Talanx, Germany's third biggest insurer, has co-ordinated a €556m ($623m) green bond to finance Global Infrastructure Partners' acquisition of 50% of Dong Energy's Gode Wind 1 offshore wind farm.
Talanx acted as lead manager for a group of institutional investors, which includes other German insurers and asset managers.
Talanx is providing up to €320m of the total €556m being raised by the bond, which has a term of about 10 years.
Dong Energy said the total price of the sale was about €780m which will be paid in the period 2015 to 2016. It also said that the bond that GIP has issued to the German consortium "marks
the issuance of the first non-recourse, investment-grade, certified green bond dedicated to part finance an offshore wind farm asset under construction."
Talanx also pointed out that the deal is the first time that a group of institutional investors led by an insurer has financed an offshore wind energy project.
GIP is an independent infrastructure investment group which manages about $16.1bn for its investors.
"Gode Wind 1 is a perfect match for us. We are very delighted to have teamed up with two very experienced and reputable sponsors, Dong Energy and GIP," said Thomas Mann, CIO of Talanx Asset Management.
Mann declined to reveal the coupon of the bond, saying it was between 3% and 4%. He said the bond would have five tranches which will be issued at various stages during the construction of the project.
The bond will also be fully amortising, meaning that the face value will be repaid in stages along with the coupon.
A 'make whole' provision is in place to ensure that the bond holders will be reimbursed in case of an early refinancing.
Talanx explained that it is deliberately increasing its exposure to infrastructure investments to compensate for the decrease in yields because of low interest rates.
"The transaction marks the first time that Talanx has provided significant amounts of debt capital for an infrastructure project," added Immo Querner, CFO of Talanx. "Our medium-term plan is to invest up to €2bn in infrastructure projects, and we have systematically built up our expertise in this area in recent years. In the long term we could potentially invest up to €5bn in a broadly diversified range of alternative investments."
Mann added that offshore wind in Germany had reached a point where large institutional investors were happy to invest because of stability in regulation and a technology which has become mature.
He added that there was an increasing "window" of opportunity for institutions to step in as investors in competition with the banks, which traditionally provide project finance but which are dealing with growing capital requirements from regulation such as Basel III.
