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Post by Ton ⓉⓞⓃ on May 24, 2014 10:11:22 GMT
Aberdeenshire Wind Turbine - 3 year loan - 9.75% per annum - 68% loan to value
I'm assuming the auction starts on the 27/28th. Brief report only.
IN EDIT This is Auction 93, not to be mistaken for The Scots Wind Turbine No90 which is also called North Lothian Wind Turbine
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pikestaff
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Post by pikestaff on May 24, 2014 14:13:02 GMT
The full document is not there yet. I agree this one looks 25-50bp light compared to the others, if one looks at the LTV alone, but I would also like to see the cover. The projected initial cover for the first 3 loans was:
Cumbria 1.44 times
Burnley 1.32 times
North Lothian 1.54 times
I thought Cumbria was a particularly good deal and may have been sweetened a little to get the market going. This need not have cost the borrower anything, because AC might have offered a reduced fee to win the business from TC. In my view, this one will be fairly priced relative to Burnley and North Lothian if the initial cover is around 1.45.
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j
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Post by j on May 24, 2014 17:37:14 GMT
At first glance doesn't this loan look rich to the prior three wind loans? The first two were at 10% with LTVs of 61% and 60%, respectively. The most recent was at 9.5% with 50% LTV. Now we get a loan at 9.75% with LTV 68%. So trading 25bp through the first two with 8% less security coverage and 25bp cheap to the last but with 18% less security coverage. I will read the docs now but interested if anybody had already observed some positives vs. the other comparable loans. With more competition out there, maybe such lower rates are a sign of things to come?! Well spotted samford71
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j
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Post by j on May 24, 2014 17:44:11 GMT
An afterthought, and I know I'm being lazy as I ask the question as I cannot spare time to trawl through the other three credit report but, are the previous wind turbine loans related or run by the same company? I have a small exposure to all of the loans simply for diversification but, wonder if adding another holding in something similar yet again really does count as diversification, especially if the companies running them were inter-related.
PS Will certainly wait till units appear on AM on this one if I decide to buy
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Post by Ton ⓉⓞⓃ on May 24, 2014 17:51:01 GMT
An afterthought, and I know I'm being lazy as I ask the question as I cannot spare time to trawl through the other three credit report but, are the previous wind turbine loans related or run by the same company? I have a small exposure to all of the loans simply for diversification but, wonder if adding another holding in something similar yet again really does count as diversification, especially if the companies running them were inter-related. PS Will certainly wait till units appear on AM on this one if I decide to buy The holding company is not named and nor is it's owner, TBA. No doubt this will be another SPV. The threat is if a Government changes a previous ones FIT's, I struggle to see any others out side of fraud and incompetence, but there must be others. The FIT and others give the value to the project if that is attacked the whole thing starts to be de-valued.
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j
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Post by j on May 24, 2014 18:04:34 GMT
An afterthought, and I know I'm being lazy as I ask the question as I cannot spare time to trawl through the other three credit report but, are the previous wind turbine loans related or run by the same company? I have a small exposure to all of the loans simply for diversification but, wonder if adding another holding in something similar yet again really does count as diversification, especially if the companies running them were inter-related. PS Will certainly wait till units appear on AM on this one if I decide to buy The holding company is not named and nor is it's owner, TBA. No doubt this will be another SPV. The threat is if a Government changes a previous ones FIT's, I struggle to see any others out side of fraud and incompetence, but there must be others. The FIT and others give the value to the project if that is attacked the whole thing starts to be de-valued. As you say Ton ⓉⓞⓃ, governments come & go & just because one promised something does not mean another will keep honouring it, In fact, governments tend to renege on their own promises regularly but, that's another conversation (don't start me on politics!  I can't see the point of ploughing money into the same investment niche area with the loose guarantee of a promise on FITS (unless someone gladly corrects me & proves there is a legal timed guarantee to all this), apart from the environmental energy aspects involved
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Post by Ton ⓉⓞⓃ on May 24, 2014 19:36:58 GMT
Pikestaff - I agree that Cu***ia was the most attractive. I have a decent chunk of that, less in the others. The problem here is that while I quite like the type of loans I see, between a few deals on TC and a few deals on AC, I am becoming somewhat exposed to this specific industry sector. I might be diversified across a number of loans but that really won't reduce the default correlation risk if we get some macro change to the landscape for renewable wind energy. Unless I scale up my P2B exposure, I sort of think from here I am really going to focus on relative value between wind loans rather than further outright buying. I wonder how many other lenders are getting into the same position? Similar feeling here. The Government is encouraging shale gas. In the future this could, I believe, seriously slow down any move to wind energy. This is why I think the Tories are, or perhapos I should say Mr. Cameron, has spoken against Wind Turbines and for the lowering of future FIT rates. I believe FIT rates are not a political guarantee but a Governmental one and I really hope are long term ones not merely short term ones that change with the wind...
