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Insurance for Biomass

By Luke Geiver | September 07, 2012

Good news for biomass project developers looking for an added boost that might help sell a project’s appeal to private investors or public lenders. GCube, an insurance provider for the renewable energy industry, just announced the company has increased its underwriting capacity, or the amount of money the company is willing to risk on a biomass project through insurance issued for equipment, construction costs and other areas that could go wrong, up to $175 million.

The company believes the new amount, “marks a major milestone,” showing the dedication of the company to biomass-based projects. The company also states that “with the additional capacity in place,” the company has underwritten new projects and is also in talks with a number of others. “We expect significant growth within these markets throughout 2013,” the company also said.

Now, not only can biomass-based companies insure new technology or entire properties (up to $175 million), the entire industry might have another tool that acts as a project finance enhancer. In the bond financing markets, federal loan guarantees act as credit enhancers to bond placements used for bioenergy project development capital, essentially pushing a biobased bond rating to a AAA rating based on the federal backing (insurance) that if the project financed through the bond market fails, the government will cover the loss.

Could a project developer looking to appease a private investment group hesitant to take on the perceived risk associated with biobased projects point out this announcement by GCube as an indication that not only are firms trying to operate in the biomass industry, but are also willing to back a certain technology or certain facet of a project? Why not.

And, by issuing insurance for that particular project specific risk, a move that essentially indicates that company believes the gamble is worth the risk and insurance fees collected will remain higher than any insurance payouts for the things that might go wrong, couldn’t a developer also point to a company like GCube and say that this type of announcement is exactly what the industry needs in the current economic lending climate, more so than a government subsidy, loan guarantee or Department of Defense renewable energy production call for proposal? I don’t know, but another tool for project financers to reduce the risk associated with all things bio, can’t be a bad thing.

 

 

 

2 Responses

  1. Wayne House @ Ibrahim

    2012-09-14

    1

    Hi Luke. This could be a fantastic credit enhancer. I would be interested in finding out if this is available in overseas markets esp Malaysia. Also is there an approved list of technologies? Thanks Luke. Wayne

  2. Michael Stone

    2012-09-16

    2

    Wayne - yes, it's available in overseas international. GCube's capacity is with London. Not sure if there's an approved list of technologies, but happy to check for you. One of my colleagues serves on GCube's advisory panel. Additionally, we have placed insurance programs for numerous renewable projects around the globe with GCube. Happy to discuss further. Thanks, Michael michael_stone@ajg.com

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