Greencoat UK Wind (UKW) plans to take on more subsidy-free offshore wind projects in 2020 after making its first acquisition of this kind last year.
However, investment manager Stephen Lilley told Utility Week that the company also expects more Renewables Obligation Certificate (ROC)-backed assets to be made available, as utilities look to recycle capital.
The investor aims to have a 50/50 split between fixed-price and merchant projects. Lilley said that over time UKW may look at corporate power purchase agreements and long-term hedging contracts.
Lilley spoke to Utility Week on the back of the group’s financial results for the year to 31 December 2019.
During the year, UKW invested £598 million in new windfarms and raised £506 million of new equity.
Its acquisitions included ROC schemes Stronelairg and Dunmaglass – taking its total of such investments to 34. It also took on its first two subsidy-free windfarms, Tom nan Clach and Douglas West.
UKW also agreed to acquire Glen Kyllachy, Windy Rig and Twentyshilling – all subsidy-free windfarm projects which are expected to become operational in 2021.
Its operating wind investments have a net generating capacity of 979MW. During 2019, portfolio generation was a lower than expected 2,385GWh, owing to low wind resource. Enough electricity was generated to power nearly one million homes.
Lilley said wind resource so far in 2020 was up 20 per cent as the impact of Storms Ciara and Dennis has been felt.
Last week, UKW announced the acquisition of the Slieve Divina II wind farm from SSE for £51 million.
Lilley said this deal was a strong signal of what could be expected going forward.
“It was good to be able to take on another ROC project after building up the subsidy-free side of our portfolio”, he said.
“The subsidy-free projects are really exciting and since we bought what is essentially a construction project in Douglas West we have been inundated with people asking ‘can you do the same for us?’.
“We have the balance sheet to allow us to take on more of those but we want a mix.
“We are bidding for many more ROC projects, as utilities try to recycle capital.
“We are prepared to buy Contracts for Difference projects as long as we can buy subsidy-free at the same time. What we are trying to do is have a mix of roughly 50 per cent of fixed and 50 per cent merchant.”
Asked about the debate over whether the government should allow onshore wind projects to bid for subsidies, Lilley said: “It does seem pretty odd that the government would resist support for on-shore wind and I think that goes back to the politics of 2015 – of a government not expecting to win a majority. In 2020, I don’t see the kind of nimbyism that was very much a theme five years ago.
“It’s becoming politically quite hard to keep up that opposition but I suppose it’s quite easy to stay quiet. It is the cheapest form of renewable power, so the logic is clear.
“Ultimately, it’s going to have to be a reality in Scotland.
“For us, there’s so much for us to buy that it doesn’t really matter. “
Net cash generation for UKW projects was £127.7 million in 2019. It finished the year with outstanding borrowings of £600 million and a market capitalisation of £2.3 billion.