Northland Power acquires majority equity stake in North Sea offshore wind farms from RWE Innogy

Northland Power Inc., ("Northland") Toronto, and RWE Innogy GmbH, Essen, have signed an agreement for Northland to acquire an 85% equity stake in three offshore wind projects, consisting of Nordsee One, a 332 megawatt (MW) project currently in advanced development, as well as Nordsee Two and Nordsee Three, which are in early stages of development. The cooperation between Northland, an independent power producer with long term experience in project development, construction, operation and financing, and RWE, a large, diversified utility with extensive technical resources, represents a new approach to ensure the effective completion of the Nordsee One project.

Nordsee Two and Nordsee Three, also being acquired under this agreement, are early stage development projects totalling approximately 670 MW. They will be developed over the next decade as offshore wind tariffs are extended and the grid infrastructure is made available.

The projects are located 40 kilometres north of Juist Island in German territorial waters, in an area of approximately 100 square kilometres, with shallow water and high wind speeds: ideal conditions for an offshore wind farm. The total estimated project cost of Nordsee One is €1.2 billion and, once operational, it is expected to generate over 1,300 gigawatt hours of electricity per year from 54 wind turbines, enough to meet the needs of 400,000 German households. Offshore wind development is a key feature of Germany’s 'Energiewende' program, the official policy supporting renewable power generation with a stated goal for offshore wind capacity of 6,500 MW of installed capacity by 2020 and 15 GW by 2030.

Nordsee One is well advanced, having received the required permits for the wind farm, and is advancing toward achieving all of the related permit milestones. A tender process for the supply, installation and maintenance of the wind turbines for Nordsee One is ongoing and is expected to be closed soon. All other major supply and construction contracts are nearing completion. Nordsee One is entitled to a fixed feed-in tariff subsidy for approximately ten years under the German Renewable Energy Act (“EEG”). A substantial portion of the project returns are earned during the feed-in-tariff period, with the remainder of the planned returns earned from the robust and mature German wholesale electricity market.

The Nordsee One project will continue to be developed and the partners expect to reach a final investment decision and financial close in the first half of 2015, with in-water construction anticipated to begin in 2016. The project is expected to be completed by the end of 2017.

Sean Durfy, President and Chief Development Officer of Northland Power, explains: “We are excited to announce this next stage of Northland’s offshore wind development program. The Nordsee One project is well advanced and increases Northland’s offshore wind portfolio to 642 MW {net to Northland}, with further growth potential in subsequent phases. We are very pleased to have partnered with a world class utility in RWE, who will provide expertise and manpower to support the development and construction of Nordsee One alongside Northland.”

John Brace, Chief Executive Officer of Northland Power, adds: “This partnership is consistent with Northland’s focussed, strategic approach to development and our commitment to delivering long term value to shareholders. Nordsee One is expected to be commercially operational by the end of 2017 and immediately thereafter should be highly accretive to free cash flow per share.”

Hans Bünting, Chief Executive Officer of RWE Innogy, adds: “Today’s agreement marks the first important milestone on the way to realize the Nordsee One offshore wind project. As part of RWE Innogy’s capital light strategy going forward, we are going to share the capital required for offshore-projects through partnerships. Nordsee One is another good example illustrating this business model as it allows us to realize large-scale projects by bringing in strong partners. We will continue to seek partnerships for further attractive projects. Northland Power is a very experienced and reliable partner and we are delighted to be working with them to successfully realize Nordsee One together.”