Three Gorges take China investors into offshore

Chinese president Xi Jinping has been in the UK this week on a state visit that UK leaders say will unlock trade deals worth an estimated £30bn between the countries.

This is the first state visit to the UK by a Chinese president in ten years, and has attracted criticism from a wide range of sources. There are those who claim UK leaders should stop any moves to allow Chinese firms to invest in UK nuclear; those who want UK leaders to challenge Jinping over China’s impacts on UK steel; and those who want them to take him to task on human rights.

But European offshore wind is one sector that should be glad for the chance of deepening relationships between the UK and China. Chinese investors have shown they are keen to put money into infrastructure around the world, and offshore wind is no different.

We have now seen the first big investment in European offshore by a Chinese company. This week, Portuguese energy firm EDP Renovaveis announced that state-owned Chinese firm China Three Gorges Corporation is set to buy a stake of up to 30% in
its proposed up-to-1.1GW Moray development in UK waters.

This is subject to the scheme winning support under the UK’s Contracts for Difference subsidy regime. UK leaders are yet to confirm details of second CfD auctions, following the first round of auctions that concluded in February. Perhaps the chance to secure this deal will force it into action on offshore CfDs. We can hope.

This is not a deal that UK Prime Minister David Cameron can take credit for, though.

In 2011, EDPR and Three Gorges agreed a strategic partnership in which Three Gorges was set to invest €2bn in EDPR projects by 2015; and also led to Three Gorges buying a 21% stake in EDPR. This deal follows on from that rather than new diplomatic ties.

This is also not the first time Three Gorges has followed EDPR into new wind markets. It started 2015 by buying a 49% stake in EDPR’s 321MW Brazilian portfolio for €111m.

Three Gorges is also expanding in emerging markets without EDPR, including opening the first wind farm in Pakistan, totalling 49.5MW, in March. It is growing its reach in global wind.

But it is still an exciting deal, and the most interesting aspect is how it raises the profile of the European offshore sector to investors in China. We expect them to like what they see.

We have already seen large Japanese and Korean conglomerates putting their money into European offshore, including Bank of Tokyo Mitsubishi, Marubeni and Sumitomo.

These firms are not just after the reliable government-backed returns, although of course those are attractive. They have also been looking to grow their confidence and experience of the offshore wind sector that they can then take back to Japan and South Korea, where their governments are keen to develop wind farms offshore. Chinese investors can do likewise.

In fact, in two years we might see this Moray deal as a trailblazer for the involvement of Chinese investors in European offshore.

Three Gorges has already been looking at the sector, and in June it signed a deal with Goldwind to set up an offshore wind test centre in its home country. Moray could be another key part of that offshore learning process.

And this is where Jinping comes in. China is the world’s largest onshore wind market, and the UK is the largest offshore. If Jinping’s visit leads to stronger ties between the two then it would make it easier for Chinese conglomerates to follow the lead of Three Gorges into investing in UK offshore.

That would be to the benefit of the UK and Europe as a whole.

Chinese president Xi Jinping has been in the UK this week on a state visit that UK leaders say will unlock trade deals worth an estimated £30bn between the countries.

This is the first state visit to the UK by a Chinese president in ten years, and has attracted criticism from a wide range of sources. There are those who claim UK leaders should stop any moves to allow Chinese firms to invest in UK nuclear; those who want UK leaders to challenge Jinping over China’s impacts on UK steel; and those who want them to take him to task on human rights.

But European offshore wind is one sector that should be glad for the chance of deepening relationships between the UK and China. Chinese investors have shown they are keen to put money into infrastructure around the world, and offshore wind is no different.

We have now seen the first big investment in European offshore by a Chinese company. This week, Portuguese energy firm EDP Renovaveis announced that state-owned Chinese firm China Three Gorges Corporation is set to buy a stake of up to 30% in
its proposed up-to-1.1GW Moray development in UK waters.

This is subject to the scheme winning support under the UK’s Contracts for Difference subsidy regime. UK leaders are yet to confirm details of second CfD auctions, following the first round of auctions that concluded in February. Perhaps the chance to secure this deal will force it into action on offshore CfDs. We can hope.

This is not a deal that UK Prime Minister David Cameron can take credit for, though.

In 2011, EDPR and Three Gorges agreed a strategic partnership in which Three Gorges was set to invest €2bn in EDPR projects by 2015; and also led to Three Gorges buying a 21% stake in EDPR. This deal follows on from that rather than new diplomatic ties.

