Wind Farm Project Finance

The Advanced Financial Agency focuses on facilitating investments and delivering financial strategies for the establishment of extensive wind farms across the globe.

• Loan durations range from 10 to 15 years.
• Investment amounts start at €45 million and above.
• Funding can cover up to 90% of the total project expenses.

1. In order to evaluate your application, kindly submit a presentation or description of your investment or business initiative. Complete the attached form and email it back to us (download the application form).

Important: Applications lacking liquid assets will not be eligible for processing.

Our team consists of high-caliber professionals and asset managers who scrutinize each case meticulously, offering tailored financial solutions that facilitate long-term project financing with the least contribution required.

Equity is supplanted by assured financing.

2. Promoter’s Contribution to the Project Prior to Securing a Building Permit**

Prior to securing a construction permit, the promoter is responsible for covering all operational expenses, which will be regarded as their contribution to the project. Additionally, costs associated with land acquisition or securing land rights are also borne by the promoter.

It is essential to evaluate which option proves to be the most advantageous for the promoter in each specific scenario.

3. A versatile blend of bank financing and financial investor contributions is suggested for the construction phase, extending for a minimum of 15 years of facility operation, replacing the conventional project financing model.

A Special Purpose Vehicle (SPV) will be established solely for the construction phase, in which the loan guarantor will hold a majority stake exclusively during this period. The requisite credit will be backed by external guarantees, ensuring that the promoter’s bank encounters no difficulties in financing the construction process.

Upon completion of construction, the assets will be acquired by an investor, who will benefit from an annual income for no less than 15 years, with the possibility of the operating company repurchasing the asset. The investor’s future annual income will be secured through guarantees from the operator’s bank.

4. Steps to Execute Before Business Operations Commence**

An exclusive collaboration agreement will be established between the initiator (promoter) and our firm in conjunction with the financing and investment structuring advisory company we recommend.

This agreement will outline all necessary steps and conditions to secure financing:

• Consultation on selecting a construction firm.
• Securing a conditional financing offer from the bank for project construction.
• Obtaining a conditional offer from the bank to guarantee future annual income for the financial investor during the operational phase.
• Securing a non-binding offer from the financial investor.
• Finalizing the business feasibility study.
• Arranging credit guarantees and construction financing.
• Securing the financial investor for the business’s operational duration.
• Agreement on the formation and management of an SPV focused on financing and executing the project construction.
• Advising the agreement among the promoter, business operator, and financial investor for the operational phase.
• Guidance on employing international legal and commercial instruments until the business becomes operational.

All financial and structural expenses will be factored into the project financing budget and deducted from the allocated financing.

Feel free to get in touch with us for additional information.

Renewable energy is a boon for the global economy.

The momentum in wind farm development is accelerating, mandating investments in the multi-billion dollar range.

China, India, and the United States continue to dominate the wind energy landscape.

In 2019 alone, over 60 GW of installed capacity was achieved.

This surge is driven by the urgency to lessen reliance on fossil fuels and curtail carbon dioxide emissions linked to energy generation.

According to WindEurope, Europe invested €52 billion in wind energy in 2019, with the UK, Spain, Germany, and France standing out as industry frontrunners.

Additionally, even hydrocarbon-rich nations like Russia and the UAE must pivot toward renewable energy development to secure a viable future.

Country-specific investments in wind farm construction:

In this context, financing for wind farm projects is increasingly challenging, necessitating the integration of diverse financial models and the pursuit of innovative funding sources.

With initial investments hovering between €1 million and over €3 million per megawatt of installed capacity, securing affordable financing is paramount for the sustainability of wind energy initiatives.

Advanced Financial Agency is a global player dedicated to fostering energy project development worldwide. In partnership with our collaborators, we are poised to provide financing solutions tailored for your facility’s construction. We go beyond mere investment; we craft bespoke financial strategies for each client.

Additionally, we offer a full suite of engineering services, including design, procurement, and delivery of wind turbines and electrical systems, as well as construction, installation, operation, maintenance, and upgrades of wind power plants.

For further information, please reach out to our official representatives.

Where to Secure Funding for Wind Farm Construction?

This is often the preliminary question for individuals or companies contemplating the launch of renewable energy initiatives.

Venturing into renewable energy projects presents numerous advantages, such as lower carbon emissions, environmental stewardship, energy self-sufficiency, and the potential for sustainable business growth. Nevertheless, the substantial investment typically required can pose a significant obstacle.

The quest for financing to construct wind farms begins with a thorough economic analysis of the project. By conducting an in-depth study, we can identify optimal strategies for executing a specific initiative. This phase encompasses an evaluation of the technical, financial, and legal aspects of the venture.

Following this, a concrete action plan is formulated.

This plan should include detailed technical specifications (such as turbine locations, capacity, optimal technologies, and projected energy output) alongside financial analyses (covering investment amounts, interest rates, and payback timelines).

Funding sources for a wind energy project may include

• Self-financing. The project is entirely funded through the initiator’s resources, without any external borrowing.

