Innovative renewable energy bridging loan hat trick for Fiduciam

By Bridging Loan Directory 25th July 2023

Fiduciam is an established provider of bridging and development finance to Western European clients with diverse business needs.

Typically, Fiduciam receives financing requests from SMEs and entrepreneurs active in the real estate, care, hospitality, leisure, manufacturing, logistics and agricultural sectors, but now also the renewable energy sector.

Fiduciam’s renewable energy bridging loan is designed to finance the acquisition, and where necessary some or all of the costs of the renewable energy development.

A case in point is a renewable energy bridging loan of €3.3 million Fiduciam granted last month to an established Dutch sustainable energy entrepreneur.

The renewable energy business opportunity

Fiduciam’s client, an established entrepreneur specialising in renewable energy projects, recognised a unique opportunity to take advantage of the challenges faced by the Dutch energy grid in stabilising demand and supply.

The key to grid stabilisation lies in rapidly supplying and taking off energy as required. Once the client had identified a property suitable for this project, Fiduciam was approached to finance its acquisition via a renewable energy bridging loan.

The property is a vacant greenhouse complex which benefits from a high-voltage energy grid connection.

This connection is capable of swiftly supplying energy to and taking energy from the grid when required by the national energy management company TenneT.

Such high-voltage type of connection is unique and is not often installed, due to the planning requirements and other national grid priorities.

The complex spans almost 100,000 sqm of greenhouse space, containing 5,500 electricity-intensive lamps used for traditional crop cultivation until now.

These lamps can be switched on (on TenneT’s request) to stabilise the grid during periods of energy oversupply.

The property also contains three combined heat and power units (CHPs), including a suitable gas connection to power them, previously used to heat the greenhouses, which will now supply energy to the grid when energy demands peak.

To provide further sustainable energy generation, Fiduciam’s client will install solar panels on the roofs of the vacant greenhouses, which cover 100,000 sqm.

To create a complete power plant, the client plans to install energy storage systems (EOS) to ensure that surplus generated sustainable energy would not go to waste in time of decreased demand.

The greenhouses will be used for a new farming technology, also referred to as dark farming, which no longer requires sunlight.

Complex valuation

Bridging loans are typically underwritten on a loan-to-value basis, and this was no different in this case, requiring the sustainable energy project to be valued.

Needless to say, the value of a sustainable energy project depends very much on the projected cash flows, and the certainty of these cash flows; the major difference being that these are harder to model than for traditional cash flows such as rental income.

In the case it hand, the grid stabilisation agreement with TenneT is a major driver of cash flow, as well as the offtake agreement for the renewable solar energy.

Despite the importance of sustainable energy, the number of valuers that can handle the valuation of such project is much smaller than those that typically value real estate projects.

Complex legal and technical aspects

The business plan’s technical nature, the technology being used (including the combined heat and power units and the energy storage systems), and the multitude of parties involved, made this transaction a daunting challenge for most lenders.

Underwriting such a transaction and understanding the associated risks requires in-depth knowledge of the technology and a carefully structured assortment of security instruments.

Fiduciam’s experienced Dutch team did not shy away from the challenge and was able to find a pathway through the complex legal structure of security instruments involved in the transaction, facilitating an innovative renewable energy bridging loan for its client and managing to complete prior to the deadline stipulated in the purchase contract.

Key terms of the renewable energy bridging loan

Fiduciam offered the client a €3.3 million loan with a maturity of 12 months at an annual interest rate of 9.5% (rolled up).

Recognising that the project would not attract significant cashflow in its first year, Fiduciam structured the interest into the loan amount, relieving the client of monthly interest payment concerns and allowing them to focus on their business operations.

Conclusion

Fiduciam provides its clients with a quick, flexible, and personalised lending process. This entrepreneurial mindset aligns with clients’ needs and makes Fiduciam an agile partner for entrepreneurs.

Director Marieke Eskens commented:

“Renewable energy is becoming an increasingly important part of our clients’ businesses.

Whether you are a property developer, a real estate manager or indeed an entrepreneur looking to contribute to the development of renewable energy solutions, it is not easy to find a bridging loan to finance renewable energy developments.

I am very proud that our team has the flexibility and the in-house knowledge to support requests for renewable energy bridging loans.

To structure this innovative renewable energy bridging loan, close cooperation between the client and the valuer was paramount.

We developed a close relationship, and we hope to finance more sustainable energy projects for this client soon!”