BP’s response to the Gulf of Mexico attracted much negative public attention, and its likely bill for clean-up costs left it looking financially vulnerable. But during this difficult period, when an independent BP looked in doubt, it still managed to close a pair of wind financings. As it moves to sell $30 billion in assets to pay the bill for the spill and rebuild its public image, its wind portfolio continues to grow.

BP Alternative Energy’s 200MW Fowler Ridge II in Indiana and 124.5MW Goshen North in Idaho reached financial close, in August and May respectively, as oil continued to flow into the Gulf. The spill, a result of an explosion on the Transocean-owned Deepwater Horizon rig on 20 April and its subsequent sinking on 22 April, is estimated to ultimately cost the BP more than $65 billion, according to Fitch. Standard & Poor’s (S&P) reported that the company had spent $9.5 billion on clean up and recovery efforts by mid-September.

While everyone from investors to rating agencies expressed concerns over the long-term viability of BP, project finance banks did not. Pricing on bank loans for both the Fowler Ridge (closed 20 August) and Goshen (closed May) plants was 275bp over Libor, in line with other wind deals that closed at the time. For example, a $496 million loan for phases two through five of Terra-Gen’s 726MW Alta wind plant priced at 275bp over Libor in July. Credit Agricole was administrative agent for the loan that complemented a $580.2 billion bond issuance arranged by Citi, Barclays Capital and Credit Suisse. The bond carried a 7% coupon.

At the same time, the price of BP’s New York Stock Exchange-traded shares took a dive. They hit a 15-year low of $27.02 per share on 24 June, one week after company executives agreed to fund a $20 billion escrow account to pay for spill recovery, and were down 55% from $60.09 on 21 April, the day before the Deepwater Horizon sank. Year-to-date BP shares were down 31% on 18 October.

The company’s debt ratings also took a dive. Fitch and Moody’s downgraded BP twice, to a low of BBB negative from AA+ at the former and A2 from Aa1 at the latter. S&P downgraded its rating on BP to A/A-1 negative from AA-/A-1+ after the 16 June escrow account announcement. Today, BP is rated A stable by Fitch, A2 stable by Moody’s and A/A-1 negative by S&P. In mid-June, the credit default swap premium on BP stood at a little over 720bp, whereas normally BP CDS would have a double-digit premium.

Project finance bankers showed little wariness, whether because non-recourse debt structures are designed to protect against this sort of situation, or because BP is one of the most established names in the US market, or because project lenders had the stomach to disregard this volatility. The fact that the loans are backed by power purchase agreements for the full output of each plant undoubtedly helped calm any nerves.

In addition, as all three ratings agencies noted, while BP took a financial hit as a result of the spill, it still had more than $7 billion in cash at the end of June. Not to mention its suspension of dividends and disposal of assets, including the $7 billion sale of upstream assets in the US, Canada and Egypt to Apache Corporation in July and the $1.9 billion sale of oil and gas exploration, production and transportation assets in Colombia to Ecopetrol and Talisman in August, to raise capital to pay for spill-related costs.

BP and Sempra Generation sponsored Fowler Ridge II, which cost roughly $400 million. BBVA was coordinating lead arranger with Banco Sabadell, Bank of Tokyo Mitsubishi UFJ (BTMU), Caixanova, Caja Madrid and Societe Generale all taking tickets on the $348 million term loan that closed on 20 August – when BP was working to seal the then-capped Macondo well in the Gulf. The 12-year loan amortises over a 17-year profile.

Located in Benton County, Indiana, Fowler Ridge sells power to three AEP subsidiaries and Vectren Energy under four 50MW long-term power purchase agreements (PPAs). The facility became operational in December 2009.The sponsors decided to take the production tax credits, splitting them 50/50, with the loan partially monetising these benefits. This was probably the nearest that the two deals got to depending on sponsor support. Lenders had to be comfortable that BP, or a successor sponsor, would be able to generate the taxable profits needed to use the PTC, despite the fall-out from the spill.

BP and Veolia Environment’s Ridgeline Energy closed on $285 million in bank debt for the Goshen North wind project near Idaho Falls, Idaho in May – just as many people were beginning to realise the full severity of the Gulf oil spill. The financing was a club deal with BTMU as lead arranger joined by Caja Madrid, Mizuho and Sumitomo Mitsui Banking Corporation. The combined construction and term loan amortises over an 18-year profile. The financing used the cash grant in lieu of the investment tax credit.

Goshen North, formerly known as Goshen II, uses 83 1.5MW GE XLE wind turbines. Ground was broken on the project in June 2010. The plant is scheduled to begin production in the first quarter of 2011. Once generating, power will be sold to Southern California Edison under a 20-year PPA for up to 130MW under a contract signed in April 2009.

Now, as the cost of the spill continues to rise, BP is pursuing financing for a third wind plant – Cedar Creek II. Located in Weld County, Colorado, the 250.8MW project is expected to receive a roughly $400 million bank loan with eight lenders contributing according to reports. Pricing for this deal will start at 250bp over Libor and increase 25bp every two to three years for the tenor of up to 12 years. Xcel Energy has a 10-year offtake agreement for Cedar Creek II’s output.

It comes as little surprise that BP, with one of the worst oil spills in history on its hands, would pursue a more active renewables programme. The fact that banks continue to provide market-rate financing for its wind projects indicates their faith in BP – or at least its ability to bring wind projects to market – has changed little. As long as the company continues to receive competitive rates, and clean energy mandates expand, it is likely the market will see more green deals from BP – if only to help revamp its tarnished public image.