Northland and Orlen nail $5.2bn for gigascale project amid offshore wind 'challenges'

Toronto-listed Northland Power and Polish fuels group Orlen have signed a credit agreement for $5.2bn in green project financing for their 1.1GW Baltic Power offshore wind project in Poland.

The non-recourse package, which a covers a 20-year term, is backed by by 25 international and local commercial banks, as well as multiple export credit and multi-lateral agencies, according to a statement by the Canadian company.

“The project is expected to reach financial close in the coming days, upon satisfaction of all relevant conditions precedent to the financing being achieved,” it said.

Northland’s success in structuring long-term financing at a time of rising costs and higher interest rates was hailed by the developers involved.

“Today’s announcement is a major achievement for Northland, our partners and the Baltic Power project,” said Northland CEO Mike Crawley.

“This milestone demonstrates the support from the global financial community and reflects their confidence in Northland and our ability to develop, procure, construct and finance large and complex offshore wind projects."

Northland has been co-developing Baltic Power with Polish oil company Orlen after acquiring a 49% equity stake in the project in 2021.

The project financing amount of $5.2bn represents 80% of Baltic Power’s $6.5bn projected total capital cost, the company noted. The remaining capital will be contributed by the project partners at financial close and has already been secured.

“This financing is Northland’s first offshore wind project in Poland,” said Pauline Alimchandani, Northland’s chief financial officer. “Once operational, Baltic Power will be Northland’s fourth offshore wind project in Europe.”

The project’s 25-year Contract for Difference offtake agreement is Euro-pegged and includes an inflation indexation feature commencing with a base year of 2021, Northland stated.

The project has its major supply and construction contracts are denominated in Euros, matching the currency of financing, with 95% under fixed price contractual structures.

Baltic Power has entered into interest rate hedges covering the loan amortisation period, with an effective all-in interest rate of approximately 5%, with additional currency hedges, Northland said.

The company stressed that its wind farm development offers further optimisation opportunities during and after the construction period and has secured a 15-year operations and maintenance agreement with the turbine supplier, with options to extend.

In September, Northland and Orlen announced Vestas as the preferred supplier for Baltic Power and the Danish OEM is is slated to provide 76 of its V236-15.0MW turbines for the project, which is located approximately 22km off the Polish coast near Leba.

With environmental approvals and key construction permits in place, Northland said fabrication of certain key components underway. Full commercial operations are expected in the latter half of 2026.

Once operational, Baltic Power is expected to provide clean energy to over 1.5 million Polish households. Poland aims to have installed capacity of offshore wind energy of up to 11GW by 2040.

"Despite the recent challenges for the offshore wind sector in some markets, Northland continues to find a way to advance large-scale offshore wind projects with attractive economics.” Crawley stated.