Interview: Allan Baker, Societe Generale

Allan Baker, Global Head of Power Advisory & Project Finance at French bank Societe Generale, has been involved in the offshore wind sector for more than 15 years. Richard Heap spoke to him for his view on the sector.

Allan will join us at Financing Wind Europe in London on 26th May to discuss how to deliver commercial-scale floating wind projects.

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Where have you been focusing recently?

I’ve been in offshore wind since the very early days – 15 years or more – as an advisor and lender on many of the deals in Europe. I’ve headed development of the business in Asia – Taiwan, Vietnam and Japan – and now also working with colleagues in the US on the Empire and Atlantic Shores offshore wind projects. As a business globally offshore wind has been very active building on our long-standing presence in onshore renewables.

What are the big issues for offshore wind in Europe?

Europe is very interesting for us as we see a lot of innovation. First, we’re advising on projects to put in place corporate power purchase agreements (PPAs) for projects with no Contract for Difference (CfD). We anticipate that a lot of the capacity awarded in in future, including the recent English auction, and possibly ScotWind, will be developed with PPAs rather than CfDs.

We’re also interested in how the market is moving to integrated technology, including offshore-wind-to-X: green hydrogen and ammonia. We see the UK is at the forefront of developing green hydrogen business models that could be exported globally.

And there’s floating wind too, where Europe is leading the charge with the first project financing closed in France recently and the award of significant floating capacity in ScotWind. This was a real breakthrough for a technology that also has global potential. The fact banks have funded small floating wind projects hopefully indicates that larger projects will get liquidity, and that part of the market will increase significantly.

Certainly, we still see Europe as the innovator in the offshore wind sector.

What questions should we be tackling at Financing Wind Europe?

I’m interested to discuss how quickly we can get floating wind to scale. In the ScotWind process they’ve awarded seabed leases for floating projects, but there’s still a question about how you justify building capacity for what is currently a relatively expensive type of offshore wind.

We anticipate that the economics will change quite quickly and then the challenge is how we can mobilise the capital for these new areas. Until now, floating wind projects have been small and so they don’t need many banks. That will have to change with gigawatt-scale projects in the pipeline.

Equally, on the corporate PPA side, we’re working through putting in the corporate PPA structure that are yet to be proven in the market for very large offshore wind farms. We’ll find some banks who are less comfortable with that approach. Perhaps they were quite comfortable with CfDs but struggle to adjust to a more commercially contracted structure. Taking a step further into merchant financing impacts further on liquidity, but there is an increasing pressure on the finance sector to accept merchant risk.

Could deeper collaboration help unlock these issues?

On floating wind, integrated offshore-wind-to-X projects and other innovations, there’s a need for a lot of collaboration to put the structures together, develop the risk allocation for the financing, due diligence, and so on. Getting financial advisors and lenders, technical / legal advisors involved much earlier than normal can help them get comfortable with the technology and risks, to really work in a collaborate way and ensure projects are bankable when they come to the market.

Where there’s more uncertainty, we need to work more collaboratively. We also have to be aware we’re potentially setting a template for future projects.

Has that been a challenge in a socially distanced world?

Businesses have carried on for the last couple of years, and most of the recent auction processes and debt closings have been completed in the virtual world. But one thing we’ve been missing is the informal discussions. Being able to chat with a group of banks or other industry players, to bounce around ideas and informally exchange views is making a very welcome return to the market.

What would you like to take away from the event?

I’ve been asked a lot recently about the current geopolitical situation and the potential for this to accelerate the deployment of wind. My view is that, yes, it probably will but it isn’t going to solve the problem of energy security today. Even if you had another round of offshore wind auctions today, you’re not going to see that capacity until towards the end of the 2020’s.

In general, I think we’re heading towards a more nationalistic approach to energy, and so the challenge is how you improve the efficiency of the energy system and accelerate energy transition to help achieve energy independence. The current situation will accelerate the philosophy that you need develop secure flexible options in energy, and that’s going to benefit wind and solar.

Want to hear more?

A Word About Wind members can click here and use their exclusive code to register. If you don’t know your code or if you'd like to enquire about attending the conference, get in touch with the team at +44 (0) 20 7100 1616 / +1 917 310 3307 or email membership@tamarindogroup.com.