Companies are not always able to fully finance their needs from internal financial resources, which is the reason for using loan financing for current business activities and even for the implementation of long-term projects.

Alternatively, companies may also use leasing, factoring or short-term borrowing from customers and suppliers.

Very few companies, from small and medium-sized businesses to large global players, can freely finance all investment projects, the purchase of goods or the development of infrastructure with their own capital, which potentially reduces their liquidity.

Companies tend to resort to a loan financing tool for the implementation of capital-intensive projects.

Due to the large number of available types of loans, businesses seek to find a reliable partner who will provide professional support and mediation both in choosing the right financing instruments and in working with potential lenders.

CP Finance UK Finance offers customized schemes and models of loan financing for any needs of large businesses.

We offer the following services:

• Project finance.
• Long-term investment lending.
• Financial modeling and consulting.
• Documentary letters of credit.
• Loan guarantees, etc.

Benefit from a free initial consultation with our experts to find suitable solutions and good loan terms. Contact us anytime to get professional financial support for your projects.

Brief overview of credit and loan financing

Credit and loan financing is primarily understood as the use of borrowed funds for the implementation of certain projects.

It serves an element of external financing of economic activities, which plays an important role in any business. With debt financing, the company receives external capital.

The investor financing the bank does not become a shareholder of the company. However, the lender returns the main part of the loan and interest. If the company goes bankrupt, the bank even has the right to part of the debtor’s assets. On the other hand, the lender has no voting rights and is not responsible for the actions of the borrower.

Loan funds are provided to the borrower only for a limited period of time within the term of the loan agreement.

With loan financing, the company raises external capital for both short-term and long-term needs. While short-term debt financing gives companies the financial flexibility they need, long-term loans in large volumes can make businesses more dependent on lenders.

What should be considered when using credit instruments?

In order for a company to successfully apply for loan financing, lending institutions request appropriate collateral and detailed project documentation for review. This allows banks to ensure that the borrowing company is really creditworthy and is really able to repay the borrowed funds on the agreed terms.

Documents attached to a loan financing application usually include the following:

• Project business plan.
• Feasibility study.
• Profit and loss statements.
• Information about the borrower’s assets.
• Debt obligations.

This information is carefully checked by credit institutions.

On this basis, the final decision is made on whether and to what extent it is acceptable to provide loan financing for a particular company.

Terms of business loans

A key role for business is played by the differentiation of forms of financing according to their terms.

Depending on which expenses or investments are to be covered by the loan, the decision is usually made in favor of one of two options:

• Short-term loan financing includes all types of borrowed capital, which is used only for a short period of time and is repaid no later than in a few months. This kind of loan financing is usually very flexible for companies and allows businesses to overcome short-term bottlenecks in current operations.

• Long-term loan financing allows companies to make larger investments in debt financing or cover expenses over a longer period of time. This form of financing usually includes bonds or loans for a period of several years.

Short-term debt financing is critical for a company as it helps to overcome short-term difficulties.

In most cases, short-term loan agreements are very flexible and tailored to specific financial models to allow borrowers to repay current debt in a series of payments over several months.

On the other hand, long-term loan financing is suitable for the most costly investments. This explains the high capital requirements that can only be provided by third parties. This form of financing also creates a certain dependence of the company on the financing bank. On the other hand, small and medium-sized businesses get a real opportunity to finance large investments.

These are loans for at least 3-5 years, but they can be issued for up to 30 years. Usually, loans are negotiated with a fixed interest rate, but may also have floating interest rates. Companies primarily seek to use long-term loan financing to finance investments in fixed assets or refinancing.

The cost of loan financing

The real cost of loan financing is an important consideration for a potential borrower and its project partners.

Banks expect to receive interest on the capital provided, and financing conditions can vary significantly depending on the type, scale and timing of the project.

Business loan financing conditions depend on the following factors:

• The creditworthiness of the borrowing company.
• The presence of assets that can serve as collateral for the loan.
• Providing loan guarantees from third parties.
• The credit risk according to the financial institution’s own assessments.
• Agreed deadline and schedule for the return of funds.
• Interest rates and terms of refinancing.
• Bank financial plans.
• Other factors.

