The Danish firm will deploy the investment towards 4 ready-to-build onshore wind farms, which are expected to be operational in Q1 2024. The projects are wholly-owned and will be developed by Ilmatar Energy, a Finnish independent power producer (IPP) that builds projects without subsidies on a fully-merchant basis. Vestas is the turbine supplier for the assets under a contract that includes turbine delivery, installation and commissioning, as well as long-term service agreements. AIP was advised by EY on the transaction, which is the investment firm's second merchant deal in the Finnish onshore wind sector.
Merchant financing of renewable energy projects has been on the rise in Europe in the past couple of years, driven primarily by the lack of projects with secured power purchase agreements (PPAs). This shortfall benefits private investment firms like AIP, which can choose to be agile and create flexible financing instruments for fully-merchant projects. Traditional banks and institutional investors, on the other hand, have been slower to adapt to this shift. For AIP, the move expands its merchant asset portfolio in Europe, which was recently diversified to include a 139 MW portfolio of wind farms in Spain. Contracts with equipment suppliers and operations & maintenance (O&M) providers are also emerging as critical elements associated with the project risk, as evidenced by the similarities in AIP’s financing agreements. All three of the firm’s merchant deals in 2022 targeted onshore wind farms 100% developed and owned by the same firm, with a well-established company engaged in end-to-end EPC and O&M activities. The investment amounts were in the $130-140 range and were deployed towards portfolios of wind farms comprising 130-140 MW of capacity.
As power prices and permitting challenges continue to impact the PPA market globally, Enerdatics expects regions with low risk profiles and relatively stable power market fundamentals to lead financing activity for merchant projects.
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.
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