In 2009, Meridian Energy Limited in New Zealand ordered 28 wind turbines from Siemens Wind Power in Denmark and started looking for viable financing for the acquisition.
Meridian has previously financed wind plants through bond loans, the drawback being that these loans have to be repaid in a single instalment as soon as the loan expires.
Instead, Meridian was now looking for an alternative type of financing based on repayment in instalments over the term of the project. This would allow the loan to be repaid as the revenue from the project's sales of energy started to roll in.
It typically takes between 10-15 years to recoup an investment in a wind farm. Owing to the financial crisis, Meridian's bank, ANZ Bank, was only able to offer a loan with a 5-year repayment term.
“Meridian had access to traditional forms of finance but recognised the opportunity EKF provided due to the Siemens supply contract to diversify its funding sources and extend the average maturity of its debt profile,” says Andrew Lawson, director for Structured Asset & Export Finance, Specialised Lending, at ANZ.
- Meridian's bank, ANZ Bank, knew EKF from earlier projects. The bank contacted EKF concerning the options for Meridian to borrow the money for the Danish wind turbines via the Danish export loan scheme.
EKF agreed to assess the options and proceeded to take a closer look at the actual export order.
”EKF delivered the long dated funding to Meridian. While diversity of funding source was the main attraction, Meridian also appreciated EKF's ability to deliver market-competitive pricing.” Andrew Lawson, Director, Structured Asset & Export Finance Specialised Lending, ANZ Among others, EKF had to make sure that that the conditions regarding Danish economic interest would be fulfilled. EKF also assessed the buyer's solvency, project finances and other risk factors.
“The EKF team was outstanding and EKF was sensitive to Meridian's requirements. EKF’s new funding program required some explanation and negotiation and EKF approached this in a positive, constructive manner. EKF executives flew to New Zealand and spent time with both ANZ and Meridian senior management to build on their understanding of the company, its renewable energy strategy and growth opportunities,” Andrew Lawson says.
As part of the financing, ANZ Bank signed a general agreement with EKF – a so-called LPAA (Loan Purchase Assignment Agreement). An LPAA stipulates a number of conditions for borrowing under the Danish export loan scheme.
What: Onshore wind farm in New Zealand
Supplier: Siemens Wind Power A/S
Size: 420 MW divided between 28 wind turbines
EKF's share: NZD 150 million
EKF Product: Export Loan and Buyer Credit Guarantee
When: 2010 - 2025
EKF offered an export loan with a repayment term of 15 years and covered by a buyer credit guarantee. The loan runs from completion of the wind farm, and the guarantee provides security for ANZ Bank. The guarantee covers the risk of Meridian not repaying the loan.
The export loan of NZD 150 million gave Meridian better financing of the wind farm than the company could have achieved from bond loans and from Australian and New Zealand banks.“ANZ will seek to partner with EKF whenever Danish exporters venture in to ANZ franchise markets (Australia, New Zealand and Asia). ANZ's local knowledge and EKF's support for long-dated finance present a very attractive combination for ANZ's clients” Andrew Lawson says.
The export loan from EKF will potentially pave the way for more exports of Danish wind turbines to Australia and New Zealand in future, as both ANZ and Meridian are now familiar with EKF's possibilities for facilitating financing.