Green infrastructure and business financing and advising
According to forecasts by leading energy experts, the trend towards renewable energy will become even stronger worldwide in the next few years. More money is already being invested in the generation of renewable energy than in fossil-fuel and nuclear power plants combined. Germany and other countries in Europe are still perceived pioneers in this area.
Demographic change, increasing natural resource demands, urbanization and the growing significance of environmental aspects are creating a growing need for investment in all types of infrastructure. The World Economic Forum estimates that US-Dollar 5.7 billion worth of green infrastructure could be needed by 2020 in order to realise environmental policy objectives in sectors such as agriculture, transport, power and water.
More and more companies and public bodies – such as sovereign states and supranational organizations – are actively involved in this area. We advise and support them to meet the financial requirements for their challenging projects.
Growing need for investment
US-$ 5.7 bn
of investments in “green” infrastructure required by 2020 (estimated by World Economic Forum)
Our business division Corporate Banking & Securities (CB&S) handles transactions involving project finance in the renewable energy sector. The division provides advisory and financing services to companies and public bodies – such as sovereign countries and supranational organizations – in conjunction with mergers and acquisitions as well as issuances of bonds or shares.
As part of our corporate finance business, we support companies in the renewable energy sector with extensive advisory and financial services. Our project financing team has been supporting similar activities since 1999, structuring financing solutions and providing capital for each phase of a project’s life cycle. The technology focus is on onshore and offshore wind, solar PV, solar thermal and biomass transactions.
Economic growth can be boosted by investments in infrastructure. Several countries are therefore examining how to increase investments in green infrastructure. In 2012, Deutsche Bank’s Asset Finance business provided more than Euro 1.9 billion to help finance the development, acquisition or modernization of projects with a total capacity of over 815 MW. That makes us one of the top five private-sector project financiers of clean energy. For example, we took on an important role in structuring and financing the Ocotillo Project. We set up a consortium consisting of seven banks that provided loan funding in the amount of $468 million US for construction of a wind farm in Southern California. The wind farm is made up of 108 Siemens wind turbines with an anticipated capacity of 265 megawatts. It is one of the largest wind power plants in the region. The wind farm will create 350 jobs and supply a quantity of energy equal to the requirements of 125,000 households.
In addition, in 2012 we procured capital for appreciable transactions in the area of environmental technology and provided advice in conjunction with acquisitions, above all in the USA. We were commended for our analyses of environmental technology shares by the Institutional Investor Magazine.
Despite tight market conditions, we provide financing solutions and capital for all phases of a project. Admittedly, government support for clean energy has decreased in some countries. However, the cost of the technology has been decreasing even faster, so they are becoming more and more competitive in the market.
The debt markets will continue to feel the effect of the European debt crisis and changes in banking regulations for the financial sector. The consequence will be that European banks will only be able to provide limited long-term project debt. Deutsche Bank continues to offer financing solutions for renewable energy projects as part of our strategy to address global climate change. Our role will expand from being a traditional lender to facilitating innovative financing structures that give new participants opportunities in this market.
With the scale-up of renewable energy resources in developing and emerging countries, the demand for finance will rise substantially beyond our home markets. We will continue to seek a balance between social and environmental responsibility and the necessity for economic sustainability through appropriate risk adjusted returns.
Because of increased capital requirements in our trading sectors, we will gradually give up our activities in energy and emission trading, although we have been playing a decisive role in building it up since the year 2000. We supported the establishment of emissions markets by participating in the trailblazing CO2 fund of the World Bank. In addition, we invested in the first projects aimed a reducing emissions in developing and emerging countries. In total we participated in 50 “Clean Development Mechanism” (CDM) projects, which will lead to a reduction by more than 70 million tons of CO2 by the year 2020. Among other things, the projects include dissemination of energy-efficient electric bulbs in South America and a large project involving geothermal district heating in China. The knowledge that we have gained in the international energy and emissions markets will continue to be incorporated into our activities in the area of corporate finance and consulting for energy and industrial companies.
€ 1.9 bn
in financing provided for development, acquisition or modernization of projects in the renewable energy segment in 2012
Total capacity of the projects financed in the renewable energy segment in 2012
In this sector, we serve larger companies in the SME sector in Germany as well as public sector clients, ranging from municipally owned utility and service companies to social services, pension funds and banks. Important thematic focus areas are the renewable energy sector and upgrading infrastructure.
