Energy Economy

19 Apr 2021

Ørsted Buys Brookfield Renewable Ireland, Enters European Onshore Wind

19 Apr 2021   

Danish wind turbine manufacturer Ørsted has announced its purchase of UK and Ireland onshore wind operator Brookfield Renewable Ireland (BRI).

The companies value the enterprise at $684m (€571m) as of the end of 2020. The acquisition marks the company’s first onshore venture in Europe, after starting onshore operations in the US in 2018.

Headquartered in Cork, Ireland, BRI has an office in Edinburgh, UK, and its developments span the Republic of Ireland and Scotland. It develops, owns, and operates onshore wind farms, with 389MW of assets currently working or under construction. The company also owns 149MW of assets in advanced development, with a development pipeline consisting of more than 1GW of projects.

A statement says that BRI’s current management team will continue running the business as Ørsted integrates it into their business ‘over time’. Most or all of the 73 BRI staff will be brought into Ørsted as part of the deal.

The transaction will close in the second quarter of 2021, subject to regulatory approval.

In an investor call, Ørsted onshore CEO Declan Flanagan said that the acquired assets in Scotland were “largely contracted”, but the upcoming contract for difference auction has the “potential to contribute” to earning from the area. Ørsted will now be a “material participant” in Ireland’s next renewable auction, recently delayed until 2022.

He continued to say that the company’s Scotland assets averaged 10 years old, with five years of contract life remaining. However, it was “too early for specifics” on BRI’s 1GW project pipeline, though this would likely be “post-2025”.

Brookfield Renewable Ireland acquisition ‘does not preclude’ more deals for Ørsted in Europe

When asked why Ørsted acquired an Irish and British business, instead of one in a more diverse European market, Flanagan said: “This is the result of a process of evaluation of various different markets.

“We came to the view, after significant diligence, that this was the best fit for us, and we wanted to see meaningful scalability. This does not exclude other markets, but we see it as adding capability. Other markets are on the radar. We’ve done this a few times, and we feel that we have a tested playbook. This was a comfortable place to start, compared to other more complex options.

“We like that we have a growing corporate market and the government-run auction process in Ireland and the UK. We like the fact it’s not just one or the other.”

He also said that the BRI team would be “very useful in a pan-European expansion, as we have decided in our evaluations over the past year”. However, this “would not preclude” any further acquisitions in Europe.

Flanagan said that he had seen an improvement in pricing and terms power purchase agreements in the US since the company’s last capital markets day. Guidance on returns and other details were withheld until the next capital markets day, on 2 June.

Deal adds to expected investments from Ørsted

A company statement said that the acquisition will not change Ørsted’s earnings guidance for the current year. The company expects to make the same amount of investments as before, excluding the BRI deal.

The company’s statement reads: “Building on the success of the US business, Ørsted has been evaluating opportunities to enter the onshore renewables business in Europe.”

In this statement, Flanagan said: “BRI has a strong strategic and operational fit to Ørsted, combined with what we believe to be very complementary business cultures.

“The Irish and UK onshore markets offer attractive fundamentals, projects at scale, and value creation through a mix of development projects and repowering opportunities. Furthermore, we can leverage the BRI team’s market-leading offtake capabilities within trading and corporate PPAs with direct synergies to Ørsted’s existing efforts in the UK.”

Ørsted group president and CEO Mads Nipper said: “In the US, we’ve built a strong onshore business with 4GW in operation and under construction. The European market for onshore wind power is expected to grow significantly in the coming years, and with the acquisition of BRI, we get a strong platform that expands our presence in onshore renewables to Europe, allowing us to continue our successful expansion of our onshore renewables business.”

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