The Eu613.9 million ($878 million) Belwind offshore wind farm deal builds on the template of the C-Power and Q7 offshore wind transactions by allocating risk to those entities best suited to bear them. However, unlike C-Power and Q7, which financed in a liquid bank market, Belwind had to contend with very tight commercial bank liquidity and the insolvency of the original sponsor and its parent, Evelop and Econcern respectively, six weeks before financial close.

The 165MW Belwind project (located offshore Belgium) is the largest offshore wind farm project financing containing construction risk to date, and the first offshore wind deal to close since the liquidity crunch started. The insolvent Econcern/ Evelop – now largely taken over by Eneco – has been replaced by a consortium of six Belgian and Dutch investors headed by Belgian discount food retailer Colruyt.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.

Given the risk profile for greenfield offshore wind projects, and the small-ticket appetite of project banks, the deal required considerable quasi-government and multilateral support: Notably, the deal is the first time the EIB has taken offshore wind risk.

Dutch development bank ASN Bank, Dexia and Rabobank acted as mandated lead arrangers. Total project cost is Eu613.9 million. The financing includes a Eu482.5 million, 15-year, non-recourse facility and a Eu63.43 million non-recourse mezzanine facility. 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 (see debt breakdown below).

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 average debt service cover ratio (ADSCR) at P50 wind is 1.5x.

The arrangers plan to sell down a 15-year Eu40 million tranche 100%-covered by EKF. They are comfortable with their hold positions, but would like to test the market and prepare distribution channels for future wind deals.

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

The proceeds will be used for the construction and operation of the 165MW first phase of the Bligh Bank offshore wind farm, comprising fifty-five 3MW wind turbine generators, located 47 km off the Belgian coast near Zeebrugge. Construction has already started and is expected to be completed by early 2011. A second phase will bring total capacity up to 330MW and will start after this phase is completed.

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.

Banks are taking construction risk but benefit from an availability guarantee from turbine supplier Vestas. The exact terms of the Vestas agreement are highly sensitive, 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 overall 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.

Dexia was lead arranger and underwriter for the C-Power transaction, and together with Rabobank has featured on all three off-shore wind farms that have placed full construction risk on the banks.

At its gloomiest the financial crisis looked to have taken the scalp of Dexia as a major project bank. Belwind signals a return to prominence for Dexia, and a return to health for the project wind sector. The next Belgian offshore wind financing is likely sometime in late 2010 for the 216MW Eldepasco project, also lead sponsored by Colruyt.

Belwind
Status: Financial close 24 July 2009; partial syndication likely
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
Lender legal counsel: Allen & Overy
Technical adviser: Mott MacDonald
Turbine supplier: Vestas
EPC: Van Oord Dredging and Marine Contractors