How Race Bank and Hornsea helped Orsted to a record year

By Grimsby Telegraph | Posted: 31 Jan 2019

Race Bank helped boost Ørsted’s annual earnings from offshore wind, while the sale of a major stake in Hornsea One accounted for half of the Danish energy giant’s record operating profit.

Both firmly anchored in Grimsby, where it is heading towards employing 400 people, Race Bank hit full power early in 2018, and was flagged up in the company’s annual report, released today, Thursday, January 31

It also revealed the only Brexit concerns harboured by the company headed up in an EU member state was the potential risk of any long term depreciation of the pound. 

As revealed yesterday, the company’s earnings of DKK 30 billion (£3.5 billion) made last year the best ever for the Danish giant, the biggest inward investor in the Energy Estuary, with a £10 million East Coast Hub in Royal Dock almost complete.

The £4.5 billion farm down of Hornsea, the largest offshore wind deal of its kind ever, in keeping with the record-breaking scale of the project, also completed in 2018, with turbine installation about to begin. 

MORE: Grimsby's path to 8GW of installed offshore wind capacity

Initial earnings from that transaction, announced in September, brought in DKK 15.1 billion (£1.8b). Ørsted will continue to lead construction - which is on track to complete later this year - then operate and maintain from Grimsby, after a US fund manager swooped.

Offshore wind operations increased by 29 per cent to DKK 11 billion (£1.3 billion), with Race Bank, the west coast’s Walney Extension and Germany’s Borkum Riffgrund 2 all ramping up.

They helped Ørsted increase it share of renewable energy in the generation mix from 64 per cent to 75 per cent in 2018. 

Henrik Poulsen, pictured above, chief executive and president, said: “2018 was a great year for Ørsted. We delivered our best financial result ever and continued our deployment of green energy, reaching 75 per cent green energy in our heat and power generation. On a global scale, renewable energy will grow rapidly in the years to come. We are well positioned to take part in this significant growth.

“In 2018, we reached significant milestones in our ambitious green strategy. In the UK, we commissioned Race Bank in January and Walney Extension, the world’s largest offshore wind farm, in May, and in Germany, we commissioned Borkum Riffgrund 2 in December. All were commissioned ahead of schedule, underpinning our experience and efficiency within the construction of offshore wind farms. Together with the rest of the portfolio, the three commissioned offshore wind farms contributed to the continued growth in earnings.

Concentration: Why Grimsby is a key location for Ørsted.

"In addition, our current offshore wind construction projects continue to progress according to plan. We have installed most of the foundations at Hornsea One in the UK, which will be the world’s largest wind farm when completed, expectedly in the second half of this year. 

"The build-out of our portfolio also includes Borssele One and Two in the Netherlands and Hornsea Two in the UK. In February, we selected Siemens Gamesa Renewable Energy’s 8MW wind turbines with a 167-metre rotor for Hornsea Two.

"We continued our partnership model in 2018 with the 50 per cent farm-down of Hornsea One to Global Infrastructure Partners. The farm-down was one of the largest renewable energy M&A transactions ever and included the largest single-project renewable energy financing scheme to date. The valuation underpins the attractiveness of our offshore wind assets."

2018 also brought an additional plan forward, an extension of Race Bank.

Mr Poulsen said: "In October, The Crown Estate in the UK confirmed that we have satisfied the application criteria for the development of our Race Bank Extension offshore wind farm, which expectedly will now be subject to a plan-level Habitats Regulations Assessment. Subject to all necessary consents being granted, Race Bank Extension will be able to participate in future auctions under the contracts for difference scheme.”

US and Taiwanese acquisitions and investments were also flagged up. 

“By the end of 2018, our portfolio consisted of 12GW of offshore and onshore wind farms and biomass-fired combined heat and power plants that are either in production, under construction or have obtained final investment decision," Mr Poulsen said. "Furthermore, we have projects with a capacity of 4.8GW for which we have been awarded the construction concessions or entered into offtake agreements, but are yet to make FID. In addition, we have a strong pipeline of projects under development. Towards 2030, it is our strategic ambition to reach an installed capacity of more than 30GW renewable energy, provided that the build-out creates value for our shareholders. Contributing to this ambition, we raised our 2025 ambition for offshore wind from 11 to 12GW to 15GW.”

MORE: Grimsby Renewables Partnership's 2019 conference is less than a week away

Mr Poulsen added that gross investments for 2019 are expected to amount to DKK 21-23 billion, (£2.5b to £2.7b) “reflecting a high level of activity related to offshore and onshore wind farm projects”.

Ørsted has said that Brexit is not seen as a top five business risk, although any long term fall in the value of the pound is, adding that the UK’s decision to leave the EU will not, in its opinion, result in fundamental changes in the UK’s energy policy.

A statement in the annual report said: "Recent announcements by the UK Government show that the UK is committed to a clean, green energy future, and offshore wind can be the backbone of this green vision. We have analysed a number of Brexit scenarios and believe that even if a deal is not reached between the UK and the EU, and there is a disruption to the flow of goods between the UK and the EU, trade and customs facilities will still function in the medium term. Our most significant risk related to Brexit is assessed to be a long-term depreciation of the GBP."

Read the full report here: Orsted's 2018 Annual Report

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