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EDP, Engie combine offshore wind businesses in bid to catch up with majors

Portuguese utility EDP - Energias de Portugal SA and French energy group Engie SA are combining their offshore wind power businesses in an ambitious bid to catch up to the largest developers in the sector in a matter of years.

The two utilities said on May 21 that they would create a co-controlled joint venture company that will bring together Engie and EDP subsidiary EDP Renováveis SA's, or EDPR's, fixed and floating offshore wind assets and development pipeline with the goal to become the global number two in terms of installed capacity by 2025.

"The opportunities are huge" in offshore wind, Paulo Almirante, Engie's executive vice president and COO, said on a call to discuss the announcement. "It's important that we do this together because we believe that we will see more competitors in the next years, very sizable competitors, and we need to be prepared."

SNL Image
Market leader Ørsted last year opened the largest offshore wind farm in the world in the U.K.
Source: MHI Vestas Offshore Wind

The two utilities are already developing several offshore projects together and currently have three under construction between them, the 950-MW Moray East in the U.K., the 487-MW SeaMade in Belgium and the 25-MW Wind Float Atlantic, a floating demonstration project in Portugal.

Those projects total 1.5 GW in capacity, although other equity partners are involved as well.

Engie and EDPR have a further 4 GW of capacity under development, including some of the first offshore wind farms in France, and said they would aim to reach 5 GW to 7 GW in operation and construction, as well as another 5 GW to 10 GW under advanced development, by 2025.

Almirante said Engie and EDPR expected to spend around €15 billion to realize their 2025 target, based on a development cost of €2 million to €3 million per megawatt. "The investment is quite significant in this area," he said, adding that Engie and EDPR will keep a majority stake after completion of their joint wind farms, although the utilities will likely bring in other investors for individual projects.

Both companies have been realigning their businesses toward renewables: EDP said in March it would double its growth in the segment in the coming years, although with a focus on onshore wind and solar, while Engie is planning to launch additional country-focused joint ventures to build renewable energy projects as part of a broader shift away from fossil fuel generation.

"The creation of this JV will enable us to seize market opportunities while increasing our competitiveness on one of our key growth drivers, renewables," Engie CEO Isabelle Kocher said in a statement.

Playing catch-up

While the utilities are hoping to leverage their combined scale to capture a larger slice of the offshore wind market, they will face strong headwinds trying to catch up with a crowded field of competitors.

Danish Ørsted A/S is currently the largest offshore wind developer in the world and has a confirmed pipeline of almost 13 GW in installed capacity by 2025, although analysts at Alliance Bernstein estimate that the company could build upwards of 18 GW by then.

German utility RWE AG will be catapulted into second place globally with a pro-rated offshore capacity of 2.5 GW after the acquisition of the renewable assets held by E.ON SE and innogy SE, expected to close later this year. The company plans to spend €1.5 billion annually to grow its renewable business, including offshore wind.

Sweden's Vattenfall AB and Spain's Iberdrola SA, as well as Norwegian oil major Equinor ASA, have also built offshore farms and plan to keep pouring significant funds into the sector.

Engie and EDP said the joint venture is expected to be operational by the end of the year and will target markets in Europe as well as the burgeoning offshore wind sectors parts of Asia as well as the U.S., where developers including EDPR are currently jockeying to build the first large-scale projects on the East Coast.

"We are confident that this partnership will reinforce our distinctive position in renewables allowing us to accelerate our path in offshore wind, one of the key growth markets in the next decade," EDP CEO António Mexia said in a statement.