Blackstone funds Germany’s largest offshore wind farm

Private equity firm Blackstone has secured financing for what will be Germany’s largest offshore wind farm once it is in operation in 2013.

The deal – Germany’s first wind farm to be fully financed by the private sector – was done through Blackstone subsidiary WindMW and is worth €1.2 billion. Seven commercial banks including Commerzbank, KfW IPEX-Bank, Bank of Tokyo-Mitsubishi, Dexia, Lloyds, Santader and Siemens Bank together with Danish export credit agency EKF and KfW-Bankengruppe are providing €822 million in debt for the project.

The project’s equity will come from subsidiaries of Blackstone Capital Partners VI and Blackstone Energy Partners, the private equity group said in a statement. The 80-turbine wind farm will be located some 50 kilometres off the German coast, in the North Sea. Once it is up and running, it will be able to generate 288 megawatts of power, enough to service about 400,000 households.

In addition to securing funds for what “is only the second German offshore wind farm to complete its financing,” according to Blackstone, the private equity firm has also acquired a permit to construct another offshore wind farm – known as Nordlicher Grund. The latter is expected to start construction in 2013 and will be situated some 100 kilometres off the German coast. Nordlicher Grund will have 64 wind turbines and will cost €1.3 billion to build, Blackstone said.

Offshore wind, and other renewable sectors, have proved popular with infrastructure investors due to their long-term, contracted revenues, usually in the form of government subsidies or feed-in tariffs that normally eliminate demand-based risk. However, there is still a risk that governments can retroactively reduce these subsidies, as happened in the Spanish solar sector.

But David Foley, Blackstone senior managing director and chief executive of Blackstone Energy Partners, seems comfortable with German regulation. “The German regulatory framework is well designed and essential to the development of the tremendous and as yet largely untapped resource that offshore wind represents,” he said in a statement.

Blackstone’s infrastructure team spun-out from its parent private equity firm in early June to found Stonepeak Infrastructure Partners, led by Trent Vichie and Michael Dorrell. Dorrell and Vichie joined Blackstone from Macquarie in 2008 to establish Blackstone’s infrastructure platform. The firm’s debut fund, Blackstone Infrastructure Partners, launched in 2009 and raised $450 million, including a $50 million cornerstone commitment from Blackstone, against a target of $2 billion.

Stonepeak will be based in New York and will start with an 11-member team. The firm will be focused on North American investments and is understood to be targeting $1 billion for its debut fund. The spin-out will retain $400 million in third-party capital commitments to Blackstone Infrastructure Partners.

In May, Infrastructure Investor reported that market feedback had indicated that a private equity-owned infrastructure fund was not popular with potential investors. Blackstone was also in the process of raising an energy fund, an area that often overlaps with infrastructure. The separation was said to be aimed at helping the team overcome both of these concerns.