Microsoft signs Dutch offshore wind PPA

Microsoft has signed a deal with Dutch utility Eneco to purchase power from Borssele 3&4 in the Netherlands – one of the first corporate PPAs signed in the offshore wind sector to date.

The 731.5MW project – sponsored by Partners Group (45%), Shell (20%), Eneco (10%), Van Oord (10%) and Mitsubishi subsidiary Diamond Generating Europe (15%) – is underpinned by a tariff of €54.50 per MWh with the Dutch government.

Once online, it will provide Microsoft with 90MW of power for its data centres for a period of 15 years, starting in 2022.

The deal is one of a growing number of private offtake deals involving data centres, as multinational tech companies increasingly look for ways to green their credentials and run their power-hungry operations.

“We are seeing increased demand from physical offtakers in the technology sector and a lot of data centre financing,” a lending source familiar with the project said.

“I don’t see this deal as a price stabiliser, because the project already has a tariff and project financing was structured around this tariff. I see this deal as Microsoft driving its green agenda,” the source continued.

Indeed, the sponsors closed the €1.3 billion (£1.1bn US$1.5bn) financing of the project in June last year [2018], raising a €950 million (£839.4m US$1.1bn) debt package from a 13-strong group of commercial banks.

Eneco and Shell originally signed an agreement to purchase 50% of the project’s power output, and Eneco has now secured PPAs for the project with the likes of DSM, Royal Schiphol Group and Dutch grid operator Stedin. It is currently in the process of negotiating further agreements.

“Finding offtakers that are willing to commit for a 10-15 year period is important for the development of future projects,” Eneco spokesperson Arie Spruit said.

Eneco would not disclose the terms of the agreement; however, Spruit explained that fixed-price and cap and floor structures enabled developers like Eneco to share price and volume risk with corporate buyers, giving them room to invest in future projects.

The deal with Microsoft is understood to be only the third corporate PPA in the offshore wind sector. The first was signed by Vattenfall with a pharmaceutical company for the Kriegers Flak project in Denmark, and the second was a 10-year deal between Orsted and Northumbrian Water for power from the UK’s Race Bank.

Sources said the Borssele 3&4 transaction was significant for the Dutch market in particular and will help prepare the ground as the country looks ahead to its second zero-subsidy offshore wind auction, which will require private offtake negotiations – importantly, for price stabilisation – on a scale not seen before in the sector.

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