| Deals of the Year 2023: Competitive funding of interconnector with France key to delivering on national strategic objectives |
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| The importance of well structured, cost-competitive finance to the attainment of Ireland’s strategic infrastructural objectives is highlighted by the structure developed to support the construction of the Celtic Interconnector between Ireland and France. Interconnection with France will make Ireland’s electricity system more resilient and efficient and facilitate the use of renewables on the national grid. |
In November 2022 EirGrid Group raised €800 million from a consortium of lenders, comprising the European Investment Bank, Danske Bank, BNP Paribas (Dublin Branch) and Barclays Ireland Bank, to fund its development a 700MW submarine power cable between Ireland and France. The Celtic Interconnector will be the first direct electricity interconnector between the two countries and is expected to be operational in 2027.
This joint venture between the Transmission System Operators for Ireland and France, respectively EirGrid PLC and Reseau de Transport d’Electricite, has a total project budget of €1.6 billion. EirGrid agreed terms for a €600 million 30-year term financing provided by the EIB and Danske Bank and a €200 million RCF provided by Barclays and BNP. In addition, to provide certainty on funding costs an interest rate swap was entered into to provide interest rate certainty on the floating rate €300 million term loan from Danske.  | | L-R] Brendan O'Donnell, Danske Bank Director Corporates & Institutions; Alistair Welch, Danske Bank Head of International Units & Country Manager Ireland; Mark Foley, EirGrid Group Chief Executive and Michael Behan, EirGrid Chief Financial Officer. |
The European Commission has deemed the Celtic Interconnector to be a ‘Project of Common Interest’, making it one of Europe’s foremost energy infrastructure projects, and has committed to provide a grant of about €530 million from the Connecting Europe Facility to support its development.
The Celtic Interconnector is the first interconnector between Ireland and the EU following the exit of the UK from the EU. Energy interconnection between the Irish and EU markets is a key policy consideration for the Irish Government in light of Ireland’s Climate Action Plan, the EU Clean Energy Package and carbon emissions reduction targets.
It is of huge national importance because it will enable Ireland to benefit from the integrated European electricity market, strengthening the future security and reliability of electricity supply. It will assist the continued development of renewable energy in Ireland by enabling cross-border exchanges and therefore maximising output and reducing curtailment of renewables, while aiding market price convergence through the sharing of available generation resources. It also facilitates the sharing of generation resources in a more cost-effective manner than if Ireland and France were to continue to act independently. | | A&L Goodbody partner David McElroy. |
Goodbody was mandated as sole financial adviser to raise funding for EirGrid’s portion of the project and conducted a highly competitive debt fundraising competition. The funding process was highly complex, given that it was conducted in parallel with the procurement process for the cable and converter stations in an inflationary cost environment and subject to detailed scrutiny by the two national regulatory authorities, the Commission for Regulation of Utilities (CRU) and the Commission de Regulation de l’Energie (CRE).
EirGrid CEO Mark Foley said: ‘The Celtic Interconnector is a key part of EirGrid’s strategic goal to transform Ireland’s power system and increase the use of renewable electricity. Interconnection with France makes the power system more resilient and efficient and allows renewables to become the primary energy source on the national grid.’ | | L-R] BNP Paribas' Derek Kehoe, CEO and Head of Country, Ireland; Billy Quinlan, Head of Global Banking Ireland and Cormac O'Reilly, Director of Global Banking. |
EirGrid Chief Financial Officer Michael Behan said, “We are very grateful for Danske’s support to EirGrid for the funding of the Celtic Interconnector. Danske’s support along with grant funding from EC’s Connecting Europe Facility and funding from European Investment Bank, Barclays and BNP Paribas allows EirGrid to construct this critical piece of infrastructure with our joint partners Reseau de Transport d’Electricite as the French TSO.”
Brendan O’Donnell, Director of Corporates and Institutions at Danske Bank said, “Danske Bank is delighted to support EirGrid with a 30 year Green Loan to part finance the Celtic Interconnector project. This is a key project for Ireland and Europe as we pursue our shared climate action and energy security goals and Danske Bank is proud to support the project funding.”
Billy Quinlan, Head of Global Banking Ireland, BNP Paribas said, “The Celtic Interconnector is a key part of EirGrid’s strategic goal to transform Ireland’s power system and increase the use of renewable electricity. Interconnection with France makes the power system more resilient and efficient and allows renewables to become the primary energy source on the national grid. BNP Paribas, a long standing strategic partner to EirGrid, was delighted to support EirGrid on this strategic project with our expertise across debt and hedging and the power and renewable sectors at large.” | | William Fry partner Ciaran Herlihy. |
Linda Clarke, associate director, Goodbody Corporate Finance, who provided financial advice to EirGrid on the deal, said; “It is very satisfying to be part of a team enabling a key piece of infrastructure which will support Ireland’s energy security and its future as a major producer of renewable energy. We at Goodbody were delighted to help in marshalling the various aspects of the financing and achieving a secure and very competitive funding outcome for our client.”
A&L Goodbody advised the lenders on all aspects of the interconnector, including the financing and security arrangements. A&L Goodbody partner David McElroy said, “This is a critical piece of infrastructure for Ireland’s renewable energy ambitions and A&L Goodbody was delighted to work with the lenders and the EirGrid team in putting in place a key piece necessary for its delivery.
”Ciaran Herlihy, Partner, Banking & Finance, William Fry said, “We were delighted to work with EirGrid and its funders on this major financing. Our team included banking, energy, corporate, real estate and consenting specialists and there’s a real feel good factor for the team in working on such a critical Irish infrastructure project”.
EY were appointed by EirGrid to provide a financial due diligence report with its team led by EY Ireland Strategy and Transactions Partners Marcus Purcell and James McCarthy and included Eanna Brennan, Clare Cronin, Ricardo Salvador, Shameelah Dawray and Yusuf Mohamed. Purcell and McCarthy said, ‘The Celtic Interconnector is a 575km long, 700MW high-voltage submarine cable link between Ireland and France, which will directly link the Irish electricity market (‘Single Electricity Market’) to mainland Europe as a joint venture between EirGrid and their French counterparts, Reseau de Transport d’Electricite. It will ultimately link Ireland and continental Europe and is essential to deliver climate and energy goals.’
Advisors on the deal included William Fry and Goodbody stockbrokers (for EirGrid); A&L Goodbody (for the commercial lenders); Arthur Cox (for EIB); Danske Bank (Mandated Lead Arranger, Global Agent and Security Agent); BNP Paribas (Mandated Lead Arranger and Hedge Provider); EY (Financial Due Diligence for EirGrid); Matheson (on Commercial Agreements); PwC (Tax and Due Diligence) and Eversheds Sutherland (Construction and Procurement, Lender Due Diligence). |
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