wpd: A developer prepared to take risks

Now recognised as one of the world’s leading wind developers and Independent Renewable Power Producers (IRPP), wpd group has a staff of about 700 people around the world.

Founded in 1996, wpd has been one of the key players in the wind sector right from its very inception, wpd has constructed and financed more than 2.3GW, an impressive 1,600 turbines of onshore wind power managed on long-term contracts over the last 16 years.

In the medium term the German company has more than 7GW of onshore and around 10GW of offshore projects in the pipeline, representing 16 different projects in six countries.

The offshore division of wpd was established in 2000 and has more than 60 employees active in wind development operating out of six offices (Bremen, Stockholm, Paris, Helsinki, Rome and Rostock). The company’s offshore growth is based on its strategy to be “more than just a developer”. It is keen to cover the entire value chain including the development and procurement for, and construction and operation of offshore wind farms.

Speaking exclusively to Offshore WIND, wpd Managing Director Achim Berge, comments: “We are different from other companies, we are not just a pure developer.” For instance with Baltic 1 (48.3MW), Germany’s first commercial offshore wind farm in the Baltic Sea, wpd was involved in procurement and construction. Taking stakeholdings is certainly part of the strategy going forward, he adds. “We are continuously growing and are happy to take stakes of 10% or more.”

wpd offshore has had considerable success since it began operations and has a strong track record as an international offshore wind project developer, obtaining building permits for eight offshore projects. Five of these projects, with a total output of more than 2GW, have been sold to major utilities and were then connected to wpd through cooperation agreements. This included the earlier mentioned Baltic 1, which was constructed in 2010 by EnBW & wpd, and Baltic 2 (288MW), where the procurement was finished in 2010.

The 288MW Butendiek project, for which the permission process finished in 2011, is under full wpd ownership and management and the financing process is ongoing. Recently, wpd made 2 successful bids in the French offshore tender in a consortium led by EDF and DONG Energy.

Total wind farm solution

With its fully owned subsidiary wpd offshore solutions, Mr Berge points out that the company is one of very few offshore wind companies with extensive experience in offering the “total offshore wind package”, which can be seen in its German projects. In 2008 wpd sold four projects (Baltic I & II, HWP Nordsee & He Dreiht) to German utility EnBW. wpd was appointed project manager and was primarily in charge of procurement and design. For Baltic I, wpd negotiated all work packages with suppliers (turbines, foundations, substation and cabling), including installation equipment.

During the pre-construction phase wpd was involved in monitoring the manufacture of components, as well as installation at the site. “Baltic I started in April 2010 and was completed by the end of the year on time and within budget!” he stresses.

“I think we have taken many lessons on board over the years. We know it is important to have a long-term perspective and that it takes time to build up the specialist knowledge needed. There is no real market any more for pure developers, companies have to be more than just that.”
“This is particularly the case in the offshore sector. It is not just about getting permission, wpd wants to create real value by having the knowledge and right people throughout the development, procurement and construction phases.” wpd is also well positioned in the field of O&M with its subsidiaries as associated companies. All for Offshore GmbH, a joint venture with Schramm Group, provides logistic solutions and harbour management, wpd windmanager takes care of commercial and technical management and Deutsche Windtechnik AG provides technical maintenance and repair services.

“We have our own in-house capability to manage offshore projects through the procurement and construction phases of the entire project. With wpd offshore we have built our own team of technical, commercial and legal experts. We have experienced engineers, commercial managers, geologists, marine, QA and HSE experts.”

Budget planning, time scheduling, resource planning, permission management & compliance, certification, park concept and layout, multi-contracting, assuring compliance with applicable rules, legal management of contract, risk analysis, design & manufacturing and quality control are just some of the services it offers in its portfolio.

Partnering utilities into new markets

The company’s capability to be able to offer an overall solution has meant that it has partnered several major utilities when they have entered new offshore wind markets. In 2005, Vattenfall acquired the 128 turbine Swedish Kriegers Flak offshore wind farm from wpd in one of the first offshore wind transactions of Vattenfall. In preparation for the French offshore tender this year the party led by EDF/DONG Energy entered into a joint venture with wpd offshore France. In April 2 tenders for projects were awarded to this group.

wpd also plays a significant role in the financing of projects with more than €2bn of wind-project debt arranged over the last decade. Mr Berge would like to see this financing base broaden, and the company is keen to attract more investors. With 1,653 turbines or 2.3GW under management, wpd windmanager is a leading operator of wind farms and customers already include closed-end funds, utilities, international infrastructures and private equity investors.

