ERBD-Led Consortium Sanctions $276 Million Loan for $377 Million Windfarm in Bulgaria

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Researched by Industrial Info Resources (Sugar Land, Texas)--In support of the development of renewable and clean sources of energy in Bulgaria, a consortium of banks led by the European Bank for Reconstruction and Development (EBRD) (London) has sanctioned loans amounting to $276 million toward the construction of a 156-megawatt (MW) windfarm in the country. The $377 million project is slated to be the largest windfarm not only in Bulgaria but also in Eastern Europe.

The proposed windfarm will be set up near Kavarna on the Black Sea coast in northern Bulgaria and will have 52 V-90 wind turbines manufactured by Vestas Wind Systems A/S (CPH:VWS) (Randers, Denmark) with a capacity of 3 MW each. The project will also involve the development of a 33/110 kilovolt substation that will be connected to the national grid through an 8-kilometer transmission line. The windfarm will be named Sveti Nikola, or St. Nicholas, and is expected to come into operation by October 2009. The annual capacity of the power project is expected to exceed 340 gigawatt-hours.

AES Geo Energy, a subsidiary of The AES Corporation (NYSE:AES) (Arlington, Virginia), will own and operate the facility and has entered into a 12-year power-purchase agreement with state-owned power distribution firm Natsionalna Elektricheska Kompania NEK (Sofia, Bulgaria). AES has also committed to working with local authorities, environmentalists and stakeholders to build a sanctuary for migratory birds in the vicinity of the project site. The firm also plans to develop a second windfarm in the country near the northeastern town of Silistra with a minimum power generation capacity of 100 MW.

UniCredit Markets and Investment Banking (Milan, Italy), along with EBRD and International Finance Corporation (IFC) (Washington, D.C.), a member of the World Bank Group, will provide a nonrecourse loan package of $311 million for a 15-year tenure under an A/B structure for the project. EBRD will retain $98 million on its books while the IFC will lend $56 million. UniCredit has underwritten the syndicated loans of EBRD and IFC that amount to $95 million. UniCredit is also expected to launch a limited syndication of the B loans soon. UniCredit Bulbank (Sofia, Bulgaria) is also providing an additional amount of $35 million for the project in the form of a value-added tax loan facility. As of September 2008, AES has invested $95 million toward the project and also provided funding of $5.6 million to attain financial closure for the project.

The EBRD is supporting the windfarm project under its Sustainable Energy Initiative that was launched in May 2006 to promote investments in projects pertaining to energy efficiency and clean and renewable sources of energy. The total installed wind power generation capacity in Bulgaria is 70 MW at present and meets a little over 1% of the country's power requirements while nuclear energy and coal-based thermal power meet 43% and 40% of the country's power requirements, respectively. The country, which is a large exporter of electric power across the Balkan Peninsula, is looking to increase the share of renewable sources in its power portfolio to 16% by 2020.

As the largest investor in the country, the EBRD has committed more than $2.37 billion to several projects across Bulgaria. In association with its partners, it has also mobilized more than $8.38 billion for various projects in the country. Over the past decade, the bank has been instrumental in restructuring and developing the country's power sector by facilitating funds for power generation and transmission projects, including the development of the first 400-kilowatt long-distance power line recently laid between Bulgaria and Macedonia in a $26 million project.

The EBRD recently extended a loan of $49 million to the Bulgarian Fund for Local Authorities and Governments to develop infrastructure and local services in the country. The loan will enable local authorities to identify, develop and finance municipal projects that can be supported by grants from the European Union.

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