Butendiek became the first German offshore project to reach close in nearly 18 months when its Eu1.417 billion ($1.87 billion) financing signed in February. The deal nearly collapsed last year, after developer wpd struggled to raise the project’s equity requirement from outside investors.

European developers have had to work hard to raise enough bank debt to finance large-scale offshore projects without leaning heavily on multilaterals and export credit agencies. Butendiek bucks this trend, since wpd managed to win commitments last year from a solid club of banks. But perceived risks attached to the project’s interconnection scared away equity commitments and held up close for several months.

Butendiek will be a 288MW wind farm roughly 32km from Sylt in the German North Sea. The project dates back to 2002, when OSB Offshore-Buerger Windpark Butendiek received approval for the project from the German environmental ministry. Its initial plan was to develop the project with equity from over 8,000 shareholders, but the high cost of construction prompted the developer to sell it to Airtricity in 2007.

Scottish & Southern Energy bought Aitricity in 2008, which triggered Butendiek’s sale to German developer wpd. Wpd is an experienced renewables developer and owns a 2GW portfolio of wind projects. Wpd is overseeing the development of the roughly Eu200 million ($263 million) Baltic 1 project, which reached financial close in 2011.

Butendiek is only the second offshore wind farm where wpd has overseen construction. The sponsor sought commitments from potential equity investors at about the same time it approached the bank market.

Three banks – Bremer Landesbank, KfW-IPEX and UniCredit – were mandated at the beginning of 2011 and soon began sounding out interest from other lenders. Wpd managed to assemble a financing package early in 2012 that was split between a direct facility from the EIB, partially guaranteed by Danish export credit agency EKF, and commercial bank debt from a club of seven banks – the three initial mandated lead arrangers along with DekaBank, Helaba, ING and Rabobank.

Several banks declined to come in after finding the terms on offer too aggressive. But wpd would have been content with the early results, after winning commitments from a wide pool of lenders at fairly cheap pricing, which was rumoured to be slightly under 300bp. The deal eventually fell apart, however, because when the sponsor failed to sign in equity commitments the bank commitments expired.

Three German stadtwerks – the municipal utilities for Bielefeld, Muenster and Osnabrueck – had planned to invest in the project but withdrew from the process after expressing concerns about the project’s connection to the grid. In November 2012 grid operator TenneT wrote to the German government to warn that it would be unable to connect any more wind farms after 2015, prompting a wave of endeavours to address the bottleneck.

Wpd eventually managed to shore up commitments from a group of other equity investors and approached the bank market again early this year. The deal eventually closed in February this year on broadly similar terms to the last deal agreed, funded through a mixture of EIB direct lending, partly guaranteed by EKF and commercial bank debt.

The deal featured Eu937 in senior debt, split between two EIB loans, a Eu150 million uncovered facility and a Eu300 million loan counter-guaranteed by EKF, as well as a Eu487 million loan from a club of nine banks – BayernLB, Bremer Landesbank, Helaba, HSH Nordbank, ING-DiBa, KfW-IPEX, Rabobank, SEB and UniCredit. The pricing on the bank debt is now slightly in excess of 300bp over Euribor.

The financing is then rounded off with roughly Eu480 million in equity and shareholder loans from the sponsors, which includes the developer wpd (10%), Industriens Pension, PKA, Siemens Project Ventures and the EU-backed Marguerite Fund, which are each taking a 22.5% stake.

The senior debt has a tenor of 10.5 years (including construction) and follows a standard amortisation schedule. The sponsors were able to shorten the maturity of the debt without taking on any refinancing risk in part because the project benefits from the German compression model. This allows sponsors to obtain a higher tariff in the early years of operations to enable a rapid amortisation of wind generators’ debt.

Butendiek is one of a series of mega offshore projects to reach close in Europe, following from Northwind and Lincs last year. Predecessors used substantial sponsor support, whether sponsor loans or mezzanine debt, but wpd had more difficulties with equity. Given signs of a break in the impasse over German offshore transmission and increased investor interest in transmission, forthcoming offshore generation financings should have an easier time. 

Butendiek Offshore Windpark Holding GmbH
STATUS
Financial close 7 February 2013
SIZE
Eu1.417 billion
DESCRIPTION
Financing for the construction of a 288MW wind farm in the German North Sea. The project is expected to be operational by the third quarter of 2015
SPONSORS
wpd (10%), Industriens Pension (22.5%), PKA (22.5%), Siemens Project Ventures (22.5%), Marguerite Fund (22.5%)
MANDATED LEAD ARRANGERS
BayernLB, BremerLandesbank, Helaba, HSH Nordbank, ING-DiBa, KfW-IPEX (facility agent, syndication agent), Rabobank, SEB, UniCredit (documentation agent, syndication agent)
OTHER LENDERS
EIB
ECAS
EKF
SPONSORS’ LEGAL ADVISER
Linklaters
LENDERS’ LEGAL ADVISER
Norton Rose
LENDERS’ TECHNICAL ADVISER
Sgurr
EIB’S LEGAL ADVISER
Ashurst
TURBINE SUPPLIER
Siemens Wind Power
EQUIPMENT SUPPLIER
Ballast Nedam