Despite tight market conditions in the second half of 2008, a total of 11 banks came onboard for Italy's largest greenfield wind farm portfolio to date.

The portfolio - known as Società Energie Rinnovabili (SER) - comprises a total of 16 wind farms located in the Italian regions of Puglia and Sicily.

Ten of the 16 wind farms were eligible for a government loans, prompting the use of a two-tier financing structure.

IJ Reporter Verity Ratcliffe analyses the innovative structure and looks ahead to upcoming projects in the Italian wind sector.

The structure

When complete, the SER portfolio will comprise 16 wind farms totalling 350MW sited in southern Italy - 280MW in Sicily and 70MW in Puglia [Projects Database].

The sponsor, SER and SER1 (junior borrower, wholly-owned by SER), is a joint venture between api nòva energia (50.1 per cent) and Iberdrola Renovables (49.9 per cent).

The initial €576.9 million financing closed on 29 July 2008 andv was structured as follows:

• Facility A - SER 1 wind farm non-eligible debt
• Facility B - SER 1 wind farm eligible debt
• Facility C - SER wind farms
• Two Working Capital Facilities

Ten of the 16 projects were eligible for the government-provided Cassa Depositi e Prestiti (CDP) loan. These loans are available for a maximum of 50 per cent of eligible costs subject to a commercial bank providing debt facilities for the same amount to cover the remaining 50 per cent of eligible costs.

The original structure was refinanced to include these government loans resulting in the following structure:

• Facility A - SER 1 wind farm non-eligible debt
• Bridge Facility - to allow for monthly draw-downs. The CDP can only be drawn down on every 6 months. The bridge can be used as and when it is needed, followed by a pay back by the CDP
• Law 488 Bank Loan - commercial loan fronted by RBS
• Law 488 CDP  - financed only by CDP
• Facility C - SER wind farms
• Two Working Capital Facilities
• VAT Facility

The following banks were involved on the commercial debt side, providing €603.9 million in total:

• RBS (as Fronting Bank for Law 488 compliance) (MLA) - €84.9 million
• BBVA (MLA) - €74 million
• BNP Paribas (MLA) - €74 million
• Calyon (MLA) - €40 million
• Fortis (MLA) - €40 million
• ING (MLA) - €74 million
• Intesa (MLA) - €74 million
• UniCredit (MLA) - €74 million
• Banca delle Marche (lender) - €30 million
• Banca Toscana (lender) - €25 million
• Centrobanca (lender) - €14 million

Hedging was implemented with 2/3 of the total debt hedged against changing interest rates.

The senior term loans were partially amortised over 15 years with a 19 per cent balloon at expiry based on the life of the asset and the repowering potential.

Allen & Overy acted as legal adviser to the banks while Italian law firm Chiomenti Studio Legale represented the sponsor. Other players include technical advisers Garrad Hassan and Poyry, with insurance adviser Marsh and KPMG on financial.

Construction on three of the wind farms has already commenced. The 400 wind turbines needed for the plan will be provided by Gamesa.

Conclusion

Italy is increasingly drawing attention from renewables developers and financiers attracted by good wind conditions and strong government support.

The route to securing the CDP loan - while difficult - is possible to navigate, even for a portfolio as large as SER, if a two-tier approach is adopted.

The success of the portfolio bodes well for upcoming wind projects in Italy that are currently in financing:

• a 450MW wind farm portfolio by Co-Ver Energy Holding (IJ News, 19 December 2008)
• three wind farms (part of a four-wind farm portfolio) by Acciona (IJ News, 15 January 2009)
• a 24MW wind farm in Sardinia (IJ News, 16 January 2009)
• Enel's 90MW wind farm in Sardinia (IJ News, 17 October 2008)
• a proposed offshore wind farm for site off the Sicilian coast (IJ News, 14 July 2008)

A similar portfolio to SER, known as IVPC5, is currently progressing through financing. The 102MW portfolio of wind farms in the Italian regions of Molise and Puglia is set to be financed through €226.9 million debt and €45 million equity sourced from sponsor FIP Energies Nouvelles (IJ News, 21 January 2009).

The project at a glance