Turkey's first non-recourse financed wind farm reached its €220 million signing earlier this month with financial close anticipated within the next few weeks.

The 135MW wind farm known as Rotor is to benefit from financing sourced from three development banks and two commercial banks as guarantors of the debt.

Coupled with the evolving structure of the transaction, Zorlu Enerji's wind farm stands apart not only as a first for Turkey but also for the EBRD which has never before financed a project in the country.

IJ Reporter Verity Ratcliffe considers the landmark transaction and looks ahead to upcoming renewables projects in the country.

The financing

Sole-sponsor Turkish energy company Zorlu Enerji put forward €90 million in equity while the following supplied debt:

• €55 million - IFC
• €45 million - EBRD
• €30 million - DenizBank (€20m) and HSBC (€10m) funded by EIB

Debt sourced from IFC and EBRD carries a tenor of 13 years while the DenizBank/HSBC/EIB portion has an 11-year tenor. Overall, all-in costs of the debt to the sponsor hit around the 500bp mark.

HSBC and DenizBank are counter guarantors on the EIB portion as they will take the risk associated with the debt while EIB will supply the capital.

Linklaters and local law firm Hergüner Bilgen Özeke represented the banks. Clifford Chance and Bezen & Partners represented the sponsor.

Garrad Hassan is technical adviser and JLT is on the insurance side.

Financing was signed on 8 May 2009.

Structuring the commercial component…

Relationship banks HSBC and DenizBank initially joined the project as MLAs with the IFC which committed to the project at an early stage.

Following the global financial downturn, the commercial banks decided to work with development banks with a view to continuing their role structuring the deal and taking the risk on the debt portion as counter guarantors. With this in mind the EBRD and EIB at the start of the year.

Adopting this financing method involving a funder and guarantor as separate parties, allows a financier in a good position to provide cash (EIB) does so and commercial banks are able to participate in the project by taking the risk while keeping liquidity costs to a minimum.

So long as banks are comfortable with the risk profile of the project, such a structure is likely to be used with increasing frequency on upcoming projects to take financing across the finish line.

This structure relies on the continued participation of the development banks. The outlook for this being the case is positive. Previously uninvolved in the Turkish market, the EBRD looks set to continue its presence as it is currently has several projects under consideration.

The future

With financing for the Rotor wind farm concluded and the project slated to come online by the end of the year, Zorlu Enerji is setting its sights on several other renewables projects - including the extension of Rotor.

The second phase would add an additional 110MW capacity to the project. Currently engaged in feasibility stage, Zorlu is yet to approach financiers. However, the sponsor has indicated that it would be keen to follow the same structure with the same participants as the first phase of development.

Nevertheless, Turkey will need to increase its support for such projects if it is to increase its renewables pipeline. A new law that would increase the tariff from its existing €50-55 cent/kWh to €70-80 cent/kWh is currently under consideration.

The passing of such a law would be a welcome progression for developers and financiers as the existing tariff is widely considered to be insufficient to sustain a renewables sector of any size.

Beyond wind

Beyond wind, Zorlu Enerji is progressing the financing of several other renewables projects. A subsidiary of the utility, Zorlu Dogal, is currently engaged in discussions with Turkey's GarantiBank and Akbank to finance a portfolio of hydro geothermal and gas pipeline projects.

The portfolio - which will be financed as a single package - is to consist of seven hydropower projects totalling around 125MW, a 15MW geothermal project and a gas pipeline. In addition, Zorlu Dogal intends to increase the hydro component of the portfolio to around 245MW. The sponsor is currently studying the feasibility of this plan.

Zorlu Enerji is also looking to develop two more hydropower projects in Turkey with a combined capacity of 200MW (120MW and 80MW). These projects, which are to be financed together, are in a very early stage of development and will likely be financed in 2010.

The project at a glance