Pension fund enters UK biomass
14 Aug 2013
Danish pension fund PensionDanmark yesterday announced it is investing £160 million in a biomass project in Lincolnshire.
The fund, which is a significant direct investor in wind energy projects in Denmark, Sweden and the US, has acquired the planned 40MW Brigg straw-fired power plant from developer ECO2.
It acquired the project as part of a joint venture with Danish contractor Burmeister & Wain Scandinavian Contractor (BWSC).
PensionDanmark has committed to investing £128 million in the project and BWSC the remaining £32 million, with BWSC also set to design, build and operate the biomass plant. The two firms have formed a UK company, BWSC PLC, to run the project.
[This investment] provides PensionDanmark an attractive return with limited risk
PensionDanmark chief executive Torben Möger Pedersen
The plant, which is expected to be operational in early 2016, will be based on energy technology developed in Denmark. The core of the plant will be a boiler primarily used for firing straw from the Danish company BWE. The steam created by firing straw will be conducted to a turbine generator, which will produce electricity for households and businesses in the local area.
PensionDanmark chief executive Torben Möger Pedersen said the bulk of his firm’s investment in the project would be made in the form of loans to the project company BWSC PLC, rather than an equity investment. The loans will be made by Copenhagen Infrastructure Partners (CIP), a fund created by PensionDanmark with DKK 6 billion (£689 million) set aside for infrastructure investment.
“We have found a model that provides PensionDanmark an attractive return with limited risk,” said Möger Pedersen.
“The risk is limited by the fact that the majority of PensionDanmark’s investment is in the form of loans and the bulk of earnings are regulated, with the costs fixed via long-term contracts.”
Perhaps the greatest risk facing the project is whether it will secure subsidy support. Only 400MW of new biomass plants built between now and 2017 are eligible for support under the Renewable Obligation (RO) scheme.
Brigg will be facing competition for RO support from schemes including RES’ 100MW Port of Blyth project, Helius’ 100MW Avonmouth project and the 300MW MGT Power Teesport scheme.
PensionDanmark, CIP and BWSC all confirmed the decision to go ahead with the Brigg acquisition was made after the 400MW cap had been confirmed by the Department of Energy and Climate Change.
