Renewables: HSH Nordbank to expand its business – focus on Scandinavia

Hamburg/Kiel, January 28, 2016 - HSH Nordbank expects to achieve appreciable growth in its core renewable energies business in 2016. The focus will particularly be on the Scandinavian market, in which the Bank successfully established a presence last year.

“We plan to generate new business of one billion euros in project finance for the wind and solar sector in 2016,” said Lars Quandel, head of Energy and Utilities at HSH Nordbank. In addition, HSH Nordbank wants to provide its corporate clients in this sector with loans of an additional € 300 million. Accordingly, growth will be moderate given that the Bank generated new business of more than € 900 million in project finance and € 300 million from other loans to energy companies and utilities including loan renewals in 2015 (2014: € 890 million). This is equivalent to new installed capacity of around 450 megawatts (MW) in 2015. All told, the Bank has thus financed significantly over five gigawatts including repayments either on a stand-alone basis or in syndicates to date. HSH Nordbank is active across Europe in finance for renewable energy projects.

“Renewable energies are a clear growth story for us for the fourth consecutive year,” said Patrick Miljes, head of corporate client business at HSH Nordbank. The Bank restructured these activities in July 2015, focusing on energy and utilities, infrastructure and logistics, retail and food/beverages, industry and services as well as wealth management. It has been supporting the growth of renewable energies projects for around 30 years and today figures among the top 3 European providers of finance in this sector. The existing loan portfolio is worth around five billion euros spread across 230 projects. And a large number of future projects are also in the pipeline, with around 40 transactions accounting for a combined value of € 1.6 billion currently in the offing.

Targets exceeded in the Finnish market

Last year, the Bank established a successful presence in Finland after entering this market in 2014. “With the provision of long-term finance for six Finnish wind power projects, we were able to substantially exceed our own goals for 2015,” reported Quandel. The Bank also signed its first contract in Sweden in 2015, additionally receiving enquiries from Norway. In Denmark, the Bank is readying wind and solar energy projects. “Our goal is to continue growing in Scandinavia over the coming years as this market offers a stable political and regulatory environment conducive to further growth,” Quandel continued. New enquiries have also been received from Ireland for project finance for wind farms. HSH Nordbank executed a transaction here again in 2015; in previous years, no suitable project finance opportunities had arisen in this market due to muted project development activity.

A further goal for the current year is to execute transactions that are no longer dependent on fixed feed-in tariffs. “Projects with long-term power purchase agreements (PPA) may also be profitable,” said Quandel. The agreements between electricity producers and customers are entered into for a defined period. However, the off-taker of the electricity is no longer the grid operator but one or several customers.

Ahead of the new bidding process, which is to replace the tariffs defined in the German Renewable Energies Act from 2017 as a means of determining prices, Quandel expects to see “a reduction in the diversity of participants that we are currently seeing”. He went on to say that preliminary bidding rounds completed in the photovoltaics segment had shown that citizen energy groups virtually never received a contract. HSH Nordbank has already gained experience in such markets as France in which bidding processes are standard practice in the photovoltaics sector. Accordingly, the Bank considers itself to be well positioned to respond to market trends in Germany and to successfully support its clients in their efforts to participate in bidding processes for wind power projects. In a currently still ongoing survey that HSH Nordbank is conducting of its clients, the interviewees - including project developers, operators and service providers - unanimously state that the installation of new onshore wind farms is being influenced by the bidding processes. The general tenor of the responses is that obtaining finance is becoming more challenging, projects must be competitive and smaller developers are being placed at a disadvantage. The results will be published shortly in a market analysis entitled “Trends in the onshore wind power market against the backdrop of the new bidding process for wind power systems”.

HSH Nordbank regularly makes its renewable energies expertise available in various publications. In its recently updated semi-annual report on the energy and utilities sector, the Bank additionally analyses the opportunities and challenges facing this sector. HSH Nordbank will be publishing its tenth wind power industry study in time for the WindEnergy Hamburg fair (27 - 30 September 2016).