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To finance the first ever commercial wind farm in Azerbaijan, mandated lead arrangers Landesbank Berlin and Société Générale closed a €128mn facility in favour of the International Bank of Azerbaijan.

The funds will be used to fully finance the purchase and installation of equipment at Azerbaijan’s Yeni Yashma I wind farm, which is expected to generate 50MW at its completion in the first half of 2011.

The realisation of this wind farm can be traced back to negotiations started in 2005 with public authorities in Azerbaijan. In 2009, with support of both the International Bank of Azerbaijan and Euler Hermes, it was finally possible to implement the project structure.

“Mitaki Project as project developer, exporter and turn-key supplier of the wind farm ties in the services and supplies of a number of German and local suppliers,” says Dr Wolfgang Willing, managing director of Mitaki Project.

The financing is divided into two separate but otherwise identical loan arrangements, with both Landesbank Berlin and Société Générale acting as MLAs and separate lenders.

This follows the fact that the project itself is for organisational reasons contracted by two buyers in separate sub-projects, each for the amount of €52mn, but otherwise identical in tenor, structure, exporter and borrower.

The buyers in Azerbaijan are Aztorq (for the financing by Société Générale) and Caspian Management Systems (for the LBB financing).
The financing is made up of two tied commercial loans for a total of €15.6mn and buyers credits for a total of €112.4mn, backed by German export credit agency Euler Hermes.

Each financing covers 100% of deliveries and related services plus capitalised interest during construction, and includes the Hermes cover premia.

“This is the International Bank of Azerbaijan’s first ever project in the renewable energy sector of the Azerbaijan economy and we are pleased to share this transaction with our partners Landesbank Berlin and Société Générale,” says deputy chairman of the board of the International Bank of Azerbaijan, Asgar Mammadov. He also notes that “the project would definitely open a new era of clean energy production in Azerbaijan, which will be the country’s contribution to the improvement of the global environment”.

“We are particularly proud that we can assist with this first significant eco-friendly energy project which will serve as a reference project for the entire region – and more wind parks are indeed already being discussed,” says Knut Richter, director of export finance at Landesbank Berlin.

Apart from being a first for green energy in the entire region – and even the CIS – the deal is also one of the largest in years for both Hermes and Azerbaijan.

“We feel particularly privileged to have been able to finance the first ever renewables project in Azerbaijan – despite the very challenging economic environment,” says Sabine Gustmann, director of export finance at Société Générale, Frankfurt. “Additionally, I would like to highlight the excellent and fruitful co-operation with Hermes, who have been exceptionally supportive of this landmark project in all aspects,” Gustmann adds.

“One must also stress the commitment with which all parties carried the project forward, especially our professional partners at the International Bank of Azerbaijan as borrower, without whose long experience and professional approach the financing could not have been structured in such a short time,” says Stefan Untergutsch, director of export finance at Landesbank Berlin.

“Certainly, a project of this size in an unsecure general business environment also constitutes a big challenge for the cover possibilities under the Hermes-scheme,” says Jens Heitmann, head of Euler Hermes’ financial sector department. “On the other hand, a project like this is absolutely worthy of support, in particular with regard to the high degree of German content in the project and the forward-looking sector of renewables. In addition, after a thorough analysis of the creditworthiness of the International Bank of Azerbaijan, the German government was in a position to grant the credit guarantee for the project. Thus, it could once again be documented that ‘Hermes-covers’ are also in very difficult times a reliable instrument for supporting the German export economy.”

The wind park is destined to produce energy for the nearby capital of Azerbaijan, Baku (meaning “city of winds”).
Deal information

Borrower: International Bank of Azerbaijan
Exporter: Mitaki Project
Amount: €128mn (€112.4mn buyer credits + €15.6mn tied commercial loans)
Initial mandated lead arrangers: Landesbank Berlin and Société Générale Corporate & Investment Banking
ECA: Euler Hermes
Law firm: Salans Baku (for LBB)
Tenor: 14 years for buyer credits; 1.5 years for tied commercial loans
Dates signed: August 11, 2009 (for LBB), September 18, 2009 (for SG)