TotalEnergies defends price paid for German offshore wind lease

By America Hernandez

PARIS (Reuters) – French energy company TotalEnergies does not believe it overpaid for a record-breaking German offshore seabed lease this month, despite industry criticism, CEO Patrick Pouyanne said on Thursday while presenting second-quarter results.

“In Germany, to be clear, we are perfectly in line with our double-digit objective,” Pouyanne told analysts, referring to returns on the integrated power business. He also said the company was “absolutely convinced” that German electricity prices would meet its expectations by 2030.

The oil major chief said it was “not a bad bet” that European power price in the range of 70 or 80 euros per megawatt-hour(MWh) can be achieved in the wholesale market once the capacity starts producing. TotalEnergies also expected industrial consumers in Central Europe would be willing to sign long-term contracts to lock in stable pricing to stay globally competitive.

Year-ahead German baseload power, the European benchmark, currently stands at 141 euros/MWh, Refinitiv Eikon data shows. Untraded distant curve prices peg 2030 at 80.2 euros, reflecting growth expectations for renewable capacity.

Pouyanne added the deal was worth it for securing a foothold in the German electricity market for the long-term.

Germany’s July tender for a series of leases totalling 7 gigawatts(GW) of offshore wind worth a record 12.6 billion euros ($13.87 billion) was won by TotalEnergies and BP (NYSE:), with Denmark renewable developer Orsted (OTC:) dropping out due to price concerns.

TotalEnergies will pay an initial 582 million euros, which the German regulator has said amounts to 10% of the bid, with the remainder paid over 20 years as and when the installations come online.

The so-called dynamic bidding process was novel in that companies could choose to forgo government subsidies, such that the one with the greatest “willingness to pay” would win.

German utility EnBW, which lost the bid alongside Norway’s Equinor, said at the time that the oil majors’ willingness to pay so much was driven by their need to expand their renewable portfolios.

($1 = 0.9084 euros)