Deals

First UK offshore transmission link closes

Barclays, BNP Paribas and Lloyds are providing debt for the UK’s first offshore transmission project, awarded to a consortium that includes International Public Partnerships. The £65m project comprises an undersea cable and onshore substation linking the mainland grid to an 180MW offshore wind farm.

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A consortium comprising listed infrastructure fund International Public Partnerships (INPP), its fund manager Amber Infrastructure, and transmission operator Transmission Capital have reached financial close on the UK’s first offshore transmission project.

Offshore wind: getting
connected
The £65 million (€77 million; $106 million) project, known as the Robin Rigg offshore transmission, includes the ownership and operation of an onshore substation and undersea cable linking the mainland electricity network to a 180-megawatt offshore wind farm at Robin Rigg, located 12 kilometres off the coast of Cumbria in Northwest England.

Robin Rigg was awarded as part of UK regulator Ofgem’s first round of tenders of the long-term licence and operation of offshore transmission assets in the UK, INPP said. It was also the first of these to reach financial close, according to INPP.

“This milestone highlights how the offshore transmission regulatory regime successfully attracted fresh sources of investment,” Alistair Buchanan, Ofgem’s chief executive, said in a statement. He added that “overall, the regime is expected to deliver investment of a total value of around £20 billion”.

Barclays, BNP Paribas and Lloyds are providing senior debt for the deal while INPP is investing about £12.4 million of equity and subordinated debt. The project was financed with an 84/16 debt-to-equity split against an annual revenue stream of £6.5 million per year, paid over a 20-year concession period and linked to the UK’s retail price index (RPI), a common inflationary indicator.

INPP said revenues are paid in exchange for making the asset available in good condition, with potential deductions capped at 10 percent in any year. INPP also emphasised the project is not exposed to any demand risk, with the revenues guaranteed by a subsidiary of utility National Grid.

INPP's consortium expects to reach financial close on three other offshore transmission projects by mid-2011. It is also shortlisted for a fifth project which should be awarded this month under Ofgem’s first round of tenders.