EIB Considers Raising Loan Price for Renewable Energy Projects (Luxembourg)

The European Investment Bank may raise the price of loans to renewable energy projects to bolster capital as demand for funds rises, the bank’s climate chief said.

“You could say that this year’s projects have to pay a bit more for next year’s borrowers, but it all goes back into the business,” Chris Knowles, head of climate change and environment in the European operations directorate at the Luxembourg-based bank, said in an interview.

The bank, which loaned a record 19 billion euros ($25.8 billion) to climate-related projects last year, continues to offer a “significant funding advantage” to borrowers, especially for project financing, he said.

The European debt crisis made it harder for banks to raise money and squeezed their lending capacity. State-backed lenders almost by default increase funding for renewable energy activities when banking sector problems constrain private-sector lending, Knowles said.

That means “there’s a huge demand for our resources at the moment and our lending capacity will not automatically grow in line with demand,” he said.

KfW, the German state lender, opened a 5 billion-euro loan program to finance offshore wind while Eksport Kredit Fonden, the Danish export credit agency and PensionDanmark A/S are offering 10 billion-kroner ($1.8 billion) of loans for Danish export orders such as turbines.

The EIB’s lending for renewable projects in the EU and accession countries rose to 5.6 billion euros last year. The bank increased clean energy lending even though it reduced aggregate loan volumes in 2010 under a plan to return to levels prior to the 2008 financial crisis, Knowles said.

‘Unchanged, Undiminished’

The EIB’s commitment to funding clean energy projects is “unchanged and undiminished” though it continues to reduce overall lending under that plan, Knowles said.

The EIB offers loans on more favorable terms including longer times than commercial banks. The bank agreed to lend 52 million pounds ($83 million) to Blue Transmission Walney 1 Ltd., a group including Macquarie Capital Group and Barclays Infrastructure Funds Management Ltd., last month to buy a 105 million-pound link bringing power from the Walney 1 wind farm off the U.K. to shore.

Dong Energy A/S, SSE Plc and OPW, a company comprised of PGGM NV, a Dutch pension administrator and the Ampere Equity Fund, managed by Triodos Investment Management BV, own Walney 1.

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Source: bloomberg, November 10, 2011