Wind is driving the energy transition

Pioneering projects call for financiers who are unafraid of risk

The Netherlands is faced with a dual challenge: the country needs to find a sustainable way to satisfy its energy needs while at the same time meeting climate change targets. Rabobank supports the leaders driving the energy transition by funding their pioneering wind energy projects.

As wind energy has hit the mainstream over the past decade and the technology has reached maturity, costs per generated unit of power continue to fall. On- and offshore wind farms demonstrate the vital role wind energy plays in the energy transition. This is especially true in the Netherlands, where the maritime industry has once again proven itself to be a global player through the construction of massive offshore wind farms.

Public duty

The energy transition requires billions of euros in investment, and providing funding to wind energy companies is one area where Rabobank has carved out a role for itself, compelled by its identity as a socially involved bank. “The energy transition is unstoppable and affects all of us,” says Marc Schmitz, project financier at Rabobank, who has more than 20 years’ experience in financing renewables. “With the increase in knowledge over the years, projects have grown in size and scale, and our clients now benefit from the fact that we have more experience with wind energy than just about anyone.”

“ The energy transition is unstoppable and affects all of us”

- Marc Schmitz, Rabobank

Leading wind energy financier

After starting out providing loans for the earliest wind farms in the Netherlands – still based in farmyards in those fledgling days – Rabobank extended its first non-recourse loan for a large offshore wind farm in the North Sea back in 2006. The bank is currently the leading financier of large-scale wind farms among Europe’s commercial banks, with a current tally of 27 offshore wind energy projects – and counting – to its name. A recent example in the Netherlands is the Borssele III/IV project.

Next year, Blauwwind, a consortium of Eneco, Van Oord, Shell, Mitsubishi subsidiary DGE, and the Swiss private equity firm Partners Group, will start construction on this 77-turbine wind farm, which will supply energy to 825,000 homes.

Windpark under construction. Picture: Van Oord

Young industry

The Blauwwind project requires a €1.3 billion investment. While this is undoubtedly a sizeable figure, it’s all relative: no lesser authority than Greenpeace has called the rate of 5.45 eurocents per kilowatt hour “spectacularly low.” Pieter van Oord, CEO of the Van Oord contracting company: “Both Van Oord and Rabobank have been involved in offshore wind farms from the get-go. It’s a relatively young industry, one that’s still faced with a number of uncertainties, including price fluctuations in the electricity market. The cost price has dropped significantly thanks to innovation and the growing capacity of wind farms. Since that also means we can expect subsidies to be scaled back in the foreseeable future, a bank with knowledge and experience in funding wind farm projects can be an extremely valuable partner.”

“We have both been involved in offshore wind farms”

- Pieter van Oord, Van Oord

Innovative financing

Outside the Netherlands, Rabobank recently managed the financing of the BlaFa project in Sweden: the country’s largest onshore wind farm, with a capacity of 353 megawatts. Rabobank created a highly innovative financing structure for the project founders, energy giant Vattenfall, wind turbine manufacturer Vestas, and Danish pension fund PKA. Rabobank project financing specialist Simone van Gendt, who regularly works on renewable energy projects: “We have built a good relationship with the Danish export credit agency, EKF, over the years. We worked with them to create a guarantee structure for long-term project financing. Rabobank and EKF will jointly take on the full project risk, while an institutional investor will provide the funding. This makes the project financing particularly appealing and efficient for our clients.”

Track record

Having this guarantee structure in place was very important to energy company Vattenfall, as Thijs van Lotringen, the company’s Head of M&A, explains. “It really added value to the project. Because of their track record – including in our own region – we liked the idea of working with Rabobank right from the start.” The Swedish energy giant had no doubt that the bank would complete the complex financing process swiftly and efficiently. Marc Schmitz: “And to be honest, another one of the factors that clinched it for us was the good personal rapport we have with Rabobank. Arranging the financing for projects of this kind can be very full-on and take months to complete. It helps a lot if you’ve got the right chemistry – that way, you can turn that process into something fun and exciting.”

Civic initiative in Zeeland

The impact of offshore wind farms on the local environment has become something of a hot-button issue in the Netherlands in recent years. Those living near onshore wind-farm projects are also becoming more vocal in asserting their interests and opinions. In public discussions, opposition is often dismissed as NIMBY-ism (“Not In My Back Yard”), but that somewhat oversimplifies the situation.

Rabobank is represented in the Green Deal Steering Committee, which was established to improve local dialogue on renewable energy projects. At the same time, a wind farm currently under construction in Zeeland province is showcasing how local communities can actively support wind energy. Windpark Krammer (‘Krammer Wind Farm’) is currently being built around the Krammersluizen locks, right where the land meets the sea. The 34-turbine wind farm will boast a total capacity of 102 megawatts.

What makes this project so groundbreaking is that it was conceived and funded by the public. Two cooperatives, Deltawind and Zeeuwind, which have a combined membership of around 5,000 people, are the driving forces behind the farm. They managed to find a new type of customer for the energy they will be producing: instead of an energy company, as might be expected, a consortium made up of Google and Dutch multinationals DSM, AKZO Nobel, and Philips will be purchasing 95% of the energy generated. Rabobank has been involved from the outset in developing the financing structure, which was arrived at in part through public consultation.

New techniques moves the sector forwards. Picture: Van Oord

Local engagement

Niels de Fijter, financial manager for Windpark Krammer: “Our project is very much driven by the local community. The members wanted to be able to invest in the project themselves, and we wanted to give local residents the opportunity to reap the rewards of the project rather than just ask them to put up with the inconveniences.” This funding style helped to garner local support: “Rabobank has created a lot of goodwill through the way it has embraced civic participation,” De Fijter continues.

The community investment project turned out to be highly complex, mainly because of the duty of care toward private investors. “Since you’re asking people to invest in venture capital, you need to make sure they’re very clear on the potential ramifications,” says Pieter Plantinga, who is involved in the Krammer crowdfunding initiative on behalf of Rabobank. “That kind of local involvement and the cooperative structure of the project are a perfect fit for Rabobank. We were really able to make a difference here – also through the local Rabobank in Oosterschelde, which provided loans to local residents to purchase solar panels as a parallel initiative to this one-of-a-kind wind energy project.”

“Wind energy is the most effective solution”

- Bas Bakker, Rabobank

Energy transition pioneers

The fast-growing capacity in both on- and offshore wind energy notwithstanding, the energy transition is still far from complete. Bas Bakker, a sector banker in Rabobank’s Energy division: “We know that wind energy is currently the most effective solution to the climate crisis. But somewhere in the world right now people are developing new technologies that will help us to achieve the climate change targets for 2030 and 2050. These new solutions need pioneers: energy companies, investors, technology partners, scientists, governments, the public... and banks. The challenge we face is so immense that we can only solve it together.”

This article is part of the Wholesale Banking for Better series.