The North Sea is known for some epic swells. The rollercoaster ride involving Merkur, one of Europe’s largest offshore wind farms, lasted nearly five years.
Located 28 miles off the sandy beaches of Germany’s Borkum Island, the wind farm will hold 66 wind turbines installed over 18 square miles. When it’s completed, Merkur will have a total capacity of 396 megawatts, generating enough electricity to supply approximately 500,000 homes. Germany is aiming to generate 80 percent of all electricity from renewable sources by 2050, and the offshore wind farm is part of this transition.
Sounds simple, but the course to Merkur—whose construction is finally set to begin this fall—has been anything but smooth sailing. Under a framework launched by the German government over five years ago to promote offshore wind, Merkur (or MEG1, as it was known then) began development, but a series of planning and financial challenges created serious delays.
Paul Hennemeyer, a former Siemens employee who now works as managing director for global markets at GE Energy Financial Services (EFS), is familiar with the story and how Merkur eventually prevailed. That’s because four separate GE businesses played key roles in closing the complex deal. EFS both invested in the project and actively worked to raise the €1.6 billion needed. The company’s Renewable Energy arm is supplying the wind turbines and servicing the wind farm, and other GE businesses will equip the wind farm with power convertors and an offshore substation, which will move Merkur’s electricity to land.
This last item had seemed to be an almost insurmountable hurdle ever since Germany unveiled the plans five years ago. Windreich, the original developer on the project, went insolvent. Then Hochtief, the main contractor on the project, sold its offshore business, and France’s Areva, chosen to make the turbines, left the project. To many, it seemed like the end of the line.
But Hennemeyer and his colleagues saw an opportunity. GE was becoming a bigger player in wind power, and the Merkur project seemed like the perfect way for the company to plant its flag in the European offshore space. The team was also confident because it could shop in the GE Store—the company’s name for the technology and know-how exchange that exists inside GE and includes all of its diverse business. “A lot of people thought we could not do it because Germany is traditionally Siemens’ market,” Hennemeyer says. “But we wanted to be part of Germany’s energy transition to renewables.”
Getting the project going required overcoming two major obstacles—securing financing and managing the risks that come with buying equipment and services from a large number of vendors. Hennemeyer says GE calmed all those concerns by drawing on four separate GE entities—EFS, GE Renewable Energy, GE Power Conversion and GE Grid Solutions.
EFS helped arrange financing—€1.1 billion of debt and €500 million in equity. The company and its partner, the French state agency ADEME, also took a combined 12.5 percent equity stake in the project, while Belgian installation partner DEME took another 12.5 percent. InfraRed and Partners Group invested the remainder. “We reduced the amount of risk in this project by bringing as much of the work as we could in-house. That made the deal more attractive to financiers,” Hennemeyer says.
The financing raised will pay for 66 GE Haliade offshore wind turbines that can generate 6 megawatts each and form the core of the project. Hennemeyer says the commitments in the package were crucial to making the project financeable.
The Haliade design used in the Merkur project includes a new converter made by GE Power Conversion and located in the turbine’s tower, saving €13 million in assembly costs. The turbines will send electricity to a $1.4 billion offshore substation developed by GE Grid Solutions. It will process power not only from Merkur, but also other adjacent wind farms under construction. Eventually the substation will receive electricity from almost 300 spinning turbines.
Getting the massive Merkur transaction done with the Haliade turbines as the centerpiece is a game changer for GE’s efforts to grow its offshore wind business, Hennemeyer says. “As a result of this deal, people are now taking GE seriously in the offshore wind market, and we are getting calls about doing other projects.”