EEE: wind blows hard
Energias Eolicas Europeas (EEE) is embarking on the development of
a wind farm in the Castilla-La Mancha region of Spain ? four times
bigger than the next largest plant in Europe. Total investment for
the whole project is estimated at Eu1.4 billion. And the Eu913
million loan, non-recourse to EEE's sponsors Energia Hidroelectrica
de Navarra (EHN) and Iberdrola Diversificacion, is said to be the
biggest renewable energy project loan in the world to date.
Banco Bilbao Vizcaya Argentaria (BBVA) was appointed financial advisor in June 2000. In February 2001 Spanish banks Banesto, Ahorro Corporacion Financiera and foreign entrants Credit Agricole Indosuez and Westdeutsche Landesbank Girozentrale joined BBVA to form the group of arrangers, with the latter acting as agent bank. The loan was thus fully underwritten.
On tickets of Eu60 million Barclays Bank, Caja Madrid, Banco Popular, Industrial Bank of Japan, Banca Nazionale del Lavoro and HypoVereinsbank subsequently climbed on board as co-arrangers. A spokesperson from Credit Agricole points to the level of interest from international players as an indication of this deal's allure, expected to continue when the deal goes to general syndication projected for early May. Financial close is expected by mid-June.
The debt is split between an Eu814 million 15-year term loan and a Eu99 million 3-year credit line set aside to finance VAT incurred during construction. Syndication is likely to only target the first of these.
The ease with which this large loan seems to be dispersing is down to two prime factors; that it is financing the largest wind plant in Europe and the strength of the sponsors. Iberdrola Diversifcacion is a wholly owned subsidiary of Iberdrola, and EHN Group is an international wind energy producer. The 50:50 venture, therefore, comes with a well-established reputation.
A further comfort is that construction is actually expansion of an existing and tested farm. EEE commenced build-out in 1999 and by the end of December 2000 had in the region of 322.7MW in operation. The current financing will allow further build out to create a total of 1173MW from 31 separate wind farms operated by EHN and incorporating 1418 turbines. Expected annual energy production is 2711GWh and target for completion is June 2002. The wind turbines are being supplied by Gamesa and Enron Wind while the transmission lines and substations are supplied by Iberdrola Ingenieria y Consultoria.
Driven by the country's poor background in renewables, the Spanish government is encouraging the development of environmentally friendly power. Capacity generated from such plants can choose between the pool price at the time and a fixed price set for renewable resources. Since this regime was introduced two years ago, it has been updated by a series of decrees setting out specific stipulations for each category; waste-to-energy, wind and combined cycle. With the government having pledged to achieve 12% of annual energy demand from renewables, the market is set to grow.
One banker involved in this deal suggests that roll out of combined cycle plants may be significantly held up by the snails pace of the liberalising gas market. Wind power will therefore have to account for a considerable percentage of new generation.
Under Spanish law, EEE sells its capacity to the pool and the local electricity distributor is obliged to purchase it. In this instance that distributor is Iberdrola, hence the warm reception to the loan from the banks: although technically a non-recourse loan, the perceived level of sponsor's incentive is enhanced, providing investors with an additional level of comfort.
Furthermore, the markets are becoming more familiar with renewable asset types. For example, last year Credit Agricole arranged Eu45 million of 14-year debt for two 30MW wind farms in Navarra, Eolica La Bandera and Eolica Caparroso. The EEE deal, however, breaks new ground in terms of debt and generating capacity.
As environmental directives begin to bite and technology improves, renewable energy plants will become more common and sponsors will inevitably turn to the project market. EEE alone has voiced plans to invest more than Pta100 billion ($560 million) in renewable energy in 2001, mainly in wind power in the Castilla La Mancha and Navarre regions. Enron subsidiary Enron Wind has also established a turbine factory in Castilla La Mancha to serve the Spanish and Mediterranean wind market.
Other regions of Europe are also starting to throw up substantial opportunities for wind farm developers. Crown Estates of the UK own the rights to the British sea-beds and have been tendering for offshore developments. In the Netherlands, three consortia are currently bidding for a Dutch government grant designated for a 100MW-wind farm project off the northern coast, with an estimated cost of Eu2 million. In return for the grant, the successful consortia will supply the government with data they accumulate with respect to energy research. Denmark also has plans for offshore turbines, which have the added attraction of minimising the visual impact of turbines on the countryside.
