Bloomberg News

Dong to Spend $1.8 Billion Annually for Offshore Wind Projects

March 12, 2012

Dong Energy A/S plans to invest about 10 billion kroner ($1.8 billion) a year on offshore wind projects to offset a “challenging” environment for gas plants as it ceases to build new coal power facilities, its chief said.

That’s about what the world’s largest developer of offshore wind parks spent last year on turbines installed at sea. “We think that is around that level we will be working at in the coming years,” Anders Eldrup, chief executive officer of the Fredericia, Denmark-based company, said by phone.

Dong announced today that Eldrup, who spoke in an interview on March 9, is stepping down as chief executive. Finance director Carsten Krogsgaard Thomsen will be acting CEO until a new chief executive is found, it said, adding that there will be no change in the company’s strategy.

Dong is focusing on renewable sources for electricity generation to shift from fossil fuels and cut emissions as the rising cost of gas depresses profits for burning the fuel. Profitability of burning gas in the U.K. has fallen 75 percent to 1.62 pounds ($2.54) a megawatt-hour in the last six months, according to Bloomberg calculations using broker data.

“It seems to be quite challenging times for the CCGTs,” or combined-cycle gas turbine plants, Eldrup said. The company doesn’t have “precise investment plans” for new plants as they are “not very profitable” now, he said. Dong operates gas- fired power plants in Norway, Denmark and the Netherlands and opened its first in the U.K. in south Wales last year.

“It’s a combination of the price of gas to the price of power because it is that conversion that gives a margin,” Eldrup said.

No Coal-Fired Plants

Dong will not invest in new coal-fired power plants as it seeks to cut by half its carbon-dioxide emissions from electricity and heat generation compared with 2006 levels by 2020. The company plans to convert “about half” of its remaining coal stations to use biomass, Eldrup said.

The company, with about 1.3 gigawatts of operating offshore wind farms and 1.1 gigawatts under construction, plans to build 3 gigawatts of offshore wind by 2020, Eldrup said. Dong may make investments of 10 billion kroner a year for the next two to three years in offshore wind, he said.

Dong will fund new offshore wind plants with company revenue and from selling shares in existing projects, Eldrup said. Dong agreed to sell 50 percent of a German park for 4.7 billion kroner to Kirkbi A/S, the parent company of Lego Group, and Oticon Foundation on Feb. 23, its fifth such sale.

Nations are promoting clean energy to curb emissions and meet European Union goals. The U.K. is planning to build 18 gigawatts of offshore wind by 2020 from about 2 gigawatts now while Germany targets about 10 gigawatts by the same year.

“We are constantly surveying the market for future projects,” Eldrup said. Germany, he noted, is an “interesting place and our close neighbor.”

Eldrup is resigning “by mutual consent,” the company said today. Krogsgaard Thomsen was named acting CEO as Dong started a process to find a permanent replacement.

To contact the reporter responsible for this story: Sally Bakewell in London at Sbakewell1@bloomberg.net

To contact the editor responsible for this story: Reed Landberg at landberg@bloomberg.net


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