Rising interest rates are expected to cool the market for wind farms

Wind farm prices may have peaked, one of Ireland’s most experienced corporate financiers has warned, despite strong overseas demand for a range of Irish assets.

IBI chief executive Tom Godfrey said wind farm assets were probably “as expensive as they’re going to be” now that the low interest rate environment had begun to change.

Rising official interest rates, so far largely in the USA, were prompting investors to rethink strategies, both because returns on relatively safe bond investments were rising to attractive levels and because a rising interest rate environment would ultimately drive up borrowing costs and therefore put downward pressure on asset prices.

The comments follow a number of big Irish sales which include last month’s deal, when IBI advised Coillte on the disposals of its stake in four wind farms to Dublin-listed Greencoat Renewables for €136m.

Meanwhile, Mr Godfrey, speaking at an event to mark a year since IBI’s management buyout from Bank of Ireland, said the Irish market for mergers and acquisitions had held up despite the uncertainties of Brexit.

Private equity buyers attracted into Ireland by the favourable economic backdrop were fuelling “unprecedented” demand for Irish assets, and there was little evidence that Brexit has dented that, he said.

The Irish market had been transformed since the crash by a wave of new debt and equity providers; giving buyers more options and greater flexibility to structure deals.

Mid-market activity (€5m to €250m) was “extremely robust” and valuation expectations among sellers remained high, he said.

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