Lawyer Monthly Magazine - October 2019 Edition

Renewable Energy Asset Finance The top asset finance deal executed in 2018 was the USD 3.34B debt transfer of the Moray Firth Offshore Wind Farm (950MW) in the UK. Additionally, the second highest valued asset finance deal was also in the UK; Triton Knoll Offshore Wind Farm (860MW) was subject to a debt transfer of USD 2.59B in 2018. In third, fourth and fifth place were the NOORm Midelt Solar Portfolio in Morocco, Borssele III & IV Offshore Wind Farm in the Netherlands and Guangdong Baolihua New Energy Shanwei Lufeng Houhu Offshore Wind Farm in China respectively. Each with a capacity of over 500MW and each valued at over USD 1.4B. The NOORm Midelt PV Portfolio is the only and largest solar energy project to feature in the top five asset finance deals executed in 2018. Whilst this was also a transfer of debt, the latter two were characterised by a transfer of equity in the projects. “ “ “ “ With the global investment in clean energy reportedly exceeding USD 300B in 2018 alone, the 2019 investment scope in this area remains to be ever-complex and interesting. With investment vehicles enabling investors to be more serious when it comes to placing monetary interest into a project, there has been growth in the renewable energy sector, as well an increase in M&A activity in this area. One to keep an eye on, for sure. Green Bonds Climate awareness bonds issued in 2007 by the European Investment Bank were the first of their kind. Since then the green bond market has experienced massive growth in the last 10 years, with the annual issuance having risen to USD 155B globally in 2017. Almost a decade ago, green bonds were unheard of. Now they are a key private sector solution which enables the finance of projects, simultaneously benefitting investors. Investors are now looking for smart initiatives that exhibit suitable risk-reward profiles, meeting specific criteria for tenor, yield, geographic diversity and rating, and often projects are looking for alternatives to funding from pension funds and insurance companies which are available in the global capital markets. Throughout 2017, new green bond issuance grew by 78% to over USD 155B globally and is expected to reach USD 250B in 2018 according to Climate Bonds Initiative. In emerging markets, the majority of green bonds were issued in China and India. However, experts have identified other developing countries to be potential bond-hotspots in the green bond market. Brazilian Development Bank BNDES procured USD 1B in May 2017, in what was at the time the single largest green bond issuance in Latin America, with the cash being directed to the financing of a range of Brazilian solar and wind projects. A brief history of the green bond shows just how rapidly the market is growing. A USD 440M climate awareness bond was issued by the World Bank in 2008 and four years later the annual global green bond issuance reached USD 2.6B in 2012. IFC issued a USD 1B green bond in 2013, the largest bond benchmark up to date. Only one year later, a USD 36.6B annual issuance was set by the Green Bond Principles in 2014. The then world’s largest green bond at USD 4.3B was set by China’s Bank of Communication in 2016 and the annual issuance was raised to USD 155B in 2017. In 2018, Europe’s largest asset manager Amundi joined forces with IFC and launched the largest green-bond investment vehicle to date. The Amundi Planet Emerging Green One (EGO) fund is aimed at emerging markets and closed at USD 1.4B. As the earnings are deployed over the next seven years, it is predicted to pump USD 2B into the targeted emerging markets. 80 WWW.LAWYER-MONTHLY.COM | OCT 2019 Special Feature How Is Clean Energy Investment Performing? Clean energy is a business opportunity that creates profitable ways of investing in protecting the earth. A brief history of the green bond shows just how rapidly the market is growing