It was a good June for European offshore wind bankers. After signing in February, Dong and Centrica’s 270MW Lincs offshore UK farm met conditions precedent and closed, followed by Parkwind (Colruyt) and Aspiravi’s 217MW offshore Belgium project three weeks later.

The two project financings share the same 17-year (15 years plus construction) tenor and come with construction risk for lenders. But the similarities stop there – while Lincs is a pure commercial bank financing, Northwind combines commercial debt with EIB support and guarantees from EKF, GIEK and Office National du Ducroire (ONDD).

The Northwind concession, then known as the Eldepasco project, was granted on 15 May 2006. A change of project ownership prompted a renaming in February 2011. Depret and Electrawinds sold their shares to the project's other shareholders, Colruyt (via its subsidiary Parkwind) and Aspiravi, which increased those companies' holdings to 66.7% and 33.3% respectively.

The 216MW project is located in the North Sea, 37km off the Belgian coast. It will cover an area of approximately 14.5km² and will use 72 Vestas V112 3MW wind turbines - one of the first offshore wind farms to procure these turbines. Vestas is providing an availability guarantee for the turbines under a 15-year service and maintenance agreement. Construction will start in 2013.

Heading up the scheme is Frank Coenen, CEO of Northwind, who also led the Belwind 1 financing in 2009, which also had Colruyt as lead sponsor and is structurally very similar to Northwind, with many of the same sub-debt providers and EKF and EIB support.

Northwind also has a lender in common with the Jadraas onshore wind project that closed in 2011 – Pension Danmark. Prior to Jadraas, Pension Danmark had been buying equity stakes in a number of wind projects and Jadraas’ financial adviser, DNB, approached both the pension fund and EKF with a view to developing a debt product to partially fund the project.

Northwind has taken advantage of the co-operation agreement that was subsequently developed for Jadraas and further deals - a commitment by Pension Danmark to fund DKr10 billion ($1.8 billion) in export finance debt covered by EKF. However, Northwind pushes the envelope further than Jadraas – it is the first offshore project to benefit from the scheme and consequently demonstrates a significant increase in appetite for risk by the EKF/Pension Danmark agreement.

The Northwind financing totals Eu596 million in debt (plus Eu37 million of contingent facilities and a Eu10 million working capital facility), complemented by Eu255 million in total equity (plus Eu16 million of contingent equity) split between Eu80.6 million of equity from Parkwind and Aspiravi Offshore, at amounts relative to their shareholdings, and Eu174.4 million in sub-debt/quasi equity from PMV/PMF, DG Infra/Inframan/GIMV, Korys/DHAM and Autofinancing.

Pricing has not been confirmed but is rumoured to be 275bp over Euribor during construction, dropping to 250bp post construction. Pricing on the mezzanine (also unconfirmed) is 600bp-plus. Minimum average DSCR at P90 wind is 1.4x.

The EIB is providing Eu333 million towards the deal of which Eu133 million is a direct loan and two Eu100 million tranches are counter-guaranteed by EKF and Office National du Ducroire (ONDD). EKF is also guaranteeing Eu60 million from KfW and Eu35 million from Pension Danmark.

In addition, GIEK is counter-guaranteeing a Eu35 million loan by Norway’s Ministry of Trade and Industry (MTI) – which is replacing Norway’s defunct ECA Eksportfinans until its new ECA entity Eksportkreditt Norge is in place, at which point the new ECA will take over the loan.

The total uncovered debt is Eu180 million and the total covered debt, Eu463 million.

The full lender line-up for the project, which was oversubscribed, is: ASN Bank Eu34 million (Eu26.6 million plus a Eu7.4 million contingency facility), Belfius Eu34 million, BNP Paribas Fortis Eu34 million, European Investment Bank (EIB) Eu333 million, ING Eu34 million, KfW Ipex Eu60 million, MTI Eu35 million, Pension Danmark Eu35 million and Rabobank Eu34 million and a Eu10 million working capital facility.

Although the deal closed extremely quickly for an offshore wind project - around three months from going out to the bank market - intercreditor issues were complicated by the EIB imposing a minimum rating on participating banks during construction.

Funding costs for the EIB are also rumoured to have climbed significantly in the last six months, although there is no confirmation that this impacted on the overall cost of debt.

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. Given Northwind will share connection infrastructure with the Belwind 2 project – which will be out to the bank market after the summer, is also sponsored by Colruyt and on which BNP Paribas Fortis is again financial advisor – connection costs for both projects will be minimal.

Nexans won the Eu50 million contract for 57km of 220 KV subsea cable for Northwind in April. The contract covers 43km of cable running to the shore and 14km of cable linking Northwind with Belwind 2. Although interconnected, both projects will have separate substations.

Northwind
STATUS: Financial close 27 June 2012
DESCRIPTION: Development of a 216MW wind farm off the coast of Belgium
SPONSORS: Colruyt 66.7%, Aspiravi 33.3%
FINANCIAL ADVISER: BNP Paribas Fortis
FINANCIAL CONSULTANT: Green Giraffe Energy Bankers
LENDERS: ASN Bank, Belfius, BNP Paribas Fortis, EIB, ING Bank, KfW Ipex, Norwegian Ministry of Trade and Industry (MTI), Pension Danmark, Rabobank
COUNTER-GUARANTORS: EKF, GIEK, Office National du Ducroire
INSURANCE: Profin, Marsh, JLT, Codan, HDI Gerling, Axis, Axa
LENDERS TECHNICAL CONSULTANT: Mott MacDonald
SPONSOR LEGAL COUNSEL: Loyens & Loeff
LENDER LEGAL COUNSEL: White & Case
COUNSEL TO EKF: Kromann Reumert
COUNSEL TO EIB: Freshfields
COUNSEL TO MTI: Norton Rose
TAX ADVISORY: KPMG
TURBINE SUPPLIER: Vestas