Ørsted has kicked off a search for advisors to help it sell a 50% stake in its 2.9 GW Hornsea 3 offshore wind farm in the UK, after reviving the project at the end of last year.

The Danish energy giant recently contacted possible M&A advisors for the sell-down, said three sources familiar with the matter, with one adding that more than 10 banks have been approached.

The company is also looking for debt advisors to help raise debt on the back of the stake, according to another source.

Ørsted, which estimates the project will cost GBP 8bn to GBP 8.6bn, took a final investment decision on Hornsea 3 in December, after previously casting doubt on whether it would go ahead with the scheme last March, amid soaring inflation and interest rates.

Ørsted’s interim CFO Rasmus Errboe indicated during the company’s latest annual results announcement on 7 February that Ørsted was considering a “farm-down”, or stake-sale, for Hornsea 3 in “the traditional way, where we go from 100% to 50%”.

A spokesperson for Ørsted pointed to these comments, declining to elaborate further on the process.

The Danish group won contracts for difference (CfD) now worth GBP 45.37/MWh for Hornsea 3 in the UK’s fourth allocation round in 2022, but the price became uneconomical due to rising construction costs.

In December, the developer said it would hand back part of the CfD, seeking to rebid in the sixth allocation round (AR6) that takes place this year, where maximum strike prices have been raised to around GBP 100/MWh after the fifth auction went deserted.

Errboe added during the presentation of results that the company will try to secure a corporate power purchase agreement (PPA) for part of the wind farm’s capacity, if it is unsuccessful in bidding in AR6.

Hornsea 3 is Ørsted’s largest ever single project, with its capex being “close to 50% of the market cap of the entire company”, said CEO Mads Nipper on the same call with analysts.

Nipper said the company has all permits in place for the wind park 120 km off the Norfolk coast as well as “all major contracts”, and expects the project to become operational in 2027.

“We have very little doubt that the LCOE [levelized cost of electricity] per megawatt is the lowest of any under-construction project in offshore in the world,” said Nipper.

In December, the company said it expects Hornsea 3 to offer returns “around the bottom end” of its target of “150-300 basis points on top of our weighted average cost of capital,” if it obtains higher prices for part of the capacity in AR6.

Finding equity investors for the project is likely to be challenging, however, the sources argued, due to the large size of the project, as well as rising return expectations by investors.

“A deal of this size will probably require a large consortium,” said one of the sources.

Ørsted said it expects to obtain DKK 70bn-DKK 80bn (GBP 8bn-9.2bn; EUR 9.4bn-10.7bn) from the sale of stakes in its projects by 2026. It added it currently has “12 ongoing dialogues, from early to very advanced” over stake sales.

Last October it agreed to sell a 50% stake in the 583 MW Changhua 4 offshore wind farm in Taiwan to Cathay Life Insurance. In the annual report, it also indicated it wants to sell a 50% stake in its US onshore wind portfolio.

The company said it is also considering selling stakes in the Revolution Wind and South Fork offshore wind projects in the US, and West of Duddon Sands in the UK, bringing its shareholding in the projects to around 25%. Ørsted already has partners in these projects – SSE owns 50% of the UK project, while Global Infrastructure Partners (GIP) will have 50% of the US schemes after it agreed to buy them from Eversource Energy this month.

Infralogic also reported today (22 February) that Ørsted has launched a sale for up to 100% of the 2.5 GW Ocean Wind 1 and 2 projects off the coast of New Jersey, working with Jefferies as financial advisor.

In one of its latest major deals in the UK, Ørsted sold a 50% stake in the 1.3 GW Hornsea 2 project to a consortium of AXA IM and Crédit Agricole Assurances for GBP 3bn in 2022. The Danish group worked with Credit Agricole as its advisor on the deal.

Last year it also exited the 630 MW London Array project, after losing its O&M contract, selling its 25% stake to Schroders Greencoat for GBP 717m.