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Post by jevans4949 on May 24, 2014 22:48:55 GMT
My guess, for what it's worth, is that a UK government would not renege on any existing obligations - unless it was a coalition of UKIP and the right of the Conservative Party. However, if Scotland went independent, and ran into financial difficulties, anything could be given the chop.
So I'm happy to invest in wind turbines south of the border, but not (at present) to the north.
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duck
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Post by duck on May 25, 2014 6:25:57 GMT
Declaring an interest here I spend/have spent a fair proportion of my working life in 'Civil Nuclear Power'. Politicians of all hues have had their fingers in the pie and continue to do so to the detriment of the UK population.
As always follow the interests / money
Just a few examples The re-valuation (down) of the British Energy share price to close to zero and then selling off the operational stations to EDF (family connections to a certain high up at the time politician) - tax payer foots legacy costs (and also some of the on-going costs).
Breaking up of BNFL - means we have to buy in reactor design ..... again vested interest (60 years of IP literally given away to all comers who are now bringing some of it back at a cost!)
Shale Gas - Check out Gideons family connections to the industry.
The sale of Sellafield and AWE (atomic weapons establishment) to American interests.
..... the list is very long.
On shore wind was used by politicians to show their 'green credentials' - it is easier to point to a wind turbine than to stand on a wave generating system. Now the direction of the wind is changing in the Conservative Party back to big business - so off shore wind will dominate. Note the Deputy Prime Ministers wife is a highly paid Consultant to the largest Spanish Wind Power Generator (she doesn't lobby in this country).
Even though I have worked on many projects that have wasted vast amounts of money I do not see a continuation/change of government having a detrimental effect on these Wind Turbine Loans. Scottish independence, well anything could happen but since 'they' fly their alternative power credentials higher up the flagpole than most combined with the timescales involved here my level of 'concern' is very low.
I await the full paperwork but in all likelihood I will invest as I have in the other turbine loans.
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Post by Richard Martin on May 25, 2014 6:42:06 GMT
Although most of the queries have been answered in replies to previous wind turbine loans, it may help if I deal again with some of the points that have been raised:
FIT payments:
The Government is committed by legislation to the payment of FITs from the date of commissioning for a term of 20 years indexed linked to RPI. Although FITs have and will continue to be reduced, the Government has repeatedly stated that it will not make any retrospective changes; indeed to do so, would be political suicide bearing in mind the huge amount of money invested in FIT based schemes ranging from domestic roof top solar to institutional infrastructure funds.
Scottish Independance:
The payment of FITs is an obligation of the UK government, which has stated that, in the event of independence, it will continue to meet these obligations.
In any event, the Scottish parliament is strongly supportive of renewable energy - particularly wind - so it is likely that even after independence it would continue to encourage further development.
Alternative Renewables:
It seems probable that political and economic pressures will alter the emphasis of renewable subsidies, which could disadvantage on shore wind, although it seems more likely that this will apply more to large scale wind farms rather than individual turbines. The point, already made, is that any changes will not be retrospective or affect existing installations.
These are very well secured loans supported by a long term index linked income stream which is effectively guaranteed by the UK government. Any operational risks are well covered by warranties and insurance provided by substantial counter parties.
