Centrica Plc, Dong Energy A/S and Siemens AG completed a 425 million-pound ($660 million) funding agreement for a wind farm off the U.K., the first deal of its kind in the country.
Ten banks provided finance for the 270-megawatt Lincs wind park near Skegness in northeast England, Centrica said today in a statement. They include BNP Paribas SA, UniCredit SpA, HSBC Holdings Plc, Nordea Bank AB, Lloyds TSB Bank Plc and Bank of Tokyo-Mitsubishi UFJ Ltd., it said.
The funding agreement for the 1 billion-pound venture marks the first time banks have provided project finance to a U.K. offshore wind farm that’s still under construction, according to Bloomberg New Energy Finance research. Britain is among European nations promoting sea-based turbines to cut emissions and secure energy supply, even as the economy stagnates amid mounting debt.
“The commercial appetite for offshore wind is growing despite the ongoing sovereign-debt crisis,” Fraser Johnston, an analyst at London-based New Energy Finance, said in an e-mail.
The Lincs wind project is due to be fully operational in the first half of 2013. It will generate enough power for 200,000 homes, according to Centrica, which owns a 50 percent stake. Dong, the Fredericia-based Danish utility, and Siemens Project Ventures GmbH each own 25 percent.
“We see a well-functioning and deep project-financing market for offshore wind projects as one of the important funding sources for the development of the sector,” Morten Hultberg Buchgreitz, acting deputy chief executive officer at Dong’s wind-power division, said in a separate statement.
Skandinaviska Enskilda Banken AB, DNB Bank ASA, KfW IPEX Bank GmbH and Abbey National Treasury Services Plc, trading as Santander Global Banking & Markets, also provided finance for the project, according to Centrica.
The 15-year agreement includes debt facilities, letter of credit lines and hedging commitments, according to an e-mailed statement from Lloyds Bank Wholesale Banking & Markets.
About 75 percent of the 1 billion-pound cost for Lincs is the cost of the wind farm itself, while the remainder will pay for a link to bring the power to shore. Centrica, Dong and Siemens are contributing 575 million pounds along with the financing from the banks.
The lenders will provide so-called non-recourse project finance, meaning they recoup their investment from its cash flows without the right to recoup it from the developers.
“Despite the challenging market environment, well-structured projects that are backed by strong relationship sponsors continue to receive the finance required,” Richard Simon-Lewis, senior director for Lloyds Bank’s project-finance renewable-energy team, said in the statement.
Centrica plans to take 75 percent of the venture’s electricity and 50 percent of its Renewable Obligation Certificates, or ROCs, according to Lloyds. The ROC system is the U.K.’s main support for large renewable-energy projects.
Dong will take 25 percent of the power and 25 percent of the ROCs. The remaining certificates will be sold to the energy market by the Lincs project company, Lincs Wind Farm Ltd.