Exclusive: Latest OFTO round attracts unusual suspects

A Danish infrastructure fund and a Saudi contractor have expressed interest in UK offshore transmission projects, which are also being eyed by institutional debt providers.

The fifth round of auctions for offshore transmission owner projects, currently run by UK energy regulator Ofgem, has seen new entrants join established players in an increasingly competitive field.

Launched in October 2016, the process allows bidders to vie for the ownership of five sets of transmission assets attached to offshore wind farms with a combined capacity of 2.3GW.

Sources told Infrastructure Investor that repeat participants in previous tenders are well represented among bidders. Mitsubishi Corporation and International Public Partnerships are said to have bid on all five projects, while Macquarie Capital and Balfour Beatty initially were in the running for at least four of the five, it is understood.

But new players are also entering the fray, with Copenhagen Infrastructure Partners, which invested in Scotland’s Beatrice offshore wind farm in 2014, believed to be a bidder in the fifth OFTO tender for the first time. A Saudi mechanical and electrical contractor has also expressed interest in the auction, a source said, though it is unclear whether it decided to participate.

All firms cited above either declined or did not respond to a request for comment.

Shortlisted bidders for the first three projects of round five were announced in March, with Balfour Beatty, Equitix, a consortium of Mitsubishi and HICL, as well as a pair comprising INPP and Transmission Capital Partners pre-selected for each of them. A team comprising Macquarie Capital and Frontier Power was shortlisted for two projects, and a Dalmore Capital-DIF tie-up for one.

The auction round has also attracted interest from institutional investors on the debt side, notably because of the growing size of the projects involved: while three of them are expected to cost about £300 million ($389 million; €341 million), the remaining two are will need more than £500 million of investment. At that scale, it becomes harder to form a bank club priced competitively with bond options.

This matter is compounded by Ofgem’s requirement that banks participating in OFTO tenders have 120 percent of the debt needed committed, a source said, noting that institutions have demonstrated growing appetite.

Aviva Investors in April hired Darryl Murphy, formerly a partner at KPMG and an OFTO connoisseur, to head its infrastructure debt operations. The firm had not responded to a request for comment on the latest OFTO round at the time of going to press.