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Caisse near deal for stake in U.K. wind farm

The Caisse de depot et placement du Quebec building in Montreal on July 21, 2010.

Christinne Muschi/The Globe and Mail

Denmark's Dong Energy is on the brink of selling a £500-million ($792-million Canadian) stake in its London Array offshore wind farm to one of the world's largest pension funds, in a fresh sign of interest in an energy business once thought too untested for conservative investor tastes.

Canada's £160-billion Caisse de dépôt et placement du Québec pension fund is close to buying half of Dong's 50 per cent share in the £2-billion London Array wind park off the coast of Kent in southeast England, according to people familiar with the deal.

This is the latest offshore wind stake sale Dong has made to a pension fund in the past three years, following similar transactions with PGGM of the Netherlands in late 2009 and, more recently, Denmark's PensionDanmark and PKA.

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Though land-based wind farms have been in place around the world for at least 30 years, the offshore wind industry is newer and heavily concentrated in Europe, especially the U.K.

Thanks to its relatively shallow waters and strong winds, Britain has more offshore wind capacity than the rest of the world combined.

Investors were initially wary of plunging into a new wind business that relies on generating electricity miles from land via large metal turbines that need to withstand heavy gales and corrosive seawater.

As offshore wind farms have spread into deeper waters further off the coast, they have also become more costly, which has made some investors cautious.

But the London Array farm is one of nine offshore parks in the U.K. now fully or partly connected to the grid, meaning it operates under existing subsidy rules, not newer ones due to start in 2017 that are less well understood.

Dong is one of the largest U.K. offshore wind developers, with a market share of about 15 per cent. Like many of its peers, it has been keen to offload stakes in its offshore farms so it can expand elsewhere. The company declined to comment on its Caisse sale, which was first reported in the Sunday Times newspaper.

London Array took on the title of the world's largest offshore wind farm in December, when the last of the 175 turbines going in during its first phase of construction was installed.

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That title had been passed on from other U.K. offshore wind farms earlier in the year.

London Array's other two owners are Eon, the German utility, and Masdar, Abu Dhabi's renewable energy group.

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