GEOTHERMAL $76M DEVELOPMENT IN GERMANY

German Giants Launch $76 Million Credit Initiative For Geothermal Development

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The German Federal Ministry for the Environment, development bank KfW and reinsurer Munich Re have launched a 60 million euros ($75.9 million) credit initiative for the expansion of geothermal power in Germany. The investment will be used to finance drilling of geothermal projects, a Munich Re statement said.

Geothermal projects are high-risk projects, due to the high drilling costs involved and do not guarantee availability of sufficient volumes of water at the required temperatures. This often leads to an investment risk of at least EUR 10m for each individual project, the statement said.

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Up to 80% of the cost will be financed by KfW loans for deep geothermal wells by way of commercial banks. If no find is made and the project is declared a failure, the investor will not be required to repay the remaining loan amount.

The productivity risk involved and whether the project qualifies for the support scheme are all factors that will be assessed before the loan is granted. When the loan is applied for and the contract is signed, one-off fees must also be paid for which the investor receives an expert assessment of the deep geothermal project and technical support before and during the drilling phase.

Thomas Blunck, member of Munich Re’s board of management said, “This cooperation is intended to be a start-up, which will make it easier to finance projects in the field of renewable energy. The examination of the productivity risk by Munich Re prior to a subsidised loan being granted is particularly important. This is because the number of geothermal projects qualifying for subsidised loans largely depends on how successful existing projects turn out to be.”

Germany has three regions primarily considered to be geothermal hotspots: the molasse basin south of Munich, the Upper Rhine Rift, and the North German Plain.

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The country’s largest geothermal power plant of a combined heat and power capacity of 38MW was the first to receive productivity risk insurance cover by Munich Re. It was erected in Unterhaching near Munich.

Sourced and published by Henry Sapiecha 23rd June 2009

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