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Six bank syndicated deal completed despite difficult financial backdrop back
SWS Wind Farms wins the Project Finance Deal of the Year, which was a six bank syndicated deal involving the refinancing of a portfolio of operational windfarms, the provision of finance for three development windfarms and availability of financing for future windfarms, and which was conducted in the midst of the financial crisis. All parties involved showed great skill in getting this, first of its kind in Ireland, deal to completion
Several factors contributed to the refinancing of SWS’ portfolio of operational and development windfarms being awarded Project Finance Deal of the Year, including the complexity of the deal from both the financing and legal perspectives and the fact that it is the first syndicated portfolio financing in the wind industry in Ireland.

The deal involved the refinancing of a portfolio of operational windfarms and, uniquely, provision of finance for three development windfarms and availability of financing for future windfarms.
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Ulster Bank was sole underwriter in the deal with a loan syndicated by RBS. A&L Goodbody was appointed as the mandated lead arranger.

‘The portfolio financing and cross-collateralisation of the windfarms has many benefits, including allowing the developer to release equity tied-up in individually project financed operation windfarms, using portfolio cover ratios for equity distributions and cheaper costs of financing than individually financed developments,’ says Ross Moore at A&L Goodbody. ‘For the lenders, cost overrun, revenue, cashflow and default risk is spread amongst the whole portfolio as opposed to limited recourse to one individual project.’

‘The operational refinancing element of the portfolio provided significant equity release to SWS Energy Limited, the development company of the group which supports additional pipeline developments going forward,’ says Steve Dalton, senior manager at Ulster Bank. ‘It also enabled it to get funding for projects that has power purchase agreements with its own supply company and having the security of REFIT, which brings additional benefits to the group and allows it to benefit from any market upside through selling directly to the single electricity market, which again was a first for an Irish wind developer.’
Ross Moore

In common with most of the deals transactions performed in the past year, ‘the external economic market conditions imposed pressure to reach financial close and achieve syndication before expiry of mandated credit terms, particularly in pricing and tenor, was very significant,’ says Moore.

‘RBS/Ulster Bank took a commercial view on the potential instability of the financial markets and sought early commitments from the lenders which ultimately paid off in a deal that was closed in December 2008 against the backdrop of the most challenging financial markets in recent times,’ comments Dalton at Ulster Bank. ‘Getting commitments in place before markets turned was crucial and as markets deteriorated syndication by RBS became more difficult, so less options were available as the months went by. In addition, deterioration in financial markets led to financiers exercising flex to ensure the deal was still attractive to potential lenders.’

The fact that there was no precedent for a deal of this kind in the Irish market, together with the complex legal and financial structures, make the deal unique in the market. ‘The purpose of the deal was also unique in that it was twofold, providing non-recourse financing to refinance the operational windfarm portfolio of SWS and to finance the construction of the 2008 development pipeline assets of SWS,’ says Dalton at Ulster Bank.
Steve Dalton

Other unique factors, continues Dalton, include the fact that the deal was closed during the toughest economic environment in recent memory; it is possibly one of the last syndication deals that will be completed in the short to medium term as banks are now moving away from syndicated debt, he says. In addition, SWS is the first private developer to get funding for projects that had PPAs with its own supply company with the security of REFIT.

Obstacles that were overcome in the process, says Dalton, included ‘the extremely tight time-frame as achieving financial close on six separate windfarm projects in less than eight months is particularly challenging, even in stable financial markets.’

Moore at A&L Goodbody adds that: ‘the deal also had to accommodate a first to market electricity sale and purchase structure and a complex tax structure which demanded complicated cash flow structuring and control throughout the portfolio.’
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