Investors' offshore appetite boosted by Blackstone deal

GERMANY: The German Meerwind project is the first offshore wind farm to be led by private investors from the pre-construction stage.

Germany's 288MW Meerwind project has become the first offshore wind project to reach financial close under government-owned development bank KfW's new offshore-funding programme. It is also the first to be fully financed and led by private investors.

The deal, led by US investment firm Blackstone, was worth €1.2 billion, comprising €822 million debt and €378 million equity. Debt was loaned by a group of seven commercial banks — Commerzbank, KfW IPEX-Bank, Bank of Tokyo-Mitsubishi, Dexia, Lloyds Banking Group, Santander and Siemens Bank — together with EKF, the export credit agency of Denmark, and KfW-Bankengruppe.

Meerwind, located 50 kilometres off the German coast in the North Sea (see map below), is being developed by a joint venture of Blackstone subsidiary WindMW and developer Windland Energieerzeugungs GmbH. Blackstone Capital Partners VI and Blackstone Energy Partners are providing most of the equity.

Under the requirements of its €5 billion offshore wind programme, KfW will also hold a small equity stake in the project.

Although greenfield project financing has been used before for German offshore projects, the trend has generally been for offshore wind farms to be built by utilities, with private investment only involved at later stages when the plants are operational. With Meerwind, Blackstone becomes the first private investor to lead an offshore wind project from pre-construction.

"The entry of new stakeholders into the offshore wind business will clearly boost the massive development of energy from the sea," said Jens-Peter Saul, CEO of Siemens Wind Power.

The investment funds the installation of 80 monopile foundations with Siemens 3.6MW turbines, the laying of infield cables, as well as the installation of offshore high-voltage substations. Connection to the main German grid will be undertaken by grid operator Tennet.

Stable framework

David Foley, Blackstone senior managing director and CEO of Blackstone Energy Partners, believes the German regulatory regime has brought a stable framework to reassure investors. "The German regulatory framework is well designed and essential to the development of the tremendous and as yet untapped resource that offshore wind represents," he said.

"This project exemplifies the progress and positive impact on the economy that can be achieved when private capital works in partnership with government, entrepreneurs and industry," Foley added.

The nature of this project financing will be seen by the investor community as a sign that the consortium members see the construction phase of an offshore wind farm, even one this far out at sea, as manageable.

"It's encouraging to see investors getting comfortable with early involvement in offshore wind projects, albeit with the finance spread between large numbers of funders," said Paul Rice, head of energy at international law firm Pinsent Masons. "This is important for the UK's Round 3 ambitions where the funding of many projects, some considerably larger than Meerwind, will put pressure on developers' balance sheets."

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