Coillte and ESB plan joint venture to invest in green electricity

State companies Coillte and the ESB are close to agreeing a joint venture that could spark a €1 billion investment in green electricity.

Forestry company Coillte and energy group ESB confirmed in February that they were in talks on establishing a joint venture to develop wind farms that could generate enough electricity to power 500,000 homes.

It is understood talks have reached the stage where the pair are finalising details on the structure and value of the deal, and that they should reach agreement by the middle of the summer.

Coillte and the ESB would then seek regulators’ approval for the deal. If they get this, they are likely to establish the joint venture by the end of this year.

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The partnership will build wind farms with the total capacity to generate 1,000 megawatts of electricity by 2030, which Coillte estimates is enough to power about half a million homes.

Confirming the talks in February, Coillte's then chief executive, Fergal Leamy, predicted that the joint venture could invest about €1 billion – €1 million a megawatt – over its lifetime.

Ultimately the partnership could build 20 to 30 of these generating plants. By February, Coillte had identified 12 sites on its land that had the best wind speeds and which where located suitable distances away from the nearest communities.

Under the plan ESB would acquire 50 per cent of the joint venture and provide services to the enterprise. The new business would use Coillte’s sites and wind farm development staff.

Coillte has a specialist team that works on renewable energy development. The company believes that the way to get the best return from this is to move them to a separate entity that is focused on this work.

Initially, Coillte and the ESB could invest about €50 million each in the venture. Both will put up 30 per cent of the cost of each project between them and borrow 70 per cent.

Suitable locations

The joint venture will build the farms, get them operating and sell them. It will then reinvest the cash raised to build further wind farms before selling them on.

The Coillte-ESB venture will hope to recruit buyers as it plans wind farms. This would cut borrowing costs, as it would enable banks to loan money for the projects knowing that they are getting a return.

Coillte began seeking a partner last year to work on building wind farms on land that that the forestry company owns after identifying suitable locations. The firm decided to begin talks with the ESB about creating the proposed 50-50 partnership after weighing several options.

ESB and Coillte discussed the plan with the Government: Minister for Agriculture Michael Creed in Coillte's case and Minister for the Environment Richard Bruton in the ESB's. They also spoke to the European Commission to anticipate any state aid queries.

The pair have already collaborated on renewable energy projects, including wind farms in Castlepook, Co Cork, and Raheenleagh, Co Wicklow.

Coillte sold its interest in both those plants, along with two others, to listed company Greencoat Renewables for €136 million last year. The four wind farms in that deal had the capacity to generate 105 megawatts of electricity.