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Wind project on Aruba defies financial crisis

A project financing guarantee from EKF rescued a vital order for Vestas in the autumn of 2008 when the financial crisis called a halt to business transactions worldwide.
Case facts
What
30 MW wind farm on Aruba in the Netherlands Antilles.
How much
10 wind turbines from Vestas. The total investment in the farm is worth USD 75 million.
EKF's role
EKF provides a guarantee of USD 60 million on the loan made to the buyer.
EKF product
Project financing guarantee
When
2008 - 2021
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  • Step 1
    The challenge
    Quote

    Given the number of players who had just a short space of time to reach agreement on an untried financing model, I was seriously concerned that nothing would ever come of it.

    Erik Sejersen, Project Finance Manager, Vestas

    ​All of the elements were in place when the financial crisis suddenly struck Wind Park Vader Piet on the Caribbean island of Aruba.

    The developer from the Netherlands had ordered the wind turbines from Vestas and had been pledged a loan by a European bank, where 80 per cent of the loan was to be guaranteed by EKF.

    The agreement with the local energy company which was to purchase the electricity from the wind farm had also been arranged. But all of a sudden the European bank had to withdraw from the agreement.

    This nearly jeopardized the whole project since sourcing risk financing in a collapsed market was going to be a tall task.

  • Step 2
    The process

    ​Vestas, unhappy at the prospect of missing out on a vital order, brought its own bank onto the scene. Vestas' bank had fewer problems than many other banks, and so had the necessary liquidity to provide a loan.

    But the bank was not willing to accept the risk on the loan at this critical stage. After having overhauled the project once more, EKF resolved to furnish a 100% guarantee for the bank's loan to the project.

  • Step 3
    The solution

    ​EKF’s guarantee rescued the wind project on Aruba and Vestas' deliveries to the project. The project owner was granted a project financing loan with a 13-year term at a time when liquidity was in short supply on the market, and when the banks were offering loans of a maximum term of 5 years, which is far too short for a project on this scale.

    EKF is not constrained by fixed types of financial solutions, and in this case it employed a brand new financing model whereby EKF guarantees 100 per cent of the bank loan for the project, but is covered by a 30 per cent back-to-back guarantee from the original lender, the European bank.

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