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4 for 4

by Jerome a Paris Thu Nov 25th, 2010 at 11:25:52 AM EST

C-POWER Financial Close PHASE 2 & 3 (Belgium)

C-Power is pleased to announce that it has closed the financing of the second and third phases of the offshore wind farm on the Thornton Bank (situated about 30 km in the North Sea off the Belgian coast). The financing will be provided by a group of 7 commercial lenders: KBC, Rabobank, Société Générale, KfW Ipex-Bank, Commerzbank, Dexia and ASN Bank together with export credit agencies Euler-Hermes of Germany and EKF of Denmark, and the European Investment Bank

A year and a half ago, I wrote a story entitled, somewhat arrogantly, 3 for 3, which bragged about my role in bringing about the financing of an offshore wind farm, and my de facto monopoly on that activity.

Today, I don't know if I should be proud or worried that I was, again, instrumental in the next offshore wind construction financing to take place and am thus maintaining my firm grip on the activity (there was another deal in the UK last year where I was only very indirectly involved, but it was a re-financing of an already-operating project rather than the financing of the construction of a new one). Proud because I made it happen (with my new start-up company), because it's the only offshore wind deal this year, and because it's a damn nice deal all around. Or worried because the "market" still seems unable to do any deals in the sector otherwise, at a time when the offshore industry is going to need the financial support from the banks.

This is a billion euro deal, not a small achievement in today's liquidity-constrained banking world. It brought together 10 financial institutions, including 3 public ones, ie the financing is backed by the governments of Denmark, Germany and the European institutions. It is the first transaction ever done with 6MW turbines offshore (the "big babies" shown right). It has an overall cost of debt of just about 5%, a pretty stunning number in itself for an 18-year financing (and, as my readers know, an all-important one for such a capital-intensive industry). With more than 20,000 pages of contractual documents, it's kept a fair number of highly-paid professionals busy before the "real people" (engineers and other construction workers) get to do the actual work - at the last count, there were more than a hundred people copied on our deal emails...

Once again, I'll be arrogant, claim full credit for making this financing happen (together with the exceptional team of the developer and my own brilliant and tireless colleagues) and continue to say "no greenfield offshore wind non recourse debt deal has ever been done without me." Having done this from outside of a bank, with my own company (acting as advisor to the project and helping it negotiate with the banks) makes me even more pleased, of course.

The traditional 'reward' for outstanding performance in the course of duty is yet more difficult missions.


Display:
well done. that sounds like a lot of complexity and paperwork That I'm glad you and not me has had to check through.

How long till you can afford your own windmill :)

Any idiot can face a crisis - it's day to day living that wears you out.

by ceebs (ceebs (at) eurotrib (dot) com) on Thu Nov 25th, 2010 at 11:30:51 AM EST

epower takes Thornton Bank contract as part of biggest ever offshore finance deal

The contract was awarded as development company C-Power closed the world's biggest project finance deal for an offshore wind project.
Total investment in the project - including refinancing of the first 30 MW phase - will amount to some €1.3 billion. Seven commercial banks are providing around €900 million in loans, with a contribution from the European Investment Bank and an export credit guarantee from the German government.

(...)

Filip Martens, CEO of C-Power, says, "This financial close is a demonstration of the trust that shareholders, contracting parties and the finance community are giving on a well-structured project, setting a good reference for the many more offshore wind farms to be financed in the near future."



Wind power
by Jerome a Paris (etg@eurotrib.com) on Thu Nov 25th, 2010 at 11:32:14 AM EST

EUR 1,289 M Investment Financing for the Construction and Operation of a 325 MW Offshore Wind Farm (Belgium)

This financing is the largest ever to be closed in the offshore sector and the first transaction where banks finance the installation and operation of 6MW offshore wind turbines.

Following the landmark financing of the first phase in 2007 (EUR 126 M for 30 MW), this deal again sets standards for the fast growing offshore wind market and shows that the banking market is open for financially and technically sound projects.

