It is becoming increasingly harder to qualify for a loan to construct a solar power plant. Lately, banks have substantially tightened conditions for loan approval and are considering further tightening requirements further.
“Banks have essentially standardised their requirements. They all demand a mortgage on the property, dictate the technologies used, and sometimes even require a business share,” said Jan Palaščák of the company Bergaden. “We’re also noticing a trend of rising margins. Banks are exploiting the number of solar projects, which has really increased lately,” he said.
Lending institutions worry mainly about the expected changes to the law concerning support of renewable sources of energy. The Industry and Trade Ministry wants to remove the clause that enables the state to lower wholesale prices of electricity by a maximum of 5% per year. Banks say the change would completely halt future development of the entire sector.
“It’s impossible to build a power plant and have it running in 14 days. The whole process might even take a year or longer,” said Marek Tichý, head of Raiffeisenbank’s corporate finance department. “If an investor launches such an extensive project under specific conditions which change half-way through the process, that changes the outlined project substantially. Investors will lose trust and leave to build power plants elsewhere, or in the worse-case but more-likely scenario, they will make use of all legal means to protect their investment.”
According to Tichý, with optimal use of the latest technology, the return on investment in a photovoltaic power plant is 10 to 12 years. If the wholesale price drops 5% next year, the return will drop back to the 14 to 15 years that the state initially intended. Tichý said that, at present, there’s no reason to lower wholesale prices considerably.
Petr Nikodým of LBBW Bank agrees as well. According to him, the price drop in quality technology isn’t as dramatic as the Industry Ministry says. The ministry argues that prices for photovoltaic systems have decreased by as much as 40%.
Already today, banks are more cautious than in the past and require at least 20% of the needed resources be derived from the investor’s own resources. A loan from a third party doesn’t suffice. Banks will loan the remaining 80% but not for more than 13, and possibly 15, years. “The amendment could result in banks tightening conditions for financing even more,” Tichý said.