Project Finance for Offshore Wind Power

Transcription

1 Project Finance for Offshore Wind Power Hamburg, 12 th May 2009 Heiko Ludwig Head of Energy Structured Finance Europe

2 Group Overview Our business model is client-oriented. Private and Commercial Customers Corporate Customers Market leader in the old duchy of Braunschweig and in Northern Germany with around 1 mn clients in Braunschweigische Landessparkasse, Bremer Landesbank and NORD/LB Luxembourg with private customers, small and medium-sized companies. Strongest German retail bank around the Baltic Sea with Bank DnB Nord Savings Bank Network As financial service provider for regional governments and municipalities as well as a central bank for savings banks NORD/LB is business partner of its associated savings banks for the consultancy of medium-sized companies, industrial settlements, infrastructure measurements and in housing support First addressee for medium-sized companies in Northern Germany; specialist for agricultural banking and housing Structured Finance Object based financings of medium-sized lending volumes; long lasting international project experience; specialised knowledge in structuring and syndication; concentration on selected asset classes: Ship and aircraft finance Renewable energies, infrastructure, industrial projects and land based transportation Commercial real estate finance together with Deutsche Hypo Financial Markets Broad range of products for client basis as well as special focus on institutional clients 2

3 Group Overview Focus on growth industries. Transport + Logistics Renewable Energy Amongst the top three ship financers and the top five aircraft financers worldwide Ship finance: approx Ships in portfolio, Volume of finance: around 19 bn Euro Aircraft finance: approx. 600 aeroplanes in portfolio, Volume of finance: around 7 bn Euro One of the leading banks with a volume financed of more than 3.5 bn Euro worldwide Infrastructure Real Estate Banking With a financing volume of around 1.6 bn Euro worldwide the bank has a strong position (e.g. Public Private Partnerships in the fields of schools, public buildings, justice and administration) With the take-over of Deutsche Hypothekenbank NORD/LB belongs to the leading group of Landesbanks and mortgage banks in commercial real estate business with a financing volume of around 20 bn Euro worldwide Industrial Projects First addressee for project and export finance for our corporate clients 3

4 Group Overview National and international business operations and located at all important financial centres. Madrid Helsinki Tallinn Copenhagen Riga BremenHamburg Vilnius Amsterdam Schwerin Hannover Berlin London Luxembourg Magdeburg Braunschweig Düsseldorf Warsaw Frankfurt Paris Munich Zurich Head offices Hannover Braunschweig Magdeburg German branches Frankfurt Hamburg Schwerin And more than 100 branches of Braunschweigische Landessparkasse Worldwide branches London New York Singapore Shanghai Representative offices: Beijing, Moscow, Mumbai and Paris Subsidiaries and bank holdings Bremer Landesbank, Bremen Deutsche Hypothekenbank (Hannover, Berlin, Düsseldorf, Munich, Amsterdam, London, Madrid, Paris) NORD/LB (Luxembourg) NORD/LB COVERED FINANCE BANK (Luxemburg) Skandifinanz Bank AG (Zurich) Bank DnB NORD A/S Helsinki Copenhagen Riga Tallinn Vilnius Warsaw 4

5 Group Overview Our subsidiaries and holdings are integral parts of our business model. Corporate Customers Ships and aircraft Energy, infrastructure Financial Markets 1) 2) Private and corporate customers North-west Germany Ship finance Commercial real estate finance Private and commercial customers Private Banking Treasury Private and corporate customers on teh Baltic rim 2) Funding of savings banks and public authorities 1) Incorporated under public law with partial legal capacity 2) NORD/LB GIROZENTRALE ensures that the banks and financial institutions included in the Group accounts as wholly-owned subsidiaries of NORD/LB can meet their obligations. 5

6 Group Overview Strong support from our owners. Savings bank associations represent 73 savings banks with more than 12 million clients. Ownership structure Land Saxony-Anhalt Land Lower Saxony 41.75% 8.25% 37.25% Savings banks association in Lower Saxony 7.53% 5.22% Special purpose holding association of the savings banks in Mecklenburg-Western Pomerania Savings banks holding association in Saxony-Anhalt 6

