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Receivables collection typically lasts for a long period in the wind farm industry, which puts pressure on the working capital and the cash conversion cycle of Goldwind. At the same time, more and more overseas project owners are asking for prolonged payment terms (typically two years or more) during project tenders. Thus, Goldwind was looking for a financing solution which will help the company win these overseas project tenders, without putting too much leverage constraints on its balance sheet. With the extended tenor nature of the transaction, in order to achieve the off-balance sheet financing goal, Goldwind sought a one-stop solution from its partner bank where (i) financing interest rate is fixed upfront, and (ii) capability for the bank to finance trade receivables for two years or more.
BNP Paribas (BNPP) Hong Kong branch was requested by Goldwind to provide a medium-term receivables purchase programme that would allow Goldwind to deconsolidate the receivables sold to BNPP.
Given the long-standing relationship and good track record, BNPP was able to fully leverage its global network, deep local market knowledge, expertise and understanding of Goldwind’s business needs to implement a robust solution, addressing the challenges encountered by Goldwind’s medium-term receivables purchase requirements.
The solution components include:
- Medium-term receivables purchase programme for Goldwind, with receivables tenor allowed for up to two years (730 days).
- Insurance cover for the payment risk on the debtor, under Sinosure’s Special Trade Credit Insurance Policy.
- BNPP conducting interest rate swap (IRS) at the point of financing, allowing each purchase’s interest costs to be fixed upfront, providing Goldwind with certainty of the financing costs incurred.
- Legal documentation allowed Goldwind to deconsolidate the receivables sold to BNPP, despite the complexity in the financing structure.
Best practice and innovation
BNPP’s solution provided Goldwind with a viable financing solution to win its project tender. The solution demonstrates the bank’s ability to accept fixed upfront interest rates and extended tenors with the use of IRS. The structure of the solution may also be replicated for other future projects of Goldwind.
By implementing the e-banking platform, it enabled Goldwind to facilitate a standardised operational procedure. The use of the platform also enabled the seller to benefit from automated reports and reminders aiding the overall management of the programme.
The partner bank’s ‘One Bank’ approach was demonstrated at all levels from global, regional and in China, clearly reflective of its corporate values of being client-centric and all-rounded excellence in its product offerings, implementation and service delivery. Beyond these, renewable energy is a key sector of focus and the financing supports energy transition and contributes to the common goals of placing sustainability and corporate responsibility at the heart of both the bank and Goldwind business models.
“At present, the market competition is very fierce, and suppliers are required to share the pressure of drawdown more than ever. BNPP provided us with the perfect solution for this issue by improving our operating cash flow and allowing us to obtain off-balance sheet treatment without increasing our financial liabilities,” says Sally Peng, Financing Manager.
The highly customised solution required significant collaboration between the partner bank’s China, Hong Kong and Brazil offices and its wider global network yet the bank still achieved the aggressive project targets.
- Costs savings.
- Process efficiencies.
- Increased automation.
- Risk Mitigated.
- Future proof solution.