The favourable conditions for developing new wind parks in Europe have encouraged a number of projects in recent months. And the pace shows little sign of abating. Two more wind farm deals closed last month, the first in Portugal and the second in Spain.

Although legislative frameworks vary greatly in both countries their contrast is also their similarity. While Portugal's project, arranged and underwritten solely by NIB, has offtake agreements based on fixed prices of production per kW/hour, the Spanish wind farm, Parque Eolico Monte de las Navas, arranged by Dexia Sabadell, has agreements based on a pool price, plus premium basis. Spain is the more fortunate of the two as financiers have an option in capacity payments, either by fixed price payment ? Portugal ? or by the more frequently chosen and more lucrative option of pool price plus premium payment, favoured because market prices are considered to be very good at the moment.

Portugal's Trandeiras wind farm reached financial close on 8 August 2002. Although NIB is the only bank on board at this stage, it is anticipated that later in the concession another Portugese bank ? or a bank specialising in wind farms and with an interest in the region ? will be invited to join in.

Currently NIB is trying to meet conditions precedent ? which have not been disclosed ? in order to actually start funding. Total project debt for Trandeiras is approximately Eu25 million ? there are five tranches in all. Financing rolls out as a three-tranche main facility of Eu20 million. This includes a senior 25-year term loan of Eu10 million, a subsidy loan pre-financing facility of Eu7.5million and a Eu2.5 million guarantee facility to cover 35% of the subsidy loan. This last tranche again splits into two parts, the first as Eu5 million in pre-financing for the grid connection (this will eventually be funded by EDP) and the second as a Eu2.5million VAT pre-financing. Eu7.5 million is being lent interest-free and the 35% bank guarantee is needed as security for this. The total financing will be used by sponsor EnergieKontor's own construction arm, EnergieKontor Portugal -Energia Eolica, to pay sub-contractors. When construction is complete the project and financing will be transferred to a special purpose company with private investors called EnergieKontor ? Portugal Transdeiras GmbH & Co. WP TRAN KG for which EnergieKontor will act as managing partner.

Roger Jansen of NIB Capital says: ?In Portugal there is government support available by means of an interest-free loan, but it must be pre-financed and will only kick in if the project meets certain criteria.?

In this case, the criteria are that the project is completed and built within set parameters, for instance, the installed capacity and the fixed price per MW/hour installed, operation and production of kW/hours. The main risk would be that the project must be connected into the national grid ? and this task is not in the hands of the project company, it is in the hands of state-owned EDP (Electricidad de Portugal).

Legal advisers Allen & Overy and regional law firm Vastoncelos Sa Carheiro Fontes assisted NIB Capital, and an individual, Dr Paulo Ennes, advised Energiekontor. Garrard Hassan was the technical adviser on the project. Insurer AON advised all parties.

In Spain, secondly, Dexia Sabadell has completed a Eu50.5 million financing with co-arranger La Caixa, with Banco Herrero and Natexis in at syndication stage. The farm, called Parque Eolico Monte de las Navas, carries a 14.5-year tenor and consists of 74 wind turbines with a total capacity 48.84MW, reached financial close in March 2002. Sponsors Endesa and Fenosa provided equity (Endesa 70%, Fenosa 30%). Financing breaks down into capital investment of Eu6 million, subordinated debt of Eu3 million, senior debt of Eu34.6 million and a TVA line of credit, Eu 6.9 million. There is no concessionary period. Dexia has a prominent interest in wind power deals in Spain. The bank has recently been awarded the mandate to finance another, 590MW, project acting as mandated lead arrangers and underwriters.

This comes with a handful of projects in Spain with the combination of Dexia and La Caixa, two major wind farm lenders, involved in the deal. Garrigues Legal advised Dexia and Garrard Hassan was the technical adviser. As is becoming more typical with wind power deals, there was no financial adviser. The lucrative cash-plus scheme in Spain has opened the floodgates for a number of projects in the country, with Portugal, Denmark and Germany hot on its heels. Spain was driven forward by a new body of legislation after a poor background in renewables and is more than making up for lost time now.

As reported in Project Finance in August 2002 (see ), the UK is yet to benefit from a premium incentive scheme, and this has slowed wind farm development.

Trandeiras Wind Farm

Status: closed in August 2002

Locations: Trandeiras, northern Portugal

Cost: Eu28 million

Description: wind farm incorporating new EU Directives on renewables

Sponsors: Energiekontor

Debt: Eu10million

Arrangers: NIB Capital

Tenor: 24 years

Financial advisers: none

Lawyers to lenders: Allen & Overy and Vastoncelos Sa Carheiro Fontes

Lawyers to sponsors: Dr Paulo Ennes

Technical adviser: Garrard Hassan

Insurance advisers: AON

Avila Wind Farm

Status: closed March 2002

Locations: Avila province, Spain

Cost: Avila, Eu50.5 million

Description: wind farm incorporating new EU Directives on renewables

Sponsors: Endesa and Fenosa

Debt: Eu34.6 million

Arrangers: Dexia Sabadell and La Caixa

Tenor: 14.5 years

Financial advisers: none

Lawyers to lenders: Garrigues Legal

Technical adviser: Garrard Hassan on both