Google supplies its 15 data centers worldwide entirely with electricity from renewable sources. The Internet giant’s server park in Eemshaven in the Netherlands is also powered by wind and solar energy. This solar power comes from neighboring Delfzijl, where experts from Wirsol, a brand of WIRCON GmbH in Waghäusel, have built the Netherlands’ biggest solar park. It was financed by LBBW.
SunPort Delfzijl measures 30 hectares, an area as large as the Oktoberfest site in Munich. But the atmosphere is much more sober here, with rows of more than 123,000 glinting blue solar panels. When the sun plays along, they produce 300 megawatts of electricity, enough to supply 7,500 households.
Waiting for cash flow
EUR 40m was invested before the power flowed, three quarters of which as project finance with a long-term loan with a 15-year term. This is not to be taken for granted: While solar park operators in Germany can count on fixed payments for the next 20 years, such long-term planning is not possible in the neighboring countries. This means the finance providers at LBBW first have to change their mindset and then find new solutions. Jürgen Klingel, Project Finance Director, says: “On the basis of the Dutch feed-in rules, we have developed a financing structure that is well suited both to the specific project circumstances and to the Bank’s risk appetite.”
After all, it is not only Wirsol taking a risk on the SunPort project, but LBBW too, because project finance is usually non-recourse finance. The risk for the Bank is that, should something go wrong, it can only draw on the capital that the companies involved have directly contributed to the project. As the name “non-recourse finance” suggests, it has no recourse to financial assets. In order to spread the risk more widely, such financing also involves operators, suppliers and customers. It requires all parties to cooperate on the basis of sound business planning. They have to agree that the investment will pay off since the principal and the interest on the loans are only repaid when cash flow is generated. Before the Bank grants the loan, it therefore analyzes the project carefully.
Project finance protects equity
The bankers quickly gave the SunPort project in Delfzijl the thumbs-up – and did not change their minds. “LBBW agreed with our business assessment,” says Dr Peter Vest, Managing Director of Wirsol. Moreover, with non-recourse finance, LBBW is meeting the company’s desire that equity be as well protected as possible. From the project manager’s point of view, non-recourse finance is off the balance sheet. Companies can thus deploy and use their equity elsewhere. That is exactly what Wirsol intends to do. Dr Vest says: “We need our equity for development.”
His company is developing rapidly. At Wirsol’s locations in Waghäusel in Baden-Württemberg, Germany, in Arundel in the south of England, and in Sydney, around 100 employees are working on the implementation of photovoltaic systems of all sizes in Germany, Great Britain and selected locations in the rest of the world. For example, Wirsol, with LBBW’s help, built the Lerchenborg solar park on the Baltic coast of Denmark, which has been supplying around 30,000 private households with electricity since 2015. This year, 200 MW has already been connected to the grid in Australia. Another 200 MW is currently under construction.
Eleven wind turbines, financed via LBBW
The company, founded in 2013, recently also got involved in wind power: At the end of 2017, Wirsol’s “Straubenhardt Wind Farm” project in the northern Black Forest was connected to the grid. The eleven wind turbines can supply electricity to up to 22,000 households. At almost exactly the same time, the company purchased an existing wind farm in Canada. Both projects were financed via LBBW.
More precisely, they were financed via Andreas Schück, corporate customer advisor at the LBBW subsidiary BW-Bank in Karlsruhe. He has known Wirsol for years and knows about the challenges involved in the development of major energy projects. If necessary, he brings in additional experts from the LBBW Group. “We always work on major project finance according to international standards in a team,” says Schück. SunPort not only required non-recourse finance plus interest rate hedging but also a solution for cash management.
Complete package, perfectly put-together
This was evidently a success. The complete package individually put together by LBBW was a perfect fit, says Wirsol’s Managing Director Dr Vest. Since then, everything has been running smoothly: “The collaboration works because our teams are excellently coordinated with one another.”
Incidentally, LBBW does not have to worry about cash flow or the repayment of the loans. In July 2018, Google secured all the electricity produced at SunPort in Delfzijl from its operator Eneco. For ten years.