Exclusive: Subsea cables could be offshore’s Achilles heel

Offshore wind projects have more stable revenues than onshore counterparts but complex operations risk may hamper ratings, says Fitch.

While institutional appetite for offshore wind assets shows their gradual acceptance as mainstream infrastructure assets, a number of factors could make them riskier investments than their onshore counterparts, according to ratings agency Fitch.

In a draft study seen by Infrastructure Investor, the agency states offshore projects often benefit from stronger wind than their onshore rivals. “Simpler topography” – the sea being mostly flat – also means production estimates tend to be more reliable than on land.

But offshore projects tend to operate in difficult environments, meaning revenues could be impacted by longer unavailability periods resulting in “lumpier operating and cost profiles”. Expenses could rapidly inflate, the agency notes, given the dependency on vessels to transport personnel and equipment in times of outage.

A key potential weakness, Fitch says, lies on provisions related to the failure of subsea transmission cables and transformers, whose impact on revenues will depend on the regulatory framework, insurance and debt structure arrangements. This risk varied to a significant extent across geographies, the agency noted.

The use of bigger turbines, among other technological changes, could also weight on credit profiles.

The agency said operational offshore projects were still assessed according to the same metrics as their onshore peers, but remarked that they remained subject to “harsher stresses on availability and O&M costs and greater focus on breakeven analysis”.

“In the absence of rating constraints such as revenue counterparty or technology, operational offshore wind projects can achieve [investment grade] ratings,” Fitch concluded.