Mainstream Renewable Power Ltd., an Irish company developing 15 gigawatts of projects globally, is tapping China’s clean-energy drive using loans from state banks in tandem with equipment from Chinese manufacturers.
Mainstream obtained loans from state-run China Development Bank Corp. to build wind farms in Chile, said Barry Lynch, head of procurement and project delivery at Dublin-based Mainstream. The financing was an option accompanying Mainstream’s wind- turbine contract with China’s Xinjiang Goldwind Science & Technology Co. (2208), he said in an phone interview.
Lending from China, “relative to others, it is certainly a little more competitive and business-focused to what we need,” Lynch said. “That doesn’t mean there’s any less of a due diligence process or any less from a governance point of view.” He declined to give loan details or amounts.
Chinese state-backed banks signed billions of dollars in credit facilities to help turbine manufacturers expand overseas to combat its slowing home market. Goldwind, China’s second- largest turbine maker, agreed to a 35 billion-yuan ($5.5 billion) financing accord with China Development Bank in January. Sinovel Wind Group Co. also has a finance agreement with the bank.
“Developers seeking finance for projects are attracted to this type of arrangement because the equipment comes with finance and securing finance is the hardest part at the moment,” Dominic FitzPatrick, a partner at London-based law firm Taylor Wessing LLP, said in an interview.
Solar power projects are also financed this way, he said. The firm has been active in China for more than 15 years assisting Chinese companies in their clean-energy expansion and operations in Europe.
Negotiating Finance Deal
W-Power Ltd., a wind developer based in Sofia, Bulgaria, is negotiating a finance deal after it signed turbine contracts with China Ming Yang Wind Power Group Ltd., according to Jonathan Mann, chief executive officer of the company.
Chinese finance was cheaper as Western banks suffering in the debt crisis attach “stronger conditions” to their loans, Mann said.
Chinese state-backed financing of its clean energy manufacturers drew criticism from solar-panel makers led by the U.S. unit of SolarWorld AG (SWV), which said they were using loans to dump panels at lower prices on overseas markets.
Complaints of this nature are wrong, according to Robert Fenner, another partner at Taylor Wessing. The Chinese finance is offered on a “fair market level” and the equipment is more competitively priced, Fenner said.
“The Chinese companies have a work force paid at a much lower level than the Western equivalent, resulting in manufacturing costs that Europe can’t compete with,” he said.
“With the financing accompanying it, that’s a powerful combination,” Fenner said.
“There’s not a turbine manufacturer out there that doesn’t have either a national banking institution or export credit agency available to be used by the customers,” Lynch said.
Western banks are still getting used to wind technology so their loans can take longer, Lynch said. The China Development Bank loans for Mainstream’s Chilean projects are non-recourse project finance, where banks can recoup from the project’s cash flow though not the developers, Lynch said.
The loan tenures, or maturity, are “relatively normal” compared to Western banks, Lynch said. The company is developing the first phase of a potential 240-megawatt project and a 34.5- megawatt park in Chile.
“Goldwind is not a cheap turbine,” Lynch said. “We like it because we deem their technology to be as good as or better than the Western manufacturers,” he said. “The fact that there’s financing available too is just a bonus.”
The company also plans to get new investors including Chinese parties as it studies a potential listing in Hong Kong, Lynch said.
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