Eurovento
European Renewables Deal of the Year 2002
On 17 December 2002 HypoVereinsbank successfully syndicated an Eu213 million ($209 million) facility for Spanish wind developer Eurovento (a joint venture between Terranova and Tomen Corporation) ? the largest true non-recourse financing for a Spanish wind project to date. The loan for the six plant deal (in effect six different projects, five in Galicia and one in Asturias) covers 80% of total project cost.
At time of sell-down the deal caused a stir for the wrong reasons ? there was very little uptake by the domestic Spanish banks and various reports attributed that to an unwillingness to support non-traditional developers with Eurovento being hailed as a newcomer to the market.The reality was somewhat different. Eurovento is not a newcomer to the market (it was formed in 1996). Its joint venture sponsors closed a $53 million credit facility for a Galician wind plant ? Paxareiras 11c and F ? in July 2000 and in the process managed to raise the longest-term Spanish wind debt to date. Furthermore, Terranova is basically ex-Sea West, which was Tomen's co-sponsor, along with Cinergy, on Paxareiras 1 and 1a. And Tomen alone currently operates wind power projects with 130,000 kilowatts (KW) of capacity in Spain. After completion of the six Eurovento projects (which range in size from 7800KW up to 49300KW) by summer 2003, with 201,200KW capacity Tomen will be operating wind power plants with a total output capacity of 331,200KW ? approximately 10% of Spain's wind power generation capacity. So these credits, although not the strongest in the market, are not unknown quantities. The reality of the sell-down on Eurovento is a mirror image of the state of Spanish banking. The Spanish banks, having been hit hard by investments in South America, have unwittingly handed back the wind market to the internationals ? a market the domestics had previously pushed them out of with keen pricing and longer tenors against a backdrop of international investor discomfort (no power purchase agreements and a potentially shifting tariff rate).In simple terms Eurovento was never about Spanish wind risk or sponsor risk. Nor was is about offtake risk ? Eurovento has PPAs with Union Fenosa and Electra de Viesgo. Eurovento was about the ability to meet the lending terms required on the deal which incorporate a number of firsts for the Spanish wind sector. Not only did each plant constitute a separate borrower, one plant in the deal came with a vendor finance package ? thus complicating cross-lender negotiations. More importantly, the sponsors and their advisors were adamant about achieving a 15-year tenor without cash sweeps, thus boosting project returns. Indeed, the term sheet for the deal went out with that provision detailed.Advisory on the project was provided by Babcock & Brown which has a longstanding relationship with both Tomen and Terranova management/owners. Requests went out to 13 banks ? a mixture of international and Spanish ? in late 2001. Three offers were shortlisted and, although all were very similar, HypoVereinsbank, eager to get its largest ever Spanish mandate, clinched the mandated arranger slot with full underwriting in August. Fortis followed, coming in underneath as lead arranger.Despite the lack of Spanish uptake, syndication came in oversubscribed with over 20 banks expressing interest. The sole Spanish bank to participate, Instituto de Credito Oficial, came in as senior arranger with a Eu30 million take. BayernLB and NordLB and Dutch bank NIB Capital all joined as official arrangers for Eu25 million each. Portugal's Banco Espirito Santo committed Eu15 million for a co-arranger title while Belgian banks KBC and Natexis Banques Populaires joined as senior lead managers for Eu10 million apiece. Borrowers' legal counsel on the deal was provided by Spanish law firm Uria y Menendez whilst Castro, Sueiro y Varela was counsel to the lenders. The Eu213 million package breaks down into a Eu180 million 15-year term loan, carrying a margin of 125bp from year one to six and 135bp thereafter; a 15-year Eu1 million letter of credit; and a two-year Eu32 million VAT facility.The deal is a measure of the comfort international lenders find in Spanish wind. The sector is subsidised but the Spanish power regulator has the ability to adjust the fixed tariff rate and pool price subsidy on a yearly and 5-year basis respectively. The Spanish government is considering cutting tariffs by 1% and subsidy by 8%. A study commissioned by Spanish regulator Comision Nacional de Energia is reviewing the proposals and the full extent of any changes is expected in the coming year. Lending banks were advised of the review of the royal decree supporting wind power but were happy with the deal economics. In addition, HypoVereinsbank had made provision for any change in its projections.Drawdown of funds will only start after the completion of each park, mitigating construction risk for the lenders. Spanish state-backed shipbuilder and engineering concern Izar Construcciones Navales will supply three quarters of the required turbines, under licence from Danish turbine manufacturer Bonus, with the remainder coming from Spain's leading turbine producer Gamesa Eólica. ToyoNova is building the plants and O&M will be supplied by Energea Servicios y Mantenimento.
Eurovento
Status: Syndicated December 17 2002
Total project debt: $209 million
Location: Spain
Sponsors: Terranova, Tomen
Sponsors' financial advisor: Babcock & Brown
Description: Funding for construction of six wind energy plants
Mandated arranger: HypoVeriensbank (100% underwriter)
Lead arranger: Fortis
Senior arranger: Instituto de Credito Oficial
Official arrangers: BayernLB; NordLB; NIB Capital
Co-arranger: Banco Espirito Santo
Senior lead managers: KBC, Natexis Banques Populaires
Pricing: Eu180 million 15-year term loan, at 125bp from year one to six and 135bp thereafter; 15-year Eu1 million letter of credit; two-year Eu32 million VAT facility.
Lawyers to the sponsors: Uria y Menendez
Lawyers to the lenders: Castro, Sueiro y Varela
Construction: ToyoNova
O&M: Energea Servicios y Mantenimento.
