Letters of credit (L/Cs) feature in the financing of one of the largest wind farms in the world, which became operational in the US late last year.

The L/Cs in this, and in several other similar projects, help fulfil the aim of the US Department of Energy to attract private capital to the country's nascent wind power sector.

Private capital

The Department of Energy's partial loan guarantee scheme has played a critical role leveraging private capital for the Caithness Shepherds Flat wind farm in the US state of Oregon.

Featuring L/Cs worth US$226 million, the US$2.3 billion project financing includes US$693 million in equity from companies including Google and GE and US$1.3 billion in commercial debt,

The project was supported by a US$1.3 billion partial loan guarantee from the Department of Energy in 2010.

More projects

Other wind power developers to use L/Cs include a division of Duke Energy Corporation, Green Frontier Windpower Holdings, which said it would use L/Cs in its financing of five wind-farm projects, (DC World News, 26 May 2010).

Cielo Wind Services said it planned two developments in the area known as the Texas Panhandle and would post a US$500,000 L/C for each of its projects.

Texas Panhandle

Several more wind power developers have said they would use L/Cs in financing arrangements for projects in the same windswept area of Texas.

They include Higher Power Energy, which said it would post an L/C totalling US$8.75 million for a project with an 875 megawatt capacity and another L/C for US$550,000 for a smaller 55 megawatt project, (DC World News, 14 December 2009).

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