The transaction is a non-recourse financing, with banks bearing risk with limited sponsor support during the construction phase. Despite the use of the largest offshore wind turbines available on the market, the financing deal was made possible by a strong contractual package with the contractors, REpower (supply and operating of the wind turbines), THV Seawind [DEME-Fabricom joint venture] (supply and installation of the foundations, cable laying and installation of the offshore transformer station and wind turbine installation logistics) and ABB (supply of the 33kV infields cables and the second 150kV sea cable as well as the offshore transformer station), taking advantage of their joint experience during the first phase construction. This firm contractual base established with experienced contractors is supplemented by a solid contingency package controlled by the lenders to cover potential cost overruns or delays, cash sweep mechanisms which protect lenders from downside scenarios and specially tailored availability guarantees under the operating contract with REpower which allow revenues and debt service to be protected even during periods of lower turbine operational availability. The project also benefits from a comprehensive insurance program brokered by Willis.

With the participation of 3 public institutions (the two export credit agencies and the EIB) and 7 commercial banks, the transaction is one of the most complex ever done in the wind sector.

(...)

C-Power is advised by Energy Bankers à Paris (financing) and Allen & Overy (legal), the bank consortium was advised by Watson Farley Williams and Loyens Loeff (legal) and by MottMcDonald (independent technical advisor).

"This financial close is a demonstration of the trust that shareholders, contracting parties and the finance community are giving on a well structured project setting a good reference for the many more offshore wind farms to be financed in the near future", comments Filip Martens, CEO of C-Power. "This was the achievement of a strongly motivated team which, in order to bring together 23 contractual parties including 10 financial institutions, designed a contractual framework of more than 20,500 pages."



Wind power
by Jerome a Paris (etg@eurotrib.com) on Fri Nov 26th, 2010 at 04:46:38 AM EST
[ Parent ]
Congratualtions, I trust the champagne will flow in Chateau a Paris tonight !!

keep to the Fen Causeway
by Helen (lareinagal at yahoo dot co dot uk) on Thu Nov 25th, 2010 at 11:37:14 AM EST
Closed at last! Great work, Jérôme!
by afew (afew(a in a circle)eurotrib_dot_com) on Thu Nov 25th, 2010 at 11:49:35 AM EST
We're going to have to break you up Jerome, pursuant to the Sherman Antitrust Act, and the Clayton Act!

Hey, Grandma Moses started late!
by LEP on Thu Nov 25th, 2010 at 12:26:10 PM EST
Drawing and quartering?

Of all the ways of organizing banking, the worst is the one we have today — Mervyn King, 25 October 2010
by Migeru (migeru at eurotrib dot com) on Thu Nov 25th, 2010 at 12:27:47 PM EST
[ Parent ]
European Tribune - 4 for 4
A year and a half ago, I wrote a story entitled, somewhat arrogantly, 3 for 3,
And back then you wrote European Tribune - 3 for 3
This is the transaction I have been working on for over a year and a half
Wow, a year and a half per project. That takes more patience than I have, that's for sure.

Of all the ways of organizing banking, the worst is the one we have today — Mervyn King, 25 October 2010
by Migeru (migeru at eurotrib dot com) on Thu Nov 25th, 2010 at 12:30:02 PM EST
The early months are typically not full time, far from it, with short bursts of activity interspersed with period of nothing (or working on something else, or course). The last 2-4 months are typically quite intense. This is true for most project finance transactions

In this case, as we did some early preparatory work for a client before going to the banking market, the intense phase was closer to 6 months, with between 1 and 4 people involved on our side.

Wind power

by Jerome a Paris (etg@eurotrib.com) on Thu Nov 25th, 2010 at 12:35:14 PM EST
[ Parent ]
you're a pioneer, Jerome, thanks for what you do for our planet.

'The history of public debt is full of irony. It rarely follows our ideas of order and justice.' Thomas Piketty
by melo (melometa4(at)gmail.com) on Thu Nov 25th, 2010 at 03:01:39 PM EST
[ Parent ]
My congratulations for another job done. Another great achievement, one I think you should indeed relish firstly because of the current financial climate and secondly as boon to your company.

