Green Firms Face Prolonged Funding Drought: Bank
Author: Gwladys Fouche
Green firms seeking bank financing will have a tough time for at least five years as banks shy away from taking on risk due to the economic downturn and new regulation, a senior banking executive said Wednesday.
"I don't think we will see a turnaround very quickly," Harro Pitkaenen, deputy head of lending at the Nordic Investment Bank, told Reuters. "We must come back from quite deep down, and we see that concerns about the macro-economic picture remain."
"Probably four to five years would be, in my view, sufficient to build up the necessary confidence and heal the wounds," he said on the margins of a conference on renewable energy.
Pitkaenen also said the cost of debt financing will be higher as banks return to sounder policies after a period of what he termed "wild excesses" and because of the higher capital requirements imposed by the recently agreed Basel III rules.
"Banks will have to be more cautious in risk-taking ... This will limit the availability of financing (to renewable energy firms)," especially to the younger, smaller companies, he said.
The publicly owned bank is a top lender to renewable energy companies in the Nordic and Baltic countries, lending 684 million euros ($930.9 million) to environmental-related projects in 2009.
The bank has also set up a special facility of 2 billion euros to finance climate-change-related initiatives, of which 1 billion has already been allocated.
Pitkaenen pointed out that green firms would face greater difficulty in getting public funding, as governments especially in Europe seek to cut their deficits.
"It will be a threat because, in many respects, renewable energy has become an addict to public subsidies," he said.
The banker pointed out, however, that venture capitalists still had the potential to offer capital to green firms as they had not been affected so much by the recession. But these investors, like banks, remained cautious, he said.
"Risk capital has not lost so much in the recession," Pitkaenen said. "But certainly they did not profit either. Many have gone into hibernation ... and their activity is a little bit subdued."
(Editing by Jane Baird)