The European Investment Bank (EIB) has agreed to provide a guarantee of 175 million euros ($185 million) to allow the Landesbank Baden-Wuerttemberg (LBBW) to release capital and channel 350 million euros ($370.5 million of dollars) in new financing for clean energy projects in Germany. .
The EIB said in a press release that this is one of the first transactions of its kind in Germany, contributing to the decarbonisation of the German economy and Europe’s energy independence.
The underlying reference portfolio amounts to €3.2 billion ($3.38 billion) and consists of loans to small and medium-sized companies and other corporate entities originated by LBBW in its ordinary course of business. Securing this existing portfolio will provide capital relief for LBBW, freeing up additional borrowing capacity. The operation is structured with a two-year repayment period and is included in the simple, transparent and standardized securitization framework (STS) approved by the European Parliament.
Through a rollback agreement, LBBW will convert this additional lending capacity into a new portfolio of at least twice the size of the EIB-guaranteed mezzanine tranche, or 350 million euros, the EIB said in the statement.
Renewable energy projects such as wind farms and photovoltaic plants usually have a maturity of 20 years or more; By generating a new portfolio fully dedicated to climate action and eligible energy security financing backed by equity that is released into a portfolio of standard corporate loans, this green securitization shows how the concept of using proceeds to the securitization, the EIB said.
Funds allocated to this operation are expected to facilitate the creation of approximately 340 megawatts of additional electricity generation capacity through renewable sources. This capacity is equivalent to feeding more than one million households, according to the EIB. The companies benefiting from this initiative are located in Germany, other EU member states and Switzerland.
The EIB Group consists of the EIB and the European Investment Fund (EIF), which finances smaller companies. The LBBW guarantee will be provided by the FEI. A continuing EIB guarantee will fully reflect the EIF obligation, so the EIB will bear the risk of the mezzanine tranche, the EIB said.
“Transactions like this one with LBBW support the decarbonisation of the energy sector and help make the green transition a reality,” said EIB Vice President Ambroise Fayolle, head of operations in Germany.
“The combination of the EIF’s investment and structuring expertise and the EIB’s efficient deployment of its own funds provides a competitive financing solution for LBBW that will serve to drive the green transition,” said Marjut Falkstedt, CEO of the EIF .
“LBBW sees itself as a model of transformation. We want to support and advance the sustainable transformation of our economy. Synthetic securitizations are an excellent instrument to decisively expand the possibilities of our balance sheet for this purpose . We will now use the scope to significantly expand our activities in renewable energy,” said Christian Ricken, member of the Executive Board of LBBW.
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