by Jerome a Paris
They say there's not enough money to invest in offshore wind.
I beg to differ.
This has been - again - a very difficult deal to close, and it's taken a lot of people a number of sleepless nights to make it happen. A refinancing of an existing operational project may not sound very exciting or difficult (after all there is no construction risk anymore, we know the project is performing), but what makes this one unusual is, as noted in the press release, that
That means that the banks are not lending to the project company, they are lending to a company that owns a part of the project company, and has only indirect rights on the project assets and revenues, alongside other shareholders. Project finance is about banks have almost full control over the projects (or at least the right to step in at any time), but in this case, the banks don't have that, and have to rely on commitments by the group of shareholders and specific minority rights - ie they can prevent a number of things they don't like from happening, but they cannot force the company to do things they want unless the other shareholders agree. And that's not a position banks are very comfortable with - especially over long periods.
Nevertheless, the banks agreed to lend around 70% of the overall amount of the investment.
What makes this an interesting precedent is that it shows a path for the big utilities, which want to keep control of the projects they invest in, to sell minority stakes in their projects, which allows them to recycle capital, to new types of investors - those that need leverage to invest (as opposed as those that would be willing to put up the whole amount on their balance sheet), without giving up as much control to banks as they would need to in a traditional project finance structure. Here, the minority investors were a pension fund and an infrastructure fund, exactly the types of investors everybody is clamoring to see enter the sector.
So that makes our second transaction this year (out of 4 altogether in the market) and a nice end to what has been a rather volatile, if busy, year.