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United Kingdom

Capital markets tapped in financing first -- Newcomer steps in with big portfolio and Breeze Two Eurobonds

In perhaps the largest ever deal of its kind, EUR 326 million has been raised from the international capital markets by private investment management firm Christofferson Robb & Company as long term debt finance for a portfolio of 39 European wind farms. The projects, totalling 335 MW, are located in Germany and France and were acquired by the London company -- a relative newcomer to wind -- over the past year.

The deal is the first international financing where renewable energy infrastructure has been funded directly from the capital markets. It effectively makes traditional securitization techniques available for financing renewable energy projects.

The finance was raised in two lots of structured Eurobonds, dubbed "Breeze Two," arranged by Hypovereinsbank (HVB) of Germany. The 20-year senior bonds are rated BBB by ratings agencies Standard & Poor's and Fitch, while the ten year subordinate bonds are rated BB+. HVB underwrote and sold the bonds to a wide range of investors, including insurance companies, banks, pension funds and asset managers. The interest and repayments on the loans will come from the sale of electricity from the wind farms.

Breeze Two is the second bond issue for wind to be overseen by HVB. Its first ground-breaking bond-financing -- Breeze One -- raised EUR 100 million to re-finance German wind project developer Energiekontor's portfolio in Germany and Portugal totalling £47.5 MW (Windpower Monthly, November 2004).

For investors, an important difference between Breeze One and Breeze Two is in the reduced risk of the financing structure. Unlike Breeze Two, which is backed by income and assets from the entire wind farm portfolio, security for the earlier bond issue came from the original loans to the different wind farms in the Breeze One portfolio. This meant that investors only had recourse to individual loans -- not the whole portfolio, as with Breeze Two.

Competitive price

Johannes Tynes from Christofferson Robb's London-based renewables team says: "We were very pleased to participate in HVB's highly regarded Breeze program and to extend Breeze to a project finance securitization." The prospect of efficient funding through Breeze allowed the company to pay competitive prices for the wind farms, he says. "We further intend to realise operating efficiencies through acquiring a larger portfolio."

The portfolio consists of operating wind farms and projects under construction or with planning consent in place and prior to construction. It bought the projects from five different German developers: Abo Wind, Energiequelle, Juwi, MFG and Voltwerk. According to Tynes, one of the attractions of the portfolio for the company was the supportive tariff regime in Germany and France. Moreover, its diversified nature makes the bonds attractive to investors. "Cash flows have a significantly reduced volatility and become more predictable when wind farms are sited in different geographical locations with turbines from more than one manufacturer," he says.

As sole equity sponsor, Christofferson Robb has invested some EUR 120 million in the projects. Tynes stresses the company considers wind a long term investment. "And the length of the financing is in tune with Christofferson Robb's strategy of buying and holding these assets for their operating lives," he says.

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