pikestaff
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Post by pikestaff on May 26, 2014 14:29:49 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. Me too. Even 10 years would be good.
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Post by Ton ⓉⓞⓃ on May 26, 2014 16:21:16 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. Me too. Even 10 years would be good. Have you, or perhaps shimself, any idea what the yield might be on such a proposition? For example how would it work on the current wind deal?
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pikestaff
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Post by pikestaff on May 26, 2014 17:26:47 GMT
About a year ago there was an index-linked deal on TC which got away at 7% plus RPI. This is equivalent to 10% if RPI is 3%.
The current deal is too short for indexation really. It comes into its own on longer deals.
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shimself
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Post by shimself on May 27, 2014 8:34:25 GMT
Have you, or perhaps shimself, any idea what the yield might be on such a proposition? For example how would it work on the current wind deal? Abundancegeneration have one right now, 7% I think it is (I've got some up to my limit)
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jjc
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Post by jjc on May 28, 2014 11:30:34 GMT
Hello folk, newbie here. Have a background in renewables, happy to comment on this offer when full docs available if it helps. In the meantime from a look at the other 3 windies I’d say the most significant points are that the borrower in NL (who may be the same one as for this loan?) is looking to put in 30% equity stake, compared to about 15% for the 77 & 83 auctions. That makes quite a difference, normally you’d be needing to put in 20% min to get debt finance.
The loans are all structured in the same way, the key point for me as regards risk is the track record of the developer in building out the sites in time before any fall in the FIT. One can assess that better knowing if/when pre-accreditation for the FIT was made (you have 12 months from then I believe to commission in the UK, after which you get whatever FIT is available at the time you connect), & clear info on the developer’s track record (specifically how many sites he has already commissioned -consented isn’t enough). The former is available (on the Q&A) for 77 I believe not the others, this info should in future be provided as standard in the documentation.
As regards political risk on the FIT scheme I would not be concerned, the retrospective changes made in other countries were due to specific problems in their energy policy setup & the UK govt has been quite clear it won’t go down this route. Scottish independence also unlikely to have an impact, FITs for sites already installed prior to independence will continue to be paid as before & those built after any possible independence I would be pretty confident will be so too (a new UK-exc-Scotland will need these plants to meet its EU commitments & Scotland will need the contribution from billpayers south of the border to avoid bills skyrocketing in Scotland, a deal will be struck). This in any case assuming Scotland does go independent (doubtful IMHO) & that the timeframe is exceedingly quick (before these plants connect to the grid ie impossible.)
As regards shale gas, the impact this will have remains to be seen, even its strongest proponents acknowledge this wouldn’t be available in meaningful volumes for many years & is most unlikely to have anything like the sort of impact on gas prices it has had in the US. Here in the UK it’s more of an issue of energy security (making up for dwindling N. Sea gas) & perhaps having a role in decarbonisation by replacing coal (not renewables).
I agree with the comments about the lack of index linking. These offers are actually unusual for the renewables sector, usually you have either construction finance (for 3-6 months, similar to bridging loans in the property sector) which offers a premium for the risk the site isn’t built out in time/on cost before a drop in the FIT but isn’t index-linked because you’re lending money only for the build, or alternatively investments in the completed & already operating plant (which are around the 7% mark but index-linked, as pointed out this can make a significant difference in your returns over time as they compound…).
Hope there’s something useful there, best wishes & thanks to all for what looks like being a very good forum.