7 Group Overview NORD/LB Group is one of the leading Arrangers in the European Renewable Energy Project Finance Market Wind power onshore Solar (PV / Thermal ) Biomass Wind power offshore 7

8 Referenzen 2008/2009 VARE Holdings, Belgium Biomass and Woodpellet Plant Gruig Wind Farm BOREAS Wind Farm Portfolio Garves Wind Farm DANU Wind Farm Portfolio Burton Wold Wind Farm DANU Wind Farm Portfolio 50,000 tpa pellets; 12 MWth; 5 MW 25,800, MW 38,000, MW 31,900, MW 24,600,000 Senior debt facilities Mandated lead arranger Senior Debt Facilities Mandated Lead Arranger Senior Debt Facilities Mandated Lead Arranger Senior Debt Facilities Mandated Lead Arranger Onshore Wind Portfolio Wind Farm Portfolio Havasnas Wind Farm Eurowind Wind Farm Portfolio Solar Park Turnow-Preilack, Germany MW 326,500, MW 140,000, MW (Germany, France & Ireland) 53 MW 135,000,000 Senior Debt Facilities Mandated Lead Arranger Senior Debt Facilities Mandated Lead Arranger Senior Debt Facilities Mandated Lead Arranger Senior Debt Facilities Mandated Lead Arranger /

9 3 Awards for Nord/LB in 2008 European Wind Deal of the Year 2008 Fred Olsen Wind Holdings (UK) European Renewable Deal of the Year 2008 Fred Olsen Wind Holdings (UK) Renewables Deal of the Year 2008 Havsnas Windfarm (Sweden) 9

10 Renewable Energy Finance Trends 2007/2008: Large Project Financings / Underwritings Changing/new support regimes (e.g. PV in Spain) Portfolio Financing Programme Finance / Framework Agreements Turbine Financing Offshore Wind Financing 10

11 Offshore Wind Offshore projects in Europe operational offshore wind farms Source: EWEA offshore report 2009 planned / under construction Offshore wind capacity currently installed in Europe (Denmark, UK, Netherlands) Ambitious offshore wind targets will drive construction boom in the North Sea (UK & Germany) It is expected that 25-40% of these projects will seek project finance as financing source 11

12 Offshore Wind Offshore projects in the North and Baltic Sea online approved under consideration 12

13 Project Finance for Offshore Windfarms Offshore Wind Power a senior lenders view or what we know so far: Capital requirements are huge who and how will the projects be financed? On-balanced sheet/corporate funding versus project finance Different Risk Profile to onshore wind: Turbine Technology - Vestas (3MW), Siemens (2.3 & 3.6MW) significant installed offshore capacity - Bard (5MW), Multibrid (5MW), Repower (5MW), Nordex (2.5MW) Construction Phase (multicontract strategies versus turnkey contract/epc wrap) - Interface Risk, Weather Risk, Vessel, Cost Increase (Contingency), Operating Phase - Energy Yield, Availability, O&M concept, spares, availability of vessels, Project Sponsors (ownership) - Industrial / actively involved sponsors versus pure investors only 13

14 Project Finance for Offshore Windfarms Offshore Wind Power Senior Lenders Risk: Risk Profile drives general bankability (project finance bankability) Risk Analysis (regulatory, technical, legal, Insurance, Contractor/Counterparty Risk, Market Price ( in certificate-styled support regimes )) - Senior Lenders do not take on material regulatory/permitting risk - Technical risk in construction / operational phase within acceptable range -> standard within project finance is well-known / proven technology -> Strong and experienced O&M contractor (min 5 year tenor) - Contract framework -> Clear and acceptable risk allocation, interface and co-ordination risk, contract complexity, - Counterparty Risk -> strong and reliable commitment by (bankable) major project contractors (warranties, guarantees,.) - Market Price Risk (e.g. UK, Sweden, ) -> not applicable for feed-in tariff markets but for certificate support regimes 14

