Mitigating risk
Growing market
increase in value to more than US$ 10 billion over the next five years. The
investments involved are so large that the availability of non-recourse
fïnancing is crucial to the market achieving its full potential.'
The main risks to wind farm projects are the possibility of cost overruns
or delays during construction, which can lead to delays in the repayment
schedule,' says Mark Paasschens, Vice President Structured Finance. 'In
addition, offshore projects present greater risks, in terms of logistics and
maintenance, than onshore projects. Every other offshore wind farm, to
date, has been fïnanced with full recourse to the shareholders and some
are in the process of being refïnanced following completion, when the
risks are reduced considerably. We carried out an extensive risk analysis of
the Q7 project, however, and arrived at an innovative fïnancing structure,
which took 18 months to close. The fïnancing structure includes a number
of novel features to mitigate the risks associated with the construction and
long-term operation of wind turbines at sea, including the availability of a
contingent facility to cover potential cost overruns or delays, a cash sweep
mechanism and specially tailored availability guarantees that allow debt
service to continue even during periods of lower than expected availability.'
The fïnancing structure incorporates numerous roles for Rabobank, includ
ing lead arranger, facility agent, hedge bank and also junior lender. The
project, and in particular the structuring of the transaction, has attracted
considerable interest from around Europe. 'Lots of
other banks have tried to get in on the deal, both
before and since it was closed,' Paasschens contin-
ues. They wanted to see for themselves how we
structured the fïnancing and, for this reason, we
were very selective in our invitations.'
Over 30 applications have already been fïled for
further offshore wind farms in the Netherlands
alone. The authorities are waiting for the fïrst two
to become successfully operational, before giving
the go-ahead for more,' says Jongste. 'Others are
being planned in the United Kingdom, Belgium
and Germany, while Denmark already has two
operational and another two under construction.'
'We've been invited by developers to make
proposals for similar projects in Germany, Belgium
and the United Kingdom,' Paasschens concludes.
'Construction of some of these could begin in
2007 and, in general, we're trying to leverage
our experience on other wind farm projects to
become lead financier in several transactions.'
The Word 11
