Centrica, the parent company of British Gas, today announced that its 270 megawatt (MW) Lincs offshore wind project has received final investment approval, and construction is expected to begin in 2010.

Lincs will be situated eight kilometres off the coast of Skegness next to Centrica's existing wind farm developments at Lynn and Inner Dowsing and will comprise of 75 3.6MW Siemens turbines. Investment in this project is expected to total approximately £725 million and the wind farm should start generating power towards the end of 2012. When Lincs is completed, Centrica will have equity interests in operating renewable energy projects with an installed capacity of 650MW.

Under current UK government proposals, Lincs will attract two Renewable Obligation Certificates (ROCs) for every megawatt hour (MWh) produced, following the UK government's decision in April to enhance the level of support provided for new offshore wind projects.

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Centrica also announced that it has agreed the sale of a 50% equity stake in its Lynn, Inner Dowsing and Glens of Foudland wind farms to the US-based investment management company TCW for a cash consideration of £84 million, and entered into agreements to raise approximately £340 million of non-recourse project finance facilities from a consortium of banks for these assets. The transactions value the wind farms at approximately £460 million in aggregate. Profit on disposal of this 50% equity stake will be around £50 million. Reported operating profit in the year ended 31 December 2008 from these wind assets was £17 million, however, the Lynn and Inner Dowsing wind farms were not fully commissioned until December 2008.

Centrica is also entering into a joint venture agreement with TCW to govern their ongoing relationship as co-owners of the Lynn, Inner Dowsing and Glens of Foudland wind farms. The agreement contains customary rights for each party to acquire the other party's shares in the joint venture company at fair market value following a material default by, or on the insolvency of, the other party.

Through its subsidiary British Gas Trading Ltd, Centrica will also enter into a 15-year Power Purchase Agreement (PPA) to off-take all the electricity production together with 50% of the ROCs generated by the three refinanced wind farms.

Sam Laidlaw, Chief Executive of Centrica, said: "Our decision to build Lincs illustrates our continued commitment to develop renewable generation and confirms our position as one of the UK leaders in green energy. The government's enhanced financial framework for offshore wind has been fundamental in improving the overall project economics of this development."

(CD/KMcA)