The London Array, the world's largest off shore wind farm in the Thames Estuary off the coast of the UK, is owned by Dong Energy, Abu Dhabi's Masdar and EON. Stephen Lock/The National
The London Array, the world's largest off shore wind farm in the Thames Estuary off the coast of the UK, is owned by Dong Energy, Abu Dhabi's Masdar and EON. Stephen Lock/The National

Wind farm builder Dong bags Europe’s biggest stock float this year



Shares in Dong Energy jumped as much as 10 per cent on Thursday after the Danish utility and wind farm developer sealed the biggest European stock market flotation this year.

The company, which has built more than a quarter of the world's offshore wind farms, including the London Array in partnership with Abu Dhabi's green energy company Masdar and Germany's EON, sold shares at 235 Danish kroner apiece, in the top half of its 200-255 kroner guidance range and valuing the business at 98 billion kroner (Dh55.09bn).

The London Array offshore wind farm smashed its monthly output record during December.

The huge 175-turbine offshore array generated 369,000MWh of clean power, well in excess of its previous monthly best of 317,000MWh, which was set in November 2014.

London Array Limited, which is owned by the consortium of Masdar, Dong Energy and EON, said the capacity factor for the month reached 78.9 per cent.

Last month, Masdar and two state-backed Norwegian energy companies, secured financing for the Dh6.86bn, 402-megawatt Dudgeon offshore wind plant in the UK.

The project will be funded by £1.3bn (Dh6.9bn) in limited-recourse bonds, which were arranged by a consortium of banks including Credit Agricole, Société Générale and BNP Paribas.

Masdar owns a 35 per cent stake in the offshore wind plant. Statoil, a Norwegian government-backed oil and gas company, owns a 35 per cent stake in Dudgeon, while Statkraft, Norway’s state-owned electricity company, owns a 30 per cent stake.

The plant, expected to power about 400,000 homes, will start producing power in the second half of 2017. It will receive subsidies from the UK government as part of its “Contract for Difference” scheme, which aims to reduce the cost of investing in the UK clean energy sector for renewables developers.

Dudgeon comprises 67 wind turbines that are located 32 kilometres off the eastern coast of England.

At 0840 GMT yesterday, Dong stock was trading at 258.7 kroner, having earlier touched 260 kroner.

The flotation raised a gross 17bn kroner for the Danish state and a consortium of investors including Goldman Sachs.

The valuation means Goldman has doubled an 8bn kroner investment made just two and a half years ago, fuelling criticism in Denmark that the previous government sold an 18 per cent stake to the Goldman consortium too cheaply.

Dong’s listing gives investors the chance to buy into the fast-growing offshore wind sector. The firm has major other projects in Britain and Germany, including the 1.2 gigawatt Hornsea 1, off the coast of north-east England, which will become the world’s largest offshore wind farm, and recently opened offices in the United States and Taiwan.

However, offshore wind power is one of the most expensive sources of renewable energy and some analysts are concerned about the sector’s reliance on government subsidies.

Dong derived 62 per cent of its revenue on operational offshore wind farms last year from subsidies and other financial support, such as Green Certificates in Britain.

“A price of around 260 [kroner] is within what we see as fair value for the share,” said Peter Garnry, head of equity strategy at Saxo Bank.

“In the short term, the share price could rise further because of the limited number of shares offered relative to the total capital.”

Dong did not issue new shares, while the government and Goldman consortium sold a combined 17.4 per cent stake. The state will retain a holding of just over 50 per cent, while the Goldman group will have a stake of 13.4 per cent after the flotation.

Gross proceeds could rise to 19.7bn kroner if the sellers exercise a so-called overallotment option to offload further stock.

Dong has made a net loss for each of the past four years, mainly due to impairment charges on its oil business, but expects to make a profit this year as its wind power business increases and the technology improves.

“We expect renewable energy like offshore wind will be able to compete with other energy types in a number of years,” said the chairman Thomas Thune Andersen, although he declined to say how many years it would take before the technology could be built without government subsidies.

Dong said more than 36,000 new investors had been allocated shares in the flotation. Private Danish investors were assigned about 10 per cent of the 72.8 million shares sold, with the rest bought by Danish and international institutional investors.

JP Morgan, Morgan Stanley and Nordea were global coordinators for the listing. Citigroup, Danske Bank, UBS, RBC, Rabobank and ABG Sundal Collier were also involved.

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