Macquarie, Barclays enter UK offshore transmission market

Macquarie Capital Group and Barclays Integrated Infrastructure Fund have entered the UK offshore transmission market with the acquisition of a transmission link to the Walney 1 wind farm. The consortium was awarded ownership and operational rights to the link by Ofgem, the UK electricity regulator.

The transmission link was originally run by the owners of the Walney 1 wind farm, which include utilities DONG and Scottish and Southern Energy as well as OPW, a joint venture between Dutch pension provider PGGM and renewable fund Ampere Equity Fund, managed by Triodos Investment Management. 

The consortium acquired the link for £105 million (€121 million; $167 million) after a tender process promoted by Ofgem under the Offshore Transmission Owner (OFTO) regime. The European Investment Bank (EIB) is backing the purchase – which will see Macquarie and Barclays own and operate the link to the 51-turbine wind farm in the Irish Sea for 20 years – with £52 million of debt. 

“This is the highest value project to have reached financial close so far in the first transition tender round of the offshore regime,” Ofgem said in a statement. Counting Walney 1, Ofgem has already awarded four licences for transmission links to offshore wind farms as part of a £1.1 billion, nine-licence scheme. The EIB said it is investing £300 million in six of the nine projects that form part of the first transition tender round.

Prior to Walney 1, the most recent OFTO scheme to be awarded was the link to Barrow offshore wind farm, won by Transmission Capital Partners, a team comprising International Public Partnerships Limited (INPP), its investment adviser Amber Infrastructure and transmission developer and adviser Transmission Capital. Two of the other projects awarded by Ofgem – Gunfleet Sands and Robin Rigg – also went to Transmission Capital Partners.

Past OFTO contracts have attracted infrastructure investors due to their availability-based revenue streams with protected downside and full linkage to the UK Retail Price Index; the absence of demand risk and lack of exposure to the associated wind farm performance or credit risk; and guaranteed revenues by National Grid Electricity Transmission, a subsidiary of the National Grid.