A new electricity product, eirtricity, produced by wind farms, was launched in January by Future Wind Holdings Ltd, a joint venture between Future Wind Partnership and NTR plc (National Toll Roads). It claims to be the first privately-offered electricity in Ireland since 1927 and marks a milestone in private investment in electricity generation. The company is headed by Eddie O’Connor, former chief executive of Bord na Mona.
A funding package of around IR?10 million made up predominantly of debt is being put together by the company for building its first wind farm in Co. Donegal. It is expected that one bank will emerge as the lender in the next six to eight weeks. The company is also using tax-based financing structures to raise capital.
Energy investment
The former Bord na Mona chief is bullish on energy investment. ‘The opportunities for the Irish financial community are gigantic. If only a fraction of Ireland’s wind resource were used, it could be exporting much more electrical energy than is consumed within the country.’
‘The appetite for investment over the next twenty years would be voracious - ?800,000 for every megawatt installed is the current price. In a twenty to thirty year period it is conceivable between 5,000 and 10,000 megawatts could be installed onshore and offshore in Ireland. So this calls for an investment of between ?4 and ?8 billion’.
Louis Fitzgerald, Finance Director of Future Wind Holdings, told Finance that wind farm investment would typically be funded by 75 to 80 per cent debt, but that this proportion would fall relative to equity as guaranteed off-take contracts became less commonplace.
The 50 per cent year one capital allowance provided in the Finance Act 1997 had proven to be attractive mainly to banks, he said, and the result was that cheaper bank funding was available to projects. In the long run, he expects that debt financing of Irish private energy projects will be on a bond rather than bank basis, as occurs now in the United States and some European countries. Financing will also move away from non-recourse project finance to company debt covering a portfolio of power generation plants.
Fitzgerald said that wind power generation involved high up front capital costs with operating costs as low as 20 per cent of revenue on a long term basis, freeing up cash to service debt finance. It provided returns which were ideal for long term investors requiring steady income payouts, such as pension funds. |
