Total, the French oil company, has struck a deal with SSE to buy a majority stake in a £3 billion project to build Scotland’s biggest offshore wind farm.
The companies said last night that they had taken a final investment decision to proceed with the Seagreen project, 17 miles off the Angus coast.
The wind farm is due to be completed by late 2022 and to produce up to 1.1 gigawatts of electricity, enough to power more than a million homes.
SSE said that it would “continue to lead on the development and construction of the project, supported by Total, and will operate the asset on completion”.
Total said that it would pay £70 million up front for the 51 per cent stake in the project and up to a further £60 million, depending on performance conditions being met. The deal marks a further escalation of Total’s push into renewable energy as it pursues a target of owning 25 gigawatts of renewable capacity by 2025.
Patrick Pouyanné, 56, Total’s chief executive, said: “This move represents a major change of scale for Total’s offshore wind activity, in line with our strategy of profitable growth in renewables and low carbon electricity.”
Oil companies are under pressure to go green and Total recently committed to cut its emissions to “net zero” by 2050. Total said that it had secured almost 70 per cent external financing to cover its share of the investment in Seagreen.
The deal comes after SSE offloaded its high-profile household energy supply business to concentrate on renewables and networks. It also is developing a series of other UK offshore wind farms at Dogger Bank jointly with Equinor, the Norwegian oil group.
Seagreen will be made commercially viable in part thanks to a 15-year contract from the government last year that guarantees it a fixed price for the electricity that will be generated from about 40 per cent of the turbines.
SSE itself has contracted to buy another 30 per cent of the power from the wind farm and said that it was “well positioned to optimise the route to market for this renewable output”.
Deepa Venkateswaran, of Bernstein research, said that the investment costs of building the project were higher than expected and as such implied likely returns to SSE that were lower than forecast. However, she said that SSE was expecting higher returns than Bernstein had predicted, which suggested that it had “a different expectation for commodity prices”.
Alistair Phillips-Davies, 52, SSE’s chief executive, said: “Total’s extensive global experience in the offshore environment, combined with their clear ambition to contribute to the development of renewable energy worldwide, is a strong fit with SSE Renewables’ strategic objective to treble our renewable output by 2030.”