Ofgem Shortlists Four Bidders for GBP 2 Billion Offshore Wind Transmission Assets

Business & Finance

July 28, 2023, by Adnan Memija

Ofgem has shortlisted four potential bidders for its next Offshore Transmission Owner (OFTO) bidding round for three offshore transmission links worth an estimated GBP 2 billion (about EUR 2.3 billion).

Artistic illustration of wind turbines at Dogger Bank; Image: Aibel

In the “most valuable” OFTO tender round ever run by Ofgem, a new bidder has joined three others in a competition to own and operate up to three offshore wind farm transmission assets.

A consortium led by newcomers Gravis Capital Partners joins previous OFTO bidders EKITD Consortium, Diamond Transmission Partners, and Transmission Capital Partners.

The four would-be OFTOs have passed through the “Enhanced Pre-Qualification” (EPQ) stage, according to Ofgem. It is the first hurdle for aspiring OFTOs, whereby they must demonstrate that they are capable of both paying for and operating the OFTO assets which form part of the tenth tender round, Ofgem said.

The four bidders are competing for the offshore transmission assets of the 1.2 GW Dogger Bank A, 448 MW Neart na Gaoithe, and 882 MW Moray West offshore wind farms, estimated to be worth a combined total of around GBP 2 billion.

Potential OFTOs will now go through to the final invitation to tender (ITT) stage for each of the assets and can choose to bid for one, two, or all three of them, Ofgem added.

The ITT stage for the Dogger Bank A project is due to being imminently, Ofgem said, with the remaining two projects to follow in phases. Ofgem will appoint a preferred bidder for each link after its respective ITT stage.

The OFTO for each project will receive a guaranteed revenue stream for up to 25 years under the terms of their licence, subject to the availability of their assets, according to the press release.

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“As we bring greater numbers of larger OFTO assets to market we are seeing increasing interest from investors and new bidding consortia coming forward. This increasingly competitive field is great for consumers because the extra competitive pressure ultimately helps keep energy costs down”, said Rebecca Barnett, Ofgem Director of Networks.

Ofgem said that the next two years will see a surge in assets coming to market, as the government seeks to increase offshore wind capacity fivefold to 50 GW by 2030.

“Many investors are looking for green, sustainable investments that offer a steady, index-linked income – this is exactly what OFTOs provide. With a stream of multibillion pound OFTO assets coming to market over the next few years there are many opportunities for more investors and consortia to come forward and get involved”, added Barnett.

The announcement of Ofgem’s tender round 10 follows the recent transaction close of OFTO tender round 8, relating to the 1.3 GW Hornsea Two, the UK’s largest fully operational wind farm.

Diamond Transmission Partners, a consortium comprising Mitsubishi Corporation and HICL Infrastructure plc, was selected by Ofgem in September 2022 as the preferred bidder to own and operate the Hornsea Two OFTO asset for the next 24 years.

The sale agreement was formally signed last week, with Breesea, Soundmark Wind, and Sonningmay Wind, a joint venture owned by Ørsted (50 per cent) and AXA IM Alts and Crédit Agricole Assurances (CAA) (jointly 50 per cent), unloading the assets to Diamond Transmission Partners.