Dong to re-tender Gode Wind projects

GERMANY: Dong Energy is putting up for graps 576MW of turbine supply contracts previously allocated to Repower and Vestas. This follows its recent purchase of the Gode Wind offshore projects from German developer PNE Wind.

by Jan Dodd 1 September 2012

Dong Energy paid EUR57 million for the three North Sea projects with a combined capacity of 900MW, to be followed by up to EUR100 million in deferred payments subject to certain milestones being achieved.

PNE had previously contracted Repower in March 2012 to supply 54 of its 6MW turbines for Gode I (332MW) and Vestas in early 2011 for 84 of its 3MW machines for Gode II (252MW). Gode III (316MW) is at an earlier stage of development.

But Dong chose to use the opt-out clause included in the contracts, which comes into effect with a change of ownership, and will issue a new tender for Gode I and II. Acting CEO Carsten Krogsgaard Thomsen said: "We intend to develop the Gode Wind zones with the most competitive turbines in order to reduce the cost of energy." As a major offshore developer, Dong will be hoping it can drive a harder bargain both in terms of price and contract conditions.

Front-runner

While Dong insists the choice of turbines is entirely dependent on the tender process, it has a long track record of working with Siemens. It has awarded Siemens orders for 3,071MW out of a total of 3,326MW for projects with supply agreements in place. In July the two companies signed a framework agreement for 1.8GW of Siemens' new 6MW machine destined for UK projects.

Given Dong's desire to drive down the cost of energy, it is likely to favour larger turbines for Gode Wind, expecting to achieve lower installation and operation and maintenance (O&M) costs for the same power output.

Dong has also said previously that it expects Siemens' direct-drive technology to reduce O&M costs. This, coupled with the fact that Dong hopes to start building Gode I and II in 2015, could be bad news for Vestas, which only plans to install a prototype of its new 7MW turbine in 2014.

Dong recently issued a profit warning for 2012, forecasting an earnings drop of around 10%. Credit-rating agency Standard & Poor's has put Dong on its watch list, but the firm says it expects to maintain investment levels even if its rating is downgraded.

Meanwhile, Henrik Poulsen, the CEO of telecommunications company TDC named as Dong Energy's new CEO in April, officially joined the power company on 27 August.