Ice Breaker-The first overseas voyage of China Resources Power
 

 

Acquisition of Dudgeon Offshore Wind project

 

On March 15,2018, in the banquet hall of the Four Seasons Hotel in London,  China Resources Consortium joined Dudgeon Offshore wind Farm along with Equinor and Masdar.  Equinor, the Norwegian state-backed oil and gas giant, formerly named Statoil and Masdar, the Abu Dhabi based state-backed renewable energy company held a formal equity delivery ceremony. This signified  the first landmark overseas project of China Resources Power (CRP).

>CRP and CR&CNIC Team at the ceremony

 

Since the launch of the project in September 2016, CRP’s project team have firmly grasped the valuable development opportunities of the UK offshore wind power project. With the backing from CR group and CR & CNIC we formed a consortium. The consortium underpin the stability of the investment and overcomes multiple internal and external difficulties. The project team unremittingly struggled to successfully complete the non-binding offer and binding offer, and finally defeated international  opposition in the fierce bidding competition with a slight premium at the end of 2017.

 

At the beginning of 2018, CRP project team played the spirit of continuous operations, completed the anti-monopoly review of the Ministry of Commerce and the overseas investment approval of state-owned enterprises in a timely manner, overcoming the unfavorable clauses of the “Share Purchase Agreement” for Chinese enterprises to complete the investment approval.

 

In 2018, the project successfully refinanced at 1.4 billion pounds, the largest most successful and highest credit rating of a wind power project financing in the European region. At the same time, various post-investment management activities such as project transmission asset sales and operation management progressed smoothly, and financial performance was in line with expectations. At the end of the year, the project was put into operation in the first year to receive considerable revenue and distribution profits to the China Resources Consortium.

 

 

During the two years of development and takeover of the dudgeon project, under the support from CR group, CRP implemented a scientific and rigorous project management mechanism. The project team members were streamlined and efficient, and all the staff were closely united and dedicated to overcoming difficulties such as support without local representative, unfamiliar situation and insufficient international experience. Not afraid of hardships and hard work, they successfully achieved breakthrough of the company's overseas projects.

 

Why choose the Dudgeon project ?

 

Encouraged by governmental policies “Going Global” and “One Belt, One Road” and the rise of the awareness of the energy cleanliness transformation, CRP has developed a strategic plan for overseas development of green projects and M&A projects while expanding its domestic renewable energy business.

 

CRP is a traditional thermal power giant with coal-fired power plants making up most of its total attributable operational generation capacity. Yet wind power renewable energy has gradually taken over a larger share of our business positioning in recent years. In 2018, the company’s newly commissioned generation capacity of wind and photovoltaic power projects reached 1,187MW and 173 MW, respectively. As at the end of 2018, the mix of clean and renewable energy further increased, accounting for 20.4% of our total attributable operational generation capacity and up by 3% over the last year.

 

In terms of geographical spread and types of assets considered CRP priorities power assets that are, high-quality, long term plays with stable returns over 20-30 years or more. CRP’s oversea investment strategy are currently with a strong focus on renewable power in the UK. In consideration of CRP having insufficient experiences to go global, the first investment must be based on stability and high success rate.

>The port town of Great Yarmouth in Norfolk is home to the Operations and Maintenance base for the Dudgeon Offshore Wind Farm

 

The UK has attractive power market fundamentals underpinned by strong regulatory and country dynamics. 50 GW of total installed capacity of fully liberalized electricity market, ranking the top five in Europe, it has no restriction for foreign investor to enter the power market. High wholesale electricity prices compare to continental Europe with a low country risk AA rating (S&P) and long-term climate policy to reduce carbon. In the past five years, The UK has become one of the leading countries in developing Offshore wind, the renewable support instruments such as CfD, ROCs and FITs facilitate long terms and stable asset cash flow continue to attract large investment institutions and industry investors from different regions.

 

Dudgeon is one of the world’s largest offshore wind projects with capacity of 402 MW using 67 Siemens 6MW wind turbines, installed off the coast of Norfolk in eastern England where the area has the best wind resources in the world, with an average wind speed of 9 meters per second. Siemens turbines dominated the offshore wind market for over five years and demonstrating a track record of operating efficiency and stability. The wind farm transmits power to over 410,000 UK homes and was fully commissioned in October, 2017. It was also one of the first UK offshore wind projects to be awarded an investment contract under the UK government’s ‘Contract for Difference’ (CfD) scheme, which protects power prices for the first 15 years operations.

 

CRP not only values the dudgeon project itself, but also the strategic exit of Statkraft brings reliable and powerful strategic partners in –Equinor and Masdar.  Equinor, with a presence in over 30 countries worldwide, over 40 assets on the Norweigan continental shelf with both fixed and floating installations;  Masdar, focuses on global new energy investment, with strong capital and cutting-edge investment. Through strategic partnership with them, CRP can learn from their extensive offshore experiences, investment prospective and gain operation and maintenance skills.

 

“Dudgeon is a unique project with strong operational performance,” said Beate Myking, Chair and Director of Dudgeon Offshore Wind Limited. “The excellent collaboration with our partners and advisors has enabled the successful refinancing. ”

 

Dr Yuning Fu, Chairman of China Resources Group, also congratulated all parties involved and thanked the support of investors. He commented that this landmark project is symbolic of the Group’s interest and commitment to offshore windfarms, and its long-term strategy in the renewable energy sector and sustainable corporate development.  

 

Prospects for CRP after the first Acquisition

 

Dudgeon is the first overseas project of China Resources Power's “going out” internationalization. It has great strategic significance, considerable return on investment, strong cash dividends, and has created a good international brand of the company.

 

With this project as the entry point, the company successfully entered the UK market and the new offshore wind power industry. CRP has established a European representative office this year and will explore new opportunities in good offshore wind resources with stable returns. We strive to learn about international advanced technology and gain management experience, to lay a solid foundation for further expansion of the offshore wind power market and the development of international business.

 

Through the shareholding of the project, the company has formed a mutually beneficial win-win strategic partnership with the world-class company Equinor and the industry fund Masdar. The potential for expanding cooperation scale and “bringing in” long-term cooperation is huge.

>Offshore wind farms in the North Sea

 

As the actual operation manager of the project, Equinor has invited our company to participate in and start the preparatory work for the development and construction of the second phase of the Dudgeon project, the Dudgeon Extension Project (DEP). CRP has the confidence to continue to develop projects and strengthen our cooperation and bring their relevant offshore wind power technology and management experience back to China for domestic wind power projects.

 

The success of acquiring the equity of  Dudgeon Project has set a good start for us to “going out” and to become an international first-Class energy company. It provides CRP with the perspective of developing new overseas energy, cooperating with European partners and expanding European business.  More importantly, the establishment of the UK company and the European representative office will play a significant role in energy transformation of CRP in terms of developing prospective of joint development of domestic offshore wind power, hydrogen energy and other related advanced technology .

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