China state company acquires Europe windpower assets

China’s state-owned investment holding company State Development and Investment Corporation acquired Spanish energy firm Repsol’s offshore wind power business in the UK for 238 million euros on Wednesday, riding on a trend of Chinese investment into the UK’s offshore wind sector.

The move is the second Chinese company to invest in UK offshore projects in the last six months, following on from China Three Gorges’ acquisition of a 30 percent stake in the Scotland-based Moray Firth offshore project from Portuguese developer EDP Renovaveis in October.

As part of the deal, SDIC has acquired 100 percent of the 784 megawatt Inch Cape project and Repsol’s 25 percent stake in the 664 megawatt Beatrice project. Both projects are located off the Scottish east coast.

The rest of the shares for the Beatrice project are owned by UK utility firm SSE (50 percent) and Danish private investor Copenhagen Infrastructure Partners (25 percent). Repsol said the sale is a part of its goal to sell non-strategic assets.

Andrew Shepherd, senior power and renewables analyst at BMI Research, said this deal highlights the attractiveness of the UK’s offshore wind sector opportunities to Chinese investors, as the UK has the largest offshore wind market in Europe.

Shepherd said the strength of the UK’s offshore wind market is due to both the UK’s strategic location as an island nation, and also the UK government’s continued support for its strategically important offshore wind sector even as it cuts support for onshore wind and solar.

In addition, offshore wind sector in the UK is demonstrating high growth opportunities compared to onshore wind farms, which have proved unpopular for home owners living nearby.

Danae Kyriakopoulou, Managing Economist at the Centre for Economics and Business Research, said the acquisition demonstrates that the UK is open to foreign investment. The fact that SDIC Power acquired the UK subsidiary of a Spanish company shows that Chinese investors are increasingly keen to find UK targets with European links. Having invested heavily in the UK, the strategy is now shifting towards expanding to Europe as a whole.

“The fact that Repsol is a Spanish company means the Chinese investors will be able to build a reputation in Europe, and in the future have the opportunity to expand to bid for new projects in Europe,” Kyriakopoulou said.

In addition, the investment ties in well with China’s policies concerning the environment. As the world’s biggest investor in renewables, China is keen to bring the cost down through investment to help this form of energy compete with traditional sources such as oil, the price of which is expected to stay fairly low in the coming years, Kyriakopoulou said.

“This raises the potential to make returns from renewable energy projects in the long term, despite their lack of immediate profitability as it is such a new sector,” Kyriakopoulou said.

The UK has 5.7 gigawatts of offshore wind projects installed or under construction, and is on track to deliver 10 gigawatts by 2020, presenting the largest expansion in any class of renewable energy technology in the country, according to government statistics.

In recent years UK organizations have expressed an interest to work with China on renewable energy, and one example is a project the UK Foreign Office funded for the non-profit organization The Carbon Trust to conduct research into China’s offshore wind industry.

The research project was completed in 2013, which in turn generated recommendations on how China can further grow this sector. The Carbon Trust’s research in China was done with the participation of over 20 Chinese companies and has drawn up some recommendations for China to consider.

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