Every day newspapers are full of the latest Eurozone crisis. In 2010, Tom Murley from private equity firm HgCapital described the economy to Wind Directions as having had the equivalent of “open-heart surgery”. Today, he says: “Depending on what happens with the Eurozone we may be wheeling the economy back into surgery again.”
The offshore wind energy industry is particularly vulnerable to the current squeeze. Banks are now having to pay more for the long-term loans the sector requires, so they are becoming more reluctant to offer them.
According to banker Marc Schmitz from Rabobank, the risk margin for bank loans to offshore projects increased from 1.9% to 2.3% between September and December 2011 alone. Because of this, the banks are now preferring smaller, shorter loans, and often loans to offshore projects are now split between as ten or more banks.
Indeed, according to Murley, lenders have also become more selective about the countries they lend to, making the price of project debt higher for southern Europe than for northern Europe.
However, other financing solutions are opening up. Institutions like the European Investment Bank (EIB) or Germany’s state-owned development bank, KFW, are stepping into the gap. Another even newer source of capital is pension funds such as PensionDanmark, which has invested in Danish offshore wind energy.
And on a positive note, these new offshore wind investors are likely to remain involved in the sector even once the financing squeeze lessens.
“Once the new stakeholders are in, there’s no reason why they wouldn’t stay in,” comments Mark Porter from Ernst & Young. “And if you have a wider stakeholder group you have more flexibility as a project developer – it’s always beneficial to have more stakeholders.”
Read the full article in the latest Wind Directions.