Risk-y Business: Regional Bank Digs Into Renewable Energy

Mark Del Franco
Written by Mark Del Franco
on November 19, 2015 No Comments
Categories : New & Noteworthy

Since financing a 1.4 MW stationary fuel cell at Central Connecticut State University in 2011, Webster Bank has financed approximately 60 MW of renewable energy projects, including two Maine-based wind farms and a residential solar installation in Connecticut. Its latest loan – for the Colebrook Wind Farm – made history of sorts: It is the state's first utility-scale wind project.

Webster provides business and consumer banking, mortgages, private banking, trust and investment services through 163 regional offices throughout Connecticut, New York and Rhode Island, explains Carolyn Morrison, vice president, of sponsor and specialty banking at Webster Bank. As evidenced by a lending arm dedicated to clean energy, the bank is digging into renewable energy, as well.

Morrison says that Webster is seeking ‘select’ opportunities within renewable energy project finance – which is lenders' parlance for the long term financing of a project against its projected cashflow as opposed to the developer's balance sheet.

In the case of the Colebrook Wind project, Morrison says the project featured a lot of attractive attributes, primarily a long-term off-take agreement with utility EverSource and time-tested equipment from a top-tier wind supplier in GE.

Morrison also credits the Connecticut Green Bank, which provided technical support and pre-development money to the Colebrook Wind project. ‘The Green Bank did its own analysis and had their own wind research at the site,’ she explains, adding that the additional due diligence alleviated concern.

With $24 billion in assets, the bank is accustomed to dealing with commercial lending and risk. And when it comes to financing wind projects, such as the Colebrook Wind Farm, the fundamentals are not entirely different from other types of commercial funding.

Just the same, Webster closely monitors state and federal policy for program changes.

‘We are very sensitive to regulatory risks,’ Morrison explains. For example, a change in a utility's net-metering program could have a significant impact on the economics of a project financed by a bank. At the federal level, Morrison is mindful that the investment tax credit for solar diminishes significantly after 2016.

For the time being, she says Webster will continue to pursue financing opportunities on projects that are $5 million to $15 million in size – while also keeping an eye on growth opportunities.

Nonetheless, Morrison says, ‘We're looking to follow the smart money,’ noting that the bank is trying to grow its practice outside of project finance, primarily by participating with other lenders and institutions in syndicated, or ‘club,’ deals on larger projects that are $10 million to $20 million in size.

She says participation among many banks in a so-called club deal affords the bank with just the right mix of risk and reward, as larger private equity firms and banks have longer histories of financing energy-related opportunities.Â

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