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j
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Post by j on May 28, 2014 12:52:50 GMT
Hello folk, newbie here. Have a background in renewables, happy to comment on this offer when full docs available if it helps. In the meantime from a look at the other 3 windies I’d say the most significant points are that the borrower in NL (who may be the same one as for this loan?) is looking to put in 30% equity stake, compared to about 15% for the 77 & 83 auctions. That makes quite a difference, normally you’d be needing to put in 20% min to get debt finance. The loans are all structured in the same way, the key point for me as regards risk is the track record of the developer in building out the sites in time before any fall in the FIT. One can assess that better knowing if/when pre-accreditation for the FIT was made (you have 12 months from then I believe to commission in the UK, after which you get whatever FIT is available at the time you connect), & clear info on the developer’s track record (specifically how many sites he has already commissioned -consented isn’t enough). The former is available (on the Q&A) for 77 I believe not the others, this info should in future be provided as standard in the documentation. As regards political risk on the FIT scheme I would not be concerned, the retrospective changes made in other countries were due to specific problems in their energy policy setup & the UK govt has been quite clear it won’t go down this route. Scottish independence also unlikely to have an impact, FITs for sites already installed prior to independence will continue to be paid as before & those built after any possible independence I would be pretty confident will be so too (a new UK-exc-Scotland will need these plants to meet its EU commitments & Scotland will need the contribution from billpayers south of the border to avoid bills skyrocketing in Scotland, a deal will be struck). This in any case assuming Scotland does go independent (doubtful IMHO) & that the timeframe is exceedingly quick (before these plants connect to the grid ie impossible.) As regards shale gas, the impact this will have remains to be seen, even its strongest proponents acknowledge this wouldn’t be available in meaningful volumes for many years & is most unlikely to have anything like the sort of impact on gas prices it has had in the US. Here in the UK it’s more of an issue of energy security (making up for dwindling N. Sea gas) & perhaps having a role in decarbonisation by replacing coal (not renewables). I agree with the comments about the lack of index linking. These offers are actually unusual for the renewables sector, usually you have either construction finance (for 3-6 months, similar to bridging loans in the property sector) which offers a premium for the risk the site isn’t built out in time/on cost before a drop in the FIT but isn’t index-linked because you’re lending money only for the build, or alternatively investments in the completed & already operating plant (which are around the 7% mark but index-linked, as pointed out this can make a significant difference in your returns over time as they compound…). Hope there’s something useful there, best wishes & thanks to all for what looks like being a very good forum. Thanks for the useful info/insight
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merlin
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Post by merlin on May 28, 2014 14:46:57 GMT
Me too. Even 10 years would be good. Have you, or perhaps shimself, any idea what the yield might be on such a proposition? For example how would it work on the current wind deal? Yes 10 years sounds good but what will bank rate be by then and will WW3 have started or ended by then, etc.? Too far out for me and far too many unknowns!
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j
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Post by j on May 28, 2014 16:49:04 GMT
Now fully underwritten. AC were probably working on getting it fully funded over the last few days whilst the loan was in review mode. I'll wait though till units appear on AM rather than tie up funds
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Post by Ton ⓉⓞⓃ on May 28, 2014 21:58:33 GMT
Did it just change to two days 23hours from 13days 18hours. That must mean they want the money reallllly quick or there's a flood of deals coming.
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j
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Post by j on May 28, 2014 22:02:29 GMT
Did it just change to two days 23hours from 13days 18hours. That must mean they want the money reallllly quick or there's a flood of deals coming. No you're not dreaming, it was initially for 2 weeks
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spockie
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Post by spockie on May 28, 2014 22:09:49 GMT
Hope it's a flood of deals...
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andy2001
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Post by andy2001 on May 29, 2014 2:33:27 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.
From the Aberdeenshire credit report. "Loan repayments are forecast to be covered by a minimum of 1.45 times in year 1. In years 2 and 3 this should improve with increasing income due to RPI and reducing interest."
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pikestaff
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Post by pikestaff on May 29, 2014 8:16:25 GMT
Have you, or perhaps shimself, any idea what the yield might be on such a proposition? For example how would it work on the current wind deal? Yes 10 years sounds good but what will bank rate be by then and will WW3 have started or ended by then, etc.? Too far out for me and far too many unknowns! To a large extent index-linking would also be a hedge against changes in interest rates. They are not going to go through the roof unless inflation does too.
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spockie
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Post by spockie on May 29, 2014 14:43:48 GMT
Did it just change to two days 23hours from 13days 18hours. That must mean they want the money reallllly quick or there's a flood of deals coming. No you're not dreaming, it was initially for 2 weeks It makes it finish within May - just. Wonder whether it is to boost May's figures as it has been a rather quiet month in relation to April.
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spockie
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Post by spockie on Jul 25, 2014 14:34:28 GMT
Drawn down at last.
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