The Breeze programme is set to evolve by making other forms of renewable energy accessible to the capital markets in addition to wind, such as solar and geothermic energy. It is expected that future Breeze transactions will contain a mixed portfolio of wind and solar energy plants as the two forms of renewable energy are largely complimentary.
"We will combine solar and wind power plants because they are both renewable energy sources which work diametrically - when the wind is blowing usually the sun in not shining and the other way around," says Dagmar Buhl, head of structured bond execution at HVB. "That perfectly works within the same combined portfolio."
HVB is also in the process of structuring a deal referencing a number of different geothermal power plants in Germany, but this is to be an entirely separate deal and seems likely to come under a variant of the Breeze name. Additionally, the bank is working on the securitisation of offshore wind farms.
"The development phase for both offshore wind farms and geothermal plants is much longer than that for an onshore wind farm," Buhl notes. "We will probably be in the capital markets with some form of bridge financing package this year, but the full bond issue for both is unlikely to be in 2007." However, it is expected that other Breeze transactions will be launched before year-end.
Thus far Breeze deals have only referenced wind farms in Germany and France, but there are plans to expand the geographical basis of the programme. Because of various tax and culture issues, it is problematic to reference renewable energy plants in many other major EU states (such as Italy and Spain), but emerging Europe offers significant potential for the financing of such plants.
"Wind farms in Eastern European countries is an interesting area and we are in an advanced stage of structuring a separate Breeze East portfolio referencing some of these," says Buhl. "You have a perfect story for renewable energy in the Central Eastern European countries so the deal does not need any support from Germany to build up a portfolio."
Breeze III itself comprises three bond tranches – the MBIA-wrapped €287m (US$383.8m) Class A slice rated triple-A with a WAL of 10.3 years printed at 26bp over mid-swaps. The 10.6-year €84m Class B notes (Ba1/BB/BB-) printed at 250bp or a 6.708% coupon, with the unrated 9.4-year €84m Class Cs offering an 11.75% coupon.
The deal was backed by a diversified portfolio in terms of the plant locations (90% Germany/10% France), the number of wind park developers (nine operators) and the turbine types employed. A total of 20% of the turbines will become operational within the next year.