Also glad to see that a few Dutch financial institutes are investing in this project.

Now, if you could just sort out this minor kerfuffle between Dutch energy producer Eneco and the German/Russian Bard Engineering, so some 3.5 billion Dutch government funding on wind energy can actually be built...

by Nomad on Thu Nov 25th, 2010 at 01:01:10 PM EST
that the Dutch government awarded the licenses to Bard on purpose in order to not have to actually spend any money on offshore, as the project would be stuck in court/limbo/etc for a long time... but then that person said that such deviousness would demonstrate too much competence coming from the Dutch government...

Wind power
by Jerome a Paris (etg@eurotrib.com) on Fri Nov 26th, 2010 at 03:33:15 AM EST
[ Parent ]
Bien joué, Jérôme !

"People only accept change when they are faced with necessity, and only recognize necessity when a crisis is upon them." - Jean Monnet
by Melanchthon on Thu Nov 25th, 2010 at 01:13:52 PM EST
European Tribune - 4 for 4
This is a billion euro deal, not a small achievement in today's liquidity-constrained banking world.

A billion euro deal with that many actors sounds like a big achievement any day. But I would have thought that given bleak investment opportunities elsewhere, and high energy prices, there should be plenty of banks eager to invest in projects with a steady future income stream. The banks problem is not liquidity but solvency right?

Sweden's finest (and perhaps only) collaborative, leftist e-newspaper Synapze.se

by A swedish kind of death on Thu Nov 25th, 2010 at 02:53:43 PM EST
a major asset class for pension funds and the like in a few years - it's indeed a long term low risk asset class. The difficulty is that these investors don't like to take construction risk in general (uncertainty as to if and when cash flows begin) and that offshore wind construction risk is still particularly high as the industry is only beginning.

So the long term investors are still waiting a bit until the industry has matured, which makes the earlier deals harder (or simply keeps them on the balance sheet of the big utilities).

Wind power

by Jerome a Paris (etg@eurotrib.com) on Fri Nov 26th, 2010 at 03:35:35 AM EST
[ Parent ]
Kudos, Jerome.

Scottish Futures Trust distinguishes between:

(a) 'financing' during development which is short/medium term; and medium/high risk; and

(b) 'funding' - of assets once complete, which is long term, and low risk.

I find this distinction is useful in getting the concepts I am working on across.

I'm surprised hedge funds aren't up for the financing phase (and the risk/reward) of constructing your off-shore farms. I am sure pension funds will be up there for the funding phase before long, but they are conservative beasts.

I'm in Oslo at the moment to meet (again) a pretty innovative insurer interested in the long term 'funding' of social/affordable housing in the UK.  They observed how the Norwegian sovereign wealth fund recently acquired a 25% interest in the Crown Agent's Regent Street estate using a partnership vehicle.

I am working with  a couple of bank debt specialists, aiming for a small-scale prototype (£10m to £15m) of a UK social housing 'Rental Pool', through the creation of Units redeemable in payment for rentals. Rental Pools are scalable, and Units are undated credits, and analogous to a new form of equity.

For the housing association this enables their funding costs to be dramatically slashed - since there is neither debt nor compound interest - and frees up funds for development finance.....which finances new building ....which then cretaes new equity to be re-'funded'.......rinse and repeat.

Rental Pools and Unitisation

The point is that 'unitisation' creates funding based directly - without the need for credit intermediaries, but requiring liquidity providers and advisers - on the use value of land and other productive assets, like wind farms or even energy savings.

There's no reason why similar Unit credits could not work for energy funding. Investment in energy (interest-free) through ETFs/ETCs exists already on a massive scale, and these investors are being robbed blind by the markets. I'm sure they'd be interested in investing directly in the pools of production of your farms if the opportunity were available.

