Introduction
Much has been made in recent months of renewables no longer being in vogue. Upheavals in international trade, disruption to supply chains, the return of inflation and associated higher interest rate environments have led to some newsworthy setbacks, including the failure of the Allocation Round 5 in the United Kingdom (UK) and a string of high-profile offshore wind projects failing to achieve a financial investment decision. However, rumours of the demise of renewables have been greatly exaggerated.
There has been a renewed focus in the UK and Europe on a relatively smaller scale (when compared with their European counterparts in the offshore wind space or the Middle Eastern utility-scale onshore independent power producer (IPP) programmes) onshore generation, including solar photovoltaic (PV) and wind, and the expansion of new technologies such as battery energy storage systems (BESS).
The relatively smaller amounts of capex required for individual projects in this category has driven the continued adaptation of holdco financing structures (traditionally used for brownfield infrastructure deals) for portfolios of renewable generation assets to facilitate the deployment of the large amounts of capital raised or committed for energy transition projects in both the equity and credit space. With more modest capex requirements, these assets are ideally suited to holdco financing structures.
Recent Examples of Portfolio Financing
Key examples of recent greenfield portfolio financings include British Solar Renewables’ £350 million senior secured financing for solar and BESS projects in the UK and Australia, comprising 11 co-located and standalone solar and battery storage assets with a combined capacity of 600MW across solar PV and BESS. This financing includes the ability to finance assets under construction prior to contracted offtake being put in place, demonstrating the flexibility that these structures can accommodate.
At the structurally subordinated level, Vargronn AS (the offshore wind joint venture between ENI Plenitude and Hitech Vision) raised a £500 million debt platform on a holdco, structurally subordinated basis with initial facilities provided by institutional and private credit funds, arranged by Credit Agricole, in addition to the £3 billion of senior secured project finance debt at each individual asset to support its 3.6GW of offshore wind projects.
In the now more traditional brownfield debt platform style of portfolio financing for operational assets, Ventient Energy’s (now Nadara, following its consolidation with Renantis Energy) £2.6 billion platform debt financing for its 140 assets across six jurisdictions closed last year.
These examples illustrate the growing use of portfolio financing as a mechanism to fund the energy transition, with global efforts focusing on scaling clean energy projects to meet sustainability targets and reduce dependence on fossil fuels.
