CfD Indexation Is A Rip Off

By Paul Homewood


We have been looking at indexation of CfD strike prices. So let’s look at an example of how it works in practice.

Beatrice is an offshore wind farm off the Scottish coast. It has been operational since 2019.

Their first three years of full accounts show:


Profits increased by £53 million between 2021 and 2022, despite lower output, on the back of higher revenue, mainly due to indexation of 8.1% on strike prices.

Finance costs fell as debt began to be repaid. Most of the debt is spread over 15 years, on floating interest rates. As with most businesses with large capital expenditures, Beatrice has covered all of its long term debt with interest rate swaps, meaning the interest rate it pays is fixed for the full maturity of the loans.


The only real risk to the business profitability therefore is the actual output of the wind farm.

In the y/e March 2023, Beatrice received another uplift in strike prices of 8.1%, and a further 6.1% was added last month. Together these will increase revenue by another £55 million, assuming output remains the same.

It was grossly negligent and a misuse of public money for Ed Davey to have drawn up contracts guaranteeing full indexation of strike prices. I know of no private business which would have offered such generous terms.

It is plainly evident that his only concern was to get as many wind farms built as he could, regardless of the cost to the public.

It has been suggested that offshore wind farms simply would not have been viable without such generous terms. If so, it gives the lie to the claim that wind power is as cheap as advertised.


May 2, 2023 at 12:52PM

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