12 june 2013

Banks Positive about Financing New Offshore Wind Parks

By Gijs den Brinker, Het Financieele Dagblad [Netherlands], June 12, 2013

Financing ambitious plans to generate more green energy is not a problem. There is enough money – what’s missing are good investment projects.

That is what Dutch bankers are saying to this newspaper. The FD is organizing a debate tonight in The Hague about the national energy agreement for more sustainable energy.

The cabinet has agreed that in 2020 The Netherlands will generate 16% of its energy from sustainable sources such as wind and sun, for which a government subsidy of 3.8 billion euros is available. In addition to that, the projects will require about 40 billion euros from investors.

Hardly any good projects

They are pretending there’s no money available from the banks, but that’s complete nonsense, said one banker, who wants to remain anonymous, because the banks are presently negotiating an energy agreement under the supervision of the Social-Economic Council (SER). “The real problem is that there are hardly any good projects that can be completed with trustworthy partners.

Another banker confirms this perspective. “The projects are either too small or too risky.” Thus, banks have little interest in financing biofuel power stations, which are a major element of the agreement. “The problem is the biofuel, not the power stations. How do you know you’ll have an affordable supply of chicken shit or wood chips for fifteen years, without a doubling of shipping costs? This kind of risk is for private parties, not banks. A contract would never get past the credit committee.”

Energy Saving

ING argued recently in a report that there is “a lack of good projects and well thought ou business cases for plans to realize energy saving. Saving is an essential part of the energy agreement.

In a confidential draft of the agreement that this paper has acquired, we read that government, companies and environmental organizations are strongly in favor of offshore wind parks and biofuel supplements to coal power plants. According to the calculations of this newspaper, close to ten billion euros will be needed for offshore wind park construction up to 2020, of which at least six billion would need to be financed as debt.

Outside funding

Bankers claim there is enough money available. Financing can come in part from infrastructure funds of investment managers or pension funds. These funds have been able to increase in recent years because investment in infrastructure is viewed as safe and stable. PGGM [a Dutch umbrella pension fund], for example, in a special energy supplement of this paper, recently announced that itwould invest in offshore wind parks. Earlier this year, Eneco [Dutch renewable energy provider] managed to involve its capital-heavy Japanese partner Mitsubishi in all its investments in wind energy.

Banks can do a part of the outside funding directly and another part via a bond issue on the capital market.

Negotiations for an energy agreement are to be completed early in July.

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