Who Should Finance Offshore Wind?
· 5:55 · With Maya and Omar
The National Wealth Fund says its lending widens the pool of capital available to offshore wind developers and helps meet high financing needs after the latest auction round.
Transcript
Vocabulary in this episode
- additionality
That idea is often called additionality: public money should add something, rather than replace money private investors would have provided anyway.
It means public funding creates an extra benefit instead of taking the place of money that private investors would have supplied.
- state-owned
The projects will also receive a £1 billion loan from the state-owned National Wealth Fund.
Owned by the government.
- offshore wind
The National Wealth Fund says its lending widens the pool of capital available to offshore wind developers and helps meet high financing needs after the latest auction round.
Wind power produced by turbines in the sea, away from the coast.
- Offshore wind
Offshore wind is an established market, and the columnist argues that public funds may have better uses elsewhere.
Wind power produced by turbines in the sea, away from the coast.
- pool of capital
The National Wealth Fund says its lending widens the pool of capital available to offshore wind developers and helps meet high financing needs after the latest auction round.
The total amount of money available for investment.
- private equity
RWE is a major energy company, and KKR is a large private equity and infrastructure investor.
Investment in companies that are not listed on a public stock market.
- revenue certainty
A contract like this gives developers a degree of revenue certainty, which can make a project less risky to finance.
Confidence about how much money a project will earn.
- make-or-break
The columnist sees that contract, alongside the companies’ ability to raise capital, as a reason to ask whether the loan was really make-or-break.
Essential to whether the project succeeds or fails.
- financing gap
Is there a clear financing gap?
A shortfall between the money needed for a project and the money available to pay for it.
- opportunity cost
It raises the question of opportunity cost: when public money goes to one project, it cannot be used at the same time for another.
The value of the best alternative that cannot be chosen when money is used for something else.
- syndicate
A lending group, or syndicate, is a set of lenders sharing the financing of a large project.
A group of lenders that share the cost of financing a project.
All In Conversation episodes
Sources
- RechercheThe finance columnist argues it is unlikely the wind farms would have been abandoned without the state loan, pointing to RWE's and KKR's ability to raise capital and to the project's 20-year inflation-linked electricity-price contract.
- RechercheThe government announced a £12bn investment package from RWE and KKR for the projects. The projects will also receive £1bn from the state-owned National Wealth Fund.