UniCredit Leasing, a unit of Italy’s largest bank, provided a record 1.5 billion euros ($2 billion) in funding this year for wind and solar projects, mainly in Italy and eastern Europe, its renewables chief said.
Renewable energy funding from the UniCredit SpA leasing arm rose 50 percent compared with a year earlier, driven by solar deals in Italy, said Martin Mayr, its head of renewables. That may drop to about 1 billion euros during 2012 as government cuts in feed-in tariffs amid the debt crisis dries up funding, he said in an interview.
“We expect a major drop in solar projects in Italy next year because the subsidies have been used up to a large extent,” Mayr said. “But we expect substantial growth in Romania, Bulgaria and Turkey.”
A boom in solar installations in Italy, now the world’s second-largest market, led to the introduction of a cap in subsidy spending in March. Like most European countries, Italy also cut feed-in tariffs, or guaranteed premiums for clean power, this year. The Czech Republic and Slovakia halted all support except for residential solar.
In contrast, Romania, Bulgaria and Turkey approved new bills with tariffs that aim to boost clean energy investment.
UniCredit, which arranged about 1.4 billion euros in project financing for renewable energy last year, is the largest lender to the industry in eastern Europe and Turkey, according to the executive. About half of the wind and solar projects in the region are funded through lease agreements, with the rest using project finance loans, he said.
‘Popular Financial Tool’
“Leasing is quite a popular financial tool in Italy, Austria and eastern Europe, particularly for certain assets like real estate and renewable energy,” Mayr said. “It’s just like classic project finance but instead of providing a loan, we sign a financial lease agreement. It’s faster, ideal for small deals up to 20 million euros.”
Leasing units typically charge the same interest as banks and have a stronger collateral position because they own the assets, he said.
UniCredit Leasing provided about 1 billion euros for solar projects this year in Italy, the Czech Republic, Slovakia and Germany. It also signed an additional half-billion euros in leases for wind projects in Austria, Romania and Turkey. In total, 600 projects benefited from this funding.
Among these countries, Romania has the most potential for a boom in renewable energy investment after it approved “quite generous” green certificates this year, according to Mayr. Turkey will continue to see investments in wind and is likely to become a “relevant” solar market, he said.
Further growth in Bulgarian solar will depend on the new tariff levels, which are decided every July, Mayr said.
The debt crisis has hit the Italian market hard, doubling the spreads for renewable energy projects to more than 500 basis points, according to the executive.
“Financings have not stopped but not all investors find projects profitable at those rates, some prefer to wait until the situation normalizes,” he said.
Eastern European markets haven’t suffered much because they use Austrian rates as the benchmark, Mayr said. Polish and Czech spreads, traditionally in line with those in Italy, have edged up to about 300 basis points from 250 points and to about 700 points from 600 in most southeastern European countries. Spreads in Turkey remain at levels comparable to those in pre-crisis Italy, he said.