Norwegian energy giant Equinor and Scotland-headquartered SSE have secured financing to move ahead with the third phase of what is set to become the world’s largest offshore wind farm, located in the UK North Sea.

Equinor confirmed on Thursday it had reached financial close on phase three of the £3 billion ($4 billion) Dogger Bank C project.

It added "strong interest from lenders” had allowed the joint venture to secure “highly competitive terms, despite continued impact from the coronavirus pandemic on the macroeconomic environment”.

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The total senior debt facilities are in the region of £2.5 billion ($3.3 billion) plus ancillary facilities of about £400 million.

The project is being financed with gearing of about 70% for the generation assets, while gearing for the transmission facilities is roughly 90%, which Equinor noted was in anticipation of Offshore Electricity Transmission (OFTO) sale post construction.

UK regulator Ofgem’s OFTO regime sees grid links auctioned off after being built by wind farm developers themselves.

“The significant appetite from lenders underpins the attractiveness of UK offshore wind assets and the confidence in SSE and Equinor as developers,” said Equinor’s executive vice president of renewables, Pal Eitrheim.

“The level of interest achieved reflects the quality of the project and combined with capturing significant value from divestments enables a strong return on equity.

"As the wind farm’s future operator, we will leverage our offshore capabilities and continue to deliver value for years to come.”

The final group of lenders for Dogger Bank C comprises 28 banks and three export credit agencies, with Equinor noting the majority of lenders were the same as for the first two phases — Dogger Bank A and B — which reached financial close last year.

Dogger Bank is being developed in three 1.2-gigawatt phases, with the Dogger Bank C to take the wind farm’s total capacity to 3.6GW.

Profitability concerns

The financial close on the third stage of Dogger Bank comes amid concerns about the profitability of the wind farm for its backers.

A recent report by Upstream highlighted how government-sponsored research in Norway had come up with the conclusion that Dogger Bank is unlikely to be profitable for Equinor.

Researchers calculated the Dogger Bank project's expected net present value (NPV) to Equinor at minus £970 million and found that the rate of return on investment does not reach the company's own benchmark requirements for profitability.

A negative NPV indicates that the value of the investment is below the rate of return which the company should require from its investments.

Equinor has not disputed the study's conclusions, but emphasised that it had benefited from selling stakes in the project.

Italian energy giant Eni last month struck a deal to gain a 20% stake in Dogger Bank C, leaving Equinor and SSE each with a 40% stake in the final phase of the development.

This gave the three companies alignment in their respective participating interests across all three phases of the development.