UK pension funds lose out to banks in major renewable infrastructure bid

A consortium including the two largest UK pension funds has lost out on a major domestic renewables infrastructure project to a group involving Barclays and Australia’s Macquarie.

The National Grid Offshore Consortium, which comprises energy firm National Grid, BriTel Fund Trustees Ltd., the trustee of the £36bn (€45.2bn) BT Pension Scheme, and the £43.7bn Universities Superannuation Scheme Ltd. (USS), had been among the bidders to link the massive London Array wind project to the UK’s power grid.

But energy market regulator Ofgem has awarded the deal for the high voltage link to the Blue Transmission group of Macquarie Capital, Barclays Infrastructure Funds, Japanese industrial firm Mitsubishi and Frontier Power. Ofgem valued the cable and associated assets at £428m.

The 630MW London Array project in the Thames Estuary is run by a consortium including state-owned Danish energy firm DONG, Germany’s E.ON and the United Arab Emirates’ Masdar.The pension funds are still in the running to link the Gwynt-y-Mor wind farm off the coast of northern Wales to the grid. The 576MW project is being built by listed German energy firm RWE.

The Macquarie-Barclays bid was chosen despite the government saying it wants to involve pension funds in infrastructure projects. In May the BT Pension Scheme took a minority stake in utility operator Thames Water.

An earlier bidding process saw the Transmission Capital Partners consortium appointed as preferred bidder for the 250MW ‘Lincs’ offshore project off the Lincolnshire coast in eastern England. The pension fund consortium was named as the ‘reserve bidder’ on that occasion.

Ofgem managing director Robert Hull said: “Competitive tendering for the ownership of offshore power links is attracting new investment into the UK energy sector at a time of tough financial market conditions.” He added it ensured that costs to consumers were kept as low as possible. Excluding this latest tender, Ofgem said that it had attracted near £4bn in investment to own and operate links worth £1.1bn to offshore wind parks.