GS Goldman Sachs Group Inc

By Kjetil Malkenes Hovland

Denmark's Dong Energy A/S (DENERG.KO), part-owned by Goldman Sachs Group Inc. (GS), decided Friday to build a German offshore wind project that would help it exceed a 2020 target on installed capacity, the first new project to be added after the utility was listed in Copenhagen.

Dong Energy said its move to build the 450-megawatt Borkum Riffgrund 2 project would bring its total offshore wind capacity to 6,700 megawatts by 2020, exceeding the company's 6,500-megawatt target.

The company was valued around $15 billion when it listed in Copenhagen June 9. The Danish government retained a 50.4% stake, while Goldman Sachs-controlled New Energy Investment S.a.r.l. holds a 13.4% stake.

Dong said Borkum Riffgrund 2 will be developed with 56 Vestas V164 turbines, the largest turbines ever employed in German waters. Each turbine measures 8 megawatts and is sweeping an area larger than the 135-meter-tall London Eye. With larger turbines, the company can save installation and maintenance costs.

"Offshore wind is a significant contribution to the German energy transition," said Samuel Leupold, head of wind power at Dong Energy. "The 8 MW turbine takes offshore wind efficiency a further step forward, and the size of the Borkum Riffgrund 2 project is yet another indication of market maturity."

The company said it intended to divest up to half of the fully-owned project at a later stage, in line with its strategy and previous moves to sell project stakes to investors, such as pension funds and corporate partners, including toy maker Lego Group.

Due to subsidies, offshore wind power projects can often deliver relatively steady returns. The Borkum Riffgrund 2 project will get a fixed price per kilowatt-hour of power for the first 10 years of production.

Borkum Riffgrund 2 is Dong Energy's fourth offshore wind project in Germany, and when production starts in 2019, the company will have 1,350 megawatt of installed offshore wind capacity in the country. The project is situated 54 kilometers off the coast of Lower Saxony, close to the first stage of the project.

Dong Energy said it would have to wait for final approval from German authorities in order to employ larger turbines than allowed in the 2011 building permit.

Write to Kjetil Malkenes Hovland at kjetilmalkenes.hovland@wsj.com

(END) Dow Jones Newswires

June 24, 2016 07:22 ET (11:22 GMT)

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