WIND FARM PROJECT POWERS UP UK RENEWABLES MARKET

 
Global energy security, capacity and sustainability needs are converging to create a compelling rationale for investment in renewable sources and the fastest growing sub-sector in the UK is wind. When the leading UK purely renewable power generator Infinis group (“Infinis”) wanted to further expand its wind portfolio, it sought a funding solution which would allow it to construct and operate the 22 megawatt (MW) Glenkerie wind farm located in Tweedsmuir, Scotland. Acting as joint mandated lead arranger, Lloyds Bank Commercial Banking (”Lloyds Bank”) Project Finance team partnered with BNP Paribas and the European Investment Bank to deliver a £32 million package which met Infinis’ funding requirements. 

Winds of change

Of all the sources of renewable energy, wind has emerged as a true growth market.  With advanced turbine technology driving efficiencies, wind farms are increasingly becoming a cost effective as well as a clean source of electricity.  

Infinis is the UK’s largest generator of purely renewable power, utilising a diverse portfolio of landfill gas, onshore wind and hydro projects to generate approximately 10 per cent of the nation’s renewable power (YE: 31 March 2010). Established in May 2006, and backed by private equity firm Terra Firma, the business is focused on growing its onshore wind capacity where it has an onshore development pipeline of 110 MW consented and a further 118 MW in planning (figures accurate as of November 2010).  

Highland view

Planning consent for the wind farm was secured from the Scottish Borders Council in 2008.  At the same time a deal with Scottish Power was struck to connect the site to the national grid. The Glenkerie development will comprise 11 Vestas V80 2MW turbines, a substation building and 8km of new access roads from the A701. When up and running, the wind farm is expected to deliver enough power to meet the electricity needs of over 16,000 homes.  

The funding climate

Glenkerie wind farm was the second development to qualify for the European Investment Bank’s (EIB) Intermediated UK Onshore Wind Scheme. The initiative was launched in November 2009 and makes loans available to eligible projects through one of three Partner Banks.    

As a Partner Bank, Lloyds Bank, acting as Joint Mandated Lead Arranger, our Project Finance team provided £17 million of funding alongside £15 million from BNP Paribas Fortis which included £18 million of EIB funding.  

In addition to the debt facilities which are over a 15 year term, Lloyds Bank also secured the account bank, security trustee and agency roles for the project. 

Eric Machiels, Chairman and Chief Executive of the Infinis operating companies, said: "We've known Richard and the team at Lloyds Bank for a number of years and built up a strong relationship over that period. Given the bank's participation in the EIB lending scheme as well as its wealth of knowledge of the sector, it was clear Lloyds Bank is the perfect partner to help us deliver this project." 

Moving forward

Work began on constructing the Glenkerie site during the first half of 2010 and the wind farm is set to become operational in 2011, taking Infinis’ operating onshore wind capacity to 97 MW.  

Ed Wilson, Head of Renewable Energy at Lloyds Bank Commercial Banking Project Finance, said: "We are delighted to be playing such a significant role in this transaction, especially as it qualifies for inclusion in the EIB lending scheme. 

"Given the bank's close association with the scheme, this deal is another example of our commitment to supporting businesses across the renewables sector in the delivery of high quality UK wind farm projects. 

“We’re committed to the sector and will continue to seek opportunities to provide tailored funding packages which meet the immediate capital needs of new projects as well as the longer-term operational requirements of existing developments.”    

Glenkerie wind farm is the second deal which Lloyds Bank has co-funded through the EIB’s Intermediated UK Onshore Wind Scheme. 

In March 2010 the Project Finance team alongside BNP Paribas Fortis and the EIB agreed to provide £76 million to finance the Hill of Towie wind farm.  When fully commissioned by spring 2012, the 21 turbine site will have a generating capacity of 48 MW.