WORK IN PROGRESS
The financing of Gemini
One of the largest project funding operations in the world for a sustainable project: a remarkable achievement. A sum of €2.8 billion has been raised and has now landed in the North Sea, in the form of 150 wind turbines. What does all this involve? A glimpse behind the financial scenes at Gemini.
14 May 2014 is a date that is engraved in the memory of many people at Gemini - and beyond. In the run-up to the financial close, the company worked hard to be able to obtain all the necessary signatures, under the supervision of the civil-law notary. In a process similar to buying a house, all the different lines then come together. This was an operation involving several hundred people. Firstly, at the four Gemini shareholders (Northland Power, Siemens, HVC and Van Oord), which jointly contributed €440 million in equity. Two of these are listed companies, which makes extra demands in terms of accounting and so forth. In addition, 15 banks and financial institutions pledged €2 billion, of which the European Investment Bank will cover some €500 million. Half of this amount - i.e. €1 billion - is covered by ‘export credit insurance’. With this, a loan is guaranteed by a national government, in Gemini’s case by the Belgian, Danish and German governments. For a premium, a more favourably-price loan is issued and the banks in question run less risk.
The final funding amounts consist of €200 million in subordinated loans and €200 million in pre-completion revenues: the revenues from electricity before the wind farm is completed.
In order to pay for the construction and development costs of €2.8 billion, €640 million was deposited immediately after the financial close. The remaining money is made available monthly via draw-downs, also referred to as ‘capital calls’. The Gemini organisation must submit the evidence for this, in a ‘utilisation request’. This shows the status of the construction work and explains what the draw-down will be used for. It is a thorough, secure and intensive method of working, which is essential for the progress of the project. The smallest mistake can lead to a halt in payments. Such situations must be avoided at all times: ‘zero defaults’ hangs above the Gemini financing strategy in capital letters. So far, the organisation has achieved this very successfully.
Another important part of the work involves keeping all the parties involved well-informed, through ‘proactive finance’. For example, the number of banks taking part has grown by 10 since the start of the project. Communications with this large group of banks could take place via the central coordinator of the external financiers, but Gemini has not opted for this. The banks are visited individually and are personally updated on the development of the project. That creates a great deal of trust which, in turn, is good for the future. All financiers are invited to the annual ‘BankersDay’ and are presented with the current picture of the progress of Gemini - in 2016, they will quite literally receive a view of this with a flight above the wind farm.
For the coming two years, there are two further milestones on the agenda in a financial sense. The first will be the project completion at the end of 2016, when the last turbine is delivered. The second important moment will follow with a potential refinancing of the project, scheduled for 2017/18.