Jera’s Parkwind win leaves strategics seeking next platform

News Analysis 22 March

Jera’s Parkwind win leaves strategics seeking next platform

Jera, a joint venture of Japanese utilities Tokyo Electric Power Company and Chubu Electric Power, has won the race for Parkwind. But it was far from being the only Asian investor or industrial giant that took part in the auction for the Belgium offshore wind developer.

Sumitomo also filed a final offer last week and was a likely frontrunner, according to sources familiar with the process. Jera’s Japanese rival on paper was well positioned given it owns stakes in most of Parkwind’s operational Belgium offshore wind farms. It is also said to have pre-emption rights over at least one of the developer’s projects. However, Sumitomo did not in the end exercise these rights, largely as the sale was of a holding company rather than Parkwind’s individual wind farms, the sources said.

Itochu and Hanwha were also linked by some of the sources to the process, although it is believed they did not submit final offers. European strategics that took part include Norway state-owned energy giant Equinor, which is said to have filed a final offer; while Eni was also linked to the sale, although not in the final stages.

Infrastructure managers including Brookfield and IFM also were involved in the process, although it is not clear if they filed final offers, according to two sources; while CDPQ considered taking part earlier in the process.

Jera, also widely tipped for some time to take a keen interest in Parkwind, typically prefers minority stakes in projects, leaving some sources to assume it was looking to partner with a fund. “I’d be surprised if someone wasn’t behind Jera, I just don’t see them doing it on their own,” said an insider days before Wednesday’s announcement.

Jera’s strategy and ambitions are today being partly driven by a new hire, Richard Scott, who joined the firm recently as its business development director from SSE. “Given they have taken on Richard, Jera needs to do something in Europe,” said one source.

Jera’s Parkwind deal follows just a few months after Tepco — one half of the Jera joint venture — agreed to buy UK floating wind developer, Flotation Energy. Jera is seen by some as an arm’s-length business to Tepco with its own strategic outlook, meaning both are free to create their own separate platforms. Flotation, like Parkwind, is substantial, with 13 offshore wind projects and stakes in the 480 MW Morecambe fixed-bottom offshore wind project in the Irish Sea and the 100 MW White Cross floating wind projects in the Irish Sea.

Ultimately, the high price offered by Jera, is likely to have won it the day. Jera has agreed to pay around EUR 1.5bn for Parkwind, according to its seller, Belgium supermarket chain Colruyt Group, which was advised by UBS.

This seems a generous amount. Colruyt owns Parkwind, which is also co-developing an array of projects around Europe, via its clean energy subsidiary, Virya Energy, which has a net book value of EUR 434m. Parkwind is just one of eight companies owned by Virya, albeit its largest, suggesting Jera, advised by Morgan Stanley on the deal, is buying Parkwind for several times its book value.

Interestingly, Energy Infrastructure Partners (EIP) was also linked by one of the sources to the process. EIP already has connections with Virya via Hyoffwind – a green hydrogen project in Zeebrugge that EIP-backed Fluxys and Virya are currently developing. Virya’s other companies include Belgium onshore developer Eoly Energy and Eurowatt, which is developing onshore wind projects across Europe.

Commenting on the sale price, one of the source said that the “business is being sold for a premium as it is the sale of a controlling stake and that it’s a genuine developer with access to future projects”.

Jera’s willingness to pay such high sums reflects appetite from investors to establish business platforms from which they can expand in a sector. Colruyt said on Wednesday that Parkwind will “provide JERA with a significant platform upon which it will grow its renewables business globally, particularly offshore wind.”

Strategically, Jera like many Asian energy giants wants to learn lessons from owning European companies that it can then transfer to their home countries, which have less mature energy infrastructure. “Many Asia investments have been for minority or partnership, to help them build knowledge and market understanding,” Alex Wotton, the co-head of Industrials and Infrastructure in EMEA at Nomura, previously told Infralogic. Wotton advised Mitsui on its acquisition last year of a stake in Mainstream. 

Jera, which owns coal and LNG power plants, said last year that it wants its worldwide operations to be net zero by 2050 both “through complementary renewables and zero-emission thermal power plants”.

Jera is starting from a solid position given Parkwind has stakes in a host of development-stage projects, including the under construction 257 MW Arcadis Ost I in the Baltic Sea; as well as the 375 MW Oriel wind park in Ireland, which Parkwind and ESB are jointly developing and which won maritime area consents last December.

Also, last June Parkwind joined forces with Greek construction company Intrakat to develop offshore wind projects in the Greek sea; while just in the past few weeks the Belgium developer partnered with Copenhagen Infrastructure Partners and Norwegian industrial group NorSea to develop the 1.5 GW Utsira Nord floating offshore wind farm, near the Norwegian island of Svendsholmen. Norway has committed to establishing 30 GW of offshore wind power by 2040.

Jera’s victory will likely leave its rivals for Parkwind scrabbling around for their next offshore wind platform. “Everyone wants a platform. They are fed up with poor pricing on single assets,” said an adviser.

Besides its stakes in the Parkwind-backed projects, Sumitomo owns stakes in the UK’s Galloper and Race Bank operational wind farms as well as under construction-floating offshore wind farms in France. This, however, is not enough perhaps to constitute an offshore wind platform.

Equinor is already one of Europe’s largest offshore wind investors with stakes in 13 projects worth a combined GBP 14.9bn, according to Infralogic, although again does not yet have a single platform through which it can meet its renewable power ambitions. “Equinor is keen to have a separate independent vehicle into which it can drop all its assets,” said a source.

Eni’s renewable energy platform, Plenitude, meanwhile, recently sold a 20% stake in the UK’s Dogger Bank but has a sizeable number of European offshore wind partnerships including with HitecVision and Octopus-backed Simply Blue Group.

But Plenitude, which was due to be sold off through an IPO until the recent uncertainty in listed markets, is seen by one sector specialist as a fairly late entrant to the offshore wind market. “Thinking of companies with a gap [in their portfolios] and with capital to deploy, then you think of Eni,” the person said.

Eni, Morgan Stanley, Equinor, Jera, IFM, Sumitomo, Hanwha and Itochu did not respond to requests for comment. Brookfield declined to comment.

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