German utility EnBW said on Thursday it was taking a €1.2 billion ($1.4 billion) impairment charge after pulling out of two wind projects in Britain, a direct consequence of losing out in a landmark UK offshore tender.
The two offshore wind projects - Mona and Morgan - with a potential total capacity of three gigawatts did not qualify for government support/taxpayer-funded subsidies via so-called contracts for difference in this week's record auction, EnBW said.
The two projects were being jointly developed with JERA Nex bp, a 50-50 joint venture between British oil major BP and Japan's JERA.
EnBW said the decision to pull the plug on its participation in the projects was also based on other factors, "including a significant increase in costs across the supply chain, lower electricity market prices and higher interest rates".
EnBW, which is mostly owned by the German state of Baden-Wuerttemberg and related municipalities, also referred to unspecified project implementation risks. It added that the charges were non-operational and would therefore not affect cash flows.
JERA Nex bp, in an emailed statement, said it believed there, "are still good pathways to delivery in our UK portfolio and we are assessing our options for taking the projects forward."
BP and EnBW had won the two sites in partnership in 2021 in what Bernstein analysts then called a "highly contested race".
At the time, the companies said they would each pay around £1 billion in fees for the project before the final investment decision, in four annual payments of £231 million for each of the two leases.
EnBW, which confirmed its 2025 outlook, said it has so far paid £840 million in total fees for the projects and that no further payments would be made.
(Reporting by Christoph Steitz, Susanna Twidale and Shadia Nasralla; Editing by Madeline Chambers and Joe Bavier)
