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Taxpayers Beat Wall Street as Top Lenders to Clean Energy

Government-backed development banks in Europe, Brazil and the U.S. arranged the most funding for clean energy projects in 2010, taking up the slack left by commercial lenders during the credit crisis.

The European Investment Bank furnished $5.41 billion of debt for renewable energy projects last year followed by $3.16 billion from Brazil’s state development bank, BNDES, and $2.12 billion from the U.S. Federal Financing Bank, according to an annual survey by Bloomberg New Energy Finance.

Banco Santander SA, ranked second in 2009, was sixth last year with $1.82 billion in lending. HSH Nordbank AG, Caja Madrid and Banco Espirito Santo SA, which were among the top 10 in the previous ranking, were squeezed out in the most recent survey.

“The development banks are filling a gap that’s been left by commercial banks,” Ronan O’Regan, a director in the renewables and clean technology team at PricewaterhouseCoopers LLP, said by telephone.

Overall, finance for clean energy projects including loans and bridge lending facilities increased by 19 percent in 2010 to $128 billion, the highest level on record, New Energy Finance said. China and U.S. accounted for more than half the deals. The U.K. and Spain both experienced drops in lending.

Government Priorities

The development banks are backing government priorities to encourage cleaner-burning forms of energy, reflecting concerns that pollution from burning fossil fuel such as oil and coal is damaging the Earth’s atmosphere. Commercial lenders have scaled back lending of all types during the financial crisis.

“Climate and renewables remain right of the top of the bank’s agenda,” Chris Knowles, associate director for energy at the EIB, said by telephone. The European Union’s lending arm may reduce the amount it lends in 2012 as commercial lenders “gradually” recover “their appetite” for risk, he said.

Knowles said demand for EIB loans has risen over the past two years and that “it’s been important that we’ve provided signals to the market in its moment of despair.”

The EIB also is offering lower interest rates, giving borrowers “a funding advantage somewhere between 50 to 100 basis points” under the price of loans from commercial lenders, he said.

The financial crisis made commercial banks less willing to lend, said Pierre Lestienne, chief financial officer of the Belgian company C-Power NV, which in November signed a $1.16 billion project finance deal for its Thornton Bank offshore wind farm with the EIB and seven commercial banks.

Favorable Terms

Without the EIB’s low interest rates, Zwijndrech-based C-Power NV’s would have cost as much as 20 million euros ($28 million) more to build, according to Lestienne.

Not all development banks are increasing lending to the industry. KfW, Germany’s lending arm, didn’t rank in the top 10 in 2010 after coming in seventh in 2009 with $946 million in loans. A KfW spokeswoman had no immediate comment.

Officials at Banco Espirito couldn’t be reached by telephone and e-mail yesterday. Caja Madrid had no immediate comment. Nordbank said it remains committed to renewable energy.

“Unfortunately, in 2010 we had a slightly lower hit rate than before in closing deals,” said Juergen Lange, head of energy at Nordbank in Hamburg. “For this year we plan to do new lending well above 500 million euros. We have a full pipeline and are actively working on several deals” including offshore wind projects.

U.S. Funding

The U.S. Federal Financing Bank, which didn’t appear in the top 10 in 2009, was No. 3 last year following a loan for Abengoa SA’s Solana solar plant in Arizona. A U.S. Energy Department spokesman didn’t immediately respond to an e-mail seeking comment.

Banco Nacional de Desenvolvimento Economico e Social, Brazil’s Rio de Janeiro-based development bank that’s known as BNDES, is the nation’s only lender willing to discuss long-term finance for some projects, said Ernesto Albrecht, chief financial officer for small hydroelectric project developer GLEP Energias Renovaveis e Participacoes SA, known as GLEP.

The Sao Paulo-based company is paying an annual rate of about 8.8 percent on 206 million reais ($124 million) of BNDES loans for two of its small hydroelectric projects, about 4 percentage points less than what it could get from a commercial bank, Albrecht said.

BNDES loans for energy projects also can be paid back over longer terms than commercial loans, with some maturing after 16 years, Antonio Carlos Tovar, head of the lender’s renewable energy department, said in an interview.

Industrias Metalurgicas Pescarmona SA, an Argentina-based wind energy developer maker of turbines, has opted to build most of its projects in Brazil where financing is less expensive and easier to arrange, Juan Carlos Fernandez, executive vice president said in a telephone interview.

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