The National Wealth Fund joined 35 international banks to finance RWE and KKR's Vanguard offshore wind development off the Norfolk coast. The projects already hold a 20-year, inflation-linked electricity price guarantee of £91.20 per megawatt hour secured through a state auction. While the fund argued its market-rate loan was necessary to broaden the capital pool amid liquidity strains, detractors contend state financing should be reserved for higher-risk endeavors like storage, electrification, or Sizewell C.
Key points
State involvement in established offshore wind assets has raised concerns regarding the N…: State involvement in established offshore wind assets has raised concerns regarding the National Wealth Fund's additionality principle.
The state fund defended its market-rate loan as essential to address unprecedented liquid…: The state fund defended its market-rate loan as essential to address unprecedented liquidity demands following January's renewables auction.
Critics believe state capital should prioritize higher-risk clean energy ventures such as…: Critics believe state capital should prioritize higher-risk clean energy ventures such as small modular reactors rather than established wind assets.
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“This major investment in UK renewables is a vote of confidence for building in Britain,” declared the prime minister.
Andy Burnham is obviously correct that the two Vanguard windfarms off the coast of Norfolk are huge investments. Together, they require almost £13bn of debt financing. But he can’t claim they represent a fresh expression of confidence. The project has been on the runway since the German utility RWE, the developer, was awarded a contract to build the windfarms in January’s renewables auction.
Instead, the new news on Wednesday was how the project will be financed, which is where the story becomes interesting. On the equity front, RWE said it had sold a 50% share in the Vanguard schemes to KKR, the giant US private equity and infrastructure investor. On the debt side, £12.8bn has come from “a consortium of 35 international banks”, including £1bn from the UK’s own national wealth fund (NWF).
It is fair enough, one might say, for the NWF to get involved – directing capital to energy transition projects is, in part, what it was set up…
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