The European Investment Bank (EIB) and three private sector banks are to lend up to £1.4 billion ($2.3 billion) to onshore wind farms in the UK

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The European Investment Bank (EIB) and three private sector banks are to lend up to £1.4 billion ($2.3 billion) to onshore wind farms in the UK – 40% more than was planned just three months ago when the programme was first flagged.

The revised figure was announced on Monday at the launch of the EIB’s UK Renewable Financing Programme, set up in collaboration with the UK’s Department of Energy and Climate Change (DECC), and in partnership with BNP Paribas Fortis, Lloyds and RBS.

“By working with our partner banks, we will be able to support high-quality onshore wind projects of – for us – medium size, up to a total cost of £100 million, though I expect most to be a good deal smaller than this,” said Simon Brooks, EIB vice-president.

The total loan figure was raised from £1 billion to £1.4 billion to “reflect the pipeline of projects identified by DECC and the banks. The valuation of the market potential has increased,” an EIB spokesman said.

The British Wind Energy Association (BWEA) welcomed the announcement and pointed out that while investment in wind energy in the UK is rocketing, the project finance market has dried up.

It quoted figures from analysis firm New Energy Finance showing that investment in renewable energy on company balance sheets – financed by the developing company itself – has increased to £920 million in 2009 from £212 million in 2007 while, over the same period, project financing has decreased to £54 million from £336 million.

“Wind energy has never been a risky investment,” said BWEA chief executive Maria McCaffery. “In fact, wind farms in the UK have never defaulted on their loans. However, the recent turbulence in the financial markets has affected availability of loan finance for smaller and medium-sized projects. The funds announced today will be particularly important in bringing forward a host of sound projects, by developers with a proven track record in wind energy delivery.”

The EIB – the EU’s long-term financing institution – is to provide £700 million, with the three partner banks providing matching funding. These latter will be responsible for originating, structuring and final risk-taking on each project, and candidate projects are to contact directly the three partner banks.

The programme is open to, “promoters of onshore wind farms with: i) cost-effective electricity production allowing for robust business case; ii) planning consent (including compliance with all UK environmental laws) and iii) a firm connection date”. Loan terms are available out to 15 years.

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