The Belwind offshore wind farm deal was a financing done in the depths of the liquidity crisis. In addition, the Eu613.9 million ($868 million) deal had to be made to work in light of the insolvency of the original sponsor and its parent, Evelop and Econcern respectively, six weeks before financial close. The 165MW project, located offshore Belgium, is also the largest offshore wind farm project financing containing construction risk to date, and the first offshore wind deal to close during the liquidity crunch.

The insolvent Econcern/Evelop – now largely taken over by Eneco – was replaced by a consortium of six Belgian and Dutch investors headed by Belgian discount food retailer Colruyt. The consortium also includes the Flemish government's investment vehicle PMV, Meewind and Rabo Project Equity. Despite Colruyt owning a minority share (26.9%), it has majority control of the project company with more board members.

With the high-risk profile for greenfield offshore wind projects, and the fact that project banks' appetite was for small tickets, the deal required serious quasi-government and multilateral support. The deal was also the first time the EIB took offshore wind risk.

ASN Bank, Dexia and Rabobank acted as mandated lead arrangers. The total project cost was Eu613.9 million, and the financing includes a Eu482.5 million, 15-year, non-recourse facility and a Eu63.43 million non-recourse mezzanine facility with a slightly shorter tenor than the senior debt. The structuring is conceptually similar to the C-Power and Q7 transactions, in that it features an availability guarantee from the turbine supplier, Vestas.

The EIB provided a direct loan of Eu150 million and a counter-guarantee facility of Eu150 million covered by Danish export credit agency EKF. The remaining Eu182.5 million is provided by the commercial banks, Eu61 million of which is guaranteed by EKF. Within the Eu182.5 million commercial bank funded tranche, Eu56 million is a contingency facility.
The uncovered commercial bank loan is priced at 300bp rising to 350bp, with the EIB facilities priced around 100bp tighter. The mezzanine facility bears a margin of around 600bp. The ADSCR at P50 wind is 1.5x.

Dexia and Rabobank are now sounding out the market to sell down a 15-year Eu40 million tranche 100%-covered by EKF, for which appetite is reportedly high. They are comfortable with their hold positions, but would like to test the market and prepare distribution channels for future wind deals.

Rabobank and PMV provided the mezzanine facility, with participation by some of the equity investors. Rabobank was the hedging coordinating bank, Dexia Bank Belgium was the accounts bank, and Dexia Credit Local was the security agent and facility agent for the transaction.

The financing covers the construction and operation of the first 165MW phase of the Bligh Bank offshore wind farm, comprising 55x3MW wind turbine generators, 47 km off the Belgian coast near Zeebrugge. Construction is underway, and is expected to be complete by early 2011. The second phase would bring total capacity up to 330MW, and will start after phase one is complete.

The project revenues comprise two elements – the fixed price sale of green certificates to Belgian grid operator, Elia, for Eu107 per MWhr for 20 years, and a 15-year power purchase agreement with Electrabel. The Belgian state also provides a subsidy for offshore wind farms to install the on-to-offshore cable connecting the turbines to the grid.

Lenders have assumed construction risk, but benefit from an availability guarantee from turbine supplier Vestas. The exact terms of the guarantee are strictly protected, but the guarantee is thought to include warrants that the turbine will be operational after construction for over 90% of the time, subject to certain exclusions such as particularly intemperate weather and vessel collisions. The service and availability guarantee lasts for five years.

The deal structure is very similar to Belgium's first offshore wind farm, C-Power, which financed in May 2007. The manufacturer warrants were stronger in C-Power, with REpower providing an availability guarantee for 10 years to prove its technology. But the financial covenants are stronger for Belwind. For example, the C-Power loan (priced at between 100bp to 190bp) closed with an ADSCR at 1.3x, compared with Belwind's 1.5x.

The Belwind financing has set a healthy benchmark for European offshore wind deals going forward. The precedent should help with the structuring of UK offshore deals such as Centrica's 270MW Lincs wind farm, which will have a project capex of around £725 million ($1.2 billion), as well as those of the nine developers that were awarded UK offshore licences amounting to 32GW of capacity by The Crown Estate in January as part of the Round 3 bidding process.

Belwind
Status: Financial close 24 July 2009
Description: Eu545.9 million financing of phase one of the Bligh Bank offshore wind farm, off the coast of Belgium
Sponsors: Colruyt; DHAM; PMV; Meewind; Rabo Project Equity; SHV
Mandated lead arrangers: Dexia; Rabobank; ASN Bank
Agencies and multilaterals: EIB; EKF
Sponsor legal counsel: Watson, Farley & Williams; Loyens & Loeff
EIB legal counsel: White & Case
Lender legal counsel: Allen & Overy
Technical adviser: Mott MacDonald
Turbine supplier: Vestas