Photograph: Siemens The financing outlook for European offshore wind developers is finally improving, as more banks start to look towards the sector and liquidity increases, easing fears of a ?funding gap? over the next decade.
Cr?dit Agricole?s Liam O?Keeffe points out that global loan markets are back at pre-credit-crunch levels, while the proportion of loans with maturities longer than three years has risen to 70% of the total.
Margins for project-finance deals are falling gently, while the number of sub-investment-grade deals has started to rise.
By far the biggest use of loans in 2011 was to refinance existing debt, but project finance has also come back strongly, with global project-finance loans reaching $327bn in 2011.
Asia was the world?s biggest project-finance market, with 43% of the total, but the EMEA (Europe, Middle East and Africa) region is not far behind with 39%. Meanwhile, energy accounted for 29% of all project financing last year.
The average size of deals has also increased to just under $350m, almost back to the pre-credit-crunch level. Bankers point to the European Central Bank?s massive Longer Term Refinancing Operation as a ?game changer? that is likely to dramatically increase the ability and willingness of banks to lend.
Most encouragingly of all, O?Keeffe says there are 20 banks that are willing to get involved in the construction phase of offshore wind projects.
Of course, this does not mean that all the issues have been resolved. Most banks are only willing to back projects involving ?large and experienced sponsors? such as the utilities that are developing many of Europe?s largest offshore wind farms.
Many bankers also continue to favour fixed-price engineering, procurement and construction contracts. But as O?Keeffe points out, the fact that a well-established contractor such as Fluor could get things so wrong on the UK?s Greater Gabbard project ? taking charges of $343m in the process ? means the approach is far from guaranteeing a reduction in risk.
Ongoing concerns include supply-chain bottlenecks, how to deal with bad weather and a lack of reliability in areas such as cable-laying.
Yet the appetite and capacity of banks to get involved in offshore wind are growing by the day.
Ben BackwellPublished: Tuesday, March 27 2012
Source: http://www.rechargenews.com/business_area/finance/article309546.ece?WT.mc_id=rechargenews_rss
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