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Insurance for wind farmers

Blades falling off trucks, a lack of wind, veld fires and labour disputes. These are just some risks associated with wind farm projects that can be insured against.

It was announced last week that two more wind farms in the province, with a combined generation capacity of 199MW, have been successful as the preferred bidders in the third round of the Renewable Energy Independent Power Producer Procurement programme (REIPPP).

One of the wind farms will be constructed at Gibson Bay in the Kouga Local Municipality and the other at Cookhouse in the Blue Crane Municipality.

This brings the total number of wind farms in the region to six, with the Cookhouse, Jeffreys Bay, Kouga and Metrowind Van Stadens wind farms all at various stages of construction with completion targets set for next year.

While Nedbank Capital is a major player in financing seven of the 17 projects awarded in the REIPPP 3, Marsh Africa offers insurance options to both the lenders financing the wind farms as well as the independent power producers (IPPs) involved.

Marsh Africa regional leader for power and energy Nicola Harris said Marsh operated in two completely separate business units – in Johannesburg for the representation of IPPs and in Cape Town for the representation of the lenders – with entirely different IT systems.

Because of non-disclosure agreements, Harris could not specify what wind farms in the Eastern Cape are represented by Marsh but said the company was involved with insuring about half of the projects of round 1 to 3 of the REIPPP.

Not all risks related to wind farms were insurable, Harris said, but Marsh insured mostly “physical aspects” like future loss of income due to theft, transportation risks, delays and the liability of third party damage to the properties the wind farms are built on, which includes environmental insurance.

Once the construction phase is completed, a different type of insurance is designed for the life span of the wind farm (generally 20 to 25 years) which will include meeting the profits and repayments as well as insuring the dividends which are required to be paid to community shareholders in the form of a trust.

Some Eastern Cape wind farms promise dividends of up to 25% of the total profit of the wind farm for the benefit of local community empowerment projects.

“A lack of wind and sun is insured, but this is based on data predictions and average wind studies which are done 12 to 24 months ahead of construction of the wind and solar farms,” Harris said.

Afri Coast Engineers director Venance da Silva said it was important for projects like the Metrowind Van Stadens wind farm near Port Elizabeth, which was an Afri Coast Engineers brainchild, to be insured for unforeseen events, both in the construction and operational phase of the farm.

He said it was vital for both lenders and IPPs to be insured to mitigate any possible risks and that the insurance was very specialised.

Nedbank Capital head of infrastructure, energy and telecoms Mike Peo said Nedbank was involved with providing financing for seven of the 17 projects awarded in REIPPP 3 and had underwritten debt funding of R6,8-billion.

Nedbank is one of the only banks to have funded projects across five of the six renewable technologies allocated by the REIPPP, including solar photovoltaic, wind, concentrated solar, small hydro and landfill gas.