The Greater Gabbard Offshore Transmission Link has become the first UK infrastructure project to attract finance from institutional investors via the Project Bond Credit Enhancement initiative, a joint programme by the European Commission and the European Investment Bank designed to stimulate capital market financing for infrastructure projects.
Greater Gabbard is operated by SSE and run on 140 Siemens turbines.
Bonds with a value of £305m ($500m) have been issued to finance the new link to connect the wind farm off the East of England coast with the grid.
Proceeds from the bond issue have been released and the bonds – which have a maturity of 2032 – have started trading on the Irish Stock Exchange.
The European Investment Bank has provided a £45.8m guarantee, representing 15 per cent of the bond issued, as a credit support under the Project Bond Credit Enhancement (PBCE) model.
Under the PBCE model, additional liquidity will be provided for the project if required, allow enhanced recovery for senior lenders by reducing outstanding debt and act as a first-loss piece in the financing structure.
Jonathan Taylor, the European Investment Bank’s vice-president for the UK, said: “The successful public bond issue for the Greater Gabbard OFTO represents the first use of the joint EIB-European Commission Project Bond Initiative in the UK.
“This adds a new dimension to infrastructure finance in the UK energy transmission sector by attracting greater participation by institutional investors in an essential part of the offshore wind value chain.”
Olli Rehn, European Commission vice-president responsible for Economic and Monetary Affairs and the Euro, said: “Investor confidence is essential for re-engaging capital markets as key sources of finance for Europe’s long-term infrastructure.”
And Guenther Oettinger, European Commissioner for Energy, added that “unlocking support of institutional investors to provide long-term investment in European energy infrastructure is crucial for stimulating economic growth and creating new jobs”.
He said the Greater Gabbard OFTO project had “successfully shown how the Project Bond Credit Enhancement product can attract competitive, long-term investment from capital markets to vital energy infrastructure”.
The Greater Gabbard OFTO has been the largest in the first round of tenders conducted by UK regulator Ofgem since 2009.
The T&D assets to be acquired from the proceeds of the bond issue include two offshore substation platforms, an onshore substation at Leiston and high-voltage connecting cables.