by Jerome a Paris
Tue Jan 5th, 2010 at 06:10:17 AM EST
Gordon Brown to launch £100bn wind energy programme
Gordon Brown will this week launch a £100bn programme to build thousands of offshore wind turbines that could power most of Britain's households during strong winds and are crucial to meeting the country's renewable targets.
The Crown Estate will announce which consortia have been successful in bidding to develop the nine zones, mostly in the North Sea, in the project, which is the most ambitious of its kind in the world. The prime minister is expected to use the event to promote the potential economic benefits of the massive building works.
Bloomberg has a story focusing on the financeability of this endeavor this morning, with a reasonably upbeat tone following the successful refinancing by Centrica last year of its existing offshore windfarms:
Centrica Wind-Farm Funding Success Shows Liquidity Improving
Centrica Plc’s deal to fund U.K. offshore wind farms through a stake sale and bank debt may become a blueprint for competitors in the country’s $160 billion push to develop sites in deeper and more remote waters.
While this deal does not have banks taking construction risk (contrary to the deals I've done in the past, which are sadly not mentioned here), it is indeed a welcome precedent and it is a good thing to see Bloomberg focus on that aspect of things, as this is going to be the key issue for the Round 3 plan to actually happen: the winning consortia are going to need to be able to invest several billions euros per year over the next 2 decades - in fact, whatever happens on the nuclear front, it's quite likely that offshore wind will be the biggest sector for investment in the industry in Europe into the foresseable future.
“The number of banks comfortable with financing offshore wind is fairly limited and the Centrica deal has expanded that base,” said Marcel Gerritsen, global head of renewable energy and infrastructure finance at Rabobank Nederland NV. “It creates additional liquidity in the offshore wind farm U.K. area, which is necessary given the pipeline of projects coming up.”
“The amount of capital needed to build all those wind farms is extremely large and utilities will need to bring in third- party investors,” said Jean-Daniel Borgeaud, a managing director at TCW, a Los-Angeles-based investment company. “It’s a new trend. If you had asked me two years ago if we’d work with Centrica I would have said no because utilities have typically used their own balance sheets.”
“It’s still difficult to get financing, but the market is slowly coming together,” said Alexander von Dobschuetz, head of structured finance at Munich-based bank Bayerische Landesbank. “The proposed structures and risk allocations are becoming more appropriate.”
(I'm quoted too, but will let you read it at the link)