Utilities in the US demanding letters of credit (L/Cs) from firms building wind power generators are proving a challenge for smaller developers according to an industry expert.

Co-head of projects at Norton Rose Fulbright, Keith Martin, says that firms with more established market positions will increasingly dominate the market.

L/C challenge

Wind power developers are now routinely asked by electricity utilities to put up standby L/Cs to secure their place in the queue to connect power plants to the electricity grid, but smaller players will find it challenging to remain in the market according to Martin.

"They used to be able to get a power contract, but they have had a harder time getting traction since the utilities began requiring large L/Cs be posted to hold interconnection queue positions. It is harder for the little guys to get the traction they used to," he says.

Financing packages

Larger wind power developers are employing L/Cs in their financing packages. In July, L/Cs helped a US$529 million wind power project in the US state of Texas reach financial close.

Affiliates of Citibank along with Santander and the Royal Bank of Canada agreed to provide a loan of US$217 million alongside L/Cs totalling US$71 million for developer Alterra Power and its partners to go ahead with the ambitious 200 megawatt Flat Top wind farm in central Texas (DC World News, 24 July 2017).

This article represents the views of the author and not necessarily those of the ICC or Coastline Solutions.