Infrastructure fund structures will need clear risk profiles
The Federal Ministry for Economic Affairs is open to incorporating fund solutions into the financing of the energy transition, in order to mobilise more private capital.
At a recent conference in Berlin, State Secretary Philipp Nimmermann said that several funds would probably be necessary, since energy transition projects are very different, with a variety of risks and potential returns.
He explained that a good approach would to bundle similar projects, and then look for suitable financing. Filling a fund first, and then distributing the money among the projects is not a good solution in his view since private investors need clear cash flow and risk profiles.
The German Association of Energy and Water Industries (BDEW) and the German Association of Local Utilities (VKU), which organised the conference in Berlin, had proposed an energy transition fund (EWF) in the summer, together with the consulting firm Deloitte, which was initially to have a volume of 30 to 50 billion euros. The aim is to address the high equity requirements of public and private energy companies. The fund would utilise hybrid capital, such as silent participation, profit participation rights, or traditional shareholdings, without this having a permanent impact on the ownership of the companies.
Less bureaucracy
The German energy industry anticipates an investment requirement for the energy transition of 721 billion euros by 2030. VKU Managing Director Ingbert Liebing said at the conference that closer cooperation with the financial sector is particularly crucial for municipal utilities, because the budget situation of local authorities has deteriorated significantly. Three years ago, local authorities were still generating a surplus. This year, a deficit of 13 billion euros is foreseeable in the municipal coffers.
BDEW Managing Director Kerstin Andreae pointed out that there is a lot of money on the markets – but it is not being used for energy transition projects. „We need to become simpler, more attractive and less bureaucratic – especially in an international comparison", he said.
