Funding breezes into the Korean renewable sector as HSBC and BNP Paribas sign an ECA-backed deal with renewable energy provider Acciona for the construction of a wind power farm in South Korea.

Reflecting a growing enthusiasm for banks and ECAs to finance projects in the renewable sector, HSBC and BNP Paribas have signed a deal with renewable energy provider Acciona for a US$63mn credit facility for the construction of a wind power farm 100 miles north of Taegu City, South Korea.

The banks were initially mandated in July 2008, and have since closed the deal for the building of the 61.5MW wind farm.

The project benefits from export credit agency backing from Spain’s ECA, Cesce, which follows the developing trend of ECA appetite for the sector, such as US Ex-Im’s recent direct loan and backing of Vietnamese projects and Danish export credit agency EKF’s backing of a UK offshore wind farm.

The deal is split into two tranches, a commercial loan and the ECA-backed export credit loan, both of which have a 14-year tenor and a non-recourse financing structure, a common arrangement for wind power projects.

The export credit loan will be used to finance the export of Acciona’s self-built turbines from Spain to South Korea.

Furthermore, the deal has been designed to take advantage of the Korean currency so that Acciona will not have to pay unnecessary foreign exchange charges and rates, as Gilles Pascual, director, resources and energy group, global banking at HSBC, tells GTR: “The loans are denominated in Euros, but the project company earns revenue in Korean won, so we have a long-term cross-currency interest rate swap at work to effectively eliminate the forex risk.”

GTR also speaks to Blanca Figueiras, state account business for Africa, Asia and Australian continent at Cesce, who explains how the decision to become involved in the deal occurred: “Our involvement in the project is justified with the participation of a renowned Spanish company (Acciona), supplying Spanish goods and services. [Acciona’s presence] makes the project eligible to be supported by Cesce insuring the financing banks; BNP Paribas and HSBC.”

Renewable energy deals in Asia are not new to HSBC, as Pascual continues: “A couple of years ago we financed a wind farm in India, which was the first of its kind. We also just closed a wind farm in China. We have a pretty good track record of being one of the key providers of renewable energy financing.”

HSBC are not alone in leading the way for Asian wind farm deals, as Chol Han Jong, head of export finance, structured finance at BNP Paribas’ Seoul branch, explains to GTR: “BNP Paribas has pioneered wind farm projects in Korea. We have set up three there now; a 40MW wind farm project in 2004, and one year later we closed a 98MW wind power project and now this project.”

“Renewable energy is the sector that everyone wants to be in,” notes HSBC’s Pascual, a sentiment echoed by Cesce’s Figueiras when she adds: “This project is just one more of the many applications received requiring Cesce cover for the financing of transactions in the renewable energy and water sector, and after the corresponding assessment of the project risks, Cesce is promoting support to the Spanish companies involved in this kind of project.” GTR