15 Project Finance for Offshore Windfarms Project Finance in Offshore Wind Power Zephyr Q7 C-Power???

16 Renewable Energy Finance and the Credit Crunch - Boom in the sector continued for the H [$ 68bn (+41% H1 2007) new investments] - Credit Crunch impact in H [$ 55bn (-18% H2 2007) new investments] Capital Liquidity Crisis Bank Market Availability of credit Risk Adjustment 16

17 Renewable Energy Finance and the Credit Crunch Liquidity Project Finance requires long-term funding Limited availability of long-term liquidity in wholsale market High liquidity/funding cost for senior lenders Construction Financing is not a real alternative Mini-Perm Structures Third Party Liquidity with senior lenders taking the risk - e.g. KfW Umweltprogramm, EIB, EKF, others Third Party Risk Participants 17

18 Trends in Renewable Energy Finance 2008/2009 Senior Debt Capacity Less long-term senior debt available Changed / reduced lending appetite for individual lenders Syndication market is not working (and might not come back at all) Leading MLAs are reluctant to offer substantial underwritings on larger projects Bank Club approach as alternative can be very time consuming Higher margins (driven by higher cost of liquidity) combined with tougher financing terms Relationships which projects can be prioritised by Banks 18

19 Renewable Energy Finance and the Credit Crunch Underwriting/Syndicating the old modell MLA(s) EUR 100m EUR 100m Arranging, Structuring & Underwriting e.g.eur 800m underwriting for an offshore project financing structuring Co-Underwriter technical, legal and insurance related due diligence financial modelling (scenario & stress testing) market testing Syndication Process EUR 100m Financial Close EUR 75m EUR 75m EUR 75m EUR 75m EUR 50m EUR 50m EUR 50m EUR 50m 19

20 Renewable Energy Finance and the Credit Crunch Underwriting/Syndicating versus Bank Club Approach Underwriting MLA(s) Arranging & Structuring Financial Close Syndication Process Bank Club Financial Close 20

21 Renewable Energy Finance and the Credit Crunch Risk Appetite (Project Ratings) Mature versus new markets Different Support Regimes: e.g. Feed-In Tariff versus Certificate Markets Established Technologies Construction and O&M contracts Project Parties Market Price Risk (Biomass, Certificate-style support systems) Project Ratings trigger banks capital usage 21

22 Project Finance for Offshore Wind Power Risk Appetite (Project Ratings) Offshore wind projects generally have a higher / more complex risk profiles Technology is not as proven as in other established sectors (e.g. onshore wind & conventional power) Multi-contract structures (allocation of responsibilities and risks, handling of interfaces, programme) Project Parties (expertise, experience, project management,explicit and clear commitment, sufficient financial strength to cover commitment) O&M / Availability risk what are realistic long-term operating cost? Financial Structure (construction cost budget/contingency, tenor, covernants) What is the Offshore Wind Power risk profile that triggers sufficient bank appetite? 22

23 Outlook Smart Bank Club Approach for Large Offshore Wind Projects feedback Bank Club Phase 1 Phase 2 Bank Club Advising / structuring bank club Preliminary due diligence (external advisers are already involved) Assessing of overall risk appetite Financial Close 23

24 Outlook Continued and growing political support (Climate Change threat and independency of energy supply) Stable and predictable long-term cash flows mid/long term outlook for renewable energy finance is positive Stable support regimes and increased targets for renewable energy Generally, renewable energy projects (wind/solar) are isolated from economic cycles 24

25 Trends in Renewable Energy Finance 2008/ : Things to keep in mind Long-term liquidity is a scarce commodity Project Finance debt capacity Risk adjustment within project finance banking market Bank Club Approach require different strategies Turbine Suppliers / contractors need to stay commited/involved (financially) strong project parties (strategic alliances, ) Third parties risk/liquidity involvement (EKF, KfW, EIB, ) Opportunity cost (onshore wind, solar, conventional power, infrastructure) Ongoing assessing / testing of project finance banking market 25

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27 Contact Heiko Ludwig Head of Energy Origination Structured Finance Europe NORD/LB Norddeutsche Landesbank Girozentrale London Branch 71 Queen Victoria Street London EC4V 4NL Phone: +44 (0)