French oil and gas veteran organization company Total has acquired a 51 percent stock from utility SSE in the construction of a massive wind farm off the coast of Scotland.
The $88 million investment in the Seagreen 1 wind farm will be Total’s first notable venture into the offshore wind as it attempts to develop its green energy business. SSE could also be in line for scheduled payments in the future worth $75.2 million based on specific performance parameters.
As European countries increasingly shift to wind farms at sea to produce low-carbon power, the project is a first step for the oil giant to become a vital player in the industry.
As part of a notification that it arrived at a financial closure on the 1,140-megawatt project, SSE stated it’ll also acquire 30 percent of the wind farm’s power capacity. Last year, the company obtained a deal with the administration to sell about 40 percent of the power at a fixed price of $52.18 per megawatt-hour.
“It could be the perfect project for exposure to evolving offshore wind projects. If you are an oil and gas company wanting to go big in offshore then you want to know how future projects might look, not the old stuff.”
– Tom Harries, Wind analyst at BloombergNEF.
SSE Renewables was advised by Jefferies International Limited and Linklaters on the sale. Total utilized advisory services from RBC Capital Markets.
The combination of government-guaranteed prices and business exposure could be an impression of the future as green power turns away from a dependence on grants. Oil companies, with their big checkbooks, have a chance to perform a pivotal role in that transformation. Seagreen will be the first offshore wind farm in the UK that doesn’t have full government support.
Total now has ownership in 5 gigawatts of renewable power capacity. The firm is targeting a portfolio of 25 gigawatts by 2025.
SSE’s renewables division will guide the development and construction of the Seagreen wind farm, which is anticipated to cost $3.76 billion to build, including $627 million for delivery. Created to meet the energy requirements of around 1 million homes, the project will be commissioned by 2023.
The purchase contract also comprises a possible addition to the capacity of up to 360MW. The deal remains subject to public authorities’ permission and should be settled by July 2020.