United Kingdom

United Kingdom

New wind player in Europe -- Enter International Power

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London-based money management company Christofferson, Robb and Company (CRC) is joining forces with international merchant power plant company International Power (IPR), formerly British utility National Power, to build a wind station portfolio in continental Europe. In the first step of a two part deal, CRC has sold a 436 MW onshore wind portfolio, dubbed Levanto, to IPR for an "enterprise value," including debt but not cash and cash equivalents, of EUR 567 million, and will support the wind business at International Power for up to three years under what it describes as a services agreement.

In a second step, CRC has announced a wind farm development pipeline of 1800 MW throughout Europe to which IPR has first right of refusal as CRC completes projects and puts them up for sale. The "novel partnership marries CRC's financial structuring expertise in the renewable sector with International Power's asset management expertise" according to the companies.

International Power has a substantial portfolio of power generating assets in North America, Europe, the Middle East, Australia and Asia, but almost all of it based on fossil fuel. Previous to the deal with CRC, its experience with wind power was limited to a 46 MW wind station in Canunda in South Australia. CRC will now assist IPR with commissioning the 126 MW of wind capacity under construction in the 436 MW portfolio and with progressing the 24 MW that is fully permitted but not yet built. Most of the portfolio's projects are in Germany, barring 27 MW in France.

CRC's experience in wind power has largely been gathered from its financial management of the Breeze Two portfolio of 29 wind farm projects bought by CRC from five German wind developers (Windpower Monthly, May 2006). Breeze Two followed the ground breaking Breeze One bond financing for a portfolio of wind projects in Germany and Portugal developed by Germany's Energiekontor (Windpower Monthly, November 2004).

The package sold to International Power combines the 338 MW of Breeze Two wind farms in Germany and France with 98 MW of operating wind stations bought from Dutch utility Nuon when it disposed of its none-core German assets in July 2006. The Levanto portfolio makes up 2% of IPR's total generating portfolio.

In May 2006, the cash flows from the 338 MW Breeze portfolio were securitized, providing EUR 470 million of bond financing, says International Power. This was "a piece of financial engineering for the business going forward, including, for example, completion of the projects not yet operating," says Sally Hogan, speaking for IPR. Securitization is a process by which companies sell receivables -- money owed by customers, but not yet collected -- for cash.

In contrast, the "Nuon" portfolio "has not and will not be securitized, not at this stage," says Hogan. She adds that within the Levanto acquisition, International Power "has acquired part of the Breeze bond financing, that is part of the debt structure of Breeze, and has access to some of the cash flow."

Total equity investment in Levanto will be EUR 190 million, with EUR 100 million funded from current liquid reserves and the remainder via long term vendor finance of EUR 90 million provided by CRC, says IPR. The debt proportion of the deal will be EUR 377 million. "The acquisition is expected to be earning and free cash flow enhancing in the first full year of ownership," the company states.

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