company like Bayer will have to consider relocating its production to countries with lower energy costs."