Offshore wind is seen as a first-class investment opportunity that could provide over 10% of New Zealand's future electricity needs. 

The NZ Super Fund’s joint venture in Taranaki Offshore Partnership (TOP) is moving forward with its feasibility plan for approximately 70 wind turbines to be installed between 23km and 30km offshore of South Taranaki, on the west coast of the North Island. 

Globally, wind power has gained considerable traction as a credible alternative to fossil fuels, largely thanks to the relative ease with which it can be installed. Sovereign investors like NZ Super see their direct investment in alternative and renewable energy assets contributing strongly to future asset growth. 

“The New Zealand opportunity in offshore wind is absolutely world-class. The wind speeds we are looking at, coupled with the water depths that are not too challenging, make this a really good project,” said TOP’s business development manager Giacomo Caleffi.

NZ Super’s venture with Danish investment firm Copenhagen Infrastructure Partners to form TOP began three years ago, with an investment of $150 million in CIP's Energy Transition Fund. TOP has now signed a memorandum of understanding with NZX-listed Genesis Energy to investigate the commercial viability of offshore wind in New Zealand.

The venture plans for an initial one gigawatt development (eventually two) that would represent over 11% of New Zealand’s current electricity demand capacity, powering over 650,000 homes.

“At the moment, the first tranche of commitment is for 2030, and that could be something in the range of NZ$200 million (US$115 million) or NZ$300 million," said Caleffi.

"Once we move into the construction, it's a 25/75% gearing with the sponsors putting 25% in equity and banks putting up 75% in lending. At that point, TOP would be exposed for two of those $6 or $7 billion.”

Wind farms can sell electricity at a price that’s effectively fixed for 15 years under an arrangement known as a contract for difference, in which the price of power is indexed annually to the consumer price index and guaranteed by a government-backed entity. Wind farms coming online in the next three years are expected to sell their electricity at around one-fifth of the current market price.

The tangible softening of the global stance on climate change is reflected in a weaker flow of capital towards renewable energy projects. David Woods, deputy chair of NZ Green Investment Finance, said “it seems to be not politically expedient at this point. There's a fear element involved. Everybody wants to stay below the radar rather than risk retaliation from political parties.”

Nonetheless, Caleffi is satisfied there is sufficient capital being directed at offshore wind.

“It is still a very attractive proposition. It's a proven technology, especially if we're talking fixed-bottom offshore wind farms - where the turbines are connected to the sea bed - which is what we are looking at.

“It's a well-oiled machine in terms of procuring components and having operations and maintenance contracts in place. Insurance knows what they're looking at. Banks understand the whole financing. So it's pretty easy, especially for institutional investors with a long-term strategy.”