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pikestaff
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Post by pikestaff on May 25, 2014 7:32:38 GMT
Pikestaff - I agree that Cu***ia was the most attractive. I have a decent chunk of that, less in the others. The problem here is that while I quite like the type of loans I see, between a few deals on TC and a few deals on AC, I am becoming somewhat exposed to this specific industry sector. I might be diversified across a number of loans but that really won't reduce the default correlation risk if we get some macro change to the landscape for renewable wind energy. Unless I scale up my P2B exposure, I sort of think from here I am really going to focus on relative value between wind loans rather than further outright buying. I wonder how many other lenders are getting into the same position? I'm not at my limit yet, because I am very confident that there will be no retrospective change to FITs. Retrospective change would destroy confidence not only in the renewables sector but also across the piece for private sector funding of roads, hospitals, prisons etc. It won't happen. However, there will come a point when I've got enough. The two main risks that I see are: Short term - timely delivery and installation. We know that turbine supply is tight at the moment. I'd like to see some projects actually up and running, in good time to qualify for the promised FIT, before I grow my exposure by very much. Refinancing risk - this will depend on interest rates when the loans come to an end. I am OK with this risk at the moment, but it's another reason to ramp up more slowly, to get a range of maturities. So far, the offers on AC have all been relatively short term, with an exit through refinancing. I would like to see some longer term deals with index-linked payments to lenders. AC's guide to renewables envisages this, but we've not seen one yet. Edit: @ john334, I see the FIT risk as almost exactly zero. Nevertheless, one should never put all one's eggs in one basket. My sector limit is probably 15% of my total p2x portfolio, perhaps 20% if there are some longer deals in there to reduce the refinancing risk, but that's a lot less than 10% of my investments as a whole, including cash and shares.
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j
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Penguins are very misunderstood!
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Post by j on May 25, 2014 8:35:11 GMT
Declaring an interest here I spend/have spent a fair proportion of my working life in 'Civil Nuclear Power'. Politicians of all hues have had their fingers in the pie and continue to do so to the detriment of the UK population.
As always follow the interests / money
Just a few examples The re-valuation (down) of the British Energy share price to close to zero and then selling off the operational stations to EDF (family connections to a certain high up at the time politician) - tax payer foots legacy costs (and also some of the on-going costs).
Breaking up of BNFL - means we have to buy in reactor design ..... again vested interest (60 years of IP literally given away to all comers who are now bringing some of it back at a cost!)
Shale Gas - Check out Gideons family connections to the industry.
The sale of Sellafield and AWE (atomic weapons establishment) to American interests.
..... the list is very long.
On shore wind was used by politicians to show their 'green credentials' - it is easier to point to a wind turbine than to stand on a wave generating system. Now the direction of the wind is changing in the Conservative Party back to big business - so off shore wind will dominate. Note the Deputy Prime Ministers wife is a highly paid Consultant to the largest Spanish Wind Power Generator (she doesn't lobby in this country).
Even though I have worked on many projects that have wasted vast amounts of money I do not see a continuation/change of government having a detrimental effect on these Wind Turbine Loans. Scottish independence, well anything could happen but since 'they' fly their alternative power credentials higher up the flagpole than most combined with the timescales involved here my level of 'concern' is very low.
I await the full paperwork but in all likelihood I will invest as I have in the other turbine loans.
Show me an honest politician!!
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Post by jackpease on May 26, 2014 6:20:34 GMT
>>>the Government has repeatedly stated that it will not make any retrospective changes; indeed to do so, would be political suicide bearing in mind the huge amount of money invested in FIT based schemes ranging from domestic roof top solar to institutional infrastructure funds.
There is a growing backlash against land based wind generally and Aberdeenshire in particular as it is swamped by wind turbines. Government's do retrospectively muck around with green policies - it tried to push private motorists into converting their cars to LPG with very low fuel duty on LPG but then wacked up duty leaving motorists with cars that could not be resold. Also look at the about turn on Home Information Packs/energy certificates - a whole army of HIP inspectors had jacked in their jobs and trained up only to find the policy all but abandoned. If you bought a first generation Prius for free driving in London you will lose your congestion charge exemption soon.
So wind investment needs to bear in mind that generous subsidies may not last forever
Jack
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pikestaff
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Post by pikestaff on May 26, 2014 6:41:49 GMT
jackpease, none of the changes that you describe are/were retrospective. Plus, in none of those cases did the government have any kind of financial obligation to the people involved. Subsidies can and will be cut for new projects, so people whose business is to install wind turbines (or to finance them  ) will need to find other things to do. But they will not be cut retrospectively. Subsidies for existing projects are financial obligations of the government, which will be honoured. Apart from anything else, this is protected in law. The wind will still blow, the people who maintain the turbines will still make a living, and the cash will still come in. Edit: The fact that the opportunity won't be here forever is another reason for wanting some longer-term deals on the platorm now! |
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shimself
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Post by shimself on May 26, 2014 12:26:27 GMT
What I find a shame is that these loans are only for 3 years or so, so we can't take advantage of that lovely 20 year index linking.
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) will need to find other things to do. But they will not be cut retrospectively. Subsidies for existing projects are financial obligations of the government, which will be honoured. Apart from anything else, this is protected in law. The wind will still blow, the people who maintain the turbines will still make a living, and the cash will still come in.