The Eu130 million ($184 million) financing of Zorlu Enerji's 135MW Rotor Elektrik wind farm project in Turkey stands out as a market first in a number of ways.

While the deal was heavily multilateral-backed with debt from the EIB, EBRD and IFC, the EIB guaranteed tranche from DenizBank and HSBC is a first in terms of commercial lenders taking Turkish wind risk. Second, the deal was the first time that the IFC, EIB and EBRD had ever worked together on the same deal. The presence of one of the two European multilaterals has normally precluded that of the other. Third, this was also the first time that the EBRD had lent into Turkey and, following financial close of the deal in May, it opened its first Istanbul office.

The project involves the development of a 135MW wind farm located on Gokcedag Mountain in the Osmaniye province of eastern Turkey. Once complete, the plant will reduce CO2 emissions by around 302,675 tonnes annually during its first seven years. The plant, comprising 54 General Electric turbines, will be the largest in Turkey to date. The project features a 10-year feed-in tariff yielding around Eu0.055/KWh, as well as a five-year power-purchase agreement with Zorlu, yielding around Eu0.10/KWh.

The Eu130 million financing breaks down into a Eu55 million IFC A loan with a 12-year tenor and a one-year grace period, a Eu45 million term loan from the EBRD with a 12-year tenor and a one-year grace period and a Eu30 million term loan from the EIB with a 10-year tenor and a one-year grace period, guaranteed by DenizBank and HSBC.

DenizBank and HSBC were mandated lead arrangers in the spring of 2008. It became apparent, as the effects of the credit crisis post-Lehman bit, that the deal would have to depend on multilateral money – there was simply not the capacity to fund the deal with commercial debt – which would take time to negotiate. Furthermore, the arrangers had to negotiate their way around uncertainties in the Turkish Renewable Energy Source (RES) Law.

The RES law, which was brought into being in 2005, has been on the verge of being amended for the last 14 months. Under the new law, tariffs will rise Eu0.08 for wind guaranteed for 10 years. At present, the Turkish feed-in tariff for wind is just over Eu0.05 per KWh. If that figure were the proposed Eu0.08, it would be easier for lenders to get comfortable with a reference figure for the on-selling of power.

On Rotor Elektrik the lenders simply entered into an agreement with Zorlu whereby the two parties agreed on a minimum trading price for the power produced and Zorlu undertook to cover the difference if the price falls below that minimum.

Though Zorlu is one of the more experienced IPPs in the Turkish market, this was its first project financing, and one that has set a strong precedent for the EIB, EBRD and IFC to lend into similar projects in Turkey. Although the deal does not set a benchmark for commercial banks, the presence of DenizBank and HSBC as guarantors of the EIB loan is significant and may herald more banks stepping in to cover multilateral money for future Turkish wind deals – particularly when the new RES law kicks in.

Rotor Elektrik
Status: Financial close 11 May 2009
Description: Eu130 million financing of a 135MW wind farm on Gokcedag Mountain in the Osmaniye province of eastern Turkey
Sponsor: Zorlu Enerji Elektrik Uretim
Mandated lead arrangers: HSBC; DenizBank
Agencies and multilaterals: EIB; EBRD; IFC
Sponsor legal counsel: Clifford Chance/Herguner
Lender legal counsel: Linklaters
Guarantor/ECA/multilateral legal counsel: Linklaters
Turbine supplier: General Electric