Isra-Mart srl: UK leads market as banks slowly warm to offshore wind

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The number of banks willing to back European offshore wind projects is steadily growing, according to a new report that predicts a record €3bn (£2.6bn) of bank funding will be delivered to the emerging industry this year.

The mid-year report published by the European Wind Energy Association (EWEA) today showed a "comfortable" 4.5 per cent increase in the installation of offshore turbines compared to the first half of 2010.

The report also said that three to five project transactions are expected to close in 2011 with a record €3bn provided by banks. It added that more than 20 financial institutions have now obtained firm credit committee approval to take on risk attached to offshore wind projects.

Christian Kjaer, chief executive officer of EWEA, welcomed the figures, but warned the European market is "not home and dry yet".

"The sector is coming out of the financial crisis but is still facing a potential worsening of the general economic crisis," he said.

"The number of banks providing capital for offshore wind farm investments is steadily growing, although there is a continued need for attracting an increasing number of large institutional investors to offshore wind farms - presently the largest construction projects going on in Europe."

The report also said non-recourse lending is now becoming a large contributor of capital and could support nearly 50 per cent of the capacity under construction by the end of the year.

Other possible boons to the market include plans by the UK for a Green Investment Bank and the recently unveiled German proposal for a €5bn programme from the KfW infrastructure bank to support offshore wind projects.

EWEA also hailed Dong Energy's policy of "recylcing" minority stakes in its existing projects to finance new investments. The company is currently in the process of selling 49 per cent of its Gunfleet Sands project in the UK, and in March it sold 50 per cent of the Anholt project in Denmark.

"The novelty in that last transaction is that it took place prior to completion of the wind farm," the EWEA said. "Even if the investors will not bear the construction risk, DONG guarantees completion on time and on budget. Demonstrating that such an approach is possible will certainly create new opportunities for utilities and developers to sell stakes in their projects before they become fully operational."

The report also underlined the UK's position as the world's leading offshore wind energy market.

It confirmed that 108 new offshore wind turbines with a total capacity of 348MW were connected to power grids in the UK, Germany and Norway during the first six months of 2011.

However, of these 101 were built off the UK coast, with only six built in German waters, and a single turbine erected in Norway.

The market was dominated by Siemens, which supplied 84 per cent of machines, followed by BARD with 16 per cent.

However, a raft of new manufacturers are currently preparing to launch larger next generation offshore wind turbines as the UK moves to rapidly expand its burgeoning offshore wind market.