The Covid-19 pandemic is unlikely to have a significant adverse impact on financing for offshore wind projects according to the founder of one of the leading financial advisory firms in the sector
Green Giraffe founder and managing director Jérôme Guillet told a Norwegian Energy Partners webinar on financing for offshore wind that he did not expect the long-term cost of capital for projects to increase as a result of the Covid-19 pandemic.
“Offshore wind has become mainstream,” Mr Guillet said. “Since the crisis in 2008, the banks have refocused on known clients, core countries and strategic sectors of activity. Offshore wind is unambiguously ‘strategic’ for many banks today.
“Debt is currently extremely cheap,” he told the webinar. “Margins rose after the 2008 financial crisis but have been trending down since 2014. With low underlying rates, the overall cost of >15 year debt is now below 3%. Pricing and underwriting costs have all fallen in recent years.”
In an upbeat assessment of the potential effect of the pandemic on financing for offshore wind, Mr Guillet said banks active in the offshore wind market were “very comfortable” with the quality of the companies at every level in the market, from developers to contractors and they are a “known quantity.”
He said that, compared with many other industries that will be hit hard by the crisis – in which the financing landscape could change in a manner that is detrimental to businesses – offshore wind has many factors in its favour.
These include the fact that the majority of projects take place in extremely safe, politically stable AA- and AAA-rated countries in which risk is perceived as extremely low.
“The countries where offshore wind is developing are seen as ‘safe’ and ‘core’ for most banks,” Mr Guillet explained. “And banks are also familiar with large-scale clean energy projects nowadays.”
Mr Guillet said that despite the potential effects of the crisis elsewhere, there is more funding available for offshore wind projects than there are bankable deals.
“There is excellent liquidity for good projects,” he concluded. “Construction risk capacity is available in all jurisdictions, including the US and Taiwan.”