On October 25, 2006 the financial close of the project was reached. On that date Q7 became the first offshore windpark ever to be fully non-recourse project financed. This means that the leading banks involved – Dexia, Rabobank and BNP Paribas – rely solely on the project to generate the revenues needed to service the interest costs and principal repayment of the financing with very limited additional sponsoring support. This is an important milestone in the development of offshore wind worldwide.
The financial structure
In addition to the sponsors’ equity, a significant part of the project is financed by loans from Rabo, Dexia and BNP Paribas acting as Mandated Lead Arrangers (MLA). Eksport Kredit Fonden, the Danish export credit agency supported the export of the Vestas turbines by also participating in the financing. The debt financing for the project includes a €189 million, 11-year, long-term project finance facility as well as a €30 million standby facility to cover contingencies. Included in the facilities are Letters of Credit in favour of the contractors Vestas and Van Oord. Rabobank is the Hedging Agent, Security Agent and Facility Agent for the transaction. Additionally, Rabo provided a junior loan to fund the debt service reserve account upon completion.
A new structured finance template for offshore wind
The financing structure includes a number of features that lowers the risks associated with the construction and long-term operation of offshore wind turbines (see press release). A fully non-recourse financed offshore wind farm has been a long time coming, but never realized Q7 appears to be the financial engineering template for getting the market funded until lenders become more comfortable with the relatively new offshore technology risk. More offshore projects will follow, and therefore Q7 can be considered a milestone in the development of offshore wind.