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Bankers think Viking’s a safe investment

THE VIKING Energy wind farm project in Shetland has the potential to be one of the “more attractive” wind deals in Europe, according to a senior corporate banker.

Director of renewable energy wholesale markets at Lloyds Bank, Richard Simon-Lewis, said the plan to build a 127 turbine onshore wind farm, estimated to cost around £685 million, was an “exciting project”.

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Lloyds Bank and other financial institutions have been in touch with Shetland Charitable Trust, one of the main shareholders in the project, for the last two years.

On Thursday, Mr Simon-Lewis, supported by associate director David Craig and Shetland corporate banker Hunter Inkster, gave a 60 minute talk on the bank’s investment strategy in renewable energy.

Mr Simon-Lewis assured trustees that their assets of more than £200 million would not be at risk as the project itself would act as security.

Of the estimated £685 million needed to realise the project, around £548 million, or 80 per cent, will have to come through project finance.

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The remainder will be financed by shareholders Scottish and Southern Energy, the charitable trust and the owners of the Burradale wind farm.

Trust managers predict that half of its £61.65 million share will come from the trust’s own resources, while the other half could be borrowed.

Mr Simon-Lewis said Lloyds had a long track record of financing onshore wind farms with a portofolio of 45 projects worth in the region of £3 billion.

Renewables that used tested technology were regarded as a safe investment, particularly in a situation where the government had set high renewable energy targets underpinned by financial support schemes.

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He added that in order to meet the UK’s target of 15 percent of all energy from renewables by 2020, capacity need to be increases from the current eight gigawatts to more than 38 gigawatts, representing an investment demand of £200 billion.

Speaking during a press briefing after Thursday’s trust meeting, the financier said: “Financing onshore wind in the UK is a stable activity and this is something banks have an appetite for. Through the economic cycle these projects have performed reasonably well.

“Therefore the prospects for Viking Energy are pretty good, because it is onshore wind, it is proven, and you have got very supporting sponsors and a regime with stable government support plus fantastic wind.

“In terms of the ingredients of making a project of this size happen, our view is, although we are not party to the absolute detail, that Shetland has all the ingredients for a viable project to attract banks in to finance it.”

He added: “I have been in this business for 25 years, so in terms of intuitively getting a sense of whether a project is bankable and whether it makes sense, the view that we have is that this makes sense.”

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He said the banking industry preferred to become involved in any potential project at an early stage so that both sides can develop a relationship that would be beneficial to the overall outcome.

No decision on whether the Shetland Charitable Trust will invest in the Viking Energy project has been taken yet, nor has the 457 megawatt wind farm any planning consent.

But describing the Viking plans as an “offshore project onshore” in terms of the Shetland wind regime and the fact no cable linking into the national grid existed yet, Mr Simon-Lewis was enthusiastic that Lloyds could become one of the potential financiers.

Meanwhile, it is thought that most charitable trust members are of the view that the planning application for the 127 turbine project will most likely go to a public inquiry, which would delay a decision on how to finance the project by at least a year.

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