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Wind funds looking for investors -- Eolfi in Greece, Poland and France

Two new local investment funds dedicated to wind projects in Greece have been launched by Eolfi, a Paris-based asset management company that develops, finances, builds and operates wind power plant. Eolfi, which is 50% owned by Veolia Environnement, a global environmental services company, hopes the funds will attract EUR 31 million from French retail investors by the closing date of March 31, 2009. The money will be used to develop and build plant mainly in western and central Greece, Thessalonica and the Peloponnese.

To date, Eolfi has built 154 MW of operating assets in France and Greece, has 63 MW under construction and another 152 MW fully permitted. The assets of America's Ridgeline Energy, which was bought by Veolia last year (Windpower Monthly, November 2008), have now also been transferred to Eolfi. This boosts the company's development portfolio to around 6700 MW in Europe and the United States, while the total equity under management amounts to over EUR 200 million.

The two new funds follow the successful launch in 2006 and 2007 of three similar funds dedicated to raising equity for wind projects in France. They attracted a total of EUR 89 million from 12,000 individual investors. As Alain Delsupexhe, founder and president of Eolfi says, "It will be interesting to see how investors respond to the new funds in the current market."

For investors, the main attractions of such "closed-end" infrastructure funds are a tax break of 25% up to a maximum of EUR 12,000 for a single person and EUR 24,000 for a couple; and exemption from capital gains tax. The investment must be held for at least five years and most of the money must be invested in the location specified. Because each fund can own no more than 35% of any one asset, Eolfi will align the two funds to invest jointly, thereby ensuring a majority share. The company expects a net return of at least 13% based on discounted cash flow, assuming no residual value after 20 years and placing no value on green certificates.

Eolfi's other investment vehicle for wind power is French venture capital mutual funds (VCMF). Unlike the local funds, these are targeted at high net-worth individuals and institutional investors. Eolfi's first such fund, launched in 2004 and known as Eolinvest, raised over EUR 69 million and led to more than EUR 350 million of investment. Eolinvest controls over 200 MW in France and Greece.

A second VCMF, Windfall, was launched in 2007, with the aim of installing some 1 GW in France, Greece and Poland. The fund, which plans to close in March, has so far raised EUR 45 million, out of a hoped for EUR 200 million. Delsupexhe expects it to be fully invested by the end of the year.

According to Delsupexhe, France, Greece and Poland are currently the most attractive European markets for investing in wind energy. "They offer the most attractive risk/return profile at the moment because they have the largest growth potential, good wind conditions, a scaling market [high growth plus a steady project flow] and a favourable legal environment for wind with inflation-indexed, 15 to 20 year power purchase agreements," he explains.

Bulgaria and romania

Eolfi has so far identified projects totalling 4350 MW in the three countries. It is likely the next local investment funds, to be launched at the end of the year, will target Poland, though Eolfi is also keeping an eye on the Bulgarian and Romanian markets.

To reduce risk and maximise returns, Eolfi primarily buys fully consented projects from independent operators. It also favours projects that offer the possibility of an extension, giving the company more megawatts at marginal cost.

Once an investment target is selected, Eolfi's specialist teams manage all aspects of the project, from structuring the financing -- using equity from both local and mutual investment funds -- to debt financing, applying for subsidies and building and operating the plant. Typically, five to eight years later Eolfi sells the aggregated plant. Its most likely customers are major European utilities, insurance companies, pension funds and other large buyers looking for strategic market share. Currently, the firm is considering selling the first tranche of its Eolinvest fund. The outcome will provide another interesting indicator of the current appetite for wind power among investors.

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