Offshore developers must give investors certainty

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Richard Heap
March 27, 2015
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Offshore developers must give investors certainty

There is no lack of financial institutions that want to be involved with Europe’s offshore wind sector. But what do developers need to get funding at the best price?

This was one of the main discussion points at our Quarterly Drinks networking evening in London last week, which featured a Q&A session with Carol Gould, head of power and renewables in the European investment banking division at Bank of Tokyo Mitsubishi.

The bank has been a keen backer of European offshore wind. Last April, it was part of the group involved in a £370m refinancing of the UK Green Investment Bank and Marubeni’s 50% stake in the 210MW Westermost Rough; and this month it was one of ten lenders in an €840m funding deal at the 332MW Nordsee One.

For Gould, the answer to that opening question is pretty simple: offshore wind developers need to offer long-term certainty over the cost of building and maintaining projects. If they offer large risks to financiers then they will have to pay more for their financial support.

Such deals are not unheard of. Law firm Freshfields Bruckhaus Deringer identified in its ‘European Offshore Wind 2014’ report last July that Dong Energy has used such a structure in most of its divestments of stakes in European offshore wind farms since 2010.

Dong has succeeded in attracting backers at pre-operating stages because, in most cases, it has offered investors an ‘EPC wrap’. This means it retains liability for construction risk and commits to completion at a fixed price by a fixed date. This protects investors.

There are a couple of reasons Dong can do this.

First, it is a leader in offshore wind so has a good knowledge of the risks; and second, it is backed by the Danish government, which is a nice backer to have if things do go wrong.

However, no other major developers have followed the ‘EPC wrap’model, and so they must look at other ways to remove risk.

This means having enough money set aside in case there are problems in the construction stage or, later on, with operations and maintenance. Some financiers are concerned about whether developers have set aside enough money in case things do go wrong. The risks of such projects are growing as projects get further offshore and become more complex.

And when it comes to operations and maintenance, the message to developers is they can avoid taking on some risks by getting long-term contracts with equipment manufacturers. This certainty can be passed directly on to their prospective financial backers.

Make no mistake, there is a lot of liquidity in the market. However, banks want to make sure they are working with people that have a good understanding of the market; and with enough capital in reserve to cope with problems if and when they arise.

So to get the most competitive finance, developers need knowledge and money. Sounds simple when you put it like that, doesn’t it?

There is no lack of financial institutions that want to be involved with Europe’s offshore wind sector. But what do developers need to get funding at the best price?

This was one of the main discussion points at our Quarterly Drinks networking evening in London last week, which featured a Q&A session with Carol Gould, head of power and renewables in the European investment banking division at Bank of Tokyo Mitsubishi.

The bank has been a keen backer of European offshore wind. Last April, it was part of the group involved in a £370m refinancing of the UK Green Investment Bank and Marubeni’s 50% stake in the 210MW Westermost Rough; and this month it was one of ten lenders in an €840m funding deal at the 332MW Nordsee One.

For Gould, the answer to that opening question is pretty simple: offshore wind developers need to offer long-term certainty over the cost of building and maintaining projects. If they offer large risks to financiers then they will have to pay more for their financial support.

Such deals are not unheard of. Law firm Freshfields Bruckhaus Deringer identified in its ‘European Offshore Wind 2014’ report last July that Dong Energy has used such a structure in most of its divestments of stakes in European offshore wind farms since 2010.

Dong has succeeded in attracting backers at pre-operating stages because, in most cases, it has offered investors an ‘EPC wrap’. This means it retains liability for construction risk and commits to completion at a fixed price by a fixed date. This protects investors.

There are a couple of reasons Dong can do this.

First, it is a leader in offshore wind so has a good knowledge of the risks; and second, it is backed by the Danish government, which is a nice backer to have if things do go wrong.

However, no other major developers have followed the ‘EPC wrap’model, and so they must look at other ways to remove risk.

This means having enough money set aside in case there are problems in the construction stage or, later on, with operations and maintenance. Some financiers are concerned about whether developers have set aside enough money in case things do go wrong. The risks of such projects are growing as projects get further offshore and become more complex.

And when it comes to operations and maintenance, the message to developers is they can avoid taking on some risks by getting long-term contracts with equipment manufacturers. This certainty can be passed directly on to their prospective financial backers.

Make no mistake, there is a lot of liquidity in the market. However, banks want to make sure they are working with people that have a good understanding of the market; and with enough capital in reserve to cope with problems if and when they arise.

So to get the most competitive finance, developers need knowledge and money. Sounds simple when you put it like that, doesn’t it?

There is no lack of financial institutions that want to be involved with Europe’s offshore wind sector. But what do developers need to get funding at the best price?

This was one of the main discussion points at our Quarterly Drinks networking evening in London last week, which featured a Q&A session with Carol Gould, head of power and renewables in the European investment banking division at Bank of Tokyo Mitsubishi.

The bank has been a keen backer of European offshore wind. Last April, it was part of the group involved in a £370m refinancing of the UK Green Investment Bank and Marubeni’s 50% stake in the 210MW Westermost Rough; and this month it was one of ten lenders in an €840m funding deal at the 332MW Nordsee One.

For Gould, the answer to that opening question is pretty simple: offshore wind developers need to offer long-term certainty over the cost of building and maintaining projects. If they offer large risks to financiers then they will have to pay more for their financial support.

Such deals are not unheard of. Law firm Freshfields Bruckhaus Deringer identified in its ‘European Offshore Wind 2014’ report last July that Dong Energy has used such a structure in most of its divestments of stakes in European offshore wind farms since 2010.

