West Texas Wind Farm Funded (BP, NRG)

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Fortis Merchant Banking has successfully closed syndication of a $280 million senior secured financing for Sherbino I Wind Farm LLC.  This west-Texas wind farm is a joint venture owned by BP plc’s (NYSE: BP) BP Alternative Energy North America Inc. and NRG Energy, Inc. (NYSE: NRG).  Interestingly enough, this syndication was oversubscribed with nine banks joining the deal.

Fortis Merchant Banking structured and underwrote the financing, which is comprised of a construction loan of some $280 million, which will then convert into a 15-year term loan in the amount of $140 million at the commercial operation date.

Fortis acted as the sole bookrunner, and the financing is accompanied by a long-term fixed price gas hedge provided by Fortis Energy Marketing and Trading. The hedge was designed to accommodate wind intermittency risk and provides Sherbino I Wind Farm with greater revenue stability for the term of the hedge.

According to the BP site, the Sherbino wind farm will be completed in stages, with an initial stage consisting of fifty Vestas V-90 3MW turbines.

If you have looked through various reports from 247WallSt.com in our alternative energy index or in our oil & gas index, you will see much coverage on alternative energy ranging from wind to solar to wave power to turbines to fuel cells and so on. 

It no longer matters whether or not global warming is fact or fiction on the business front.  Green energy and renewable energy are mainstream now.  Some projects were viable at $40 oil, but with $100 oil you can do the math.  Imagine if once upon a time committed itself to the mantra, "We just want to sell soft drinks, that bottled water trend isn’t something we are interested in."   

Jon C. Ogg
April 4, 2008

Jon Ogg produces the Special Situation Investing Newsletter; he does not own securities in the companies he covers.