Market News

 July 19, 2012
DONG Energy and Siemens ink offshore turbine mega-deal

 Siemens' plans for a new wind turbine manufacturing facility in the UK have taken a significant step forward, after the company announced it has inked a major new offshore-turbine supply deal with developer DONG energy.

The two companies have signed a framework agreement that will see Siemens supply 300 of its 6MW offshore turbines to offshore wind-farm projects planned by DONG for UK waters between 2014 and 2017.

The financial details of the deal were not disclosed, but analysts estimate that offshore turbines typically cost around €1.4m per MW, putting the total cost of the 1,800MW at €2.52bn.

"The agreement will enable DONG Energy to install a significantly larger turbine from 2014 compared with the turbines we know today," said acting DONG Energy chief executive Carsten Krogsgaard Thomsen in a statement. "The agreement on the supply of the new turbines totalling 1,800MW is an important step towards the growing wind industry, and will help make offshore wind more competitive."

Under the terms of the deal, Siemens will "design, manufacture, supply, install and service" the turbines, while the two firms have also agreed product and performance warranties.

Significantly, the agreement commits DONG Energy to pay a cancellation fee if the projects covered by the deal are cancelled.

As such, the move significantly increases the likelihood of Siemens moving forward with plans for a new £210m wind turbine factory in Hull.

The company has already gained approval from a local planning committee for the development, and had been waiting to secure orders to move forward with the investment.

Siemens today declined to confirm whether it would definitely green-light the project, but a source close to the company acknowledged that the deal with DONG Energy significantly increased the likelihood of the factory being built. "Transporting big turbine nacelles is not easy, and this deal is for wind farms in UK waters," the source said.

The deal builds on DONG Energy's long-standing partnership with Siemens, which currently supplies turbines for DONG's Lincs, London Array and West of Duddon Sands offshore wind farms in the UK, as well as its Borkum Riffgrund 1 development in Germany and Anholt offshore wind farm in Denmark.

The news comes just a day after new figures from the European Wind Energy Association confirmed the UK's position as the world's leading offshore wind market.

The report revealed that the rate at which new offshore turbines are being erected increased by 50 per cent during the first six months of the year, while 114 of the 132 turbines connected to the grid in Europe over the same period were located in UK waters.

This week also saw DONG Energy and Centrica edge forward with plans for a major new offshore wind farm in the Irish Sea as part of the UK's so-called Round 3 developments, after the two companies submitted initial proposals to the National Infrastructure Planning agency.