Belgian export credit agency ONDD is backing a £210mn bioethanol project in the UK.

The ONDD is getting approval to provide insurance on 75% of the project’s senior debt package, as Belgian company De Smet has been contracted for the plant’s construction in Grimsby, north-east England. According to Future Capital Partners (FCP), the Future Fuels plant’s financial promoter, ONDD involvement was essential in securing financing for the project.

Jonathan Turney, FCP associate director of renewable energy, tells GTR: “One of the reasons we switched our preferred engineering contractor from Simon Carves [a UK company] to De Smet was that [ONDD support] was one of the features of their tender.

“For a project financed deal (no track record, no balance sheet, etc.) to get financed in the current climate, the banks are looking to take almost zero risk in providing finance. With only 40% gearing and 75% of that underwritten by a sovereign state, the bank exposure is clearly less than full risk bearing debt at a higher leverage.

“The project would simply not have got financed without someone being prepared to bear both the commercial and construction risk in what is perceived to be a fledgling industry, with long-term commodity price exposure against a general gloomy macro-economic back drop.”

The UK-based firm says it has also secured financing from an unnamed “major senior lender” who will provide £25mn, and has agreed to be the mandated lead arranger for the rest of the senior debt.

The deal closes in October 2012, but FCP expects to get funding for the remaining £85mn of its corporate debt in the coming weeks, “with a number of senior European institutions already in line to come on board”.

FCP director Tim Levy says: “Securing senior debt finance and the involvement of the ONDD is a major development for the project financing. Having completed thorough due diligence and approved every element of the project’s business model, their backing will be the spur for other institutions to join in. We expect to be able confirm the full financial raise shortly.”

Levy adds that the fundraising environment has been tough but that now that the project has the support of the Belgian ECA, “the time is right for the intermediary market to benefit”.

According to FCP, investors in Future Fuels will benefit from an innovative investment structure that could provide them with returns in excess of 30% per year over a five to seven-year period, and allows them to claim capital allowances, providing protection “of up to 100% of their investment”.

The plant, operated by UK bioethanol firm Vireol, will produce renewable transport fuel, ethanol and animal feed. FCP claims to be finalising agreements worth over £1.5bn for the purchase of the three products. “Once finalised, these agreements will ensure the plant’s long-term profitability ahead of its construction,” the company says.