Novera says may sell equity to beat credit crunch

LONDON Oct 23 (Reuters) - Smaller renewable energy operators may have to sell more equity in projects to raise money during the credit squeeze, a Novera Energy NOEN.L executive told a clean technology conference this week.

Novera is an example of mid-tier renewable energy companies which analysts say are most vulnerable to frozen or most costly debt markets, and which could contribute to a slowdown in a previously booming sector.

The company failed to refinance its existing facilities earlier this year, and is now looking at the possibility of selling stakes in its projects to utilities, in particular, to raise money, said chief financial officer Rory Quinlan.

Project financing was still taking place, Quinlan said, but project margin costs had gone up.

"There's a big portfolio out there at the moment being financed but (the problem is) getting down to the terms," he said.

Cash-rich utilities, by contrast, can fund projects off their balance sheet and so don't have to approach banks or debt markets [ID:nL1115865].

The renewable energy sector is supported by government subsidies because such technologies are often more expensive than incumbent oil, gas and coal-fired power, and the outlook was still positive, said Quinlan.

"Even with corporate debt as it is (today), there is still the appetite from banks to fund wind projects."

Novera is primarily a producer of electricity from landfill gas, with 87 megawatts (MW) of operational capacity, which could power up to 50,000 homes, but aims to increase its wind power generation from 15 MW to over 250 MW by the end of 2011.

To fund its wind development programme, the company completed a 15 million pound equity placing in the summer [ID:nL24976825] and has two long-term non-recourse project finance debt facilities worth 114.5 million pounds ($185.8 million) combined.

Despite an economic downturn Quinlan was confident that Novera could secure financing for its planned 27 MW Glenkerie wind farm in Scotland by next year.

"We are in discussions with various partners for a finance arrangement. We are confident we can retain a 50 percent interest (stake) by potentially selling 50 percent of the wind farm down."

"I am still seeing project finance deals being done. We are testing the waters now with Glenkerie," he added. (Reporting by Nina Chestney; Editing by James Jukwey)