Danish pension buys into local wind farm for €94m

PensionDanmark has teamed up with DONG Energy to acquire a 50% stake in the Nysted offshore wind farm, in Denmark. Under the deal, DONG is providing an operating guarantee to the Danish pension in exchange for a larger share of the operating profits if current price levels increase.

PensionDanmark, a €10 billion cross-sector Danish pension fund, and local energy group DONG Energy have entered into an agreement that will allow the pension fund to acquire a 50 percent stake in an offshore wind farm on the island of Lollan, Denmark’s fourth-largest island.

The acquisition, which will cost the Danish pension DKK700 million (€94 million; $120 million), will be a two-phase process involving the purchase of a 30 percent stake in the Nysted wind farm from DONG for DKK400 million. The second part of the deal will see DONG buy out existing shareholder E.ON’s 20 percent holding in the wind farm, which it will then resell to the Danish pension for DKK300 million.

At the end of the transaction, the first of its kind in Denmark, DONG and PensionDanmark will be equal stakeholders in the wind farm. As part of the deal, DONG, which will be solely responsible for operating the asset, is providing an operating guarantee to PensionDanmark in exchange for receiving a larger share of the operating profit if the power prices increase over the current price level, DONG said in a statement.

Torben Moger Pedersen, the Danish pension’s chief executive, hopes the deal will serve as a template for future partnerships:  “We believe that the model chosen can serve as a breakthrough for the investment of pension fund assets on a large scale in green technology and other infrastructure in Denmark,” the chief executive said.

Earlier this year, reports suggested that PensionDanmark and PBU, a €3.5 billion Danish pension for early childhood teachers, had agreed to co-invest €100 million in a renewable energy fund. The fund, which would reportedly be called Green Power Partners, would be run by another Danish pension, AP Pension, and local private investment firm Proark.

The Nysted offshore wind farm has a capacity for close to 166 megawatts. Since it was commissioned in 2003, it has provided enough power to serve the annual needs of 140,000 Danish households, DONG said in a statement.