"The future is already here -- it's just not very evenly distributed" William Gibson

by ChrisCook (cojockathotmaildotcom) on Fri Nov 26th, 2010 at 05:08:02 AM EST
[ Parent ]
PensionDanmark Becoming Equity Partner in Nysted Offshore Wind Farm

Is this the first time a pension fund enters offshore?  Not completely announced, claiming conditions are fulfilled for entering into an equity role in Dong's Nysted II offshore windpark.


On September 9 2010 it was announced that PensionDanmark would become equity partner in Nysted offshore wind farm.
All conditions in relation to the transaction have now been fulfilled and it is expected to be completed in the fourth quarter of 2010.

Announcement here.



"Life shrinks or expands in proportion to one's courage." - Anaïs Nin

by Crazy Horse on Fri Nov 26th, 2010 at 07:20:48 AM EST
[ Parent ]
Congrats!

It is the first transaction ever done with 6MW turbines offshore (the "big babies" shown right).

The REpower 6M, right?

Meanwhile, Enercon is erecting its first 7.5 MW E-126, and is preparing to build a monster on-shore farm of 1101 turbines of this type and the 3MW class in Sweden. Do you know (a) anything about the financing of that farm (Markbygden Wind Farm); (b) any plans about an off-shore E-126?

*Lunatic*, n.
One whose delusions are out of fashion.

by DoDo on Thu Nov 25th, 2010 at 04:09:55 PM EST
3GW is a lot of money (4-6billion euros) so it probably won't be built in one go...

Enercon doesn't want to do offshore right now (yet?), because it's not sure how it can manage to guarantee the 98-99% availability it has consistently delivered onshore and its management feels rather strongly on that commitment... And they still make loads of money onshore (they are bit the Apple of the wind world, with a rather loyal client base for their more expensive but high quality turbines...)

Wind power

by Jerome a Paris (etg@eurotrib.com) on Fri Nov 26th, 2010 at 03:38:42 AM EST
[ Parent ]
it probably won't be built in one go...

They say 2020; but if they don't get the financing together, not even that. So I wondered if you know anything about that; even parts of the project would be in your region, i.e. billion euros.

*Lunatic*, n.
One whose delusions are out of fashion.

by DoDo on Fri Nov 26th, 2010 at 07:47:12 AM EST
[ Parent ]
6 MW, 7.5 MW?

The Spanish have gone a little tildy at offshore turbines, which will be quite impressive if they pull it off.  Still I'm surprised because of the lack of good sites off the Spanish coast for windfarms.  They've announced plans to pursue a 15 MW model by 2020.

Gamesa says the initial objective call for the development of a 15 MW offshore wind turbine that can overcome the technical and financial hurdles facing the rollout of offshore wind power. These include availability, foundations, transmission and costs.

Gamesa will head activities related to offshore wind energy capture; Acciona Windpower will be responsible for electricity conversion technologies; Alstom Wind will manage the marine structure and substructure segment; Acciona Energia will head construction, operation and maintenance at offshore sites; and Iberdrola Renovables will be managing the integration of offshore wind energy into the grid.



And I'll give my consent to any government that does not deny a man a living wage-Billy Bragg
by ManfromMiddletown (manfrommiddletown at lycos dot com) on Fri Nov 26th, 2010 at 11:03:01 AM EST
[ Parent ]
The Azimut program is quite interesting, as it is basically a joint effort by all of Spain's major homegrown players (even if owned by Alstom and others).  Rather than competing with each other.

As the program lags far behind those of the other major offshore manufacturers (and researchers), this somewhat novel solution may be the right path forward.  If it can stay together commercially.

"Life shrinks or expands in proportion to one's courage." - Anaïs Nin

by Crazy Horse on Fri Nov 26th, 2010 at 11:26:20 AM EST
[ Parent ]
This is really cool for me.  I just got word that I passed my PhD comprehensive exams.  I'm planning on doing my dissertation on the the topic of the Spanish industry and government policy.

Basically, the thesis is that government policy has been to aid in the creation of these sorts of sectoral organizations as means to create competitive advantage.

