Loan commitments for renewable energies collapse – subsidized loans too expensive due to state aid rules
jsc Frankfurt
The development banks KfW and Landwirtschaftliche Rentenbank are doing little new business as a result of high EU interest rate requirements: Because state aid rules result in a high reference interest rate, the two nationwide development banks are providing almost no money for renewable energies, as both institutes announced on Thursday.
KfW provided practically no money at all for renewable energies in the Mittelstandsbank, i.e. EUR 0.0 billion. In the first half of 2023, it was still EUR 2.1 billion, already a low figure at that time. However, the bank sees the effect of the aid rules more generally in “corporate financing”. The entire KfW Mittelstandsbank only pledged EUR 5.7 billion, compared to EUR 10.1 billion in the previous year. Rentenbank also sees a slump: It has EUR 41 million for renewable energies in the program loan business, compared to EUR 339 million in the previous year.
Rentenbank points to inverted yield curve
In order for loans not to be considered aid, the interest rates must not fall below a certain minimum threshold. According to KfW, the reference value in the best price category is 5.11%. In April, Rentenbank had already referred to an “inverse” interest rate curve, i.e. higher rates for shorter terms. Because the reference rate is derived from shorter terms, the interest rates are unattractive.
There are also other obstacles: KfW sees energy aid coming to an end, and Rentenbank sees “pessimistic future expectations” in agriculture. KfW sees a glimmer of hope for private housing projects: Here, commitments are increasing in a similar way to the entire credit industry, albeit from a low level (see graphic).
“Consequences of the crisis years over”
Across all categories, KfW committed EUR 34.7 billion in the first half of the year, up from EUR 58.7 billion in the first half of 2023. Because the commitments are at the same level as in 2019, the bank wants the decline to be understood as a “normalization.” “The consequences of the crisis years are over.” The smaller Rentenbank provided EUR 1.55 billion through program loans, up from EUR 3.18 billion previously.
The bottom line is that the development banks remain profitable: Rentenbank posted a profit of 98 million euros, while the larger KfW posted a profit of 932 million euros. Neither institution is primarily profit-oriented.
