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Dong Gets $840 Million for 50% Stake in Unbuilt Wind Project

February 24, 2012

(Updates with analyst, CEO comments from second paragraph.)

Feb. 23 (Bloomberg) -- Dong Energy A/S agreed to sell 50 percent of a German offshore wind power project for 4.7 billion kroner ($840 million), the most expensive acquisition to date for an unbuilt facility of the type.

The Danish utility sold stakes in the wind park to Kirkbi A/S, the parent company of Lego Group, and the Oticon Foundation, Dong said today in a statement. Dong has permission to build the facility in place and will retain liability for construction risks associated with the project.

The transaction means Dong is selling the project for about $6.08 million per megawatt, the most expensive for an offshore wind farm, according to Fraser Johnston, an analyst at Bloomberg New Energy Finance.

“Similar projects typically cost around 3.5 million euros ($4.7 million) per megawatt at most today,” Jerome Guillet, head of Green Giraffe Energy Bankers in Paris, said by e-mail. “The higher price probably reflects the fact that the buyers don’t take construction risk and are happy with the stable return coming from the combination of a stable revenue stream and the long-term operations and maintenance agreement.”

Kirkbi and Oticon are equity holders while Dong carries out the investment “taking the risks during the construction,” Dong Chief Executive Officer Anders Eldrup said today in an interview by phone from Copenhagen.

Interest in Park

Dong received about 60 expressions of interest for the park, including from the Americas, Asia and Europe, Eldrup said.

“This is the first time that we have make a deal with corporate companies,” he said. “We think this is a new interesting step in attracting investors. Very substantial investments are in front of us especially in building out renewables and offshore wind.”

Dong, with 1.3 gigawatts of operating offshore wind farms and 1.1 gigawatts under development, has funded many of its projects using co-investors because its own cash flow and access to commercial bank funding isn’t sufficient.

It has sold stakes in three parks to Dutch and Danish pension funds and shares in a U.K. park to Marubeni Corp., the Japanese trading house, to help finance new projects and spread the risk. Wind turbines anchored to the seabed, one of the more costly renewable-energy technologies, are being promoted by Germany and the U.K. to curb emissions.

“In the field of renewable energy, our objective is an ambitious one,” Jorgen Vig Knudstorp, chief executive officer of Lego Group, said in the statement. “One of our fundamental values is that we want to help enable future generations of children to grow up in a better world.”

Fifth Stake Sale

The Borkum Riffgrund 1 wind park in the German part of the North Sea is set to start construction next year and produce enough power for more than 285,000 homes when built, according to the statement. It’s planned to have at least 277 megawatts of capacity using turbines made by Siemens AG.

The deal was the fifth stake sale by Dong in an offshore wind park “and our first in Germany, and we hope to do more,” Eldrup said. First power is expected in 2014 with the park fully operational by 2015.

The deal indicates there is money available for offshore wind developers and “the sector has attractive risk and remuneration profile for long-term investors and environmentally-focused investors,” Guillet said. “It also shows that Dong is doing a good job of finding these different sources of funds,” he said.

Oticon and Kirkbi

Kirkbi, based in Billund, will invest 3 billion kroner for a 32 percent share. Smorum, Denmark-based Oticon, the part owner of hearing aid products maker Oticon A/S, will invest 1.7 billion kroner for 18 percent, according to the statement.

They will pay the purchase price in four instalments starting at the end of this year and take over the completed wind farm “and the earnings that come with their ownership interests” in October 2015, Dong said in the statement.

Production will mainly accrue to Dong until then, according to the company. Dong also approved a 15-year operation and maintenance agreement for the project.

--Editors: Reed Landberg, Alex Devine

To contact the reporter on this story: Sally Bakewell in London at

To contact the editor responsible for this story: Reed Landberg at

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