The "political science" thing with this is the distinction between liberal market economies, i.e. UK/US, and coordinated market economies, i.e. Germany, Sweden, etc.  Spain has always been an uneasy fit between these two.  What's really obvious from the Spanish wind industry is the extent to which various parts of the Spanish and regional governments have transformed the industrial structure of the region from the liberal to coordinated model.  By having policy directed at associations that are composed of the firms in the region, rather than having the state target any one firm, they create an anchor for the firms in terms of the specialized services and products that they are able to obtain.  Conducting an industrial policy through the construction of associations keeps firms in the region without being to "state" based.

And I'll give my consent to any government that does not deny a man a living wage-Billy Bragg

by ManfromMiddletown (manfrommiddletown at lycos dot com) on Fri Nov 26th, 2010 at 02:48:20 PM EST
[ Parent ]
Good news on the exams, congrats!
by afew (afew(a in a circle)eurotrib_dot_com) on Fri Nov 26th, 2010 at 02:52:00 PM EST
[ Parent ]


She believed in nothing; only her skepticism kept her from being an atheist. -- Jean-Paul Sartre
by ATinNM on Fri Nov 26th, 2010 at 03:01:21 PM EST
[ Parent ]
Thanks guys.

And I'll give my consent to any government that does not deny a man a living wage-Billy Bragg
by ManfromMiddletown (manfrommiddletown at lycos dot com) on Fri Nov 26th, 2010 at 03:55:06 PM EST
[ Parent ]
Incidentally, what do you think of this?

Converteam Powers World's First 5MW Permanent Magnet Direct Drive Offshore Wind Generator in China >> Offshore Wind

Chinese wind turbine manufacturer Xiangtan Electric Manufacturing Corporation Ltd (XEMC) has recently unveiled the world's first 5MW permanent magnet direct-drive offshore-specific wind turbine. The achievement was marked by a 21st October ceremony in Xiangtan which was attended by leading officials representing regional and national government including the Vice Minister of the Ministry of Science and Technology Cao Jianlin.



*Lunatic*, n.
One whose delusions are out of fashion.
by DoDo on Fri Nov 26th, 2010 at 03:08:13 PM EST
[ Parent ]
XEMC has purchased Dutch manufacturer Darwind from bankrupt owner Econcern last year.

http://xemc-darwind.com/

Wind power

by Jerome a Paris (etg@eurotrib.com) on Fri Nov 26th, 2010 at 04:04:34 PM EST
[ Parent ]
By 2020, that's quite long-term; but Gamesa wants to be on stage in the current maximum size market segment, too:

Gamesa plans to develop 5MW offshore turbine in the USA >> Offshore Wind

Gamesa's offshore plans have been eagerly awaited since the breakdown of negotiations with offshore specialist BARD in July and the announcement it was developing its own offshore turbine.

The clearest indication of Gamesa's plans has come with the announcement that it is joining forces with Northrop Grumman Shipbuilding, the largest US shipbuilder and a defence industry giant, to develop a 5MW offshore turbine in the US. Gamesa is planning to launch the prototype, the G11X-5MW, in the final quarter of 2012, with series production slated for 2013. Gamesa's offshore capacity will be further boosted by plans to build the G14X, a 6/7MW offshore turbine that will go into pre-series production in 2014.



*Lunatic*, n.
One whose delusions are out of fashion.
by DoDo on Fri Nov 26th, 2010 at 03:10:15 PM EST
[ Parent ]
The US needs a couple of not-for-profit companies to build out wind power - and they should be able to get financing by selling bonds to the Federal Reserve bank.
That would allow the Fed to inject money directly into the economy with low risk and generate green energy.
by rootless2 on Thu Nov 25th, 2010 at 07:54:08 PM EST
cheap funding by public authorities (passed on through commercial banks which keep the operational risk) is one of the easiest ways to boost the sector (and bring power costs down). It's how Germany got its industry going.

But it's socialist or something.