• External financing. This approach necessitates external investments and bank loans. Here, it’s crucial to assess the financing options available in the specific market.

• Hybrid financing. This model combines self-generated funds with borrowed capital, employing various financial configurations.

Below, we will outline the primary external financing options available for wind energy projects.

When selecting the ideal financing model, project sponsors are advised to follow a specific methodology.

This approach considers several critical factors, such as liquidity, overall investment levels in both absolute and balance terms, the likelihood of partners securing bank loans, and the future potential for scaling the wind energy project, among others.

Typically, financial institutions require a solid credit history from a company to secure a substantial loan on reasonable terms.

The credit line is set for a defined period but may be renewable and adjustable based on needs.

The bank opens an account for the client, allowing access to funds within a predetermined limit.

The client incurs interest only on the amount drawn.

This financing approach is ideal for bridging the gap between income and expenditures or addressing short-term cash flow issues. However, it may not be well-suited for the construction of wind farms, where substantial capital is needed upfront before any revenue is generated.

While some banks do offer loans for wind farm development or modernization projects, the elevated interest rates and stringent qualification criteria often render them impractical for many businesses.

Participation loans can involve multiple lenders collaborating to support a single borrower. For instance, three banks might finance a significant project, with one bank designated as the lead lender, which then coordinates with others to distribute risks and rewards.

Wind farm construction financing can also utilize leasing mechanisms, which involve long-term leasing of an energy asset, permitting eventual contract renewal or asset acquisition.

Forfaiting involves transferring bills of exchange or payment obligations to a financial institution. In this arrangement, the project initiator settles debts with the creditor, enhancing liquidity while shifting associated risks to the financial entity. This key distinction sets forfaiting apart from factoring, which is a closely related financing method.

Both factoring and forfaiting serve as viable alternatives for advancing energy projects by alleviating debt burdens for the initiators.

A wind power project sponsor can secure long-term financing from investors through the issuance of new shares or elevating the par value of existing ones. Potential investors can include business angels, venture capital, and investment funds.

Business angels are affluent individuals who not only provide capital but also offer industry insights and technical expertise in the wind energy field. They can facilitate valuable business connections and resources, often investing in the nascent phases of projects.

There exist networks of business angels dedicated to identifying promising ventures for potential backers, with some focusing specifically on wind energy development.

Venture capital funds, on the other hand, channel resources exclusively into financing other enterprises. Their investment in a wind farm hinges on confidence in the business strategy and the team behind it. Also vital is clarity regarding their exit strategy, as they seek to time their share sell-off for optimal profit.

Generally, venture capital funds play a pivotal role in innovative energy initiatives, favoring involvement in later-stage projects that have demonstrated market viability.

Specialized investment funds have emerged due to the unique demands of renewable energy project implementation. Today, a mix of private, public, and public-private entities are springing up, offering tailored solutions for this sector.

Crowdfunding represents a financing avenue that aggregates funds from numerous individual investors without bank participation. Typically facilitated via online platforms, this collective financing can involve purchasing shares of forthcoming energy facilities.

Additionally, cooperatives are emerging that commercialize clean energy and invest in renewable projects. Some offer members opportunities to invest in wind initiatives with fixed or variable interest rates or access to affordable electricity.

Despite the numerous financing avenues available for wind energy projects, executing large-scale, multi-million-dollar ventures necessitates bespoke solutions that integrate various funding sources and conditions.

A collection of financial instruments typically encompasses multiple mechanisms designed to attract and efficiently deploy capital within a given project.

At the forefront of wind farm project financing is the project company, commonly referred to as a Special Purpose Vehicle (SPV). The necessity for a distinct organizational structure has emerged due to the increasing complexities of energy projects.

When funding the development of a wind farm, there may be instances where a company’s fiscal stability is threatened by undertaking multiple costly projects simultaneously. In such scenarios, the ideal approach might be to finance each venture through an independent legal entity, known as an SPV.

A project company is specifically established to execute a designated project.

The selected financial institution, such as an investment fund, provides capital to the SPV.

This institution supplies the initial funding required for construction.

Consequently, project initiators are spared the burden of financing from their own reserves. The profits generated are subsequently allocated between the initiators and the investment fund.

The fundamental distinction from traditional financing is that the project sponsor’s balance sheet and that of its partners do not reflect the debts incurred from the project’s initial investment. Instead, the SPV assumes full responsibility for the liabilities.

In several nations, government-sponsored funds have been established to focus on energy efficiency and renewable resources. These funds typically extend loans for energy initiatives and are generally managed by state administrations to encourage the growth of renewable energy within their jurisdictions.

The international firm Advanced Financial Agency provides tailored financial solutions for the development of power plants, substations, and transmission lines.

Project finance serves as a strategic funding mechanism for expansive projects, hinging on the future entity’s capacity to generate cash flows that facilitate debt repayment and yield profits for all stakeholders involved.

Such projects are typically robust and efficient, leveraging mature and proven technologies.

