EIB to Support EU Wind Sector With €5 Billion in Bank Guarantees

By Bloomberg

Dec 02, 2023

image is BloomburgMedia_S514IXDWX2PS01_02-12-2023_11-00-09_638370720000000000.jpg

Wind turbine blades dockside during loading onto a ship at the Siemens Gamesa factory in Hull, UK, on Wednesday, Aug. 9, 2023. Siemens Energy AG launched a strategic review of its wind power business as problems with its turbines are expected to cause a 4.5 billion ($5 billion) net loss in one of industrial Germany's biggest debacles.

The European Investment Bank will pledge €5 billion in counter-guarantees to help support the region’s ailing wind energy sector, a top official said. 

The EIB plans to unlock the money in tranches, starting with €1.5 billion ($1.63 billion) before the end of the year, assuming the program is approved by the institution’s board on Dec. 13, said Jean-Christophe Laloux, head of operations at Luxembourg-based EIB. 

The counter-guarantees will be in equal partnership with about 10 of Europe’s largest lenders to the sector and directed toward the region’s five main wind turbine manufacturers as well as companies in the supply chain.

“The European wind industry has been suffering quite a lot,” Laloux said in an interview on the sidelines of the COP28 summit in Dubai. The guarantees to help address the issue “are a true European effort,” he added. 

Europe’s wind energy sector — a centerpiece of the continent’s clean tech efforts — faces soaring costs and growing competition from China. In 2022, the EU’s trade balance with China in the wind sector showed a record negative deficit of €462 million. Prices there are on average 20% lower than those of Europe and the US.

All of Europe’s largest turbine manufacturers reported significant losses in 2022. Siemens Energy AG, which had to seek government help, will be one of the beneficiaries from the guarantee program, Laloux said.

The European Commission, the bloc’s executive arm, put forward a plan to reverse that trend in October of this year, including measures to boost domestic companies when bidding for contracts, as well as speeding up permitting. The EIB was to propose a counter-guarantee plan by the end of the year.

Yet European banks are close to reaching their limits in providing guarantees to turbine manufacturers that are needed to win contracts. The EIB estimates that about €40 billion of extra guarantees will need to be provided by the end of the decade.

Under the plan, banks will be able to offer more money in the form of guarantees, with the EIB underwriting half, using its own balance sheet. That will help European turbine makers win more contracts and generate higher revenue, Laloux said. Once the €5 billion is used up, the institution could potentially issue more.

“We’re going to ask the banks that traditionally guarantee these manufacturers to issue a larger amount of guarantees to allow them to grow,” Laloux said. “We are going to de-risk part of that guarantee by putting it on our balance sheet.”

Component makers will also have access to the support so long as the company or subsidiary is incorporated in the EU, Laloux said. That means the likes of US-based General Electric Co. could benefit as long as they use their European subsidiaries and produce in the region.

©2023 Bloomberg L.P.

By John Ainger

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