Valuation of Statoil’s Offshore Wind Portfolio

Emil Berg

Student thesis: Master thesis


Changing and adapting to keep up with a dynamic environment is importantto remain competitive in almost every industry. Statoil’s observed sensitivity to the oil price sheds light on the importance of becoming more diverse.Recent endeavours show that Statoil has high ambitions with regards to renewable energy. I.e., the establishment of a renewables division in 2015, and arenewable venture capital fund in February 2016. Followed by investments inboth the US and Germany, to complement the, until recently, purely UK-basedoffshore wind portfolio.In this thesis, the goal has been to build a DCF-model that can estimate theenterprise value of Statoil’s offshore wind portfolio, and to find the key factors affecting this value. I find that the UK has favorable policies, which canexplain Statoil’s interest in UK projects. Further, the portfolio value is completely dependent on subsidies. I compare the prevailing subsidy schemes inthe UK, namely the Renewables Obligation (RO) scheme and the Contracts forDifference (CfD). RO provides the highest value of the two, assuming equalcosts of capital. Further, the value is sensitive to output-related factors. However, these are more likely to improve, rather than decline, because of industrylearning effects, and technology improvements. The portfolio value is also sensitive to the cost of capital (WACC). I argue that even though Brexit introducesmore uncertainty to the long term sustainability of the industry, Statoil’s recentrisk diversification by expanding outside the UK points to a reduction in theportfolio cost of capital, rather than an increase. Further, the portfolio value ispositive even though electricity prices are equal to zero. A possible interpretation is that offshore wind in the UK is over-subsidised. The estimated enterprise value of Statoil’s offshore wind portfolio is £0,45 billion (rounded). Theestimated value does not include the value of Statoil’s wind energy storagetechnology, Batwind, nor a commercialisation of Hywind. Several factors suggest that Hywind has good chances of reaching commercialisation. Both innovations represent a competitive advantage, with a high potential value.

EducationsMSc in Applied Economics and Finance, (Graduate Programme) Final Thesis
Publication date2016
Number of pages110