While project finance has traditionally dominated the telecommunications realm, its influence is now expanding into sectors like power and infrastructure, facilitating the transition of substantial investments—once the domain of public financing—into private ventures.

Notably, large-scale solar photovoltaic and wind energy farms in Europe frequently utilize this financing approach. The intrinsic nature of these projects aligns seamlessly with project finance principles, and European regulations provide a framework for predictable, sufficient cash flow generation to uphold financial commitments.

The surge in wind power project finance corresponds with a notable uptick in renewable energy investments, fueled by governments’ efforts to curtail budget deficits while continuing to develop large-scale initiatives. This model enables both governmental entities and private enterprises to effectively execute high-investment projects.

Key characteristics of wind power project finance are outlined below:

• A special purpose vehicle (SPV) is established to manage a specific project’s execution.

• The project’s sponsor may inject a considerable portion of the capital, thus linking project financing directly with managerial oversight.

• The project company enters into intricate contracts with various stakeholders (such as developers, suppliers, clients, and financial institutions).

• The operation of the project company typically involves a high debt-to-equity ratio, limiting lenders’ recourse against SPVs in the event of project failure.

• Guarantee agreements are structured to ensure all participants’ interests are upheld, with heightened requirements during the initial phases of wind farm construction (engineering design), where costs are substantial and income is not yet realized.

• A reserve fund is created from surplus cash flows to safeguard against unforeseen challenges throughout the project lifecycle.

Consequently, the funding for wind farm project finance is secured not through conventional credit assessments of the participants but through projections of the project’s anticipated profitability.

Project finance is distinguished by cash-flow-based lending, well-defined risk distribution among participants, and off-balance-sheet financing structures.

The unique aspect of wind power projects lies in their remarkably low revenue potential during liquidation compared to the overall development costs. Take, for instance, a nearly finished wind farm facing early termination; the remaining assets would likely fetch a modest price. In the realm of project finance, the value of wind farm assets and their potential market price are secondary considerations—lenders primarily focus on the cash flows anticipated once the project commences operations.

Unlike traditional lending or asset-backed finance, where assets are paramount, special purpose vehicles (SPVs) prioritize cash flows over asset value.

The predominant risk for lenders in wind farm financing is the possibility of halting construction. Cash flow generation hinges on the wind farm being built, certified, and operational.

Efficient risk distribution among partners is crucial; sharing risks entails a clear allocation of project challenges based on individual competencies and resources, ensuring effective management throughout the project’s lifecycle.

Depending on a project’s specifics, a financial institution might offer loans grounded in projected cash flows, potentially incorporating additional recourse rights. Typically, financiers categorize financing into three tiers: non-recourse, limited recourse, and full recourse.

While non-recourse financing—which places stringent limits on lenders’ access to borrowers’ capital—is uncommon, full recourse financing undermines project finance principles, leaning instead towards traditional corporate finance reliant on borrower creditworthiness.

The fundamental goal of risk sharing among the involved parties is to forge a robust funding structure that enables project continuation, even amid unforeseen challenges.

Off-balance sheet financing is a prevalent accounting method where businesses record certain assets and liabilities in a manner that keeps them off the balance sheet. This approach, particularly through the use of Special Purpose Vehicles (SPVs) for funding wind farm projects, presents significant advantages for project sponsors by enabling them to sustain a favorable debt-to-equity ratio.

However, this strategy also introduces potential risks for investors, as companies are generally required to reveal off-balance sheet financing in their financial reports, allowing investors to analyze the information and evaluate the company’s actual financial standing. Additionally, establishing a project company with designated quotas may lead to sponsors only needing to report their respective share in the company in line with relevant accounting standards.

The global demand for financing projects related to wind farm construction is on the rise.

To ensure the successful execution of such projects, it is essential to tailor financial products to meet the specific needs of each company. The diverse range of financing options, coupled with intricate bureaucratic processes, potential risks, and unforeseen costs associated with selecting the most suitable financing source, often leads businesses to seek expert guidance.

Advanced Financial Agency, an international firm, is prepared to serve as your financial advisor and dependable partner in investment lending. We assist in identifying funding sources for wind energy initiatives across various regions, including Russia and the CIS, the EU, the USA, Latin America, Africa, the Middle East, and East Asia.

Whether you require a bank loan, factoring, leasing, or capital raising through new share issuance, Advanced Financial Agency, in collaboration with our global partners, will identify the optimal solution. We provide support in securing financing for wind farm construction, covering up to 90% of the total project cost.

Our firm boasts extensive experience in executing numerous successful investment projects and is backed by a team of highly skilled professionals in finance, banking, project management, and legal matters. We assure our clients of expert advice and dependable financing models tailored to each project.

Our services include developing business plans and conducting financial analyses necessary for securing business financing. In crafting these business plans, we consider your enterprise’s resources and the objectives of all project stakeholders, enabling us to create a model that facilitates obtaining bank loans or alternative financing on favorable terms.

Reach out to our representatives to discover more about our wind farm project financing services.