Breaking with established practice, APG, the investment arm of the Dutch pension giant ABP, has partnered with an offshore wind developer to compete for 4GW of upcoming Dutch offshore tenders.
Having no in-house experience with early offshore wind developments, APG has set up a consortium, Noordzeker, with a “leading renewable energy developer”.
According to Jan-Willem Ruisbroek, head of Global Investment Strategy Infrastructure at APG, the developer’s identity will be announced before the end of the year: “We are now at a very advanced stage, but we cannot make the announcement until we have entered into the consortium agreement.”
APG’s infrastructure mandate is 16 years old and has been directly invested since 2011. Five percent of the total capital that APG manages on behalf of ABP, or €24 billion, is in APG’s infrastructure portfolio, and approximately 80 percent of this is directly invested.
“We had been looking at the market for operating offshore wind farms and there is a lot of capital chasing those projects and the returns are thin,” Ruisbroek told Infrastructure Investor.
The consortium has been established in the hope that early investments in offshore wind could provide a better return. But by doing so, APG has encroached on developers’ territory.
“Our team has the expertise to understand and assess the risks involved in the projects. And if we take on the risk, we are of course also very keen to take extra profit, which goes straight back to the Dutch pensioners,” said Ruisbroek.
“There was a bit of sentiment, but a number of utilities and experienced developers acknowledged the value that we brought – that this is the Netherlands, and this is the largest Dutch investment fund, so this might actually be helpful. Overall, we have been received very positively. Everybody is looking for partners that will help them win the project,” Ruisbroek added.
A tender proposition
The newly formed consortium’s targeted projects are four lots located in the IJmuiden Ver wind farm zone, which is 33 nautical miles off the west of the Netherlands. Tenders are scheduled to open in 2023 and the wind farms are expected to be in operation by 2028.
The tenders will be awarded according to a scheme that rewards both financial aspects and qualitative criteria such as plans for system integration and ecology, which is to the consortium’s advantage, according to Ruisbroek.
“We think we have a competitive advantage because of how the project is being tendered. You get points for how well the generated energy enters the onshore grid system. It’s also about ecology and how well the bidder can preserve natural capital, both under the sea and above. And then there is circularity, the choice and origin of the materials. We think that we have a pretty good view as to which companies can deliver innovative solutions for system integration. Being Dutch in the Dutch market, we also have a good social dialogue with all the stakeholders in the Netherlands,” he explained.
The lifetime for APG’s engagement is “until they tear down the turbines again”, Ruisbroek said. “The intention is for that project to also deliver funds for my pension, and I’m still pretty young. However, there is always a chance to exit if we believe that the capital can be better deployed elsewhere. But the plan is to approach this project from a very long-term perspective.”
Technicalities
One crucial element in APG’s participation in this consortium is the level of technical skill that the fund can contribute to the enterprise. But it has not been deemed necessary to expand APG’s workforce.
“We have contracted in a handful of high-calibre people like former CEOs of utility companies – people that have been running this kind of construction projects themselves – in an advisory capacity,” said Ruisbroek. “We do not have the skills to decide what the foundation should look like or which turbine to choose. We have found a partner that brings that expertise.”
Much will depend on exactly who that partner is. However, the Dutch government is targeting 21GW of offshore wind energy in the North Sea by 2030, and 70GW of capacity by 2050, so APG may get more than one attempt at entering early phase offshore developments. For now, the focus is firmly on 2023.
“We are confident that we can win the tenders. We have good ideas and good partners. But it is a competition,” said Ruisbroek.
If you do not receive this within five minutes, please try to sign in again. If the problem persists, please email: