BMU and KfW Launch EUR 5 Billion Offshore Wind Programme

The Federal Ministry for the Environment (BMU) and the state-owned KfW Development Bank (KfW) officially launched the Offshore Wind Power Programme under which KfW grants loans for offshore wind power projects.  The funding scheme is part of the  10-Point Immediate Action Programme to last year’s German Energy Concept. The total credit volume amounts to EUR 5 billion.

The programme is aimed at giving financial incentives for the innovative offshore wind power technology, thus facilitating private financing in the future, Dr. Ulrich Schröder, CEO of KfW pointed out.

1. Background

Offshore wind energy has been accorded even higher priority by the German government in its efforts to bring about a faster transformation of the German energy infrastructure following the nuclear disaster in Fukushima.

The government’s proposals for a realignment of the Energy Concept contained in a legislative package adopted yesterday include improved feed-in tariffs for offshore wind power. The Federal Cabinet recently also agreed on a draft bill that facilitates the construction of offshore wind farms. By 2030 the government wants to reach an installed capacity of 25,000 MW.

2. Offshore Wind Power Programme

Under the Offshore Wind Power Programme, KfW supports project financing by commercial banks.  The funds will be granted as loans (debt financing). Equity of about one third of the total capital needed (Gesamtkapitalbedarf) has to be provided to the project company.

If the above conditions are met, KfW will provide the following types of co-financing:

a) Direct Loan

KfW becomes a partner of the financing cosortium, granting a loan at the same conditions as the other partners. The maximum loan amounts to EUR 400 million per project, on condition that its loan does not exceed 50% of the total debt capital.

b) Combination of Pass-Through Loan and Direct Loan by KFW

Projects can also be financed by a combination of a pass-through loan (Durchleitungskredit) and a direct loan by KfW. The direct loan by KfW must not exceed the amount of the pass-through loan. The maximum amount of the KfW loan is EUR 700 million per project, on condition that the loan does not exceed 70% of the total debt capital.

c) Direct Loan for Unforeseen Additional Expenses

In addition, KfW can grant an additional direct loan in case financing for unforeseen additional expenses is necessary during the construction of the wind farm. In this case, KfW has to be a partner of the banking syndicate and the commercial banks have to provide financing of an at least equivalent amount as KfW. The maximum loan granted by KfW is EUR 100 million, on condition that the loan does not exceed 50% of the debt capital needed for the unforeseen expenses.

d) Maximum Term

The maximum repayment term is 20 years, with up to 3 years without repayment of principal at the beginning.

Source: KfW Bankengruppe

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