EIB provided Deutsche Bank with its first counter-guarantee to support wind turbine manufacturing

The European Commission’s Wind Energy Action Plan announced in October 2023 a dedicated guarantee mechanism provided by the EIB to support wind companies in the EU through commercial banks, in an effort to ease financial pressures and support a competitive EU manufacturing sector. The first transaction has now taken place.

The first transaction under the European Investment Bank’s (EIB) €5 billion wind energy package, announced on Wednesday, 31 July, was a €500 million counter-guarantee for Deutsche Bank, part of a financial effort to strengthen Europe’s wind industry.

“Together with Deutsche Bank, we are supporting the expansion of renewable energy in Europe, thereby lowering the cost of sustainable energy. The project will also help secure and create jobs in a sustainable and competitive European industry,” EIB Vice-President Nicola Beer said in a press release.

How does it work?

Explaining how the support works, the EIB told Euractiv that “banks benefiting from EIB support under the wind energy package can provide guarantees to companies outside the EU if they have a manufacturing facility in the EU”.

Commercial banks typically provide guarantees to cover the advance payments that wind farm developers make to their suppliers when ordering new equipment. The developer is then entitled to payment if the manufacturer fails to meet its contractual obligations.

As demand for new wind turbines grows, commercial banks are being asked to increase the size of their guarantee lines. However, they are reaching the limits of what they can offer under their prudential limits. Without counter-guarantees, the industry risks having to turn down otherwise commercially viable orders for turbines that Europe needs.

That is where the EIB comes in. Counter-guarantees ensure that the risk for the issuing commercial bank is borne not by the manufacturer but by a third party. This allows commercial banks to provide the larger volume of guarantees now required. The approach is nothing new. Government guarantees, such as export credit guarantees, are common practice.

Made in the EU

The €500 million should enable Deutsche Bank to set up a €1 billion guarantee facility to support new wind farm projects. The bank guarantees will support the operations and investments of wind power producers.

“Demand for wind turbines ‘made in Europe’ is growing rapidly. Improving access to finance and risk-reduction tools is essential to ensure that European wind turbine manufacturers can keep pace with this demand and increase their production capacity in line with the EU’s 2030 targets,” Phil Cole, director of industry affairs at WindEurope, said in a press release.

Regarding the next steps under the EIB’s €5 billion initiative, the bank said it expects to conclude further deals under the package soon, as it is currently in talks with banks and intermediaries from various EU countries.

“The EIB gradually increasing its commitment to renewable energy and net-zero technologies is an important step,” Wolfram Axthelm, chief operating officer of the German Wind Energy Association (BWE), told Wolfram Axthelm.

Investigation

The first tranche was launched shortly after European Commission Executive Vice-President Margrethe Vestager announced an investigation into Chinese wind turbine suppliers under the Foreign Subsidies Regulation in April 2024.

The investigation, prompted by concerns that some wind power manufacturers are benefiting from unfair subsidies, focuses on wind farms in Spain, Greece, France, Romania and Bulgaria.

“It is essential to confront market-distorting activities, such as the US Inflation Reduction Act or state subsidies for China’s wind industry,” Axthelm commented.