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Royal Dutch Shell sells wind stake to Eon and Dong Energy
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The oil giant Royal Dutch Shell has agreed to sell its stake in the £2.5 billion London Array, the world’s largest offshore wind farm, to Eon and Dong Energy, its former partners.
Under a settlement reached last week, the utilities agreed to divide Shell’s one-third stake evenly between them. Eon and Dong will now own 50% each.
The accord was struck after some leading utilities – Centrica, Scottish Power, EDF, RWE Npower and Scottish & Southern – made first-round bids in an auction run by Dresdner Kleinwort.
The sale process provided reference points on price, but Eon and Dong’s familiarity with the project gave a critical advantage. They are expected to announce the deal this week.
The resolution of ownership will be a relief to the government, which has put wind at the heart of its renewable-energy agenda. When Shell announced its intention to quit the project in May, there were fears that Eon and Dong, a Nordic group, could scrap it altogether because of the soaring cost of building wind farms.
Paul Golby, chief executive of Eon UK, called the project’s economics “marginal at best” as prices for turbines, ships to install them and personnel have soared to record levels.
The decision by Eon and Dong to buy out Shell means the scheme, already seven years in development, will almost certainly go ahead.
Eon and Dong will now have to shoulder all the £2.5 billion development costs but some element of deferred compensation for Shell is thought to be included in the deal.
Danny Fortson
20 July 2008
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