Banks still view the Viking Energy windfarm as a sound investment and their confidence means only £31 million of community funds would have to be put towards it, according to Shetland Charitable Trust.
The controversial issue of funding the £685 million windfarm is to be discussed in public in Lerwick next week with financiers from Lloyds Bank, presenting a rare opportunity for islanders to gain an insight into how corporate investors view the 127-turbine proposal.
Lloyds’ renewable energy project finance director Richard Simon-Lewis will give a presentation to the trust’s 21 councillors and two independent trustees on Thursday morning, joined by Hunter Inkster from Scalloway who works for Lloyds Bank Corporate Markets in Aberdeen.
The windfarm’s main opponents Sustainable Shetland said today they would attend the session.
According to the trust, three significant factors help give the banks “comfort” that Viking would be a sound investment: the strong winds of Shetland; the support of the utility company Scottish and Southern Energy, which is the trust’s partner in the project; and the involvement of local investors like the four Burradale windfarm directors.
Burradale’s productivity is claimed to be more than 50 per cent and its five turbines feature regularly in the top 10 most productive wind turbines in the world.
Trust financial controller Jeff Goddard said today financing Viking had been discussed with several banks, including Lloyds, while SSE has had talks with the EU’s European Investment Bank. There is little new in that because last year he said talks had also taken place with the Royal Bank of Scotland, BNP Paribas Fortis and Barclays in addition to Lloyds.
Lloyds Bank Corporate Markets says it has already underwritten over 40 major projects in the renewable sector worth approximately £3 billion.
Mr Goddard said: “The clear message we are getting from the banks is that this project can be financed and Lloyds Bank Corporate Markets were keen to meet the trustees and give the view of a potential investor.
“The good news for us is that onshore windfarms are seen as an attractive investment opportunity because they use tried-and-tested technology.”
The windfarm application is currently awaiting its fate with the Scottish government’s energy consents unit in Glasgow and the Scottish energy minister. No decision is expected until after the election on 5th May and the trust has said recently that its trustees’ big decision about whether to invest in the windfarm will not be made until next year, about a year after gaining consent.
According to Mr Goddard, most of the £685m costs would be financed through loans from a mix of commercial banks and specialist infrastructure and renewable funds. Security for the loans would be taken against the project itself and therefore would not put any of the trust’s other funds at risk.
He said the trust “might” have to raise £62m to meet its share of the building costs but half of that would be borrowed and the rest raised by selling off some of its existing £200 million investments in the stock markets and local businesses and property.
The trust believes it could earn £23 million a year from its stake in what could be one of the world’s most productive windfarms.
Responding to the Lloyds visit, Sustainable Shetland chairman Billy Fox said talks about bank funding were premature given all the missing pieces in the overall project, including how the interconnector cable to the mainland is to be funded and what electricity transmission charges are to be for exporting power to the National Grid.
He said: “Fair enough it they want to have preliminary talks but it is pretty much putting the cart before the horse really.”
He suspected next week’s event was another opportunity for Viking to bring pressure to bear in its favour. “The cynical view is that this is leverage again coming from the developer to say that this is the best thing going and we must go with this otherwise if the Shetland Charitable Trust doesn’t maintain a position in this then it will happen anyway. All these things are very questionable.”