NuCapital Inc., a closely held Caribbean wind developer, will borrow $53 million to build two projects in Curacao, which is seeking to diversify its energy sources.
The 12-year loan will include a guarantee from the Danish state export credit agency Eksport Kredit Fonden to reimburse lenders if Aqualectra, the state-run utility that’s agreed to purchase the wind farms’ electricity, defaults on its contract, NuCapital Chief Executive Officer Hendrik Hutting said yesterday in a telephone interview.
The loan guarantee helped Curacao attract the developers, Hutting said. The Caribbean island nation, part of the Netherlands Antilles until the country was dissolved in October, is seeking to to expand its use of renewable energy and reduce its dependence on imported oil.
“Without the credit agency it would have been very expensive to go to a commercial bank,” he said. EKF’s guarantee “allows you to get much longer terms. Normal commercial loans rarely exceed 8 years.”
The two 15-megawatt projects will be built with turbines from Randers, Denmark-based Vestas Wind Systems A/S. They will replace two aging wind farms with combined capacity of 12 megawatts.
EKF, based in Copenhagen, will insure the loan and provide half of it, with the other half to be furnished by local lender First Caribbean International Bank Ltd., Hutting said. It is expected to close within two weeks and will carry an annual rate of about 6.5 percent, which includes a 2.5 percentage-point premium to cover EKF’s guarantee.
Brussels-based bank Dexia SA agreed to pay off 30 percent of the value of the loan if Willemstad, Curacao-based NuCapital defaults, he said.
The loan “is a novel concept,” Hutting said. “It’s the type of thing EKF has been using for offshore wind projects,” that are typically high risk. EKF guaranteed business transactions worth almost 14 billion kroner ($2.7 billion) in 2009, according to its website.
Hutting said the wind farms will generate electricity at half the cost of oil, which provides virtually all of the nation’s power.
“We’re going to be saving the island $1 million a month” in energy costs, he said. “We can beat any conventional power plant without incentives or subsidies.”
NuCapital expects to invest $76 million in the project, making it more expensive than wind farms in other countries in the region.
It costs $2 million to build one megawatt of wind power in Brazil, about 21 percent less than what NuCapital is paying, according to Helena Chung, an analyst at Bloomberg New Energy Finance’s Sao Paulo office.
“You have to import the cranes, the trucks, the steel,” Hutting said. “It’s basically a semi-offshore wind farm from a logistical point of view.”