In 2011 a group of private investors in Belgium and the Netherlands kick-started the negotiations for the establishment of the hitherto largest offshore wind farm off the coast of Belgium.
The plan was to make the new offshore wind farm, Northwind, even larger than the first offshore wind farm, Belwind, which was initiated by the same group of owners back in 2006.
Offshore wind farms typically require loans with a credit period of 15-17 years to ensure a proper balance between repayment and earnings. But the financial crisis turned the loan finance into a major challenge for Northwind.
”We found that it had become more difficult as well as more expensive to involve the banks in long-term financing. However, the banks would be willing to finance the project if we were able to present a strong business case”, says Francois van Leeuw, CFO, Northwind Offshore Energy.
”We were therefore forced to provide security for the financing before initiating negotiations with banks and financial partners. This was to be achieved by obtaining fool proof contracts with suppliers, guarantees from ECAs and commitments regarding insurance of the wind farm,” says Francois van Leeuw.
- The group of owners behind Northwind had positive experience with EKF, Vestas and other Danish suppliers from the Belwind offshore wind farm. The very first thing the management of Northwind did was therefore to contact EKF to discuss various guarantee solutions.
”EKF has lots of experience with wind energy and having EKF as a guarantor was crucial to the financing as that would ensure a sense of security among the financial partners and owners”, says Francois van Leeuw, CFO, Northwind Offshore Energy.
EKF informed Northwind that we could offer a guarantee up to EUR 300 million but at the same time EKF emphasised the importance of involving the commercial banks as much as possible in order to reduce the share of EKF´s commitment. In view of this, Northwind initiated negotiations with both suppliers, bankers, investors, ECAs and insurance companies.
“Prior to the negotiations with the final group of partners regarding the financing, we had a busy period during which we met with all potential suppliers and financial partners. Our aim was to clarify as many questions as possible before settling down around the negotiation table”, says Francois van Leeuw.
It put the minds of bankers and owners at rest that EKF offered to participate in the project with a larger guarantee framework than subsequently required. This allowed Northwind to close the overall financing agreement in only 7 weeks.
The owners themselves put in 30 per cent of the total project amount equivalent to EUR 850 (approximately DKK 6.4 billion). The loan finance ended up being EUR 595 million of which EUR 195 million is guaranteed by EKF, EUR 100 million is guaranteed by the Belgian ECA ONDD and EUR 35 million is guaranteed by the Norwegian ECA GIEK. The credit period of the guarantees is 15 years after a 2-year construction period.
Facts about the case
- What: Offshore wind farm in Belgium
- Supplier: Vestas Wind
- Size: 216 MW divided between 72 wind turbines
- Construction period: 2011 - 2013
- How much: 850 millioner euro.
- EKF's share: EUR 195 million of the total loan amount worth EUR 595
- EKF product: Project Financing Guarantee
- When: 2013 - 2030
The Northwind project obtained loans from 9 banks and financial partners, among them PensionDanmark who participates with EUR 35 million.
The project has several Danish suppliers: Vestas supplies 72 3 MW offshore wind turbines, Semco Maritime and Bladt Industries install a transformer station whereas Codan insures the wind farm.
The construction of the wind farm is scheduled to commence in 2013 and the first electricity is expected to be delivered in 2014. The production is equivalent to the annual consumption of 230,000 households.
Francois van Leeuw, CFO, Northwind Offshore Energy, praises the strong Danish team behind the Belgium offshore wind turbine projects.
“Vestas has supplied an ideal construction and maintenance of the wind turbines in the Belwind project, and we look forward to cooperating with Vestas on the Northwind project in the years ahead”, says Francois van Leeuw.