The knockout blow for the financing of offshore wind farms is the so-called matching maturities rule which was aggravated to stabilize the financial markets. “Offshore wind farms cannot be financed by anyone. We have just been banned from doing this.”
Next bad news for the German Federal Government: Stricter regulations of the financial markets are endangering the green energy transition.
Everything depends on everything else, it is said forever. But who would have thought that this also applies to the banking regulation and the green energy transition? At a meeting of the Council for Market Economy, supported by the Association of Bavarian Industry (vbw), Commerzbank board member Markus Beumer granted insight into applied political chaos theory.
He doubted that the switch to offshore wind power generation will occur. The dream, he said, was founded on “wind farms that cannot be financed by anyone.” What particularly upset the banker: “We have just been banned from doing this”. The host and President of the Association of Bavarian Industry Randolf Rodenstock commented dryly: “When it comes to the green energy transition, nothing surprises me anymore. If there are no profitable businesses, then the transition will simply not take place.”
Federal Environment Minister Norbert Röttgen has already been confronted by the financial industry about this problem. The Christian Democrat minister turned pale. That’s because the giant mills off the German coast were supposed to provide the mass of green electricity in the next few decades. Off shore, the wind is blowing stronger than on land, so that wind turbines would be profitable much faster than solar technology that is being subsidised to the tunes of billions. Offshore, wind mills do not blight the landscape and cause less public protests. And now this!
The knockout blow for the financing of offshore wind farms is the so-called matching maturities, which was aggravated to stabilize the financial markets. Due to this regulation, banks should secure their loans with a refinancing of a similar maturity. After all, in the banking crisis, banks which had borrowed money for long-term loans only for short-term got into serious trouble.
Large investment wind farm
Although the Basel Committee on Banking Supervision, the international committee of bank supervisory authorities, has provided the strict rules only as observation value, but the banks with long-term commitments must take them into account now because the new rules will come in force during the running time of these loans. Beumer is angry: “Long-term financing has been regulated out of existence.”
Wind farms are big time investment with a long-term value, their funding runs for decades. But for the banks, it has become increasingly difficult to borrow money long term in the capital market, which they then could pass on as loans for such long-term projects.” We get no more than five years in the market in Europe,” moans Commerz banker Beumer.”Before, it was at least seven to ten years.”
This has been confirmed by the Federal Association of German Banks in Berlin. But most of all: In the past, the rules for matching maturities were not so strict. Therefore, customer deposits have become increasingly important for the refinancing, but two decades cannot be bridged like that. Hardly any customer wants to lock his deposit for more than three years.” But if I get no more than five years, I cannot give a loan over 20 years,” Beumer identifies the dilemma.
There are longer maturities in the construction business, but there the conditions are different. There, the refinancing is secured via mortgage bonds, and the property stands as security. In an emergency, the bank could recover its money by a foreclosure. For offshore wind farms off the German coast, however, there is no experience how long the giants will last in the mud. As a result, Commerz banker Beumer does not give credit for eco-projects: “Banks cannot take the risks for a non-proven technology.”
Translation Philipp Mueller