SIEMENS

Efficient, environmentally-friendly technologies are on the march. According to Booz Allan Hamilton, a consulting firm, some €27 trillion needs to be invested in the expansion of water, electricity, and transport infrastructure over the next 25 years. Siemens, with its Environmental Portfolio, acts as a technology partner in many infrastructure projects. However, the company’s role is much broader than that. Specifically, its own Siemens Financial Services (SFS) division helps get projects moving, takes over financial planning, brings the right partners together, and even financially participates in major projects via its Siemens Project Ventures (SPV) subsidiary.

SPV was involved in Siemens’ acquisition of a stake in the Israeli company Arava Power (see informationbox "Israel: Perfect Place for PV"), a PV development firm established in 2006 with the goal of commercially utilizing solar power in Israel for the first time. The company needed an international partner and thus began negotiating with SPV in February 2009. Just six months later, the two companies signed an agreement under which Siemens acquired a $15 million stake in Arava Power. “The chemistry between Arava’s owners and Green Financing Siemens was great from the start,” says Klaus Kolof, who is responsible for Renewable Energy at SPV. But that was only the first hurdle. Arava still had to negotiate with Israeli authorities regarding the price of future green electricity. After all, solar power had never been fed into the Israeli grid before. Finally, the price was fixed at the end of 2009. “That made it possible for us to achieve further milestones,” says Kolof. The two partners are now establishing a project company that will build the first solar facility at the Ketura Kibbutz, between the Dead Sea and the Red Sea. It’s maximum output will be 4.9 megawatts. Siemens is not only providing technical expertise and components, but also managing the project as its general contractor.

Four Gigawatts of Wind Power. The fact that Siemens invests its own capital is important for many customers that commission major infrastructure projects - particularly in the wake of the financial crisis. SFS currently has investments totaling some €7 billion, around €1.4 billion of which is accounted for by technologies from the Siemens Environmental Portfolio. The UK also wants to significantly reduce its CO₂ emissions. For example, by 2020, the British government plans to cover around 25 percent of its electricity needs through nine offshore wind parks. These facilities are currently in the planning stage. Siemens is involved in several projects here, the largest of which is a wind park with a planned output of four gigawatts that will be built near Hornsea in Yorkshire county. Together with the firm Mainstream Renewable Power, Siemens has established the Smart Wind project company to develop the wind park.

Each partner is providing half the start-up capital. “And that means we’re financing half of the required preparation measures,” Kolof explains. Construction is scheduled to begin in 2014 - but studies will first have to be carried out to determine the impact of the new facility on the environment, ocean floor, and fish populations. Developers will also be measuring how much wind blows at which time and from which directions in order to determine the park’s optimal location. They will also have to determine if shipping routes need to be altered. Kolof estimates it will cost around €19 billion to build the wind park. Siemens’ share of the contract will likely be some €6 billion. Once completed, the facility, which will produce enough electricity for around 3,000,000 households, will be sold to an energy supply company.

Siemens is also helping to finance the Lincs offshore wind park project, which will begin this summer off the east coast of England. To this end, SPV and Danish energy supply company DONG Energy have acquired a stake in British energy firm Centrica. The resulting joint venture has already financed half of the €55 million development costs incurred to date, and will acquire a 50 percent interest in the project in return. “Now, we’re getting ready to implement Lincs with the help of the project financing market,” says Roger C. Ernst, SPV’s director at the joint venture. This means the project team is now searching for banks and investors interested in financing some of the €830 million construction costs. The fact that Siemens is also making a significant contribution makes the search easier. “The credit market situation isn’t as bad as it was at the beginning of the financial crisis,” says Ernst. The Lincs wind park is to go online in just over two years, when its maximum output of 270 megawatts will meet the annual electricity demand of around 200,000 households.

The injection of its own capital is just one of the many financial instruments available to SFS. For example, Siemens built and installed 130 wind turbines for the Windy Point wind park in the U.S. state of Washington. These turbines supply some 90,000 households with green electricity. SFS provided a $178 million line of credit for this project, which was carried out by Cannon Power Corporation, one of the leading wind energy companies in the U.S. Other options for supporting green investment projects include leasing schemes and energy performance contracting. Here, the capital investment is paid back in installments from the savings made thanks to lower energy bills.

Sustainable investment also includes financing transportation projects such as one involving the new high-speed Sapsan train. This Siemens train - a Velaro adapted to meet Russian climate conditions - has been operating between Moscow and St. Petersburg since December 2009. With a top speed of 250 kilometers per hour, the train shortens the trip by around 45 minutes, and is thus tempting passengers to switch from planes to the train. After years of negotiations, SFS was selected to provide the €318 million needed to finance the new fleet of eight high-speed trains. Siemens was also awarded a 30-year maintenance contract.