Dresdner Kleinwort Wasserstein has forecast that global wind capacity will more than triple over the next five years. Germany currently has the most installed capacity but the US is forecast to overtake this in 2006.
Banco Bilbao Vizcaya Argentaria (BBVA) was appointed financial advisor in June 2000. In February 2001 Spanish banks Banesto, Ahorro Corporacion Financiera and foreign entrants Credit Agricole Indosuez and Westdeutsche Landesbank Girozentrale joined BBVA to form the group of arrangers, with the latter acting as agent bank. The loan was thus fully underwritten.
On tickets of Eu60 million Barclays Bank, Caja Madrid, Banco Popular, Industrial Bank of Japan, Banca Nazionale del Lavoro and HypoVereinsbank subsequently climbed on board as co-arrangers. A spokesperson from Credit Agricole points to the level of interest from international players as an indication of this deal's allure, expected to continue when the deal goes to general syndication projected for early May. Financial close is expected by mid-June.
The debt is split between an Eu814 million 15-year term loan and a Eu99 million 3-year credit line set aside to finance VAT incurred during construction. Syndication is likely to only target the first of these.
The ease with which this large loan seems to be dispersing is down to two prime factors; that it is financing the largest wind plant in Europe and the strength of the sponsors. Iberdrola Diversifcacion is a wholly owned subsidiary of Iberdrola, and EHN Group is an international wind energy producer. The 50:50 venture, therefore, comes with a well-established reputation.
A further comfort is that construction is actually expansion of an existing and tested farm. EEE commenced build-out in 1999 and by the end of December 2000 had in the region of 322.7MW in operation. The current financing will allow further build out to create a total of 1173MW from 31 separate wind farms operated by EHN and incorporating 1418 turbines. Expected annual energy production is 2711GWh and target for completion is June 2002. The wind turbines are being supplied by Gamesa and Enron Wind while the transmission lines and substations are supplied by Iberdrola Ingenieria y Consultoria.
Driven by the country's poor background in renewables, the Spanish government is encouraging the development of environmentally friendly power. Capacity generated from such plants can choose between the pool price at the time and a fixed price set for renewable resources. Since this regime was introduced two years ago, it has been updated by a series of decrees setting out specific stipulations for each category; waste-to-energy, wind and combined cycle. With the government having pledged to achieve 12% of annual energy demand from renewables, the market is set to grow.
One banker involved in this deal suggests that roll out of combined cycle plants may be significantly held up by the snails pace of the liberalising gas market. Wind power will therefore have to account for a considerable percentage of new generation.
Under Spanish law, EEE sells its capacity to the pool and the local electricity distributor is obliged to purchase it. In this instance that distributor is Iberdrola, hence the warm reception to the loan from the banks: although technically a non-recourse loan, the perceived level of sponsor's incentive is enhanced, providing investors with an additional level of comfort.
Furthermore, the markets are becoming more familiar with renewable asset types. For example, last year Credit Agricole arranged Eu45 million of 14-year debt for two 30MW wind farms in Navarra, Eolica La Bandera and Eolica Caparroso. The EEE deal, however, breaks new ground in terms of debt and generating capacity.
As environmental directives begin to bite and technology improves, renewable energy plants will become more common and sponsors will inevitably turn to the project market. EEE alone has voiced plans to invest more than Pta100 billion ($560 million) in renewable energy in 2001, mainly in wind power in the Castilla La Mancha and Navarre regions. Enron subsidiary Enron Wind has also established a turbine factory in Castilla La Mancha to serve the Spanish and Mediterranean wind market.
Other regions of Europe are also starting to throw up substantial opportunities for wind farm developers. Crown Estates of the UK own the rights to the British sea-beds and have been tendering for offshore developments. In the Netherlands, three consortia are currently bidding for a Dutch government grant designated for a 100MW-wind farm project off the northern coast, with an estimated cost of Eu2 million. In return for the grant, the successful consortia will supply the government with data they accumulate with respect to energy research. Denmark also has plans for offshore turbines, which have the added attraction of minimising the visual impact of turbines on the countryside.
Dresdner Kleinwort Wasserstein has forecast that global wind capacity will more than triple over the next five years. Germany currently has the most installed capacity but the US is forecast to overtake this in 2006.
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