Overcoming the Challenges of Financing Offshore Wind Projects

Abstract

The objective of this paper is to help the various stakeholders involved in offshore wind projects identify and overcome the challenges of financing offshore wind projects. It will present key considerations for debt and equity financing during the development (i.e., early stage), construction, and operational project phases. Additionally, the paper will outline the benefits of adopting a joint go-to-market approach that combines equipment, services, and financing solutions into a single bundled package. Where applicable, the strategies/conclusions outlined in this paper will be validated using real-world case studies, which serve as a benchmark for how projects can be structured to secure high levels of funding. Funding remains a key challenge for offshore wind projects due to the quantum of capital required and often complex contractual structures. This complexity stems from the large number of contracting parties involved, and the resulting "interface risk". With utilities less willing to finance projects on balance sheet (i.e., via equity or corporate-level debt), and increasingly partnering alongside co-investors – such as equipment manufacturers and institutional investors—tailoring projects for the project finance market has become increasingly important. Expert financiers can help bring confidence to lenders by acting as a peer within a bank syndicate. In the case of an original equipment manufacturer (OEM) or solution provider, providing financial support in the form of debt or equity capital to the project highlights how the company has so called "skin in the game", providing the necessary vote of confidence to enable the utilization of newer technologies and consequently reduce capital costs. As many real-world projects have demonstrated, doing so helps to reduce the overall risk profile of the project – ultimately increasing its bankability and improving the likelihood of securing the level of funding required for construction.