Veja Mate scores hat trick

Green Giraffe is proud to announce the closing of the EUR 127 M refinancing of an 80 MW portfolio of renewable assets located in France and managed by Acofi Gestion! This adds a new milestone to our collaboration and work for Acofi Gestion, a leading French fund manager with EUR 2.6 bn under management. The portfolio comprises a mix of solar PV ground mounted parks, rooftops and greenhouses and onshore wind projects commissioned between 2013 and 2016. The new financing replaces the existing senior term loans at SPV level through a unique holding level financing, benefiting from the portfolio’s track record, improved market conditions and providing for simplified administrative and reporting requirements. The refinancing ultimately involved Société Générale as Mandated Lead Arranger, Lender and Hedging Bank and BPI for a total refinancing amount of ca. EUR 127 M, including the term loan and the debt service reserve facility. The process between lenders selection and financial close only lasted 29 days, once again demonstrating Green Giraffe’s high level of efficiency and ability to streamline financing processes!

The speed at which the 332 MW Nordsee 1 offshore wind farm signed off its financing – and the absence of any multilaterlal involvement on the deal – is further evidence of the increased maturity of the European offshore wind market. Inspiratia published on 27 March 2015 an article about the Nordsee1 financing for which Green Giraffe acted as financial advisor. The speed at which the 332MW Nordsee 1 offshore wind farm this month [March 2015] signed off its financing – and the absence of any multilaterlal involvement on the deal – is further evidence of the increased maturity of the European offshore wind market  By 18 March, just six months after it first approached banks, the €1.2 billion (£883.1m $1.3bn) Nordsee 1 offshore wind farm had not only signed financing agreements but also reached full financial close – the first major offshore financing in Germany for over two years. For Northland Power, the Canadian IPP that owns 85% of the project, the swift transaction marks its second success in European offshore wind in the space of 10 months – after it took the Gemini project to financial close last May. No fewer than five lenders from Nordsee 1’s 10-bank club were fresh out of Gemini, while four of the others have experience in German offshore wind financings. In fact, of the entire bank club only NBC is new to the sector. Unsurprisingly, given the current appetite for deals, the €840 million (£618.2m $919.6m) debt raise was massively oversubscribed. inspiratia understands that twice as many banks made offers, though only the final 10 were invited to participate. This appetite was high enough that Northland and utility RWE Innogy were able to fund the project solely with commercial banks – with EDC, an export credit agency, acting as an MLA on identical terms but without the interest rate swaps. Several sources note how multilaterals often slow deals down because of the greater due diligence required, and that their absence was a key factor – along with the bank club’s experience in offshore wind – in getting Nordsee 1 to financial close in just half a year. So too was the involvement of Northland itself. Jérôme Guillet, managing director of the project’s financial adviser Green Giraffe, says, “Northland is being seen more favourably. It was the new kid on the block on Gemini, but now it is the kid that has done it – which is very important for banks.” Utility trend Those involved in Nordsee 1 – which will be built at a site around 50km north of Juist Island in the German North Sea – see its shareholder structure as a blueprint for future deals in European offshore wind. RWE Innogy had taken the project through development and sold off a majority stake to Northland last September, leaving it with a 15% equity interest. This decision is part of a wider strategy that will see the utility share the capital required for offshore projects in an effort to cut costs – partly in response to German energy reforms that have squeezed utilities’ margins and put pressure on their business models. “RWE Innogy had done a lot of the development legwork already but wanted to get Nordsee 1 off its balance sheet because it’s a pretty big project,” says Adam Beaumont, director of finance at Northland. “We’re seeing some of our peers come into this space and do the same thing as well. It’s about taking the fiscal responsibility off the utilities and onto the private power producers.” Contingency funding Cost overruns have affected the German offshore wind market in recent years, most notably on the Bard 1 project that is thought to have cost double its initial valuation of €1.5 billion (£1.1bn $1.6bn) when it was grid connected two years behind schedule in 2013. This caused problems around which parties – debt or equity – had to stump up the contingency funding. Previously, it has been commonplace to set aside roughly 12-15% on top of the original capex to cover delays and other cost overruns. This is now seen as a futile approach, with most saying contingency funding should be determined on a project-by-project basis. Nordsee 1’s capex includes €35 million (£25.8m $38.3m) of base contingency, with an additional