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Balance sheets to the wind

19 November 2008

European wind developers have had cheap debt and good subsidy for the past three years. How many of the smaller developers will have access to debt in the coming months and is costly offshore expansion now a non-starter? By Ivan Castano.

The £326.5 million ($480 million) Fred Olsen wind portfolio financing has just signed – and while any European wind deal closing in the current lending climate is good news, the terms of the deal are much harsher than wind developers have been used to.

The key changes are not just on debt pricing – margin ratchets from 150bp to 195bp and fees have been upped to 130bp. More significant is that any bank on the 18.5 year loan has an option to call for full repayment in year 12 and although the structure is intended to be added to with new projects in the future, the banks can opt out of funding new assets or sharing security with those assets.

As the credit crunch ups the cost of project finance debt by as much as 125%, many small wind developers are struggling to finance projects, prompting some to cancel or...

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