The transaction will enable Commerzbank to set up a portfolio of up to €1 billion of banking guarantees for new investment in wind farms in the EU.
The deal represents the second operation in Germany under the December 2023 EIB plan to strengthen the provision of commercial bank guarantees for companies throughout the European wind industry. The initiative is part of the EU Wind Power Package presented by the European Commission in October 2023 to maintain a healthy and competitive wind energy supply chain across the Union. It foresees counter-guarantees to the sector's main lenders, which include Commerzbank.
“Through our cooperation with Commerzbank we are promoting the European wind energy manufacturers and the whole wind energy supply chain”, EIB Vice-President Nicola Beer said. “On our path to net zero, we need to strengthen the European key industries to accelerate the decarbonization through innovation and know-how. With this project we safeguard jobs in a sustainable and competitive industry but also our competitiveness of a critical sector.”
The EIB's counter-guarantees under its €5 billion initiative are designed to share credit risks faced by commercial banks when dealing with players in the wind industry. The instrument facilitates access to advance payment and performance guarantee lines, benefitting both the banks and the industry.
The project is backed by the EU's InvestEU program. Without this support the EIB would not have been able to be involved to this extent.
In this project, Commerzbank will use the EIB`s backing to provide banking guarantees to wind-energy manufacturers. This will enable the manufacturers to receive advance payments as well as to provide performance guarantees when taking on new wind projects. The guarantee-scheme enables manufacturers to pay their suppliers in advance for the supply of wind farms and the related wind value chain components, which include turbines, grid connection infrastructure, cables and transformer stations.
The combined EIB-Commerzbank €1 billion guarantee facility is estimated to initiate private investments of up to €8 billion.
“The acceleration as well as the overall magnitude of the energy transition requires massive investments but also entails significantly increased collateral and guarantee requirements. Our accord with the EIB provides us with the opportunity to broaden our strong support for clients from the wind energy industry”, said Tim Koenemann, Global Head of Green Infrastructure Finance, Commerzbank. "These kind of partnerships between public actors and the private sector will be a cornerstone in facilitating a timely and successful digital and sustainable transformation in Europe.”
While the wind-power sector has to date been an EU success story, challenges remain within the supply chain by uncertain demand, slow project-permitting, supply-chain bottlenecks, high inflation and commodity prices, as well as greater international competition.
The contract between EIB and Commerzbank is an example of using risk-sharing instruments to tackle such challenges and, by extension, ensure the financing of projects for the green transition. The counter-guarantees free up additional financing that can be used to meet the increased production required to accelerate the deployment of wind energy.
Wind energy will play a significant role in achieving the EU's renewable-energy target. For the EU to achieve a 45% renewable-energy share by the end of the decade, installed wind capacity will need to expand by 117 gigawatts (GW), of which the EIB`s €5 billion initiative will enable building 32 GW.
