December 12, 2019 11:49 am

The German energy transition: A playground for distressed investors

The energy system transformation in Germany is doomed to failure because there is no general plan for the implementation of the mammoth project. Many of the former model companies of the German renewable energy sector are now only interesting for investors from the distressed sector.

Citizens, experts and politicians are still deeply disappointed by the German government’s climate package. There was great hope that something would change. What was expected was a comprehensive and far-reaching concept of how Germany intends to transform fossil power generation into the energy world of the future. And how the energy, heat and transport sectors can be meaningfully linked. The result is a strange mixture of voluntarism and force, by which the German government wants to tackle the mammoth energy turnaround project.

Please don’t mget me wrong: An energy turn is right and important. If the climate continues to change, it will have extensive consequences that we cannot even imagine at the moment. But it is also a fact that the measures implemented by the Federal Government in the past and now are not sufficient and are not consistent. There is a little work going on everywhere – but there is not much that can be counted on. And even worse, billions of euros have already been burned without any sense or reason. What is still missing in Germany, unfortunately, is the appropriate general plan for the energy system transformation project.

Only niche players survive

The energy turnaround in Germany remains in a dead end; this can also be seen from the many bankruptcies of the German companies involved – even though German engineers were the first to develop the essential groundbreaking technologies. Of the former RE pioneers, unfortunately only niche providers have survived; apart from two to three large wind power project planners. But they operate primarily on a global scale and thus ease the uncertainties in Germany.

The market for wind turbines in Germany has virtually come to a standstill. There are 30,000 large wind turbines in Germany, but only a few are being added at the moment. For one thing, the approval procedures take an endless amount of time. In addition, more than 1,000 citizens’ initiatives are currently resisting further expansion of the turbines. In addition, it is still unclear how the wind from the north of the republic will finally reach the southern states. The planned Suedlink electricity highway is highly debated – although the investments of 10 billion euros are certainly an economic stimulus package that Germany could use well at the moment.

The situation in German photovoltaics is also rather gloomy at the moment. With Solarworld last year, Europe’s last major photovoltaic corporation finally slipped into insolvency – like a large number of German solar companies before it. Those who were able to save themselves now prefer to sell premium goods to home builders rather than compete in the mass market against the overpowering Asian competition. As a general rule, only those who have a potent investor behind them will succeed in the market in the long run – like the Sonnen Gruppe. At the beginning of the year, Shell acquired the Bavarian battery storage manufacturer based in Wilpoldsried.

Renewables sector has lost attraction

However, the takeover of Sonnen by the Anglo-Dutch oil company is a major exception. This is because German companies in the renewable energy sector no longer have a strong attraction for institutional investors – at most for those in the distressed sector who are targeting insolvent German companies. The distressed market has discovered the exploitation of insolvent energy companies as a lucrative asset class. That already says everything about the current state of the German energy transition.

Companies are also finding it increasingly difficult to obtain loans for their businesses – even though banks in Germany have massively relaxed their lending standards since the financial crisis. But which financial institution would like to invest lastingly in renewable energies in Germany? By way of comparison, it used to be easy to finance the construction of a biogas plant. Which bank still finances something like this today? The same applies to solar module production or the construction of new energy networks. Which bank gives a financing commitment for a project that is approved on average in four to five years – if at all?

Germany must also be aware of its international responsibility . German CO2 consumption accounts for only a fraction of global emissions. But it would be a major signal if Europe’s largest economy finally tackled the energy transition with all its might – always with a sense of proportion, of course, but also with a good portion of courage and will. The German government could at last have created the framework conditions that would have allowed the economy and the population to play their part in driving this forward. That would then have been an important engine for the stuttering economy. Unfortunately, this opportunity was also missed.

This post was written by Peter Riedel

Peter RiedelBefore starting at Debitos, Peter Riedel was working for HETA Asset Resolution in Vienna. Here he was working within the restructuring team.
Before he was with Merrill Lynch and Hudson Advisors Germany GmbH (special servicer from Lone Star Funds). In both positions he was responsible for the asset management, work-out and for the sale of real estate and Non-Performing Loans. One further step in his career was at PwC Frankfurt, where he was working in the Corporate Finance Real Estate division. Peter Riedel's vita includes a more than 15 year experience in work-out and sale of distressed loans. Mr. Riedel holds a law degree and the accreditation as attorney.

Website:
https://www.debitos.com

(Image rights: istockphoto.com/Juanmonino)

back

Newsletter registration

Subscribe now for the Debitos-Newsletter to stay up to date about all upcoming Highlights.

Please fill out the following form.

* Mandatory