Better integration of renewable energies into the energy mix

04/06/2020

Germany: development of underground water sources to ecologically power 14,000 households in Bavaria

Societe Generale brings a unique financing to a pioneering geothermal energy project in Bavaria, Germany for STRABAG SE and RAG Austria AG.

Geothermal energy is heat derived from the sub-surface of the earth and has one significant advantage: It is always available - independent of the time of day, the season and the weather. Also, the future potential of geothermal energy is considerable as there is a phenomenal amount of heat stored under our feet. Furthermore, land consumption of geothermal energy is very low and structures can be integrated harmoniously and ecologically into the local landscape. Lastly, the constant, “baseload” production of geothermal energy make it a reliable and stable energy provider.

“Generating geothermal energy with heat extraction is becoming increasingly important for ecological power generation and supplements the EPC Activities of our affiliate company STRABAG Umwelttechnik GmbH. We as developer and co investor recognize the financial close of this first internationally placed Project Finance in the geothermal power sector in Germany as a landmark for further transactions in the future. The close working relation with Societe Generale as structuring bank ensured a closing even in times when the Corona virus hit the financial markets.“ says Wolfgang Zechmeister, Executive Board Member STRABAG AG

This source of power generation requires suitable underground reservoirs of hot water and locations where drilling into these reservoirs can be carried out. These two elements come into play in Garching an der Alz in Bavaria, Germany where Austrian companies, STRABAG and RAG, are constructing jointly the Bruck geothermal power plant. This project aims to decrease dependence on fossil fuels and could help the region to become less reliant on energy imports. Thus, the project is completely in line with European Energy Policies which are targeting to achieve carbon neutrality within the next decades.

“RAG Austria AG as an experienced energy storage company contributed its montanistic technical and project management expertise to the geothermal project “Bruck” which is an important landmark in European renewable energy generation. We are pleased to have found experienced and committed banking partners in an international consortium led by Societe Generale for the implementation and execution of a tailor-made project finance facility which was a significant element for the overall success of the project.” says Dr. Michael Längle,  Chief Financial Officer, RAG Austria AG

The Paris and Vienna teams of Societe Generale, cooperated seamlessly to structure a sophisticated and innovative bespoke financing for the 5.5 MW (power) and 6 MW (heat) geothermal project with an annual power and heat generation of some 50 GWh. The financing closed in March 2020 marking the first time an international bank consortium ( Erste Bank joined Societe Generale in the financing) acted as a non-recourse lender for a German geothermal energy project. The plant scheduled to complete and commission in the fourth quarter of this year will guarantee renewable energy supply of about 14,000 households in the region with additionally planned heat extraction for the community of Garching an der Alz. In this regard the financing facility has also to be seen as a “Green Finance” activity.

“This transaction once again demonstrates Societe Generale’s commitment to financing the energy transition, innovation capacities and successful cross-border collaboration with clients and teams in Austria, Germany and France coming together for this project. ” says Emil Steiner, Chief Country Officer Austria, Societe Generale

«  The project dovetails our commitment to raise EUR 20 bn between 2019 and 2023 through advisory and financing dedicated to the renewable energy sector.  »

Yann Le Bot
Director Energy Finance and Advisory, Societe Generale