Apollo funds take $265m stake in Maryland offshore developer US Wind

Funds controlled by Apollo Global Management have acquired an equity stake potentially worth $265m in US Wind and will finance development and construction costs associated with development of the MarWin wind project off the coast of Maryland.

Apollo Funds’ structured investment includes convertible debt and equity as the New York-based alternative investment manager assumes a “strategic partnership” with US Wind, formerly wholly owned by Italy’s Renexia, both companies said.

“We believe our strategic partnership with Apollo will create significant value for US Wind and the state of Maryland in advancing development of our offshore wind projects,” said Riccardo Toto, president of US Wind, in a statement.

“Apollo is a creative and dynamic partner with global expertise, and together we believe we can make a positive impact on the energy transition in the United States.”

The move is Apollo's with investment in renewables including five in offshore wind, but the first in the offshore wind space.

US Wind controls a 324 sq km (80,000 acre) commercial lease area located 16-48 km (10-30 miles) east of Ocean City in federal waters with 1.3GW potential wind power capacity.

In May 2017, the state awarded offshore wind renewable energy credits (ORECs) at a price of $131.94/MWh over 20 years for MarWin – the highest price off-take thus far for a commercial wind farm off the US east coast.

Issues such as federal permitting delays and growing stakeholder concerns over US Wind’s possible use of much larger, latest generation turbines have pushed MarWin’s commercial start beyond 2023 without clear timeline visibility.

The developer is evaluating the 12MW Haliade-X and Siemens Gamesa’s 10MW SG10-193DD and 8MW SG8-167DD models for the first phase. It had originally selected a Siemens Gamesa 4MW turbine no longer commercially available.

Officials in Ocean City, a popular resort and retirement destination, for example, want regulators to force US Wind to move its array further out to sea. The Public Service Commission has the issue under study after holding public hearings earlier this year and it is uncertain what new requirements, if any, may be imposed for siting larger turbines.

Governor Larry Hogan’s administration and opposition Democrats have reaffirmed their political backing for offshore wind development and ratepayer subsidy support for the US Wind project. US Wind plans to use the Port of Baltimore to stage its array.

Still, the longer timeline has added costs and drained cash for US Wind’s parent Renexia, a similar situation to other projects along the Atlantic coast waiting for a green light from the Department of Interior in Washington, DC.

However, with barely a decade of corporate existence and a modest project portfolio at home and in North Africa, Renexia lacks deep pockets of the energy giants that dominate the US offshore wind industry in its early stages.

These include US electric utilities such as Dominion and Eversource Energy, global independent power producers led by Iberdrola and Orsted and major oil companies Equinor and Shell.

That said, Renexia was quicker than most of its rivals in seeing the potential of the American offshore wind market and has shown financial savvy since US Wind was incorporated in 2011.

In August 2014 it paid a then-record $8.7m for commercial development rights in two areas – since merged – off Maryland.

The move drew smiles from some analysts and onshore renewables developers who felt the European newcomer had overpaid in its eagerness to enter a new market that, while potentially interesting, was rife with economic, political and regulatory uncertainties.

No one is laughing now. US Wind values its ORECs contract with Maryland at about $3.3bn over 20 years for the initial MarWin phase.