German pension giant BVK, DekaBank team up for second renewable finance deal

Loan of “several hundred million euros” to Munich utility with green ambitions

The Bayerische Versorgungskammer (BVK), Germany’s largest pension scheme with €62bn in assets, has again teamed up with DekaBank to provide funding for renewable energy infrastructure, with the money going this time to Munich’s municipal power utility (SWM).

In a statement, the BVK and DekaBank said they had extended a loan on the order of “several hundred million euros” to SWM, which will use the proceeds for investments in new renewable infrastructure, including photovoltaic (PV) solar, wind and hydropower. Said André Heimrich, BVK’s Chief Investment Officer: “We pay close attention to the sustainability of our investments and that’s why we’re delighted to finance renewable energy projects.”

Further details about the loan, for example the interest rate and duration, were not disclosed. But sources with knowledge of events said the loan has a lifespan of 10 years and carries an interest rate of just below 2% annually. By comparison, 10-year German government bonds (Bunds), the bedrock of German institutional investment, are yielding around 0.5% currently.

The SWM deal is the second time the BVK and DekaBank have joined forces to provide financing for renewable energy infrastructure. The first time was last November, when the BVK contributed €60m of a €125m loan to a Swiss renewable energy firm for the acquisition of 18 German wind parks.As with the SWM deal, the loan was arranged by DekaBank, which is owned by German Sparkassen (state-owned savings banks).

BVK is also one of several so-called Versorgungswerke, or pension schemes for free trades like doctors, architects and lawyers, that have turned to debt finance given that German Bunds and Pfandbriefe (covered bonds), another investment staple, are yielding next to nothing. Beyond the BVK, industry sources point to the Ärzteversorgung Westfalen-Lippe (AEVWL, a €10bn doctors’ fund) as an example.

According to the BVK, debt finance for infrastructure projects like the SWM and Swiss deals currently account for 3.5% of its portfolio of direct fixed income investments. That portfolio was worth €36.7bn at the end of 2014. A spokeswoman said the scheme wanted to further increase the debt finance portion, adding that this depended on the attractiveness of projects.

Including the funding from the BVK, SWM said it had set aside a total of €9bn for investments in renewables between now and 2025. By then, the utility hopes to generate 3.5bn kilowatt hours of green energy – or enough to supply the entire city of Munich. As of this month, SWM, which owns and operates 38 renewable energy facilities, including 21 PV parks, was halfway toward that goal.