Brookfield Buys $2.3 Billion Stake in Orsted UK Wind Farms

(Bloomberg) -- Brookfield bought a £1.75 billion ($2.3 billion) stake in four offshore wind farms from Orsted A/S in one of the largest deals for the sector this year. 

The agreement marks a significant expansion into offshore wind for Brookfield, one of the biggest global investors in the energy transition. It’s also the asset manager’s first investment in the sector in the UK. The announcement of a major investment in an area that’s critical to Britain’s growth was a boost for Chancellor Rachel Reeves ahead of the budget announcement on Wednesday.

“This investment is a huge vote of confidence in the UK’s clean energy sector, and is exactly the kind we want to see as we grow the economy,” Reeves said in a statement. 

The sale gives Brookfield a minority share in four of Orsted’s operational offshore wind farms in the UK. It comes at a critical time for Orsted as the Danish renewable power developer tries to prove to investors that the market still has an appetite for embattled offshore wind.

Orsted saw its share price plummet last year as soaring costs and supply chain bottlenecks related to its US offshore wind plans forced the company to make multi billion-dollar write-downs and fire two executives. In February, Chief Executive Officer Mads Nipper unveiled a turnaround plan that included a more aggressive strategy to sell down stakes in its assets.

“Today’s transaction is an important milestone in the farm-down program as part of our business plan, supporting our significant re-investment in new assets,” Nipper said in a statement.

It’s the second major sign of investor appetite for Orsted and its assets this month after Norwegian oil and gas company Equinor ASA announced a $2.5 billion stake in the company.

The wind farms include Hornsea 1, Hornsea 2, Walney Extension, and Burbo Bank Extension, which have a combined total capacity of approximately 3.5 gigawatts. Orsted will maintain a roughly 38% ownership interest in the projects and will continue to operate and maintain the wind farms.

Orsted shares fell as much as 1.9% to 411.8 Danish krone.

“While the delivery of this transaction should be welcomed by the market in the short term, we do question the long-term sustainability of such a strategy: selling prized assets along with its cashflows to plug the gap in the balance sheet,” Jenny Ping, analyst at Citigroup Inc., said in a note.

(Updates with comment from chancellor in third paragraph, analyst comment in last paragraph.)

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