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Project Funding Picking Up in Wind Energy

Funding for wind energy companies and investments accelerated in the first quarter of 2013, with most activity centered around some very large project transactions, according to Mercom Capital's latest quarterly analysis.

A record 29 deals amassing $6.2 billion were closed in 1Q13, up from 22 deals for $4.2 billion in 4Q12, pretty evenly split between onshore and offshore ($3.42 billion vs. $2.74 billion) and spanning 14 different countries, says Mercom. Some "extremely large transactions" came off the board:

  • $1.9 billion in project financing for wpd group's 288-MW Butendiek offshore wind project in Germany
  • $700 million in debt financing for Samsung Renewable Energy and Pattern Energy Group's 270-MW South Kent onshore wind project in Canada
  • $664 million loan for EnBW Erneuerbare Energien's 288-MW Baltic 2 offshore wind project from EIB
  • Invenergy Wind secured $500 million from Caisse for 11 operating onshore wind projects in the U.S. and Canada, amounting to ~1.5 GW
  • EDF EN's Mexican unit, Eoliatec del Istmo, received $399 million from Mitsui's subsidiary MIT Renewables Mexico and EDF Energies Nouvelles for its 164-MW Bii Stinu onshore wind project

Only one quarter into the year, the wind industry is already almost halfway to last year's project investment totals, and even further along compared with 2011 and 2012.

Project acquisition was also brisk with 17 transactions worth $1.4 billion, the biggest of which were Geronimo Energy's acquisition of Midwest Wind Energy's 1-GW Wind Park Burg II project, and Blue Energy's $392 million acquisition of HgCapital's 177-MW RidgeWind portfolio.

Top five project acquisitions by MW in 1Q13. (Source: Mercom Capital Group)

The heavy shift toward backing projects is typical for a maturing sector such as wind, which was the most installed energy generation source in the US last year and has kept up the pace through the early part of this year, explained Raj Prabhu, CEO of Mercom Capital. "Initially, investors tend to gravitate towards innovative companies with disruptive technologies, but as the industry matures and products get commoditized, investors tend to move towards downstream companies," he said in an e-mail exchange. "Large-scale wind projects with lower system costs are attractive to investors."

It was also a big quarter for M&A activity. Four transactions (three with disclosed info) totaled a year-high mark of $543 million, led by the $314 million purchase of Dong Energy's Polish onshore wind businesses by two local power utilities.

VC funding in the wind sector showed a spark, with three deals worth $16 million: $7 million financing to Vancouver-based wind turbine maker Endurance, $5.5 million for wind LIDAR system developer Pentalum, and $3.9 million to wind turbine/blade manufacturer Heartland Energy Solutions. (Three deals may not seem like much, but it's better than the one deal for $500K eked out in 4Q12. On the other hand, that barely registers a blip compared with a year ago when $240 million was spread across 12 VC investments.)

 

We'll be tracking all the latest information about the wind energy sector — market growth, financing landscape, policy outlooks, technology and operations — at the AWEA Windpower event next week in Chicago. (Stop on by, we're in booth #2716.)

Lead image: 3D blowing cash via Shutterstock

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