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State-owned energy company concedes wind farm might not be as profitable as envisaged ‘Developing offshore is a complex construction process’. Stock photo: Getty Images The ESB has now racked up impairments and provisions of just under €400m in relation to its embattled Neart na Gaoithe offshore wind energy project in Scotland. But ESB chief financial officer Paul Stapleton has insisted the group will eventually make a profit on the 448MW project, which is slated to be operational next year after delays compounded by the Covid pandemic and construction woes.
Publishing its interim accounts yesterday, ESB said that it has made a fresh €135m provision in relation to the Neart na Gaoithe project, in which it owns a 50pc stake alongside a unit of France’s EDF. ESB bought its stake in the project in 2019. But since then, it has been a drain on the Irish energy group.
In 2021, the ESB incurred an exceptional charge of €153.5m for Neart na Gaoithe. A further €91.
2m was shouldered the following year and €14.8m in 2023. At the end of 2023, the recoverable amount of the ESB’s investment in the project was deemed to be zero.
But Mr Stapleton said the offshore wind farm – due to be in commercial operation late next year – will be a profitable venture for the ESB and said it isn’t a write-off. “It has been difficult and it has had a number of difficulties in the construction period,” he said. “It is now at a very advanced stage.
Two-thirds of the turbines have been fully erected. “The difficulty in long-life, large-scale infrastructure projects like an offshore wind farm is that you’re trying to value it now by predicting energy prices over the next 30 years,” he added. “The analysis today suggests it will be a profitable asset over its life, but won’t be as profitable as originally envisaged because of the delays and increased construction costs.
“It’s not that we won’t ever recover the investment, and it’s not even the case that we won’t make a profit on the asset, but it won’t be as profitable – at least the analysis today suggests it won’t be as profitable – over its life as the original business case targeted.” The Neart na Gaoithe has a 15-year contract for difference with the UK government that secures its revenue for that period. The ESB is involved in joint ventures that are developing offshore wind energy projects off Ireland.
He said the experience of Neart na Gaoithe has not deterred the company from those ventures. “Developing offshore is a complex construction process, (with) a huge scale of infrastructure being put in place in a very hostile environment out in the ocean, so there’s always going to be challenges in offshore wind,” said Mr Stapleton. “That’s generally priced into the investment case.
” “There were particular challenges in Neart na Gaoithe,” he added. “Some aspects are unique to that project.” The ESB noted in its interim accounts that it has also recently completed the acquisition of the near 52MW Pallas Windfarm in Co Kerry.
The group saw its operating profit decline 34pc in the first six months of this year to €446m as it experienced lower energy margins as the wholesale price of gas continued to retreat. Join the Irish Independent WhatsApp channel Stay up to date with all the latest news.
