By Mikael Holter

(Bloomberg) — Statoil ASA, Norway’s greatest oil firm, purchased a 50 p.c stake in EON SE’s Arkona offshore wind farm, coming into the German market and widening its renewable-energy portfolio because it scales again its funding for conventional fossil-fuel initiatives.

Statoil and EON will make investments greater than 1.2 billion euros ($1.4 billion) within the challenge, which lies 35 kilometers (56 miles) off the German island of Ruegen, the Stavanger-based firm mentioned in an e-mailed assertion. Electricity manufacturing is scheduled to start out in 2019 and can energy as many as 400,000 households, it mentioned. Siemens AG will provide the generators.

“There’s no getting around for the big utilities to gear up investments inrenewable power,” mentioned Christopher Rodler, an analyst at fairness researchers Montega AG in Hamburg, by telephone. “Financial clout and staying power is needed for offshore.”

The challenge is Statoil’s first wind-power enterprise outdoors the U.Okay., the place it holds a stake within the Sheringham Shoal wind farm, the corporate’s solely business wind challenge in manufacturing. For EON, it’s the second large-scale renewable energy growth introduced in as many months and is a part of a technique to take a position as a lot as 1.5 billion euros yearly in new clear power initiatives.

Significant Investment

“This is a significant investment in a relatively demanding financial situation for Statoil,” Irene Rummelhoff, government vice chairman of the New Energy Solutions unit, mentioned at a press convention in Oslo. “It shows we’re committed to building up a complementary renewables business in addition to oil and gas.”

At the tip of final yr, Statoil made a closing funding resolution on the two billion-kroner ($243 million) Hywind Scotland challenge, the world’s first floating wind farm. Statoil has additionally determined to go forward with the Dudgeon challenge in 2014 and is a companion on two Dogger Bank initiatives, which have been permitted by the U.Okay. in 2015.

The funding is a milestone for the Norwegian firm’s New Energy Solutions enterprise unit, which was arrange by Chief Executive Officer Eldar Saetre after he succeeded Helge Lund on the finish of 2014. Statoil, certainly one of Europe’s high producers of oil and pure fuel, mentioned it should now be capable of ship renewable power to greater than 1 million households in Europe.

Strong Growth

Statoil has now dedicated to investing about 20 billion kroner in offshore-wind initiatives from 2012 to 2019, and that determine is prone to rise, Rummelhoff mentioned in an interview after the press convention. Statoil is at the moment working with public sale processes in Denmark, the Netherlands, Germany and France. Its executives have visited the U.S. to contemplate offshore wind work, the place the corporate sees a “very positive development,” she mentioned.

While the corporate has a aim of utilizing its offshore competence to hunt alternatives in renewables power, it has mentioned these initiatives must compete with conventional fossil-fuel initiatives in its portfolio on the premise of profitability at a time the place the corporate is decreasing spending due to a collapse in crude costs.

“We see enormously exciting opportunities and strong growth” within the wind energy trade, Rummelhoff mentioned. “We want to take part — to not green-wash Statoil, however as a result of we see actual and good enterprise alternatives.’

The deal additionally implies that Germany may exceed its renewable power targets, based on Bloomberg New Energy Finance.

“This project shows that Germany will beat their original target of 6.5 gigawatts installed offshore wind by 2020 and get closer to the revised 7.7-gigawatt target announced last week,” BNEF wind analyst Tom Harries mentioned. “The Baltics are known to have lower capacity factors than the North Sea but an easier working climate for installation and maintenance access.”

–With help from Anna Hirtenstein and Brian Parkin.

© 2016 Bloomberg L.P