June saw Airtricity wrap up financing for yet another Irish wind farm - Bindoo. Nothing much to write home about there. But as the mild panic that precedes any financial close gave way to an eerie calm, it became clear that a subtle shift had taken place. The dust settled to reveal the developers had stolen the bankers' clothes - and are now wearing the trousers

Onshore wind is changing. Where once was a quaint patchwork of small assets and cottage industries, a broader landscape is emerging. A maturing market is going through a process of consolidation.

In a modern-day version of enclosure, a series of acquisitions and portfolio refinancings is seeing the industry's smallholdings swallowed up by large-scale wind farmers, who increasingly are able to set their own rules.

Take Bindoo, for example. Previous financings went something like this: A developer would approach a potential lender with a proposal. The lender would take it away and return with plans for financing. Complex triangular negotiations would ensue. In these it would be the bankers - who after all were sitting on the cash - calling the shots.

Bindoo was different. Funding came from Nord LB, a new partner for Airtricity. Rather than go through the tiresome rigmarole of three-way arbitrage, the sponsor went to the bank with the nearest thing possible to a fait accompli.

'Airtricity approached the bank with all the documents - finance, insurance and the rest - prepared,' explains James Flynn of Laverby Kirby Gilmartin, counsel to the sponsor. 'They presented the bank with a finished deal. All the bank had to do was put a signature on it.'

Certainly good for the sponsors; but not so good for the banks, perhaps. If the market continues on its current  trajectory and such methods become the norm, bankers stand to lose not only influence over deals but also the fees they would otherwise charge for doing the creative financing themselves.

The deal

Bindoo - Airtricity's second largest project in Ireland, the UK and the US - will be a 48MW wind farm in County Cavan. Estimated costs are €70 million (US$89m), of which Airtricity will supply €10 million (US$12.7m) in equity.

'At 85 per cent, gearing is pretty high for this type of deal,' says Airtricity's Manus O'Donnell.

GE will supply 32 1.5MW turbines. The supply contract comes under a global umbrella agreement by which Airtricity is assured machinery for all its projects. The turbine market is constricted and the deal with GE assuages risk in a way that is sure to please the banks.

Nord LB will provide a €60 million (US$76m) senior debt facility in a single tranche. Arrangements for syndication are in place, although a decision to syndicate has not been made. Tenor is 15 years.

The loan is priced 'on a government-style offtake,' reflecting the impact of REFIT - the new Renewable Energy Feed-In Tariff, Ireland's German-style alternative to the renewable obligation scheme in place in the UK.

REFIT, which still needs approving by the European Union, is only due to begin in August, however. As the bank was understandably reluctant to finance the project on the basis of a tariff scheme that did not yet exist, Airtricity had to come up with two PPA proposals - one with REFIT, one without.

A non-REFIT PPA will apply until the new tariff is introduced, after which a portion of equity will be replaced with further debt. Commissioning is scheduled for April 2007, by which time REFIT should be well established.

The offtaker is Airtricity's own supply business. The PPA has 15 year floor price, with actual pricing slightly higher.

While financing for Bindoo is unconnected to other assets, Airtricity has the option to 'bolt' the project onto to its portfolio of Irish, British and American assets, refinanced by Barclays in a €40 million agreement signed in December 2005.  

Passage of the Bindoo deal was reasonably smooth. The only snag of note was a delay in brokering lease agreements between land owners and the bank. Bindoo involved a large number of land owners - between 25 and 30 - and agreements were finalised just four or five days before financial close.

Conclusion

Bindoo sees Airtricity coming of age as a developer in a market that is itself maturing. Future deals are likely to see the company, along with the other large developers, increasingly able to dictate terms.

Bindoo provides confirmation - if any were needed - that onshore wind remains a developer's market.

The project at a glance