Wind energy - not just hot air
project finance
T
Rabobank Internationals project finance team (RIPF) has just conduded
another of what it hopes will be many future international deals in the fast-
growing sector of wind energy. The unit recently played a leading role in the
arranging and financing of one of the largest wind farms in Germany, and thus
gained a foothold in a potentially lucrative region traditionally dominated by
German banking competitors. At the same time, it took an important step
towards its stated strategie goal of becoming a leading global player in a sector
which is now coming into its own.
Growing market
Energy finance
Winning mandates
What sNewS Issue 6-June 1999
he project is named after Midlum, a
Ptoast north of Bremerhaven. Soon, it will
play host to an array of 70 wind turbines
generating 35 MW of power; the largest
wind farm in Germany to date. The
realization of this dream required DEM 70
million (EUR 37.8 million) in syndicated
financing, which RIPF arranged and
underwrote for the project's American and
European developers. It also included an
additional private placement in Germany
valued at DEM 20-30 million (EUR 10.2-
15.3 million). What's more, soon after the
Midlum transaction, two further German
wind farm mandates, involving invest-
ments totalling DEM 80 million (EUR 41
million), were also received. 'Traditionally,
RIPF was a participant in international
project finance. Increasingly, we are arran
ging and underwriting major projects as
Mvell,' says Wim Blaasse, head of RI pro
ject finance. 'It comes as a surprise to some
people, hut wind energy happens to be a
very fast-growing niche market. The
Midlum deal was an important interna
tional first step, and it gave us a foot in the
door of a sector whose opportunities are
only growing more important with time.'
To date, wind energy projects have tended
to be relatively small in comparison to
major infrastructure works such as hydro-
electric power plants. On the Dutch
market, for instance, where we have
already financed some 12 wind farms to
date, the average deal size was up to NLG
30 million (EUR 13.6 million). These were
financed by highly lucrative domestic tax
leases. Today, however, not only are
fcjndividual turbines and wind farms
'becoming progressively larger, and thus
more important in the overall energy mix,
but financing their construction is a
commitment that dovetails perfectly with
Wim Blaasse takes the market by storm
our stated aim of promoting economically
viable concepts of sustainable develop-
ment, cleaner production, and ecological
efficiency. Moreover, the combination of
ecological concerns and government tax
incentives is driving the wind energy
market into a phase of remarkable growth,
with some estimates projecting a threefold
increase over the next three years. A recent
survey by the Danish consulting firm
BTM, for example, predicts that installed
global capacity will rise from the present
10,153 MW to some 31,000 MW in the
year 2003. Much of the growth will be in
Germany and the United States, both
stable industrialized markets that perfectly
fit the risk profile required for project
finance - which by definition involves
credits of long duration. We are already at
an advanced stage of negotiation on
several other large deals in these markets;
indeed, we have been offered the role of
co-arranger for three US wind farm deals,
each of which involves 100 MW plants for
a unit of the US energy market giant,
Enron. Other European states, not least
Turkey, are also slated for rapid growth.
RIPF has established a strong track record
in all its target project finance sectors to
date. Starting from scratch eight years ago,
for example, it has now become a leading
financier of energy-efficient and environ-
mentally-friendlier electricity/heat co-
generation plants, and can boast corporate
food and agribusiness clients such as
Aviko, Lamb Weston Meijer, and Cerestar
Benelux. Co-generation plants now
account for about a fifth of the total Dutch
electricity grid; many of these plants were
financed by RIPF and, combined with a
large portfolio of foreign co-generation
projects, have accounted for about half the
unit's current total deal flow. Indeed, we
arranged and syndicated the finance for
the soon-to-be-opened NLG 540 million
(EUR 245 million) Akzo Nobel/Edon co-
generation plant in Delfzijl, the
Netherlands, the largest and most energy
efficiënt plant of its type to be built to
date. Moreover, in a strong example of
cross-border, cross-functional cooperation
within RI, the structured finance depart-
ment is also arranging a large cross-border
lease on that project's assets.
In addition to sustainable energy and
large energy projects, the RIPF unit,
which has centres of competence both in
Utrecht and London, is also involved in
health care and water-related financing
(which will be covered in July's What's
NewS). According to a recent Arthur D.
Little consultants report, RIPF enjoys a
strong if not dominant market position in
the UK health care sector, where the
government has been an EU pioneer in
private sector hospital construction
initiatives and we have arranged a
number of sizable deals. Such privati-
zation has also been an important factor
in the UK water industry as well, which
is setting trends that may potentially have
European-wide implications, and where
we have also had considerable success in
winning mandates. RIPF's growing
activity in arranging and underwriting
projects such as the Midlum wind farm
generates attractive fees and a strong
ROS-add. Last year, RIPF generated
income of some NLG 30 million (ELIR
13.6 million), and the unit has since been
busily adding important colours to our
total spectrum of products and services.
