Ofgem confirms new bidder amongst final four in biggest ever Offshore Transmission tender round
Press release
Publication date
Industry sector
Offshore Transmission Network
Ofgem has shortlisted four potential operators for its next OFTO (Offshore Transmission Owner) bidding round for three offshore transmission links worth an estimated £2billion.
A new bidder has joined three others in a competition to own and operate up to three offshore wind farm transmission assets, in the most valuable OFTO tender round ever run by Ofgem. A consortium led by newcomers Gravis Capital Partners joins previous OFTO bidders EKITD Consortium, Diamond Transmission Partners and Transmission Capital Partners. The four would-be OFTOs have all successfully passed through the ‘Enhanced Pre-Qualification’ (EPQ) stage. This is the first hurdle for aspiring OFTOs, whereby they must demonstrate that they are capable of both paying for and operating the OFTO assets which form part of the tenth tender round.
All four bidders will be able to bid for the three offshore transmission assets of Dogger Bank A Offshore Wind Farm, Neart na Gaiothe Offshore Wind Farm and Moray Offshore Wind Farm (West), estimated to be worth a combined total of around £2bn. They will now go through to the final Invitation to Tender (ITT) stage for each of the assets. The ITT stage for the Dogger Bank A project is due to begin imminently and will be staggered thereafter for the remaining two projects, with Ofgem appointing a preferred bidder for each link after its respective ITT stage. The OFTO for each project will receive a guaranteed revenue stream for up to 25 years under the terms of their licence, subject to the availability of their assets.
The OFTO regime has successfully operated for 11 years, having so far brought in investment for 24 assets, with several more currently going through the process. The next two years will see a surge in OFTOs coming to market, reflective of the UK Government’s ambitious target of increasing offshore wind generation capacity fivefold to 50GW* by 2030.
Ofgem Director of Networks Rebecca Barnett said: “As we bring greater numbers of larger OFTO assets to market we are seeing increasing interest from investors and new bidding consortia coming forward. This increasingly competitive field is great for consumers because the extra competitive pressure ultimately helps keep energy costs down.
“Many investors are looking for green, sustainable investments that offer a steady, index-linked income – this is exactly what OFTOs provide. With a stream of multibillion pound OFTO assets coming to market over the next few years there are many opportunities for more investors and consortia to come forward and get involved.”
Ofgem’s Tender Round 10 announcement follows the recent transaction close of OFTO Tender Round 8. Diamond Transmission Partners, a consortium comprising Mitsubishi Corporation and HICL Infrastructure plc, was selected by Ofgem in September 2022 as the preferred bidder to own and operate the Hornsea Two OFTO asset for the next 24 years. The Hornsea Two OFTO asset serves the UK’s largest fully operational wind farm which will help power more than 1.4 million homes. The Final Transfer Value of the asset is £1.14bn.
Ofgem is running a programme of engagement to familiarise potential new bidders with the OFTO process. Any interested parties should contact tendercoordinator@ofgem.gov.uk for more information.
*A gigawatt is equivalent to one billion watts, and one gigawatt hour (GWh) of electricity is enough to power one million homes for one hour.
Bidding consortia
Gravis-ITOCHU-UKPN Services Consortium is a bidder group formed of Gravis Capital Management Ltd, ITOCHU Corporation and UK Power Networks Services (Commercial) Limited
EKITD Consortium is a bidder group formed of Equitix Investment Management Limited, Kyuden International Corporation and Kyuden T&D Global CO, INC.
Diamond Transmission Partners is a bidder group formed from the Mitsubishi Corporation
Transmission Capital Partners is a bidder group formed of International Public Partnerships Limited and Transmission Capital Partners Limited Partnership
These bidders can now choose to bid for one, two or three of the following offshore transmission assets associated with the named wind farms:
Dogger Bank A Offshore Wind Farm
OFTO transmission assets anticipated to be worth in the region of £1bn
Current status: ITT Stage due to commence Summer 2023
Installed capacity: 1,200MW
Developed by: DBA Projco, a joint venture owned by SSE Renewables (40%), Equinor (40%) and Vårgrønn (20%)
Neart na Gaoithe Offshore Wind Farm
OFTO transmission assets anticipated to be worth in the region of £0.5bn
Current status: ITT Stage due to commence Q4 2023
Installed capacity: 448MW
Developed by: Neart na Gaoithe Offshore Wind Limited, a joint venture between EDF Renewables UK (50%) and ESB (50%)
Moray Offshore Wind Farm (West)
OFTO transmission assets anticipated to be worth in the region of £0.6bn
Current status: ITT Stage due to commence Q2 2024
Installed capacity: 882MW
Developed by: Moray Offshore Windfarm (West) Limited, which is owned by Moray West Holdings Limited. Moray West Holdings Limited is owned by UAB ‘Ignitis Renewables’ (5%), Moray Offshore Renewable Power Limited (67%) and Delphis Holdings Limited (28%).
Information on each asset in the Tender Round 10 can be found at Offshore Electricity Transmission (OFTO) - Offshore transmission tenders and projects.
Offshore wind
Already an established part of the UK energy mix, offshore wind is expected to play a key role in achieving the Government’s targets of decarbonising the UK power system by 2035 and helping the UK achieve net zero by 2050.
The Government has set a target of achieving 50GW of offshore wind generation by 2030, with up to 5GW coming from floating offshore wind.
The OFTO assets to be tendered comprise offshore and onshore substations and cables, already consented, constructed and commissioned by the wind farm developers, which connect the wind farms to Great Britain’s electricity transmission network.
Since Ofgem and Government launched the OFTO regime in 2009, winning bidders have invested over £6 billion in links connecting 9.5GW of offshore wind farms.