UK: Sponsors launch debt raise for 1.1 GW Inch Cape offshore wind

SDIC-backed Red Rock Power and Irish utility ESB have launched the financing of the 1.1 GW Inch Cape offshore wind project off the east coast of Scotland, it is understood.

The sponsors originally began sounding out the banking market over the financing of Inch Cape in H2 2022 following its securing of inflation-linked 15-year CfDs at a strike price of GBP 37.35 /MWh (in 2012 money) in the UK’s fourth allocation round for the low carbon incentives, then put the process on pause in the face of rising supply chain and financing costs.

However, MUFG, the financial advisor on the transaction, re-initiated soundings in late Q1 this year, and it has in recent days formally launched the transaction with the issuance of a detailed financing structure, an IM, and a request for credit approved lender offers by the end of July, according to market sources.

Inch Cape’s sponsors are understood to be looking to secure a long-term senior debt package of in the region of GBP 1.4bn for the wind farm, and around GBP 800m for the OFTO infrastructure connecting the project to the grid.

In addition, ESB and Red Rock are also understood to have negotiated with Ofgem a circa 25% reduction in the total power to be supplied under the CfDs previously agreed in allocation round 4.

The sponsors are currently looking to secure replacement CfDs for this capacity in this year’s auction (allocation round 6), it is believed.

However, should they be unsuccessful in obtaining fresh CfDs, the GBP 1.4bn in senior debt being requested would be initially reduced by over 25%, it is understood.

Margins on the senior debt are forecast to come in at around the 160bps - 190bps plus Sonia range.

ESB is also concurrently working on a partial selldown of its 50% stake in Inch Cape, with the equity divestment, being overseen by Rothschild, forecast to occur at around the same time the scheme reaches financial close.

*This story was originally published exclusively for NPM Europe subscribers.

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