Dong has succeeded in attracting backers at pre-operating stages because, in most cases, it has offered investors an ‘EPC wrap’. This means it retains liability for construction risk and commits to completion at a fixed price by a fixed date. This protects investors.

There are a couple of reasons Dong can do this.

First, it is a leader in offshore wind so has a good knowledge of the risks; and second, it is backed by the Danish government, which is a nice backer to have if things do go wrong.

However, no other major developers have followed the ‘EPC wrap’model, and so they must look at other ways to remove risk.

This means having enough money set aside in case there are problems in the construction stage or, later on, with operations and maintenance. Some financiers are concerned about whether developers have set aside enough money in case things do go wrong. The risks of such projects are growing as projects get further offshore and become more complex.

And when it comes to operations and maintenance, the message to developers is they can avoid taking on some risks by getting long-term contracts with equipment manufacturers. This certainty can be passed directly on to their prospective financial backers.

Make no mistake, there is a lot of liquidity in the market. However, banks want to make sure they are working with people that have a good understanding of the market; and with enough capital in reserve to cope with problems if and when they arise.

So to get the most competitive finance, developers need knowledge and money. Sounds simple when you put it like that, doesn’t it?

There is no lack of financial institutions that want to be involved with Europe’s offshore wind sector. But what do developers need to get funding at the best price?

This was one of the main discussion points at our Quarterly Drinks networking evening in London last week, which featured a Q&A session with Carol Gould, head of power and renewables in the European investment banking division at Bank of Tokyo Mitsubishi.

The bank has been a keen backer of European offshore wind. Last April, it was part of the group involved in a £370m refinancing of the UK Green Investment Bank and Marubeni’s 50% stake in the 210MW Westermost Rough; and this month it was one of ten lenders in an €840m funding deal at the 332MW Nordsee One.

For Gould, the answer to that opening question is pretty simple: offshore wind developers need to offer long-term certainty over the cost of building and maintaining projects. If they offer large risks to financiers then they will have to pay more for their financial support.

Such deals are not unheard of. Law firm Freshfields Bruckhaus Deringer identified in its ‘European Offshore Wind 2014’ report last July that Dong Energy has used such a structure in most of its divestments of stakes in European offshore wind farms since 2010.

Dong has succeeded in attracting backers at pre-operating stages because, in most cases, it has offered investors an ‘EPC wrap’. This means it retains liability for construction risk and commits to completion at a fixed price by a fixed date. This protects investors.

There are a couple of reasons Dong can do this.

First, it is a leader in offshore wind so has a good knowledge of the risks; and second, it is backed by the Danish government, which is a nice backer to have if things do go wrong.

However, no other major developers have followed the ‘EPC wrap’model, and so they must look at other ways to remove risk.

This means having enough money set aside in case there are problems in the construction stage or, later on, with operations and maintenance. Some financiers are concerned about whether developers have set aside enough money in case things do go wrong. The risks of such projects are growing as projects get further offshore and become more complex.

And when it comes to operations and maintenance, the message to developers is they can avoid taking on some risks by getting long-term contracts with equipment manufacturers. This certainty can be passed directly on to their prospective financial backers.

Make no mistake, there is a lot of liquidity in the market. However, banks want to make sure they are working with people that have a good understanding of the market; and with enough capital in reserve to cope with problems if and when they arise.

So to get the most competitive finance, developers need knowledge and money. Sounds simple when you put it like that, doesn’t it?

There is no lack of financial institutions that want to be involved with Europe’s offshore wind sector. But what do developers need to get funding at the best price?

This was one of the main discussion points at our Quarterly Drinks networking evening in London last week, which featured a Q&A session with Carol Gould, head of power and renewables in the European investment banking division at Bank of Tokyo Mitsubishi.

The bank has been a keen backer of European offshore wind. Last April, it was part of the group involved in a £370m refinancing of the UK Green Investment Bank and Marubeni’s 50% stake in the 210MW Westermost Rough; and this month it was one of ten lenders in an €840m funding deal at the 332MW Nordsee One.

For Gould, the answer to that opening question is pretty simple: offshore wind developers need to offer long-term certainty over the cost of building and maintaining projects. If they offer large risks to financiers then they will have to pay more for their financial support.

Such deals are not unheard of. Law firm Freshfields Bruckhaus Deringer identified in its ‘European Offshore Wind 2014’ report last July that Dong Energy has used such a structure in most of its divestments of stakes in European offshore wind farms since 2010.

Dong has succeeded in attracting backers at pre-operating stages because, in most cases, it has offered investors an ‘EPC wrap’. This means it retains liability for construction risk and commits to completion at a fixed price by a fixed date. This protects investors.

There are a couple of reasons Dong can do this.

First, it is a leader in offshore wind so has a good knowledge of the risks; and second, it is backed by the Danish government, which is a nice backer to have if things do go wrong.

However, no other major developers have followed the ‘EPC wrap’model, and so they must look at other ways to remove risk.

This means having enough money set aside in case there are problems in the construction stage or, later on, with operations and maintenance. Some financiers are concerned about whether developers have set aside enough money in case things do go wrong. The risks of such projects are growing as projects get further offshore and become more complex.

And when it comes to operations and maintenance, the message to developers is they can avoid taking on some risks by getting long-term contracts with equipment manufacturers. This certainty can be passed directly on to their prospective financial backers.

Make no mistake, there is a lot of liquidity in the market. However, banks want to make sure they are working with people that have a good understanding of the market; and with enough capital in reserve to cope with problems if and when they arise.

So to get the most competitive finance, developers need knowledge and money. Sounds simple when you put it like that, doesn’t it?

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Become a member of the 6,500-strong A Word About Wind community today, and gain access to our premium content, exclusive lead generation and investment opportunities.