Scotland benefits from some of the world's richest wind resource. But it hadn't fully harnessed this valuable natural power through the use of offshore wind farms.
That trend begun changing course in 2014, when SSE, a leading UK utility and renewables developer, solidified a partnership with Copenhagen Infrastructure Partners and the Spanish utility Repsol (who subsequently divested to SDIC Power) to progress the development of the Beatrice Offshore Wind Farm, located off the east coast of Scotland.
The project will see the construction of 84 turbines, which will generate 588 megawatts of renewable energy. But with its sheer size, the project would require funding worth £2.6 billion. Deliverability would be paramount to the success of the venture.
Increasing competition for capital from other European offshore wind project financings and the unprecedented size of the debt financing requirement, meant it was crucial for the project's shareholders to optimise the funding sources.
MUFG, which has enjoyed a decade-long relationship with SSE, was appointed as financial adviser to lead the process in February 2015.
For Beatrice to be a success, Beatrice Offshore Windfarm Ltd (BOWL) needed a partner that possessed a full suite of services, from financial structuring and modelling to the ability to raise debt at the right price.
After exploring a comprehensive range of alternative financing options, MUFG delivered a financing structure that maximised the shareholder's returns while maintaining leverage at a level which ensured that interest levels were sufficiently robust to support the senior debt funding requirement of £1.9 billion.
With time of the essence, it was vital to put in place an efficient negotiation process which mandated a high calibre group of established offshore wind project finance lenders and associated due diligence advisers.
In close concert with these lenders and advisers, MUFG delivered the project on time and in line with the shareholders' objectives. In addition to its role as financial adviser and lender, MUFG was involved in foreign exchange and interest rate hedging, co-ordinating book-running, and as security trustee and facility agent.
After several years in development and an intense financing process, BOWL and its consortium of lenders reached financial close on the project in May 2016, receiving the green light to begin construction of the wind farm.
The project represents many firsts for the market: it is one of the largest private investments ever made in Scottish infrastructure, and the largest project financing for an offshore wind farm.
In addition to powering approximately 450,000 homes, it is estimated that Beatrice will deliver close to £680 million into the UK and Scottish economy via employment and supply chain opportunities during construction alone. In the wind farm's 25-year operational life, it could contribute a further £525 million.
For SSE, Copenhagen Infrastructure Partners and SDIC Power, the project is an important milestone that has placed them at the forefront of the fledgling offshore wind sector.
Oliver Cass, Finance Director at Beatrice Offshore Wind Farm, said:
“When we set out to appoint a lead bank, we were looking for a team with standout experience, and a mix and depth of skills that could provide us with a pragmatic, clear approach. We ran a competitive tender process and ultimately MUFG possessed the full combination of winning factors.
Throughout the process, MUFG understood our priorities and were excellent at using their experience to deliver on those priorities. They were hard-working, diligent and importantly, had a good working relationship with ourselves and all of the stakeholders involved in this project."