Ofgem changes Ofto bidding regime, aiming to increase pool of bidders

Up to eight bidders will be invited to tender for the right to own and operate links to offshore wind farms in future tenders, and the licence will run for 25 years (instead of 20 years), Ofgem has announced. The new rules will apply to the upcoming tender process for the links to Beatrice, Hornsea and East Anglia One.

Ofgem wants to increase the number of consortia who bid to take on the so-called ‘Ofto’ licences. At present companies building offshore wind farms also build the link, and its ownership is transferred via Ofgem’s tender process once the wind farm is in operation (although Ofgem wants companies eventually to compete to build the links). Now Ofgem wants to increase the pool of bidders, partly because there has been consolidation among bidding organisations.

Ofgem plans to increase the Ofto licence terms from 20 to 25 years, because it is a typical asset lifetime in the bond market, potentially interesting more bond investors. Also, growing experience in offshore wind makes it clear the assets will still be operating over the full 25 years.

Secondly Ofgem wants to increase the number of qualifying bidders who proceed to the ‘invitation to tender’ to eight, and it will take other measures to help bidding consortia reach that stage. Some have expressed concern over whether increasing the number of companies tendering will make the tender less attractive for bidders – that is because companies will only incur the significant costs of bidding if there is a reasonable chance of success.

Other changes will alter at what point Ofgem assesses how robust bids are, and will make the final choice entirely dependent on price. Previously a weighted process made the bid price only 60% of the final decision, but Ofgem says the change will make bids more efficient, and robustness will be assessed an=t an earlier stage.

Full details here

 

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