Project Inch Cape
We are proud to have been a key player in one of Scotland's largest offshore wind projects. A complex and time-constrained project, it has so far contributed over £300 million to the UK economy and is estimated to create at least £700 million more [1] .
The Challenge
The 1.1 GW Inch Cape Offshore Wind Farm project is sited in the North Sea off the east coast of Scotland and will include 72 turbines, an offshore substation platform, and associated electrical infrastructure. Onshore, the project is constructing a new substation at the brownfield site of the now decommissioned Cockenzie coal power plant, where the project will connect to the national grid.
The project's capital cost is more than £3.5 billion, and once operational in 2027, it will be able to power more than half the homes in Scotland and significantly contribute to the UK's 2030 target of 43-50GW of offshore wind installations.
MUFG joined the project in 2020 as financial advisor to support the sponsors and project team through the various phases of the project. This included preparation for the UK Allocation Round 4 (AR4) Contract for Difference (CfD) auction, support in developing a bankable offtake solution (including revenue optimisation post AR4), ensuring the bankability of the project's procurement package and finally in the structuring of a competitive debt finance package. MUFG coordinated £2.7 billion in senior debt facilities from 22 commercial banks. For greenfield offshore wind projects, this deal stands as one of the largest debt raises from the commercial bank market to date.
However, the invasion of Ukraine in February 2022 added further pressure to a global economy recovering from the consequences of the COVID pandemic. Uncertainty around the conflict contributed to inflation, raised interest rates from central banks and higher costs for consumers. This market disruption impacted the offshore wind sector globally, and for the project in particular, it added complexity to the negotiation of its procurement contracts.
Execution
The MUFG team's almost two decades of experience financing global offshore wind projects proved crucial in executing the Inch Cape project, as it manoeuvred a supplier market with a notably reduced appetite for risk.
Adapting its strategy, the project team undertook an in-depth feasibility analysis of the options available, including effectively using the permitted 25% reduction in the contracted volumes secured under the initial AR4 CfD contract in 2022.
This reduction made the project investment case more attractive, clearing it to enter into specific supply chain commitments on a limited-notice-to-proceed basis.
As financial advisor, MUFG was responsible for ensuring that the project's strategy across procurement and offtake was communicated effectively to the bank market to underpin lender appetite, ensure robust liquidity, and ultimately deliver a cost-competitive debt package.
Overall, the adapted approach gave sponsors the requisite transparency and comfort to make additional financial commitments ahead of financial close.
Results
Despite challenging conditions in early 2023 created by the invasion of Ukraine and the COVID pandemic, MUFG's deep sector knowledge and specific understanding of Inch Cape allowed it to reduce risk for sponsors while remaining open to innovative commercial options to bring the project forward.
After 18 months of negotiations and problem-solving to satisfy all parties involved in the project, MUFG and its consortium of lenders reached financial close on the project in January 2025. Construction of the Inch Cape wind farm is already underway and is set to be completed in 2027.
Inch Cape has so far spent more than £300 million with more than 300 UK companies and is expected to contribute another £700 million at least to the UK economy [2] [3]
Mark Fogarty, Finance & Strategy Director for Inch Cape Offshore Limited, said:
"We have worked very closely with the MUFG team to develop and execute the project financing of Inch Cape. MUFG was highly effective in their role due to their significant expertise in offshore wind and also an ability to effectively develop solutions with the project team to overcome the challenges that we faced."
For further information on Project Inch Cape, read the PFI article here.
[1] https://www.inchcapewind.com/