Growth of solar energy
Global efforts to stem the rise in harmful greenhouse gas emissions through clean energy alternatives have accelerated in recent years. To a large extent, this growth is being driven by government policies aimed at levelling the playing field for industry players in renewable energy projects and providing incentives to end consumers.
"Like other renewables, solar requires government support to compete against fossil fuel-based alternatives"
The growth in solar photovoltaic (PV) technology, one of the most technically advanced and viable contributors to a low carbon economy, is a prime example. Solar PV grew by an estimated 30 GW (+42%) in 2012 compared to the previous year, according to the International Energy Agency. As a result, it is also an industry that has witnessed rapid consolidation, increased competition, and a steady fall in investment costs. “Like other renewables, solar requires government support to compete against fossil fuel-based alternatives,” explains Therèse Brouwer, Head of SF Utilities, Power & Renewables for EMEA at ING. “However, regulatory regimes show a high degree of differentiation per country, so producers and investors are careful to target locations that are favourable.”
Leadership in sustainable energy
Once such producer is Silver Ridge Power (SRP), a leading global solar developer that supplies renewable energy to homes and businesses across Europe, North America, and Asia. The company, which was originally founded as AES Solar in 2008, operates a fleet over fifty utility-scale solar PV power plants with an expected installed capacity of over 520 MW in 2014. “Our focus has been oriented to those countries which had set a favourable business environment around renewable energy and in particular PV,” says Claudio Pisi, Vice President Finance at Silver Ridge Power. “This has meant a larger development in US, Italy, and France to date.”
"Our focus has been oriented to those countries which had set a favourable business environment around renewable energy and in particular PV"
Of these three countries, Italy arguably enjoyed the best combination of stable regimes and feed-in tariff levels for PV support, and this has made the sector a significant contributor to the nation’s energy mix, with an installed capacity of some 17.5 GW. Silver Ridge Power Italia is among the most active local investors in solar PV, and operates a total of 25 plants with a combined capacity of 130 MW. “What really sets Italy apart in Europe is the country’s credible industrial policy in this area,” says Pisi. “It has established incentive programmes for increasing the volume of renewables in the market, and while we have seen some regulatory changes over the years, these have not prejudiced the support committed to plants that are already operational.”
The Elpida solar project
Since 2011, ING has co-arranged three solar project financings for Silver Ridge Power in Italy. These have led to the construction of PV plants in Lazio, Puglia and Sicily with an aggregate capacity of around 70 MW. The most recent of these was Elpida Portfolio in 2012, in which ING acted as the lead arranger in a € 77 million non-recourse project loan. “We demonstrated an efficient credit process by involving our senior credit officer at an early stage, and this speed was an important feature of our service for SRP,” says Giulia Bartolini of ING Structured Finance.
"SRP is operating successfully in a sector we want to promote"
The 26.8 MW Elpida portfolio is owned by Silver Ridge Power Italia and consists of ten plants owned by five special purpose vehicles in central and southern Italy. The projects benefits from the Fourth Italian Conto Energia feed-in tariff during its first twenty years of operation. “SRP is operating successfully in a sector we want to promote," says Brouwer. “We know the company well, and we made a conscious decision to support them when ING committed to becoming more active in the solar industry some years ago.”
The deal has allowed ING to build on its track record in the PV sector, while strengthening its relationship with a top sponsor. “ING has always had a good understanding of our business and of the underlying risks. Their support has been valuable thanks to the open and transparent dialogue established with us,” says Pisi, “which allowed the front line to show their credit risk people that the deal was solid notwithstanding its tailoring to our specific needs.”
"ING has always had a good understanding of our business and of the underlying risks"
Looking ahead, Bartolini and Brouwer expect to see more movement and opportunities for consolidation in the European energy market if large utilities companies continue divesting non-core businesses. With its combination of local and sector knowledge, ING is well positioned to support SRP with its ambitions in Europe, and help it to remain a leading player in the field.