budget of €90 million (£66.2m $98.5m) to be committed by the debt and equity providers on a pro-rata basis if this limit is exceeded. Also included in the project’s capex is around €70 million (£51.5m $76.6m) in pre-completion revenues. In the case of a wind farm, by the time the final turbine is commissioned, the first turbine is already generating electricity and making money. Sources who worked on the deal say it is becoming acceptable in the market to consider these revenues as quasi-equity, which Nordsee 1 has done. EPCI contracting A noteworthy aspect of Nordsee 1 in terms of project finance transactions is its use of so-called EPCI contracts – a variant of multi-contracting that, for example, will see one company not only design, manufacture and deliver the turbines, but also transport and install them. The idea is to take away the risk from the project and put it on the counterparty, which also means the project requires less contingency funding. Three of the five engineering contracts are designed in this way: Senvion – turbines Bladt Industries – offshore substation Siem – inter-array cables Ranjan Moulik, global head of power and renewables at Natixis, one of the banks on the deal, says, “It’s about dividing the workflow into independent silos that have very few interfaces. It’s a much more efficient contracting structure than traditional multi-contracting, which have caused material delays and cost overruns on certain projects in the past.” It’s a much more efficient contracting structure than traditional multi-contracting, which have caused material delays and cost overruns on certain projects in the past  While EPCI-type contracts have been used in Europe before, their presence in such a large project is said to be relatively unique. Northland and RWE have condensed potentially dozens of contracts into just five, with Ambau and GeoSea also contracted to produce and install the monopile foundations respectively. Meanwhile, Germany’s North Sea transmission system operator TenneT will connect the project to its DolWin 2 offshore converter station, which is scheduled to be installed in mid-2015. Financing details The project has a total capex of €1.2 billion (£883.1m $1.3bn), with around €840 million (£618.2m $919.6m) in non-recourse debt being provided for a gearing of 70:30 debt-to-equity. Green Giraffe, which had played a key role as financial adviser on Gemini, acted as financial adviser to the sponsors and once again ensured that the financing was concluded swiftly. The debt was made up of a single-tranche 12-year construction and term loan, provided by the following 10-bank club: ABN AMRO Bank of Montreal BTMU Commerzbank EDC Helaba KfW-Ipex NBC Natixis Rabobank The debt terms on Nordsee 1 show an improvement since Gemini, reflecting general market conditions and the strong appetite for the deal. Pricing is set at 275bp + Euribor during construction, before falling to 250bp upon operation and rising back to 275bp by the end of the 12-year tenor. As with Gemini, it is understood that the bank club plans to syndicate up to €10 million (£7.4m $10.9m) each to one or two additional banks – leaving them final tickets worth around €75 million (£55.2m $82.1m). Under new German energy laws, the project will receive support through a contract-for-difference feed-in tariff for a 20-year period, structured as follows: €194/MWh for the first eight years €154/MWh for an additional 1.54 years €39/MWh until year 20 As such, the banks on the deal will see just short of 2.5 years of uncontracted revenues. Meanwhile at P90 – the amount of electricity that the wind farm is 90% likely to produce over an average year – the DSCR is 1.3. As well as financial adviser Green Giraffe, the sponsors were also advised by Linklaters (legal) and Chatham (hedging), while Clifford Chance (legal), Sgurr (technical), Benatar (insurance), Corality (model audit) and EY (tax) acted for the banks. Conclusion Banks still want the due diligence to be watertight… but if you meet that threshold, the liquidity is huge – which is the difference from before  Nordsee 1 follows Nordergründe – a more modest deal at 111MW, with debt provided by the EIB and KfW-Ipex – in reaching financial close in Germany this year, and precedes the likes of Veja Mate and Baltic 2 – both of which are on track to close in the coming months. All of this suggests that if 2014 was the year of the Dutch, 2015 is without a doubt Germany’s. The transaction had so few complications that one adviser went as far as describing it as “the smoothest process we have ever had”. While the strong counterparties were important in achieving this, the deciding factor in its success was the appetite from a banking market that is hungry for deals. Jérôme Guillet of Green Giraffe says, “There is still a cliff effect in offshore wind. It’s still quite hard to get a deal financed. The lending standards have not slipped; banks still want the due diligence to be watertight and for the structure to follow a certain number of rules. But if you meet that threshold, the liquidity is huge – which is the difference from before. Before it was adequate, and now it is plentiful. Projects still have to meet that high standard of quality, and if they do, they become eminently financeable.” Click here for the full article

