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Financing leftovers from better times -- Wind equity deals in America

While a number of wind power equity investments have been announced recently for US projects that came online in late 2008 and early 2009, they do not necessarily represent money flowing into the business despite the financial meltdown, but are the result of deals struck some time ago. "There is, in some of these cases, a significant time lag between when the commitment is made and when the projects are completed and go commercial and the money changes hands," says Andy Katell of GE Energy Financial Services (GEEFS).

GEEFS announced in January that it was providing an undisclosed amount of equity funding to the 166 MW Hackberry Wind Project in Texas, a project completed in December by developer Renewable Energy Systems Americas. In December, Chicago-based Invenergy LLC announced the successful closing of equity financing with GEEFS and Metlife for the 150 MW McAdoo Energy wind farm in Texas and the 99 MW Grand Ridge Energy Center in Illinois.

"In both of these cases these were commitments made when the market conditions were significantly different. We are following through on those commitments," says Katell.

GEEFS is still "selectively considering" new investments in wind power to utilise the federal government's production tax credit, which is granted on income from sales of wind produced electricity, he adds. "The bottom line is we want to do many more of these wind structured equity deals, but given the market conditions and the way the production tax is configured right now it's very difficult for investors such as us to participate in that market."

In January, Invenergy announced it had also secured equity funding for a portfolio of three projects generating a total of 354 MW of wind power in Texas, Oregon and New York. Invenergy did not disclose the amount and terms of the financing, but it did say that a consortium of investors that includes JP Morgan Capital Corporation and its affiliates, Wells Fargo and Union Bank NA, had taken an equity stake in the projects. IIF Coastal Winds Investment LLC also made an equity commitment. The financing includes construction loans underwritten by the New York branch of the German bank Bayerische Hypo und Vereinsbank AG.

The deal was for assets owned by Invenergy subsidiary Coastal States Wind Holdings LLC and includes the 169.5 MW Turkey Track Energy Center in Texas, which came online in December; the 112.5 MW High Sheldon Wind Farm in New York, scheduled to reach commercial operation this month; and the 72 MW Willow Creek Energy Center in Oregon, which began contracted power delivers in January.

Raising capital

Invenergy's Susan Dennison declines to say when the financing commitments were made, saying it is company policy not to discuss specific details. But she says Invenergy "has continued to raise new capital" despite the current global economic climate. "We are optimistic that the strength of our projects and our execution record will continue to enable Invenergy to obtain necessary financing."

Portugal's EDP Renováveis SA also announced in December that JP Morgan Capital Corporation, New York Life Insurance Company and New York Life Insurance and Annuity Corporation would make equity investments of $265 million in a portfolio of project brought online in 2008 by its subsidiary, Houston-based Horizon Wind Energy LLC. The company did not specify the projects included in the portfolio. Horizon failed to respond to requests for further information.

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