Attracting investors

“The industry is dealing in financing huge numbers and more huge investments will be needed in the future.” Utilities are continuing to build offshore wind farms but they are not able to build all these farms alone and need equity from other sources, he stresses.

wpd is working hard to attract other investors to offshore wind such as smaller and medium-sized utilities and local communities. “In Germany these smaller utilities were excluded from investing in nuclear power production but in this new market they can now have a bigger share. Financial investors, pension funds and construction companies are also other potential sources.” Even given the economic climate, wind energy is still proving attractive, he adds. “Yes, three or four years ago tickets were bigger, but now banks and investors are much more reluctant in general. However, there is still a lot of interest in offshore wind following the Fukushima nuclear disaster. “Offshore wind energy is now a much bigger part of the energy mix. The outlook for offshore wind is certainly looking healthy, particularly now that the technical issues are less risky than they used to be.”

In terms of its geographic positioning one obvious gap in its European portfolio is the UK. But Mr Berge is philosophical after the company was the runner up in the race to get the Hastings zone under Round 3.

“We are not acting like a utility, we don’t need to be present in every market, instead we are opportunity driven. If we see a great opportunity, we are there and then we are prepared to step in as a developer and one that is prepared to take the development risk.”

French projects and aiming for more

In France it was another story when wpd was awarded the two zones together with EDF and DONG Energy. “We are now looking at the more detailed project organisation and we are also considering the second round which comes up soon.”

wpd has already built up considerable knowledge of the French market through its offshore development over the last few years. With France though there are issues surrounding the technological development, he admits, because of the very large turbines being used. “There is a prototype under going tests and a second is planned to be operating soon but we don’t have any experience of large-scale operations as yet however I am confident and we have trust in our turbine partner Alstom.”

He considers the home market Germany a straightforward one in terms of feed-in-tariff but says that there are potential problems with the grid as a consequence of having such a large number of projects. “I think this would be the same in any country. If you are connecting 20 to 30 projects, divided over several regions, it would be a similar problem. The German market has taken a long time to mature and this will have to happen in other countries as well.”

Eyeing Poland and the US

wpd offshore is turning its attention to Poland, Asia and the US at the moment. Although China is currently not in the company’s sights, as it is deemed too difficult to enter for foreign companies. With the US, he says, opportunities are still few and far between. “The US market is very difficult to judge.”

There is a big opportunity there and the need for energy is certainly evident, especially in the North East, but the political environment and the differences from state to state make it more problematic. “All offshore projects are pretty much a one-off so there is no general framework which leads to uncertainty about the time needed before a project can get off the ground and how expensive it will be.” Even though Mr Berge is confident that offshore wind will eventually be just as important as the oil gas market there are still some potential hindrances in his opinion. There is still a lack of experienced people, with wind still not able to attract people like the oil and gas industry, and it is still a challenge to attract new investors, he comments. For this a stable political environment is required and the steady climate is the main reason why the UK and German markets are so far ahead.

Technically there will be a lot of developments, he says, and he does not see that as a major hurdle to the future, although he emphasises that there does need to be a reduction in costs of course. However, he believes there is a lack of competition in the turbine manufacturing sector and a lack of mass production with the foundations. “Foundations are pretty much still handcrafted, there is no real serial production. They need to be built in a similar way to other industrial products – mass produced.”

“Vital role” of wind energy

Despite having some concerns, Mr Berge believes the industry has a bright future. “You must consider that oil and gas took many years to develop. Although some things are better in offshore wind than in oil and gas, we don’t have these huge payments that were made in the oil and gas sector. These triggered development and consequently led to very profitable operating companies, which then in turn, invested in the industry.”

“In the offshore wind sector we are building steadily at a normal rate of return. We can develop but we don’t have such big margins, so perhaps things wont move as fast.” In terms of Europe’s ambitious 2020 targets Mr Berge thinks this misses the point. “It is not really a problem if we do not exactly meet the target. A major step towards this target is fine; the ambition is good. And it is important to work as much as possible towards these goals.”

He expects the company to be awarded further projects during 2012. “I am optimistic, it is a question of time, but in the end I am sure offshore wind will be as important as the oil and gas market. Wind will play a vital role and take a bigger share of the energy market.”

Helen Hill