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SSE in £308m wind farm deal with RWE

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By Fiona Harvey, Environment Correspondent

Published: November 4 2008 02:00 | Last updated: November 4 2008 02:00

Scottish and Southern Energy sold half of its Greater Gabbard offshore wind farm yesterday to RWE Innogy, in one of the biggest recent deals in the wind power market.

RWE will pay £308m for the 50 per cent share in the wind farm, which is under construction and will have a capacity of 500MW when completed in 2010.

The development of Greater Gabbard, excluding the connection to the electricity grid, is expected to require an investment of about £1.3bn, to be shared between the owners.

Kevin McCullough, chief operating officer of RWE Innogy, said: “This acquisition is . . . an important step towards reaching [our] goal of increasing renewables production capacity to 4,500MW by 2012.”

The site, 25km off the coast of Suffolk, will comprise 140 wind turbines installed in water depths of 24-34 metres. Npower Renewables and SSE will share the electricity output equally.

Dean Cooper, analyst at Ambrian, said the deal was “very positive” for the UK’s offshore wind market. “Investors have been looking at Germany, France and the UK, and it looks as if RWE sees a greater profit in the UK.”

Although the UK is the world leader in offshore wind, it is still a tiny market. The UK has about 600MW of offshore wind turbines installed, mostly in trial sites. Offshore turbines are more than twice as expensive as onshore ones.

But Gordon Brown, the prime minister, pledged in June to increase the capacity of offshore wind to 14GW by 2020, partly because of the difficulty of getting planning permission for onshore turbines.

Yesterday’s deal was a fillip for the offshore market, which took a blow this year when Shell pulled out of the biggest planned offshore wind farm, the London Array, amid spiralling costs. Dong Energy and Eon, the other partners in the London Array, found a new partner in Abu Dhabi’s Masdar initiative last month.

Morgan Stanley said in a note that the deal represented a good price for SSE, and vindicated its purchase of Airtricity for £1bn this year, which gave it a half share in Greater Gabbard. It bought the other half for £40m from Fluor in May.

“We believe that the Airtricity deal was a positive move for SSE and that this is not reflected at all in the share price,” said Morgan Stanley. “In fact the Airtricity deal is widely touted as a negative for SSE when we believe that the reverse will be the case in six to 12 months.”

Shares in SSE closed up 18p at £12.32.

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