Renewable Energy Finance: AIP finances 139 MW portfolio of fully-merchant onshore wind projects

published on 02 August 2022

The Danish investment firm will execute the transaction through a flexible financing instrument that can accommodate projects of all revenue streams. The renewable portfolio that secured the financing comprises 4 wind farms developed by Elecnor Group subsidiary Enerfín , which is also the 100% owner of the wind farms. The assets are in the ready-to-build stage, with construction scheduled to start in Jun '22 and commercial operations expected to begin in Oct’23. 

The move marks AIP’s first Spanish investment. The firm recently inaugurated its Madrid office and hired two veteran renewable energy investment executives to help expand its financing activities in the country’s promising energy market. To date, AIP has invested more than $6.2bn primarily in green energy assets, including 7 offshore wind farms in Europe, five onshore wind farms in Europe and the US, and four large solar power plants in California and Texas. According to the Enerdatics research team, today’s transaction marks AIP’s second major merchant financing agreement, the first being its entry into the Finnish market in Feb’22. Under the deal, the firm agreed to lend $154 million for a ready-to-build, 149 MW onshore wind project, developed and 100% owned by VALOREM. The Enerdatics research team observes that the technical characteristics of the financed windfarm were similar to the Spanish one. AIP cited the country’s low-risk profile, strong power market fundamentals and ability to build renewable projects at scale without subsidies as the key drivers for the investment.

Assets backed by merchant-based revenue streams have been steadily climbing up the ladder of projects awaiting financing in Spain, since the start of the COVID-19 pandemic in 2020. The trend is attributed to the lack of projects with signed power purchase agreements (PPAs), which is driven by the volatility in power prices. Historically, projects awarded under the Royal decree 413/2014 were deemed the most attractive for financiers, as they benefitted from subsidies under the feed-in-tariff regime and compensation for reasonable profitability. Such projects were able to secure as much as 90% of the total capital cost through a debt financing instrument, at an interest rate not exceeding Eurobor + 2%. Meanwhile Merchant projects were seen to secure not more than 65% of the capital costs through debt instruments, with interest reaching as high as Euribor + 3.25%. However, given current market conditions, merchant projects are receiving more attention from financiers and several reports suggest that this trend will continue until the European power market stabilizes.  

The above analysis is proprietary to Enerdatics’ energy analytics team, based on the current understanding of the available data. The information is subject to change and should not be taken to constitute professional advice or a recommendation.

Click to know more about Enerdatics' Renewable Energy M&AFinancePPA, and Projects databases.       

Read more