- Final project to reach financial close in Ofgem’s second tender round – total Offshore Transmission Owners (OFTOs) now 13
- Over £2.5 billion new transmission investment delivered by regime since 2009
- EIB’s Project Bond Credit Enhancement product helps deliver lower costs for consumers
Ofgem today completed the second tender round of its Offshore Transmission Owner (OFTO) regime. It granted West of Duddon Sands (WoDS) Transmission plc a licence to own and operate the £269 million transmission link to the West of Duddon Sands offshore wind farm. This decision brings the total new transmission investment delivered by the OFTO regime to date to over £2.5 billion, of which nearly £1 billion has now been delivered through the capital markets.
WoDS becomes the fourth and final offshore transmission project to reach financial close and licence grant in tender round two of the regime. The second tender round has delivered £1.4 billion of transmission assets, connecting 1.9GW of offshore wind. WoDS offshore wind farm, located in the East Irish Sea approximately 14 km from the nearest coast on Walney Island, Cumbria, comprises 108 turbines with an installed capacity of 389MW.
WoDS Transmission plc is owned by Macquarie Corporate Holdings Pty Limited and 3i Infrastructure plc. It was selected by Ofgem through a competitive process, in which bidders compete to become OFTOs, and will now own and operate the link for the next 20 years. The project is supported by the EIB’s Project Bond Credit Enhancement product. This financing approach opens up investment in the OFTO regime to a wider range of investors, helping to drive down the costs for consumers of connecting offshore wind farms to the onshore grid.
Dermot Nolan, Ofgem chief executive, said: “With the licence granted for West of Duddon Sands, the OFTO regime has attracted over £2.5 billion of new investment into the UK transmission sector to date. The regulatory frameworks devised by Ofgem are key to attracting the new investment needed to extend grid networks to connect renewable energy projects, and to enable planned interconnectors with European partners to be built. This model is helping drive down costs for consumers.”
Notes to editors
Ofgem and DECC launched the offshore transmission regime in 2009. It uses competitive tendering for licensing offshore electricity transmission systems.
There have been three tender rounds to date. All projects in tender round two have now reached financial close and been granted Offshore Transmission Owner (OFTO) licences. Financial close is where the developer completes the sale of the offshore transmission system to the OFTO. Once all the projects in the first three tender rounds have reached financial close and been granted OFTO licences, around 4.4GW of electricity will have been connected to the national grid.
- The European Investment Bank’s Project Bond Credit Enhancement (PBCE) product is designed to enable infrastructure projects, such as the WoDS OFTO, to attract additional private finance from institutional investors such as insurance companies and pensions funds. The PBCE reduces the investment risk, enabling the project to attract cheaper finance, which ultimately reduces costs for consumers.
- A recent independent report by consultants CEPA and BDO estimates that through competition and appropriate allocation of risks, the regime has already saved consumers between £200m and £400m. Ofgem will provide an update on the savings achieved by the second tender round.
- For more information on the offshore transmission regime see the offshore section of our website.
Ofgem is the independent energy regulator for Great Britain. Its priority is to make a positive difference for consumers by promoting competition in the energy markets and regulating networks.
For facts, figures and information about Ofgem’s work, see Energy facts and figures.
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