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Credit crunch shortfall warning for renewables

Senior bankers have warned the renewable energy sector of a €21 billion shortfall in debt finance by 2020 following the credit crisis and a brake on lending.

European wind and solar power projects drew 18 billion euros investment in 2007 and needed about 85 billion euros annually by 2020 to meet EU targets, said Tanja Cuppen, a renewable investing executive at Rabobank.

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However, the pace in growth of the sector, coupled with less appetite for long-term lending, would contribute to a 21 billion euros debt finance shortfall, she added.

“The credit crunch will have a major impact on the renewable energy sector,” Cuppen said. “I think we haven’t had the worst yet.”

The sector has become more competitive recently due to high oil, gas and power prices but energy infrastructure projects are hurting because the banks, faced with the threat of more loan defaults, are limiting lending.

“Debt markets are much tighter than 12 months ago and are set to get tighter,” said Ian Simm, chief executive of Impax Asset Management, which invests in clean energy, water and waste.

The result has been “the worst liquidity crisis in recent memory”, said Andrew Marsden, managing director for Europe at GE Capital, which has a US$4 billion portfolio of renewable energy assets.

However, Marsden added: “Money is still there for renewables, (especially) private equity.”

The offshore wind energy sector was showing “sub-prime” symptoms, said Kevin McCullough, chief operating officer of RWE’s renewable energy business, comparing current prices of offshore wind projects to the high-risk US real estate sector before the recent blow-out.

 

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