June 18, 2018

U.S. Wind Energy Outlook – Project Finance, M&A and Capital Markets

By Denis Roginskiy, Vice President, CohnReznick Capital & Pat V. Sonti, Senior Consultant, Nexant Inc.


The U.S. wind energy industry is poised for an aggressive upward trajectory over the next 5-10 years, driven by ambitious announcements in offshore wind and buoyed by sustained interest in onshore developments.  Major capital investment will be targeting U.S. wind assets and projects in the very near future.

The first half of 2018 has shown a robust and dynamic wind market.  Past incentives have expired, pushing a dynamic transition of energy markets to new auction mechanisms.  Forecasts estimate as much as a 30% increase in capacity between 2017 and 2020 [1] considering these developments.

Many major energy players have stayed the course of investing in onshore wind, reflecting strong demand and lessening levelized costs (anticipated to be reduced by up to 47% by 2040). Most recently, MidAmerican announced that it will invest $922M in building a 591MW wind farm in the state of Iowa with commissioning due in late 2020.

Key stakeholders are also racing to build an initial tranche of offshore wind (OSW) projects on the East Coast.  Several states in the northeast and mid-Atlantic, from Massachusetts to North Carolina, have announced major policies encouraging OSW development. Recent improvements in OSW technologies, economics of scale, and the viability of energy storage are making these investments more attractive. For example, Avangrid and COP recently announced that their 800 MW Vineyard Wind project was selected by the Massachusetts Electric Distribution Companies with the project due to be completed by 2021.

With price tags in the range of hundreds of millions of dollars, well-informed investment decisions will be crucial to success in the wind energy sector on both the development side and the investment side.

[1] MAKE Q1 2018 Global Wind Power Market Outlook, March 23, 2018

Market Outlook

Investor interest in renewable energy continues to be strong. New participants, including previously untapped pockets of private equity and family office investors, regularly enter the market with attractively priced capital. This trend provides much needed development funding to fuel wind market growth. New investments in U.S. wind surpassed $19.2Bn in 2017, accounting for 19% year-over-year growth and the second highest annual figure to date [1]

U.S. wind capacity is expected grow by 40.5 GW over the next 5 years [2]. This represents about 9 percent of current consumption in the U.S.  An estimated 5-8 GW of OSW capacity (slated to be installed by 2025) will contribute to this capacity increase. Greater than 10 GW of OSW will be installed by 2030.  This growth will be driven by falling turbine prices as well as improved efficiency (i.e., lower ownership costs) and strong corporate demand.

There has been concern how the recent change in tax law, effective for the 2018 calendar year, will impact the sector. The value of wind energy production tax credits (“PTCs”) in the market have been negatively affected to an extent, due to a notable drop in demand (i.e., tax capacity) from tax equity investors.  Despite this and the looming PTC phase-down through 2020, continued demand for wind generation will be supported by state-level renewable portfolio standards (“RPS”) and the retirement of baseload coal power generation.

[1] 2017 Clean Energy Investment Trends, BNEF, January 16, 2018

[2] AWEA 2018: Outlook for U.S. Wind Build, BNEF, May 18, 2018

Project Finance

Increased investments in wind projects and related infrastructure will drive a growing need among global sponsors, lenders, and other stakeholders for ensuring “bankability” and risk mitigation.  For project sponsors and developers, several viable options are available with respect to balance sheet finance, limited recourse finance, and non-recourse or project finance.  Regardless of the financing mechanism, comprehensive due diligence will be required during the capital investment process to validate sponsor and investor return expectations, as outlined below:


The M&A market continues to show strength and shape the wind sector, with total clean energy asset and corporate M&A activity in 2017 reaching nearly $105Bn. In the U.S., international utilities, corporations, and strategic and financial sponsors have used M&A to enter the growing market and deploy capital. In particular, asset sell-side activity continues to be robust with at least several new processes being announced monthly. In addition, due to a healthy level of liquidity and a highly competitive cost of capital in the market, sponsors and developers have been leaning in the direction of private M&A vs. public offerings to monetize late stage development and/or operating assets.

The market is also witnessing an increased level of sophistication in asset valuations due to a maturing M&A market with numerous comparable(s) to aid in value benchmarking. This also provides buyers and sellers with a high degree of transparency, allowing for better asset and capital optimization. The role of third-party advisors has also continued to increase as thorough technical and commercial due diligence is needed to ensure investors and lenders are fully informed in M&A transactions. This is especially true for new market entrants.

Capital Markets

As highlighted above, financing activity primarily assesses the risks and rewards of the construction of new wind farms, refinancing transactions for wind farms under construction or operation, and project acquisition activity.  Another key activity is capital market funding which primarily consists of equity investments in specialized publicly listed companies developing wind projects.

The OSW sector has been very active in Europe, in particular, with an uptick in IPOs since 2010.  Starting in 2015/2016, some the largest IPOs in the energy sector have been dedicated to OSW companies.  Roughly €5.2 billion has been raised in IPOs in 2016 for OSW representing the highest level of investment in almost a decade.  For equity investors, OSW projects provide stable returns in a lower yield financial market as they are regulated assets.


The wind industry in the U.S. is rapidly expanding with major policy announcements and state-wide targets bolstered by strong corporate demand. Tangible commitments are being made in 2018 and long-term PPAs/ORECs are being executed. The wind industry is attracting major capital investment as project developers seek to meet demand and forecast costs continue to decline. The industry has proven dynamic with increased transactional deal flow. Several options for project finance exist for the construction of new assets, there has been increasing activity in the M&A space, and IPOs for OSW starting to emerge.

Technical and commercial due diligence will be required to verify and validate return on capital expectations in advance of any of these transactions. With an anticipated rapid expansion of capacity, developers must have a clear understanding of the options for obtaining project funding and lenders must comprehend the commercial and technical implications of their capital investments.


  1. Burdock, Elizabeth. Summer 2018. “The US Offshore Wind Starts Spinning”. Published by Business Network for Offshore Wind (www.offshorewindus.org).
  2. Burke, Brandon W. October 2017. “Tilting at Windmills – The emerging U.S. offshore wind energy industry”. Published by Kleinman Center for Energy Policy, School of Design at University of Pennsylvania.
  3. Hughes, Kevin, Commissioner-Maryland Public Service Commission. “Maryland’s Offshore Wind Projects”. May 2018.

Photography credit: Utilities Aruba