This is also not the first time Three Gorges has followed EDPR into new wind markets. It started 2015 by buying a 49% stake in EDPR’s 321MW Brazilian portfolio for €111m.

Three Gorges is also expanding in emerging markets without EDPR, including opening the first wind farm in Pakistan, totalling 49.5MW, in March. It is growing its reach in global wind.

But it is still an exciting deal, and the most interesting aspect is how it raises the profile of the European offshore sector to investors in China. We expect them to like what they see.

We have already seen large Japanese and Korean conglomerates putting their money into European offshore, including Bank of Tokyo Mitsubishi, Marubeni and Sumitomo.

These firms are not just after the reliable government-backed returns, although of course those are attractive. They have also been looking to grow their confidence and experience of the offshore wind sector that they can then take back to Japan and South Korea, where their governments are keen to develop wind farms offshore. Chinese investors can do likewise.

In fact, in two years we might see this Moray deal as a trailblazer for the involvement of Chinese investors in European offshore.

Three Gorges has already been looking at the sector, and in June it signed a deal with Goldwind to set up an offshore wind test centre in its home country. Moray could be another key part of that offshore learning process.

And this is where Jinping comes in. China is the world’s largest onshore wind market, and the UK is the largest offshore. If Jinping’s visit leads to stronger ties between the two then it would make it easier for Chinese conglomerates to follow the lead of Three Gorges into investing in UK offshore.

That would be to the benefit of the UK and Europe as a whole.

Chinese president Xi Jinping has been in the UK this week on a state visit that UK leaders say will unlock trade deals worth an estimated £30bn between the countries.

This is the first state visit to the UK by a Chinese president in ten years, and has attracted criticism from a wide range of sources. There are those who claim UK leaders should stop any moves to allow Chinese firms to invest in UK nuclear; those who want UK leaders to challenge Jinping over China’s impacts on UK steel; and those who want them to take him to task on human rights.

But European offshore wind is one sector that should be glad for the chance of deepening relationships between the UK and China. Chinese investors have shown they are keen to put money into infrastructure around the world, and offshore wind is no different.

We have now seen the first big investment in European offshore by a Chinese company. This week, Portuguese energy firm EDP Renovaveis announced that state-owned Chinese firm China Three Gorges Corporation is set to buy a stake of up to 30% in
its proposed up-to-1.1GW Moray development in UK waters.

This is subject to the scheme winning support under the UK’s Contracts for Difference subsidy regime. UK leaders are yet to confirm details of second CfD auctions, following the first round of auctions that concluded in February. Perhaps the chance to secure this deal will force it into action on offshore CfDs. We can hope.

This is not a deal that UK Prime Minister David Cameron can take credit for, though.

In 2011, EDPR and Three Gorges agreed a strategic partnership in which Three Gorges was set to invest €2bn in EDPR projects by 2015; and also led to Three Gorges buying a 21% stake in EDPR. This deal follows on from that rather than new diplomatic ties.

This is also not the first time Three Gorges has followed EDPR into new wind markets. It started 2015 by buying a 49% stake in EDPR’s 321MW Brazilian portfolio for €111m.

Three Gorges is also expanding in emerging markets without EDPR, including opening the first wind farm in Pakistan, totalling 49.5MW, in March. It is growing its reach in global wind.

But it is still an exciting deal, and the most interesting aspect is how it raises the profile of the European offshore sector to investors in China. We expect them to like what they see.

We have already seen large Japanese and Korean conglomerates putting their money into European offshore, including Bank of Tokyo Mitsubishi, Marubeni and Sumitomo.

These firms are not just after the reliable government-backed returns, although of course those are attractive. They have also been looking to grow their confidence and experience of the offshore wind sector that they can then take back to Japan and South Korea, where their governments are keen to develop wind farms offshore. Chinese investors can do likewise.

In fact, in two years we might see this Moray deal as a trailblazer for the involvement of Chinese investors in European offshore.

Three Gorges has already been looking at the sector, and in June it signed a deal with Goldwind to set up an offshore wind test centre in its home country. Moray could be another key part of that offshore learning process.

And this is where Jinping comes in. China is the world’s largest onshore wind market, and the UK is the largest offshore. If Jinping’s visit leads to stronger ties between the two then it would make it easier for Chinese conglomerates to follow the lead of Three Gorges into investing in UK offshore.

That would be to the benefit of the UK and Europe as a whole.