February 12, 2009

European Lenders Will Continue Funding Green Power Projects

The credit crunch has slowed the progress of many small European green energy projects, which may lead to larger firms having to take up the slack.

"The main problem for the smaller developers is the short-term freeze on lending," Christian Kjaer of the European Wind Energy Association (EWEA) told Reuters, adding that the credit crunch could lead to consolidation in the sector.

"We may see some of the smaller projects which have turbine delivery contracts but are struck by the banking liquidity freeze being taken over by the larger power companies," he said.

Renewable energy projects in the UK are losing funding from many foreign-owned banks, Richard Simon-Lewis, director of project finance for energy and utilities at Lloyds TSB Corporate Markets, told the news agency.

"A lot of deals are being done by clubs of banks," he said. "For the very big deals ... we are seeing the multilaterals, the likes of the European Investment Bank and potentially the government coming in to co-fund."

The EIB has so far granted funding for offshore wind projects to a sum of nearly 2 billion euros since 2002.

Juan Alario, who heads the EIB's energy lending team, said the bank was considering lending to a large number of big offshore wind projects in the North Sea and Baltic Sea, some worth more than 1 billion euros ($1.3 billion).

He added that although the boom in renewable energy is beginning to subside, the EIB will increase funding this year to about a fifth of its lending for energy products.

"Additional lending within the energy and climate change package will amount to 6 billion euros per year," the EIB said in a statement. "This includes a clean transport facility for the automotive and other transport industries, their original equipment manufacturers and component suppliers. The facility will target significant CO2 reduction through research, development and innovation expenditure, as well as tangible fixed assets in related infrastructure and production plants."

"This year, I expect the number of renewable projects will most likely be higher than the number of conventional energy projects," said Alario.

"There are some indications coming out of the United States that the market could drop a little, but then there are also signs the Chinese market could grow a little," Kjaer told Reuters.

"So overall, I would say the market will grow in 2009, but probably not by the 30 to 40 percent we've seen in recent years."


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