Eni enters offshore wind with Dogger deal

Every dog has its day. And in recent weeks, most news days have had their Dogger. The 2.4GW Dogger Bank A and B project has been everywhere.

First came the news on 24th November that Equinor and SSE Renewables had won power purchase agreements (PPAs) for the full output. Ørsted signed for 40%, with Equinor arm Danske Commodities, SSE and Shell buying 20% each.

These PPAs meant the partners could reveal two days later, 26th November, that the project had secured funds of £5.5bn to reach financial close. Equinor and Backers included 29 banks and three export credit agencies.

And on Friday (4th December), Equinor and SSE Renewables each announced they had sold 10% stakes in the project to Italian utility Eni for £202.5m each. This means Eni has paid £405m for a 20% stake in Dogger Bank A and B, with Equinor and SSE retaining 40% each. The deal is due to complete in early 2021.

There are a few angles we could have focused on in all of that.

The fact Ørsted signed a 960MW off-take deal to support its move to sell electricity in the UK market is a powerful indication of the direction of its retail-focused ambitions.

Then there’s the sheer size of the project. At 2.4GW, Dogger Bank A and B is set to be the world’s largest installed offshore wind farm if it can complete as planned in 2026. The fact it was able to achieve a £5.5bn close is a testament to offshore wind’s appeal.

There’s the sub-plot that the project uses GE Renewable Energy’s Haliade-X 13MW turbines. This caps a great fortnight for GE, which picked up preferred supplier status at the 800MW Vineyard Wind in the US, ousting MHI Vestas.

But we don’t want to focus on any of that. We want to look at Eni.

Eni takers

For Italian oil giant Eni, buying 20% of what is set to be the world’s largest offshore wind farm helps announce the company as a player in both offshore wind and in renewables as a whole. This follows a strategy it embarked upon 12 months ago – and, before that, its involvement in renewable energy was next to nothing.

For example, at the end of 2019, the company had only 200MW installed renewable energy capacity, of which the 48MW Badamsha wind farm in Kazakhstan is the only wind investment of note. The development was commissioned in late 2019.

But it started giving indications in December 2019 that this was changing.

That is the month it formed a tie-up with fellow Italian firm Falck Renewables in the US to buy 49% of Falck’s operating renewables assets in the country; and created a 50:50 tie-up to co-develop onshore wind, solar and storage. They are targeting 1GW of installed renewables in the US in 2023.

Eni followed up in February 2020 by setting out a three-year plan, where it would look to achieve 3GW installed renewables by 2023 with a target of over 55GW by 2050. Claudio Descalzi, chief executive of Eni, called this strategy a “fundamental step for Eni” that “set out the evolution of our company for the next 30 years”. He said that its plan was being driven by changes in the market and the need to cut emissions.

And in the last month it has added offshore wind to the mix.

In November, it hooked up with Norwegian private equity group HitecVision to develop 1GW of renewables, including offshore wind, in the Nordic region by 2030. Eni owns a 69.6% stake in the Vargroenn joint venture.

It followed this last week by completing the deal at Dogger Bank that is its most high-profile move in wind so far.

Descalzi said it gives Eni a way into offshore wind in the UK and the wider northern European market, with a chance to learn from two experienced offshore players. We expect to see it pick up more stakes in offshore wind projects in established European markets before moving into new regions.

He added that renewables would complement, rather than replace, Eni’s oil and gas operation: “These nascent businesses will develop strongly and be highly connected to our existing businesses,” he said, adding that the plan “combines economic sustainability with environmental sustainability”.

This tells us three things.

First, Eni’s focus on renewables will be a tiny part of its capital expenditure for the near- to medium-term, despite some big deals. Second, it won’t be going into green energy all guns blazing like fellow Italian utility Enel. And third, we must keep an eye on how it seeks to pair offshore wind with green hydrogen, because that will likely be central to oil giants' strategies in the coming years.

Or to bring us back to dogs, Eni has been barking about its green plans for a year or so. Now we need to see how much bite it has.