As the wind industry matures and the market has grown exponentially in the past years, the nature of investing in this sector has also changed. Wind project companies are not restricted to small specialist developers, and many very large companies are involved in wind turbine generation projects. As the size and number of projects has increased, the funding options for wind projects have also become very extensive.
Wind project funding in most cases involves a loan, based on the expected cash flow of the particular wind project. Recently, as the number of large companies involved in the field is increasing, some larger developers have moved towards balance sheet funding. However many smaller and medium-sized developers and sponsors continue to require equity and debt capital for wind farms.
How Does Kapok Capital Execute Project Financing for Wind Farms?
Funding for wind projects is a financial structure where the investors rely on the wind farm revenues to repay the loan principal plus interest, and the cash flow available after debt service, expenses and taxes is available to pay dividends to equity investors. The structuring of a wind farm financing involves debt providers, power purchasers, landowners, equity holders, and WTG equipment suppliers. Usually, equity and debt providers and WTG suppliers operate in different models. Kapok Capital is responsible for taking care of several aspects of closing the wind project finance. They are:
- A financial model for the wind project
- Defining the optimal mix of funding sources(equity and debt)
- Defining the collateral including the security options for the debt funding
- Finding the required sources to meet the financial requirements of the wind project
In the case of an onshore wind farm, equity is considered typically around 20 to 30% of the total funding requirement with preference or ordinary shares. The standard leverage can therefore vary from 70% to 80%. If the project can deliver steady cash flow, it may be possible to reduce the equity required.
Why is Kapok Capital a leading advisor for wind project funding?
Kapok Capital has been involved in wind project financing and transactions in Europe and Asia. We focus primarily on the long term financing of wind energy projects.
If your wind project is stalled to a lack of finance, please contact us to discuss your requirements.