Irish investor biggest in Italian market -- Trinergy finally breaks cover and reveals 650 MW portfolio

Irish-based renewables investment player Trinergy is now on the wind map with its purchase of the 283 MW IVPC4 wind farm portfolio spread across Basilicata, Campania, Molise, Puglia and Sardinia in southern Italy. The deal, in the process of completion, will make Trinergy Italy's largest wind power generator.

Trinergy is buying the assets from a shareholder group led by US-based wind developers UPC. From the same sponsors, Trinergy bought a 250 MW IVPC 2000 portfolio last summer with wind farms spread across Puglia, Molise, Sardinia and Sicily.

Details of the transactions are undisclosed, but in the case of IVPC4, Trinergy is understood to be paying some EUR 25-30 million for an interest which originally equated to 10% of the original EUR 378 million-equivalent build costs, the rest funded by what at the time, in 2000, was the largest wind power project financing in the world. That a mere six years later UPC is able to cash itself out of the deal for EUR 25-30 million gives some idea of how lucrative the return on the deal has been. The wind farm benefits from Italy's old-style CIP6 regulated tariff.

Trinergy was set up in 2004 by UK investment fund The Matrix Group and private shareholders, but has kept a low profile while building up a EUR 1 billion European wind power portfolio now totalling some 650 MW. Its other operational wind plant investments are in Germany and Ireland. Critical mass and a simultaneous decision to break cover seem to have been reached with the IVPC4 deal, however. On its heels the company has appointed a clutch of new senior management, revamped a previously nondescript website and stated that it wishes to reach its initial targeted portfolio size of 1000 MW with more acquisitions by mid year. Besides Italy, its target markets are France, Spain, Portugal and the UK.

Bond markets

The new recruits include Jim Barry as head of capital management. Barry was previously head of power project finance at Bank of Scotland and has some 20 years of project financing experience which should prove central to Trinergy's plans as it wishes to restructure its acquired assets into a uniform financing structure. This has not yet happened, as bankers holding existing project debt on the separate IVPC portfolios say they have only been informed of a change in ownership.

When the refinancing does occur, however, there will be considerable value in the financial economies of scale to be extracted from leveraging the assets as a single portfolio. Such a deal may also involve the bond markets, to date a very rare occurrence for wind farms, as the portfolio size would justify the additional expenses and Barry's listed duties include liaising with ratings agencies, something which implies an upcoming bond issue rather than bank debt.

The wind power sector is getting accustomed to fund investors seeking to acquire assets and tune their subsequent return through financial engineering. With potential investment yields falling across traditional asset classes such as government bonds, the benefits of long term, cost-plus returns guaranteed to green power generators under various regulatory incentive frameworks has seen a trickle of such incomers to the sector growing to a flood. While investors such as GE or Babcock & Brown can claim a degree of historical wind sector involvement, most fund incomers such as Australia's Macquarie and German Allianz have no such prior pedigree.

Italy favourite

Italy is a favourite target market for such investors right now. While the prevailing green certificate system might on the surface seem to involve market risk, in reality a floor price supported by transmission system operator GRTN is seen to be as good as a regulated feed-in tariff. Allianz Specialised Investments made its first wind farm purchase in Italy at the end of last year, the 72 MW Francofonte project in Sicily (Windpower Monthly, January 2006) while UK-based fund Oxenbridge is among the bidders for a majority stake in Italian wind power developer EnerTAD.

Trinergy is notable among fund-led buyers in taking significant construction risk on new plants, with another 300 MW set to come on-stream under its ownership in the UK, 220 MW likewise in Italy, 120 MW in Spain, 80 MW in Germany and 35 MW in Ireland. Royal Bank of Scotland has closed a EUR 103 million project loan to fund the build-out of 91 MW of the pending Italian pipeline, in the form of the EUR 110 million IVPC6 wind farm deal for which Trinergy purchased the development rights in tandem with IVPC2000.

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