Analysis - Canada taps new sources of finance with first public wind bond

CANADA: Brookfield Renewable Energy Partners' recent decision to tap the public bond market in the C$450 million (US$438.6 million) refinancing of its 166MW Comber Wind farm in Ontario is a sign of similar deals to come as North American wind developers seek out new sources of capital.

Comber wind farm in Ontario (photo:Sharon Drummond)
Comber wind farm in Ontario (photo:Sharon Drummond)

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Built in 2011, Brookfield’s 166MW Comber Wind farm comprises 72 Siemens SWT-2.3-101 turbines. It has a 20-year power purchase agreement with the Ontario Power Authority.

The senior bonds, rated an investment grade BBB by rating agency DBRS, bear an all-in interest rate of 5.13% and will be fully paid off over a period of 18 years. The issuance drew more than 25 investors, says Brookfield, many of which have not traditionally invested in renewables.

"Given that this was the first public wind deal in Canada, there was a concerted education effort and the extra time spent with investors proved very worthwhile," said Zev Korman, the company's director of investor relations.

"It should help to open up a new financing market for these assets, which could in turn improve cost of capital and diversify funding sources for issuers."

It also appeals to investors who are looking for new income sources backed by long-lived infrastructure-type assets, Korman added.

"We would therefore not be surprised to see others follow suit."

The rated bond market has not been a common source of capital for the wind sector in the US either, Richard Donner, vice-president at Moody's Investor Services, told the recent Infocast Wind Power Finance and Investment Summit, although the rating agency expects that to change.

"Renewables tend to be financed through the bank market and private placement market, but we do think there will be more deals being done on the bond market," Donner said.

"I think one of the things that is driving this is just a growing awareness and knowledge and expertise in the investor community about these projects."

Moody's has anticipated this interest by publishing a methodology it will use in rating renewable energy investments, assessing things such as predictability of cash flows, stability of the regulatory environment, technology and operating risks, and key financial metrics.

"Basically it sets out the factors that we look at as we are assessing credit risk for these projects," said Donner.

"We think the methodology will be helpful to market participants who want to see how we approach these issues."

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