Wind power

by Jerome a Paris (etg@eurotrib.com) on Fri Nov 26th, 2010 at 03:39:56 AM EST
[ Parent ]
Surprisingly, this type of solution is not supported by any of the well known "progressives" in the US. They are steadfast in demanding things that will never happen and feeling victimized. And they have generally accepted right wing arguments about the Federal Reserve via a display of gullibility that is quite impressive. One can easily find on DKOS and other "progressive" sites arguments against the Federal Reserve's QE program that are word-for-word from the von Mises institute.
by rootless2 on Fri Nov 26th, 2010 at 11:55:43 AM EST
[ Parent ]
It's also how the rural areas of the US got electricity, under the New Deal.

She believed in nothing; only her skepticism kept her from being an atheist. -- Jean-Paul Sartre
by ATinNM on Fri Nov 26th, 2010 at 03:03:03 PM EST
[ Parent ]
Awesome work Jérôme. Be proud for what you've done.
We can all be worried that so few people do anything useful, but that's hardly restricted to offshore windfarming.

Earth provides enough to satisfy every man's need, but not every man's greed. Gandhi
by Cyrille (cyrillev domain yahoo.fr) on Fri Nov 26th, 2010 at 01:54:04 AM EST
The benefits of being THE pioneer in this area are:

  1. You build up your own company's brand equity
  2. You generate confidence in the sector
  3. You begin to routinise the processes and procedures required to bring such deals to fruition - relationships, standard documents, approval processes, regulatory requirements etc.

Although every deal is unavoidably a once off, the number of standard or common elements will gradually grow, people will feel more confident that various risks have been covered off, and the whole project management process become (slightly) less onerous.

Gradually you build capacity to do more and bigger deals, develop more specialist expertise, and can focus on new and more unique and interesting aspects of new deals - later technology, bigger size, wider range of funding instruments and players in the market.

I wouldn't be shy about touting your unique expertise and experience in this area.  If it proves profitable, there will be plenty of cowboys flooding in soon enough - possibly giving the industry a bad name after a while.  

No doubt there are already proposals with unproven technology, dodgy locations, uncertain regulatory environments and the sort of financial "innovations" we have seen rather too much of in other areas.

It only takes one failure to give all the naysayers their chance to try and damn the whole industry.  There are enough capacity constraints and quality issues now for you to feel entirely unapologetic about expanding your "monopoly" of the project finance area for as long as you can.

Index of Frank's Diaries

by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Fri Nov 26th, 2010 at 02:02:42 AM EST
All of what you write is true, although the risk from "cowboys" is low as the job is to convince large number of banks (ie their risk departments and ultimately their internal credit committees) to pony up the money and then to coordinate their participation. Cowboys might fool a few banks (and in today's risk adverse environment, I even doubt that), but not all of them and for offshore you need lots of them!

But don't worry about me being shy! :)

Wind power

by Jerome a Paris (etg@eurotrib.com) on Fri Nov 26th, 2010 at 03:43:05 AM EST
[ Parent ]
When I say cowboys in this context I mean generic bankers/financiers  who think they know it all and think there can't be much to this wind farm business that they can't pick up themselves in no time.

However I'm sure you've never come across any know-it-all bankers in your time!

Index of Frank's Diaries

by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Fri Nov 26th, 2010 at 04:35:12 AM EST
[ Parent ]
Reposted from the Salon, a graphic project summary from the developer.

I've seen the first of the REpower 6M (6.15MW) turbines in assembly on the shop floor in Bremerhaven. They're very large.

"Life shrinks or expands in proportion to one's courage." - Anaïs Nin

by Crazy Horse on Fri Nov 26th, 2010 at 05:56:01 AM EST

From the link noted above.

The 6M is the exact same dimension, externally, as the 5M photographed in my story - it's just that some major components are more powerful.

Wind power

by Jerome a Paris (etg@eurotrib.com) on Fri Nov 26th, 2010 at 06:41:10 AM EST
[ Parent ]


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