Meet the financial stakeholders

Amongst myriad stakeholders embedded within the renewables industry none are more important, or perhaps overlooked, than the role the financial stakeholder and especially the banks.

Major projects run to rigorous standards with ongoing financial reporting on a range of metrics relating to budget spend profiles, equipment, connection and planning obligation costings.  The inclusion of these metrics at earliest stages of development are largely due to the vital  influence of financial stakeholders and with the ultimate goal of providing the board a running commentary as to a likely  financial close from the very outset

I was in central Manchester yesterday to catch up with one such financial stakeholder in the very human form of Jim Leamon  and Stuart McKenzie of Close asset finance. The meeting offered a timely chance to take a strategic view of where the UK renewables industry is headed with an organisation bringing a lengthy record of financing wind energy and renewable projects.

My journey in wind started back in 2005 and the projects being brought forward then were a mix of smaller and locally connected windfarms and amongst the mix were single turbines schemes favoured by landowners and industrial enterprises along with AD, biomass and hydro- electric schemes and most were special purpose vehicle or ‘spv’ projects coming in under 50MW. The experience proved invaluable as experience was gained en-route to ever larger offshore ‘megaprojects’.

Curiously the smaller schemes of between 250KW to 1MW never really went away and have been steadily been delivered  over the last decade and a half.

One consequence is that many ‘boutique’ scale developments operational in the UK,  built out under support under a roc’ regime which served their promoters well.  During that time several manufacturing companies have come and gone in the intervening years, and although warranties may have expired many have exceeded initial expectations.  In 2010, for example I was involved with the re-powering of the UK ‘s oldest commercial onshore wind farm at Delabole in Cornwall where  the same principles ageing kit, expiring warranties were addressed and coupled with a desire to update to the most modern equipment and gain a substantial increase in generation from the same footprint.  Technology was moving ahead at a rapid pace and the industry was keen to keep up.

The same principles are now being transferred across the smaller scale sector.  The early- adopter schemes are now ageing and decisions about the future need to be made and  these formed the basis of my discussions with Jim and Stuart. 

Close asset finance indicate that although some manufacturers may have gone it left a gap in the market and others have now entered. Indeed, companies are looking at refurbishing machines and have such confidence in the bankability of the kit that they offer the warranties necessary in achieving third party project finance. Warranties are examined as due diligence is undertaken along with grid connection arrangements  and the relevant landownership  lease details in order to  de-risk the process. The longer the warranty, the better and pain free the terms of the financial close. This refurbishment has advantages for the developer as well and fits well with most developers recycle and re-use philosophy and especially well with circular economy principles.  

Going forward, I suggested, smaller schemes may benefit from the advances in technology which have made a quantum leap forward in the last decade. Not only are turbines themselves more efficient but they can be combined with solar arrays, hydro, and especially battery technologies  to enable time- shifting and optimise their return from the sale of their generated  electricity.  Smaller landowner and community schemes could learn the lessons of their ‘mega project siblings’ where developers are seeking to drive out cost and maximise project returns in the post-subsidy renewables world.

Smaller schemes may not have gone through  the planning process at a time when documentation was routinely uploaded to web based portals for wider scrutiny and may have been decided on using  discretionary powers and not even gone to a full planning committee. This can make them difficult to aggregate and track and investigation of output via generation portals remains a means of tracking their progress   Close brothers are doing just that are keen to let existing and future landowners know that finance is there for viable projects and should there be landowner appetite for re-powering, integration or expansion. 

With parliament declaring a climate emergency and school children on the streets over the issue this is a heartening message indeed.  Close are used to dealing with renewable schemes and keen to support initiatives which encourage communities to ‘meet the buyer’ and favouring local content as promoted by the government and routinely engaged in by responsible developers.

I enjoyed my return to the ‘boutique’ world of 250k to 1MW  turbines with the attraction for farmers wishing to diversity, for industrial estates keen to get to net zero and for community based initiatives.  The projects offer a significant and organic contribution to meeting the UK’s climate change aspirations and can continue to do so as we aim for the UK’s ambitious 2050 net zero climate change goals.

The message from financiers directly involved is that their appetite remains as strong as ever: especially within the operational turbine refinance sector where funds raised are deployed in a multitude a ways to help meet current and future business, generation and indeed Community goals and doing so in an accelerated way.

Support for smaller scale robust commercial schemes is there. It comes not from me but a key stakeholder so influential in helping the industry move steadily forward and who can continue to so do