Deutsche Bank helps clients benefit from Germany’s “Energiewende”, i.e. the transition away from nuclear power. We estimate that annual investments of more than €30 billion will be needed in Germany for renewable energy, conventional power plants, grids, power storage and energy-efficient buildings. Municipalities and utility companies are constrained by limited financial resources. They frequently need alternative financing solutions, such as public-private partnerships, that facilitate investments in areas such as education, energy efficiency and public transit. Part of Deutsche Bank's role is to help create consortia of institutional investors in order to finance necessary investments in clean energy and grid infrastructure in Germany. For example, we are participating in the partial sale of offshore high-voltage power lines that Mitsubishi Corporation is taking over from TenneT, one of the German electricity network operators. It involves the world’s longest high-voltage direct current connections (HVDC). They connect two planned wind farms (BorWin 1 with 400 megawatts and BorWin 2 with 800 megawatts) to one another and are setting a new technology standard in the process.
A survey among small and medium enterprises (SME) in Germany revealed that more than two thirds of them expect increasing investments in energy efficiency projects. In the year 2012 we more than doubled our loan commitments to SMEs that are involved in energy efficiency in comparison with the year 2011.
Facilitation of financing through low-interest loans or guarantees and reduction of risk exposure via development banks play a great role in the case of investments in energy efficiency projects. For example, we grant subsidies in the area of innovation financing and make financing available for renewable energies as well as measures aimed at improving environmental and energy efficiency. One proof of our leading role is the first syndicated loan in Germany, which we provided jointly with the KFW bank group in conjunction with a new financing structure in order to push ahead with the energy transition.
€ 30 bn
Annual investments in renewable energy, conventional power plants, grids, power storage and energy-efficient buildings required in Germany alone.
Through our Corporate Banking and Securities business, we help our clients to manage risks and build their business. Facilitating access to global capital markets meets clients’ needs for short-term liquidity, as well as long-term finance for investments, mergers and acquisitions. Analysis by the Center for European Economic Research (ZEW) shows capital market activity can benefit the economy, with a positive correlation between both securitization volumes and credit growth and Gross Domestic Product.
In 2012, we helped 180 companies around the world to gain access to the capital markets for the first time. German clients in particular are increasing their use of corporate bonds relative to loans. Moreover, we secured access to financial markets for 3,500 financial institutions from 33 countries around the world. The US government selected us as lead financial advisor – together with one of our US peers – for its sale of the AIG shares it had acquired at the height of the financial crisis.
Corporate clients also have to manage a wide range of risks, particularly on interest rates, foreign exchange, commodities, equities, and credit. We processed one-seventh of global FX volumes and helped 8,000 companies and institutions to hedge their risks. For this, Deutsche Bank received the top ranking in foreign exchange for the eighth year in a row.
Our Corporate Finance business supports acquisitions and sales of companies, and provides consulting and customized financing. We create growth opportunities – from the entrepreneurial perspective as well as the overall economic perspective. A survey of German clients found that M & A advisors help to reduce the costs, risks, and complexity of such transactions. Recent research by ZEW shows that the profitability of acquired firms increases and that acquiring companies significantly improve their productivity. In 2012 we were the highest-rated European bank in corporate finance. We cover all large-cap and 80 % of the mid-cap German companies. On average, these mid-cap companies are active in 20 to 30 countries, and some SME clients do business in 60 markets. Deutsche Bank’s international nature and commitment to our German home market is especially important for our smaller clients, which remain at the center of Germany’s economic success.
Deutsche Bank experts advise corporate clients and the public sector, and offer customized financing facilities, for example in the form of long-term loans or guarantees. These facilities are partly subsidized by federal funds, the European Investment Bank, KfW Group, or other development banks. In 2012, Deutsche Bank provided more than € 2 billion to SME, mid-cap, and public sector customers.
In our Global Transaction Banking (GTB) business area, we support companies with international activities worldwide in connection with risk mitigation, liquidity management, international payment transactions, trade financing and securities services. In this way we help our clients deal with the complexity of cross-border transactions.
Our advisory services relating to trade and export financing encompass numerous services that make it easier for our clients to enter new markets. For example, we helped NII Holdings, a telecommunication company listed in Fortune 500, build up the first 3G network in Mexico with the aid of cross-national financing solutions. Our bank provided accompanying support for trade financing in the amount of €56bn in total with letters of credit for companies with international operations.
A strong and growing project financing business is characteristic of Deutsche Bank. In this context, we also offer fiduciary and administrative services. For the third year in succession, we were commended as Global Corporate Trust Services Provider of the Year by Infrastructure Investor. In addition, Project Finance Magazine and the consulting firm of Project Finance International commended us with the Deal of the Year title nine times in the year 2012. Among others, the evaluated transactions included the LS Power’s Arlington Valley project, a photovoltaic project in Arizona involving $550 US with a capacity of 127 megawatts. More than one third of the project financing transactions were related to projects in the renewable energy sector with a total value of $4.95bn US. That included ten projects for generation of regenerative electricity (1375 megawatts) and several bio-energy projects.
companies and institutions were helped in 2012 by us in hedging their risks.