XLCC shrugs off Moroccan upset as UK offshore wind boom anchors cables factory

The firm planning to build the UK's biggest dedicated HVDC subsea cable factory has shrugged off a sister company's failure to secure an offtake deal for a proposed Morocco-UK interconnector project, and hopes to break ground early next year.

The factory that XLCC intends to build in Hunterston, Scotland, was initially seen as an offshoot of an Xlinks plan to connect 11GW of Moroccan solar and wind power to the UK via a 4,000 kilometre subsea cable.

With so much attention focused on Xlinks, a £1.5bn ($2bn) plan by XLCC to manufacture high voltage direct current (HVDC) subsea power cables, and to build one of the world's biggest cable-laying vessels to install them, made fewer headlines at first.

With founding shareholders in common, XLCC was at risk of losing credibility if the planned interconnector failed to materialise.

While acknowledging that Xlinks and XLCC were "cut from the same cloth in the early days", Douglas stressed that they were independent of each other from the outset, and this distance has grown.

“We've now got completely independent shareholding groups. Xlinks went down one path in terms of getting their investors, we've gone down another.”

Massive pipeline

The business case he describes for XLCC rests largely on projected demand for HVDC subsea cables from transmission system operators (TSOs) and transmission asset owners (TOs) in the UK, as well as the wind farms.

“There is a massive pipeline of projects out there," said Douglas.

"If you look at the UK's clean power plans, this mean adding 45GW to the grid — predominantly by moving power from offshore wind from north to south — so there's about 28,000 kilometres of demand for HVDC out there.”

While Douglas sees export cables for offshore wind, especially for floating wind, as key parts of this “huge opportunity”, he describes the Xlinks interconnector project, which depended so much on the CfD, was always more of an expansion opportunity.

"It depends on the time scale for such a project, but in reality it doesn't affect our view of the market whatsoever." he said.

With its promise to provide 900 jobs at the UK’s largest dedicated HVDC subsea cable factory, XLCC has won over locals in Scotland, and has also been successful in attracting institutional support.

After raising an initial £40m from a cohort of private shareholders, later to include investment vehicle Hainsford Renewables, XLCC attracted £87m in funding from the National Wealth Fund (NWF) and £20m from the Scottish National Infrastructure Bank (SNIB), plus backing from agencies such as Scottish Enterprise.

"This allowed us to conclude the development round and go to the construction round. It is at this point that we raise all the money in one go, without risking, any stop-start scenario," Douglas said.

XLCC expects to reach closure with its financing arrangements by the end of this year, move to a final investment decision in the first quarter of next year and break ground early in the second quarter. Production is forecast to begin in 2026.

The company is hoping to raise finance through a combination of equity and first level debt.

Unfazed by rivals

Other subsea power cable factories being built in the UK, include JDR Cables’ new HVAC facility in Blyth, northeast England and the HVDC plant that Sumitomo Electric Industries is building at Port of Nigg, in the Scottish Highlands.

Sumitomo has already been named preferred bidder by National Grid Electricity Transmission (NGET) for the Sea Link HVDC cable project, a proposed 138km connection between Kent and Suffolk.

Some bootstrap projects are already steaming ahead. National Energy System Operator (NESO), the newly formed UK entity overseeing the offshore grid buildout, has the four Eastern Green Link (EGL) projects at various stages of planning, development and construction.

But Douglas is not worried that XLCC is missing the boat, as the buildout is only beginning to gain momentum in his view.

He refers to NESO documents which outline grid reinforcement plans already stretching to scores of projects.

Some parts of this rollout have been allocated to different TOs ahead of development, but many more are at an earlier stage.

As NESO’s plans to upgrade the grid depend so fundamentally on subsea cables, Douglas is convinced that demand will only be approaching its peak in 2030, when the factory should have first cables in the water.

"The government has a target to get to more than 90% clean energy by 2030, but this target is really about what follows," he says.

National Grid already has a £21bn frame agreement in place covering scores of these offshore projects as well as interconnectors between reinforcement cables and to other countries.

“We've got the second biggest offshore wind market in the world on our doorstep, but also one that faces the challenge that offshore wind power lands in one place when most of the demand is elsewhere," said Douglas, a veteran of cable giants such as Global Marine.

"NESO's work, including the Centralised Strategic Network Plan (CSNP), is providing increasing clarity on how all of this fits together, including how power from ScotWind projects can be brought to markets. This is becoming increasingly well-defined.”

In a bottlenecked market where customers may have to wait for up to seven years for a subsea HVDC cable, Douglas sees a dedicated production line as the way to go to turn standardisation and scale into gains.

"You've got this massive demand, so you don't need to hedge your bets," he argued. "There is no transition without transmission... we have got to build this infrastructure."

"Building a dedicated factory, and installation capability at scale, means you can drive economies right the way through your project and help shorten the lead times for customers."

In its first phase, the factory will produce just short of 2,000km per year from a 185-metre tower, but aims to double or triple this in subsequent phases.

"We would also expect to be able to build a really big export opportunity on the back of HVDC," Douglas says.

XLCC's drive for standardisation from the panned new factory is likely to include scope for aluminium-based cables to help drive down costs.

The decision to build a vessel stems from the conviction that customers prefer to know that installation capability is in-house, along with "quality control" factors.

The company intends to fit two carousels with capacity for 12,000 tonnes each, receiving HVDC from a factory that produces cable lengths from 160km to 200km.

Chinese friend or rival?

XLCC does not fear Asian competition, according to Douglas, who pointed to the advantages of local production and installation capacity.

Interestingly, one of the top Chinese suppliers, Orient Cable (NBO) owns a stake in XLCC and also fabricated and is now testing the UK company's 525kV cable design.

"They are a very small shareholder," Douglas said. "And when we do the construction, they'll be diluted further.

"We have an agreement with them. The design is ours, but NBO manufactured the lengths for us and now they are testing our cable at a facility of the kind that doesn't exist in the UK," he said, admitting that such a deal with European rivals such as Nexans, NKT or Prysmian was never on the cards.

"We are very happy with the technical partnership with NBO, but they have no management representation, or seats on the board."

XLCC's management team includes other experienced hands such head of technology Vegar Syrtveit Larsen, who was most recently at rival cable-maker Nexans.