The 1.1GW Inch Cape offshore wind project by ESB and Red Rock Renewables is the largest in UK waters to reach financial close since the 2.9GW Hornsea 3 in December 2023. We talk to John Hill, project director at Inch Cape, about what the £3.5bn close tells us about the market.
“The macroeconomic backdrop has been much more difficult. Interest rates are much higher, exchange rates were jumping around, inflation kicked off in 2022,” says John Hill, project director at Inch Cape Offshore Wind
Hill is reflecting on the financial close of the 1.1GW Inch Cape offshore wind farm in UK waters, which ESB and Red Rock Renewables took to financial close in late January after raising £3.5bn funding. This is the largest UK offshore wind farm to reach financial close since the 2.9GW Hornsea 3 in December 2023, with support from 22 lenders.
The project is based in the North Sea off the coast of Angus, Scotland, and is set to be made up of 72 Vestas 15MW turbines.
This financial close has been a long time in the making. Inch Cape first gained planning consent in 2014, but the design has evolved since then to use newer turbine technology. It has a 50-year lease with Crown Estate Scotland, and 15-year deals with the Low Carbon Contracts Company through the UK’s Contracts for Difference auctions in 2022 and 2024.
Hill says the close shows us that investor appetite for offshore wind remains strong as long as projects are viable and have the right project teams in place.
“It’s a known universe and the parameters are pretty well-established,” he says. “You can argue about margins and tenors slightly, but you’re not going to do anything too dramatic. Then you’re into what’s the quality of the sponsorship in terms of the shareholders, so it is the diligence the banks are doing that is the entry ticket to them lending, which is essentially where I was mostly focused.”
Depth of the funding market
Hill says there was no difficulty in securing funding: “Sometimes you say, ‘I’m not too sure about the depth of the commercial bank market, so I’ll look at export credit agencies.’ We had discussions with some of those but, at the end of the day, it’s a bit more straightforward to assemble a consortium of banks.”
But after securing initial support via the UK’s CfD process in 2022, how did the project team cope with upheaval in offshore wind in the intervening years?
“We were at auction round four in terms of our original CfD allocation, and after that there was the Ukraine crisis that kicked off a huge bout of inflation,” he says. “Then there was effectively a supply chain crunch, with so many projects being developed in the US and Europe, so suddenly it became a seller’s market for the suppliers, whether that’s turbines, marine assets or vessels.”
Hill adds that securing a turbine supplier was essential: “Locking in and establishing that Vestas contract was crucial to us. That said, everything’s crucial, which means you can’t actually get one of these projects over the line if one element is missing. You need all the core assets lined up.”
Chinese-made turbines
Despite the Chinese ownership of Red Rock Renewables, Hill says Inch Cape locked in Vestas early rather than doing a deal with a Chinese supplier. But he argues that Chinese turbine makers will become a bigger presence in Europe because of the lack of machines by western manufacturers.
“The capacity that’s getting built in China in offshore wind is equivalent to the rest of the world put together so, somewhere in all of that, they must have turbines that work. They just haven’t made their way into western Europe yet. But I think you see the rate of technological development over there and think it is credible for the next generation of turbines,” he says.
Hill continues: “Within the timeframe of this project, there hasn’t been an alternate turbine supplier, other than Siemens, that’s credible and would have got through all of the due diligence certification for a western European project. But that’s not to say that will be true for the next five years.”
The other big challenge for the market globally is the anti-offshore-wind drive by President Trump in the US. Hill argues that a slowdown in offshore wind in the US could help accelerate the delivery of projects in Europe and the UK.
“You could say that’s advantageous for developers in western Europe and the UK. Removing some of that supply chain bottleneck I think is beneficial to get these projects over the line, because it was becoming really problematic.”
At Inch Cape, construction has been underway on the onshore infrastructure for the last year, including the substation. Work on offshore construction is due to start in July, including on the transmission network. Hill says work is on track and Inch Cape is due to be commissioned in 2027.
“We’re kicking the tyres on all the aspects, but everything is on programme so there is another two-and-a-half years’ construction to go,” he says. “There’s always something that comes about that you don’t want or you don’t expect, but at the minute everything’s in a good place.”
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