On 17 December 2002 HypoVereinsbank successfully syndicated an Eu213 million ($209 million) facility for Spanish wind developer Eurovento (a joint venture between Terranova and Tomen Corporation) ? the largest true non-recourse financing for a Spanish wind project to date. The loan for the six plant deal (in effect six different projects, five in Galicia and one in Asturias) covers 80% of total project cost.
At time of sell-down the deal caused a stir for the wrong reasons ? there was very little uptake by the domestic Spanish banks and various reports attributed that to an unwillingness to support non-traditional developers with Eurovento being hailed as a newcomer to the market.The reality was somewhat different. Eurovento is not a newcomer to the market (it was formed in 1996). Its joint venture sponsors closed a $53 million credit facility for a Galician wind plant ? Paxareiras 11c and F ? in July 2000 and in the process managed to raise the longest-term Spanish wind debt to date. Furthermore, Terranova is basically ex-Sea West, which was Tomen's co-sponsor, along with Cinergy, on Paxareiras 1 and 1a. And Tomen alone currently operates wind power projects with 130,000 kilowatts (KW) of capacity in Spain. After completion of the six Eurovento projects (which range in size from 7800KW up to 49300KW) by summer 2003, with 201,200KW capacity Tomen will be operating wind power plants with a total output capacity of 331,200KW ? approximately 10% of Spain's wind power generation capacity. So these credits, although not the strongest in the market, are not unknown quantities. The reality of the sell-down on Eurovento is a mirror image of the state of Spanish banking. The Spanish banks, having been hit hard by investments in South America, have unwittingly handed back the wind market to the internationals ? a market the domestics had previously pushed them out of with keen pricing and longer tenors against a backdrop of international investor discomfort (no power purchase agreements and a potentially shifting tariff rate).In simple terms Eurovento was never about Spanish wind risk or sponsor risk. Nor was is about offtake risk ? Eurovento has PPAs with Union Fenosa and Electra de Viesgo. Eurovento was about the ability to meet the lending terms required on the deal which incorporate a number of firsts for the Spanish wind sector. Not only did each plant constitute a separate borrower, one plant in the deal came with a vendor finance package ? thus complicating cross-lender negotiations. More importantly, the sponsors and their advisors were adamant about achieving a 15-year tenor without cash sweeps, thus boosting project returns. Indeed, the term sheet for the deal went out with that provision detailed.Advisory on the project was provided by Babcock & Brown which has a longstanding relationship with both Tomen and Terranova management/owners. Requests went out to 13 banks ? a mixture of international and Spanish ? in late 2001. Three offers were shortlisted and, although all were very similar, HypoVereinsbank, eager to get its largest ever Spanish mandate, clinched the mandated arranger slot with full underwriting in August. Fortis followed, coming in underneath as lead arranger.Despite the lack of Spanish uptake, syndication came in oversubscribed with over 20 banks expressing interest. The sole Spanish bank to participate, Instituto de Credito Oficial, came in as senior arranger with a Eu30 million take. BayernLB and NordLB and Dutch bank NIB Capital all joined as official arrangers for Eu25 million each. Portugal's Banco Espirito Santo committed Eu15 million for a co-arranger title while Belgian banks KBC and Natexis Banques Populaires joined as senior lead managers for Eu10 million apiece. Borrowers' legal counsel on the deal was provided by Spanish law firm Uria y Menendez whilst Castro, Sueiro y Varela was counsel to the lenders. The Eu213 million package breaks down into a Eu180 million 15-year term loan, carrying a margin of 125bp from year one to six and 135bp thereafter; a 15-year Eu1 million letter of credit; and a two-year Eu32 million VAT facility.The deal is a measure of the comfort international lenders find in Spanish wind. The sector is subsidised but the Spanish power regulator has the ability to adjust the fixed tariff rate and pool price subsidy on a yearly and 5-year basis respectively. The Spanish government is considering cutting tariffs by 1% and subsidy by 8%. A study commissioned by Spanish regulator Comision Nacional de Energia is reviewing the proposals and the full extent of any changes is expected in the coming year. Lending banks were advised of the review of the royal decree supporting wind power but were happy with the deal economics. In addition, HypoVereinsbank had made provision for any change in its projections.Drawdown of funds will only start after the completion of each park, mitigating construction risk for the lenders. Spanish state-backed shipbuilder and engineering concern Izar Construcciones Navales will supply three quarters of the required turbines, under licence from Danish turbine manufacturer Bonus, with the remainder coming from Spain's leading turbine producer Gamesa Eólica. ToyoNova is building the plants and O&M will be supplied by Energea Servicios y Mantenimento.
Eurovento
Status: Syndicated December 17 2002
Total project debt: $209 million
Location: Spain
Sponsors: Terranova, Tomen
Sponsors' financial advisor: Babcock & Brown
Description: Funding for construction of six wind energy plants
Mandated arranger: HypoVeriensbank (100% underwriter)
Lead arranger: Fortis
Senior arranger: Instituto de Credito Oficial
Official arrangers: BayernLB; NordLB; NIB Capital
Co-arranger: Banco Espirito Santo
Senior lead managers: KBC, Natexis Banques Populaires
Pricing: Eu180 million 15-year term loan, at 125bp from year one to six and 135bp thereafter; 15-year Eu1 million letter of credit; two-year Eu32 million VAT facility.
Lawyers to the sponsors: Uria y Menendez
Lawyers to the lenders: Castro, Sueiro y Varela
Construction: ToyoNova
O&M: Energea Servicios y Mantenimento.
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