With investments in the offshore wind sector set to increase from a few hundred million euros to tens of billions per year, the question of where the money will come from has been at the forefront of industry preoccupations. This article examines how equity investors and potential lenders look at the sector and in what ways they can be expected to contribute. The market to date Industry growth so far has largely been achieved by utilities, alone or in small partnerships, financing and building their own projects and keeping them on their balance sheet. There are, however, other possibilities. “Non-utility” projects, undertaken by independent power producers (IPPs), may call on non-recourse debt financing from banks, particularly during the construction phase. As of end 2010, just over 10% of operational capacity (and a similar percentage of capacity under construction) had benefitted from non-recourse debt financing, with a smaller percentage having been refinanced through debt after completion. A number of interesting conclusions may be drawn at this point. One is that there are alternative sources to utilities for investment in offshore wind. Another is that banks show willingness to take construction risk (via debt), preferably, so far, in non-utility projects. Meanwhile, financial investors (via equity) tend rather to seek a stake in already operational projects. These conclusions also point to the most likely routes for utilities looking for external sources of funding: recycling of project equity via the sale of (typically minority) stakes in operating projects; non-recourse financing of IPP projects prior to completion; non-recourse refinancing of “utility” projects once they are operational. Jérôme Guillet co-founded Green Giraffe in 2010 and was a Managing Director until 2021.

In George Orwell’s scarily prescient novel “1984”, he introduces the concept of doublethink: the ability to hold two apparently contradictory thoughts at the same time, e.g. my wife fancies the svelte, densely coiffured actor Hugh Jackman but has actually married me, a fat bald accountant. On a less personal scale, the UK Government’s approach to transport seems to be a classic example. They proudly proclaim no new cars or vans powered solely by a petrol or diesel engine will be sold in the UK from 2040 – but at the same time they spend the best part of GBP 500 M per annum on incentivising technology to produce diesel and gas from bio sources such as crops and waste. This is through the somewhat clunkily titled Road Transport Fuel Obligation scheme (RTFO).

Green Giraffe is delighted to announce a partnership with respected industry publishers “A Word about Wind” for their forthcoming inaugural Women’s Power List report, which will be published on 7th March to tie in with International Women’s Day and will celebrate the achievements of our female colleagues in the industry.  Green Giraffe will also be the official sponsor for the launch event for the report in the City of London on the same day. Green Giraffe’s many successes over the last year would not have been possible without the strong women (some of which have been present since the start of the company) taking leading roles on transactions and helping manage the company. We benefit from the talents of all our employees and we strongly believe they should all be given the same opportunities and rewards. Green Giraffe has focussed from its inception on recruiting talented women and supporting them through their careers and we are thus very pleased to be associated with A Word about Wind’s initiative.

Michael Ware discusses Levi Strauss and the future of electric car charging.

The EUR 350 M NOP Agrowind financing, where Green Giraffe advised, closed on 14 February 2014. Here’s the press release describing the transaction, as provided by the company at the time. A banking consortium consisting of the European Investment Bank, the German KfW IPEX-Bank and Rabobank granted a loan of 350 million euros in total to NOP Agrowind. NOP Agrowind will use this loan to build 26 wind turbines with a total power output of 195 Megawatt. These wind turbines are part of the 86 wind turbines of Windpark Noordoostpolder, which will become the largest wind farm in the Netherlands. NOP Agrowind is an initiative of agricultural entrepreneurs along the Westermeerdijk and Noordermeerdijk in the North East Polder (the Netherlands). They will invest together in the construction of 26 Enercon E-126 wind turbines on their lands. The total investment amounts to circa 420 million euros. The turbines have a tower height of 135 meters, a rotor diameter of 127 meters and an installed capacity of 7.5 Megawatt each. The development of the NOP Agrowind project started in 1994. In spring 2013 the construction process started with the construction of the infrastructure works for roads and hardstands. The piles have already been driven for the majority of the wind turbines. The first turbine is planned to start generating power as of September 2014. It is expected that the project will be completed in 2016.