EU activates €5bn bid to boost wind manufacturing with Deutsche Bank partnership
Financing initiative welcomed by industry body as aid to deals to supply European-made equipment
The European Investment Bank (EIB) has activated a €5bn ($5.4bn) initiative to support manufacturers of wind power equipment in Europe through a new partnership with Deutsche Bank.
The EIB announced today that it is extending a €500m counter-guarantee to Deutsche Bank, enabling the German bank to set up a portfolio of up to €1bn of guarantees for new investment in wind farms in the EU.
The deal is the first move under an EIB plan launched in December to provide €5bn to strengthen the provision of commercial bank guarantees for companies throughout the European wind industry.
“A quick build-up of wind power is crucial for decarbonising the economy,” said EIB vice-president Nicola Beer. “Together with Deutsche Bank, we are promoting the expansion of renewable energy in Europe and in that way bringing the price of sustainable energy down.”
"Due to the financial difficulties experienced by a number of suppliers, their ability to provide the large bonds typically required under wind construction and installation contracts has become a bottleneck."
The funding will benefit manufacturers and also developers, which Le Noac'h said "rely on the protection" of performance bonds.
Phil Cole, director of industrial affairs at industry body WindEurope, said the move is an important step in delivering the Wind Power Package amid “rapidly growing demand for wind turbines that are ‘made in Europe.’”
“Improved access to finance and de-risking instruments are central to ensuring Europe’s wind turbine manufacturers can keep up with this demand and ramp up their manufacturing output in line with the EU’s 2030 targets.”
Banks provide guarantees to cover the down payments wind farm developers make to suppliers when they order new equipment. The developer is then entitled to payment if the manufacturer fails to meet its contractual obligations.
With the growing demand for new turbines, banks are being asked to increase the volume of their guarantee lines, said WindEurope. But they’re pushing up against their prudential limits in terms of what they can offer.
“Without counter-guarantees,” it said the industry “risks having to refuse what would otherwise be commercially viable orders for turbines that Europe needs.”
The new €1bn guarantee facility is estimated to initiate private investments of up to €8bn, said the EIB.
The accord with the EIB provides "tangible additional guarantee volumes for wind manufacturers to win and perform" the substantial amount of projects up for grabs, said Deutsche Bank’s EMEA chief Alexander von zur Muehlen.
“These partnerships between public actors and the private sector will be a cornerstone for financing the success of the digital and sustainable transformation.”
For the EU to achieve a 45% renewable-energy share by the end of the decade, the EIB said installed wind capacity will need to expand by 117GW, of which its €5bn initiative will enable building 32GW.
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