The Crown Estate has reported record profits as it continues to feel the “short-term uplift” from lucrative offshore wind farm leases.
Profits at the King’s property group more than doubled to £1.1billion in the 12 months to the end of March, up from £443million in the previous financial year.
Most of the £658million increase in profits came from the extra fees paid by the developers who won the rights to build six new offshore wind farms — in the North Sea and off the coasts of Cumbria, Lancashire and north Wales.
In total, the in the fourth round of seabed leasing in January 2023 banked just over £1billion for the Crown Estate.
The Estate pays its profits to the Treasury, which in turn gives a cut to the royal family in the form of a sovereign grant. That cut, which had been at 25%, was reduced to 12% for this year.
The payment to the King is based on the group’s performance from two years earlier, when the Crown Estate’s profits were still affected by the pandemic. However, the sovereign grant is not allowed to fall, meaning that, for the third year in a row, the King will receive £86.3million.
In recent years, its ownership of the seabed surrounding the UK has taken on greater importance within its overall portfolio as energy companies have paid more for the rights to develop offshore wind farms.
The winning developers are required to pay option fees every year until they are ready to sign a formal lease, partly to incentivise them to move more quickly.
Dan Labbad, chief executive of the Crown Estate, said the developers “are moving quite fast through that process”, which means option fee income is likely to start tailing off soon.
“We expect moving into next year there will be a high level of round-four option fees, [but that] will probably be the final year of them, after which we expect some normalisation,” Labbad, told The Times.
A fifth round of leasing, which is seeking to establish an offshore floating wind industry in the Bristol Channel, is under way. The outcome of that is not expected until the end of this year at the earliest, although Labbad does not anticipate it will generate the sort of fees seen in round four.