Swept up in gale of investor interest -- Third Breeze portfolio

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Wind farm portfolio financing moved up a league in the money business with the gathering of 45 wind stations spread across Germany and France into a third bond offering in the Breeze series with a EUR 455 million price ticket. Split into three bond tranches, Breeze Three sold like hot cakes on the capital markets across Europe in April.

All three tranches were oversubscribed, with keen interest coming from investment funds and banks, says Kai Frömert, a director at Unicredit Market and Investing Banking. Wind portfolios are attractive to investment funds because their inherent risk has little correlation with macro economic swings. "Whether there is an economic downturn or upturn, the wind blows regardless," he says.

British investors with UK weighted wind portfolios were particularly anxious to further spread their risk by buying into an assortment of wind farms with a wide geographic spread, he adds. Four of the Breeze Three wind plant are in France with the remainder dotted the length and breadth of Germany. In total, 206 wind turbines with a combined capacity of about 350 MW are involved.

Breeze Three is the biggest of the Breeze trio so far. Breeze One, from October 2004 and valued at EUR 100 million, was for just over 80 MW in Germany and Portugal while Breeze Two from this time last year rolled 39 European wind farms into a EUR 326 million package.

Breeze Four is in the pipeline, but is likely to be smaller than Breeze Three, says Frömert. It will be a portfolio of 30 to 40 wind farms and may be on the market by the end of the year. German and French wind stations are already signed up, with further developments in Spain, Portugal or Ireland on the list of possibilities. Those countries are favoured because of their fixed power purchase prices for wind power, which the conservative-minded bond rating agencies prefer, says Frömert.

Triple A rating

Breeze Three's tranches A and B are rated by rating agencies Moody's, Standard & Poor's and Fitch. Tranche A gets an across-the-board triple A, thanks to being guaranteed by a so-called monoliner, MBIA Inc, an American insurance company specialising in acquisition of financial risk. On a stand-alone basis, tranche A would have received a triple B rating, says Frömert. Tranche B was rated BB- by Standard & Poor's, BB by Fitch and BA1 by Moody's. Tranche C is described as a "first loss piece" and is unrated.

Around 35 investors took up tranche A, valued at EUR 287 million. About 50% of them were investment funds and 30% were insurance companies. Interest was strongest from the UK and Ireland, accounting for 60% of the total. Around 25 investors took up tranche B, valued at EUR 84 million, and were almost equally split between investment funds and banks. Nearly half the total went to British and Irish investors. The C tranche, valued at EUR 84 million, went to six investors, again mainly from the UK and Ireland and again divided roughly equally between investment funds and banks.

All three tranches are listed on the Luxembourg stock exchange and are approved for trading on the Frankfurt stock exchange, says UniCredit Group (HVB), which acted as sole arranger and sole bookrunner.

German wind developer UMaaG contributed 25% of the total capacity of Breeze Three, the largest single chunk. From France, Epuron contributed 22% and Abo Wind 20%, accounting for the four French projects. Epuron's Joachim Müller says: "Institutional investors' interest in wind projects is continuing to grow. Large portfolios are especially popular because they provide excellent risk diversification." Epuron, part of German renewables company Conergy, will hand over five turnkey wind projects worth EUR 107 million and with a cumulative capacity of 74.4 MW, of which 68.4 MW are in Germany and 8 MW in France; 58 MW of the total is already online. Technical and commercial management of the stations will be provided by Conergy Services. Abo Wind contributed about 80 MW. Like Epuron, this is the second time that Abo has participated in a Unicredit (HVB) Breeze transaction.

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