Apollo’s $6.5 Billion Power Play in Hornsea 3 Signals a New Era for Offshore Wind
Private Money Steps Up as Banks Pull Back
Apollo Global Management just dropped a $6.5 billion bombshell—snapping up a 50% stake in Ørsted’s Hornsea 3 offshore wind farm. It’s not only the biggest private capital investment in European renewables this year, but a clear sign that the rules of green infrastructure finance are being rewritten. With banks retreating and utilities strapped for cash, private capital is taking center stage.
Here’s how the deal works. Apollo’s payment is structured around construction milestones, not a lump sum. Ørsted will get about DKK 20 billion up front—half as purchase price, half for early construction funding. The remaining $3.25 billion will flow as Hornsea 3, a 2.9-gigawatt North Sea project, hits development checkpoints through 2027. This smart design protects both sides: Ørsted eases its cash crunch while Apollo avoids overexposure to construction risk before progress is proven.
Ørsted’s Tightrope Act
Context matters here. Ørsted has been under heavy pressure. In May 2025, it axed the Hornsea 4 project and took up to DKK 5.5 billion in impairments after a brutal run of write-downs. Over the past year and a half, the Danish energy giant lost $2.3 billion on U.S. projects and had to raise $9 billion through a rights issue just to keep its credit rating intact.
Now it’s scrambling to sell DKK 35–40 billion in assets between 2025 and 2026 to fund an 8-gigawatt construction pipeline—without diluting shareholders again or scaring off rating agencies.
That’s why this Apollo deal matters so much. Despite Ørsted’s financial strain, the transaction values Hornsea 3 at roughly DKK 78 billion—right at the top of Ørsted’s own cost estimates of DKK 70–75 billion. In other words, this isn’t a desperate fire sale. While other developers have been forced to take 20–30% price cuts to attract investors, Ørsted held its ground. Apollo didn’t buy cheap; it bought smart.
Their calculation is simple: the real opportunity lies not in distress pricing but in timing and complexity.
Cracking Apollo’s Investment Code
Apollo’s strategy rests on three core ideas that fit together like gears.
First, the project’s revenue stream looks better than it first appears. Hornsea 3 initially won a 2022 Contract for Difference at £37.35 per megawatt-hour in 2012 prices—a number that seemed modest at the time. But newer capacity secured higher rates in the 2024 AR6 auction, with longer 20-year contracts. Adjusted for inflation, the average strike price likely sits in the low-to-mid £60s per MWh, locking in steady, inflation-linked income for two decades.
Second, Apollo holds both the equity and the debt. Its own credit funds lead the senior financing, while major banks like BNP Paribas, ING, Lloyds, and RBC back additional facilities. Co-investors such as CDPQ and PSP Investments join certain tranches. This structure lets Apollo earn both equity returns and credit fees—generating internal rates of return around 9–10%, even at full replacement cost. By managing the complexity that others shy away from, Apollo turns risk into reward.
Third, Ørsted stays deeply involved. It’ll handle engineering, procurement, construction, operations, maintenance, and energy sales under long-term contracts. That means Ørsted keeps earning from services while Apollo shoulders the capital load. It’s a clever split: Ørsted uses its hard-won expertise from Hornsea 1 and 2, while Apollo secures a trusted operator and reduces execution risk.
Payments roll out in stages. Apollo pledges the full $6.5 billion but only releases cash as specific milestones—like turbine installations or grid connections—are met. If costs rise beyond Ørsted’s DKK 70–75 billion budget, Ørsted absorbs its share of the overrun, ensuring it stays efficient. If the project finishes ahead of schedule or under budget, both sides win. That alignment of incentives explains why Apollo paid full price during a market downturn.
The Bigger Picture Everyone’s Missing
There’s more to this deal than meets the eye.
First, it proves that offshore wind projects can still attract big money—if structured smartly. Forget the doom-and-gloom headlines of 2023 and 2024 claiming private investors had abandoned the sector. Apollo just showed how to make it work: stage payments, keep the industrial expert on board, blend guaranteed CfD revenues with market exposure, and finance in-house to control the stack.
Second, Ørsted is shifting its identity. Instead of owning everything it builds, it’s moving toward a lighter, more flexible model—similar to how pipeline operators or grid companies work. By selling 50% of Hornsea 3 yet keeping control of operations and maintenance, Ørsted turns capital-heavy projects into steady, service-based revenue streams. It’s trading short-term profits for long-term stability and balance sheet strength.
Third, Apollo’s move caps a massive year of European energy investments: €3.2 billion for German grid upgrades, £4.5 billion for Hinkley Point C nuclear, and now this. The firm is quietly positioning itself as the go-to source for large-scale energy transition financing—filling the void left by banks squeezed under stricter Basel IV regulations. This isn’t distressed investing; it’s a strategic reshaping of who funds the future of energy.
What Could Go Wrong
Of course, no project this size comes without risks. Construction costs remain unpredictable. Supply chain hiccups—especially from Siemens Gamesa turbines, vessel shortages, or grid delays—could slow progress and stretch timelines. The North Sea’s growing crowd of turbines also raises “wake effects,” where one farm’s airflow cuts another’s output by a few percent.
Policy shifts add another wild card. While the U.K. still targets 50 gigawatts of offshore wind by 2030, future governments under fiscal pressure might trim support, squeezing post-CfD returns later in the decade.
Still, if the deal closes by year’s end, as expected, it’ll mark a clear milestone. At roughly $2.2 billion per installed gigawatt, Hornsea 3 shows that top-tier offshore projects can attract full-scale institutional capital—even after a rough patch for the industry. The secret? Structure the deal right, share the risk, and keep the experts close.
That’s the real takeaway from Apollo’s bet. It’s not just about the money—it’s about redefining how the energy transition gets built, one wind turbine at a time.
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