When putting together smaller wind projects remember that generally a bank providing debt finance would look at these on a project finance basis.
The bank’s security package usually reflects the fact that the finance is committed in advance of the electricity generating an income to enable the developer to service the debt. Accordingly the bank will review all of the main contracts that underpin the project including turbine supply and maintenance agreements, construction and consultancy contracts and grid connection and power purchase agreements. The bank will often require step in agreements to ensure that the suppliers cannot terminate the contracts for breach without giving the bank a chance to address the problem, collateral warranties in its favour in respect of some contracts and, where the developer is such that a share pledge cannot be taken, assignations in security to enable the bank to “own” important contracts if the project is in difficulty.
The bank will want to know that any land lease is robust. In particular, the bank will need to know that rights for roads and cables are in place, that (where necessary) oversail rights are in place and that the bank is sufficiently protected against termination by a landlord on tenant default. The bank will need to know that all planning permissions and planning agreements are in place and that pre-commencement conditions have been implemented.
Windows of opportunity to get on site can be small – due to planning, weather or turbine supply dates. Be aware of funders’ likely requirements at the earliest stage. Otherwise, time critical slots can be lost.
You can’t always second-guess funders (and the identity of funders may not be known until late in the project) but you and your professional team should start asking “what will a funder look for” from day one.
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James Dickson