Thus, it is in the interests of the company to timely take into account a set of internal and external factors on the level of costs when planning loan financing.

To optimize cash flows and ensure financing of strategic projects, it is recommended to use the services of professionals who are able to comprehensively assess the situation, develop an individual financial model for a specific investment project and find suitable sources of capital.

Alternatives to loan financing

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Europe is an industrialized country with large energy needs and high environmental standards that promote the development of RES, including the Wind farms financing in Austria.

Lacking access to the sea, thus being cut off from the highly efficient offshore wind energy technologies, Austria has focused on the construction of onshore wind farms in the foothills of the Alps, mainly based on medium-power wind turbines.

Although for many decades the country relied mainly on fossil fuels and conventional thermal energy, today investment and wind farms financing in Austria is experiencing a boom.

How much does it cost to build one medium-sized onshore wind turbine in Austria?

What does this investment mean for the local economy and business?

Let’s look at the numbers and statistics:

• A typical 3MW wind turbine supplies up to 2,000 Austrian households with green energy, reducing the local economy’s CO2 emissions by 4,500 tons per year.

• The average cost of each wind turbine is 5 million euros, with 1.5 million added value for local companies being created during the production and construction stages.

• Each turbine creates about 20 temporary jobs during construction and installation and 2 permanent jobs for local communities during operation and maintenance.

Wind energy sector already plays a significant role in stabilizing electricity prices in Austria, and this tool will become increasingly important after the European decision to reduce dependence on Russian natural gas.

Experts expect the growth of investment in Austrian wind energy in the next few years. In particular, the demand for long-term investment lending, project finance services and related financial services for large businesses will increase significantly.

CP Finance UK offers long-term loans for the construction of wind power plants in Austria and other European countries.

We also provide project finance services, financial modeling services, financial engineering and consulting.

Contact us to learn more.

Financing of wind energy projects in Lower Austria

Lower Austria is a fairly developed and economically active region with a population of about 1.7 million people, which has huge energy needs.

This region is unable to cover its consumption with renewable energies. Nevertheless, the total share of renewable sources in the energy balance of the region is now about 92%, and 29% of energy needs are covered by wind farms. For comparison, in 2005, the share of wind energy in the energy balance of Lower Austria was only 5%.

As of the end of 2021, the federal state of Lower Austria had 735 large and small wind energy facilities with a total installed capacity of over 1.75 GW. This accounted for about half of Austria’s total wind energy capacity, making this federal state the undisputed leader in the industry.

Annual wind generation in this region reaches 4 TWh, and this figure is constantly increasing with innovative technologies and investments.

Favorable topography and huge wind energy potential attract many investors to Austria, who are ready to invest long-term financial resources in the further development of the wind energy sector.

Lower Austria’s existing wind energy projects help reduce annual carbon dioxide emissions by 1.8 million tons, which is equivalent to 720,000 passenger cars. Moreover, the enterprises of the sector perform an important social and economic role, providing the local community with 1,100 additional jobs (not including indirect jobs in related fields).

Annual investment in the construction of wind farms in Lower Austria reached a peak after the liberalization of state policy in 2012. In particular, in 2015 the total investment in the wind energy sector of this federal state amounted to about 470 million euros, after which it gradually decreased to 25 million euros in 2020.

By the way, 2020 was the only year when the total installed capacity of wind farms in the region decreased (-21 MW) due to the planned decommissioning of old turbines against the background of insufficient investments to restore the park.

In all other years, starting from 2015, the annual increase in installed capacity ranged from +62 to +284 MW.

From that moment on, local authorities and businesses again began to take up the financing of wind energy, which was largely due to the sharp rise in fossil fuel prices. During 2021, 22 facilities with a total investment of more than 100 million euros will be built in Lower Austria. In particular, new large wind farms were installed in Bruck an der Leitha, Gänserndorf and Mistelbach. In 2022, 57 wind power projects were planned with an installed capacity of about 225 MW.

In 2022, wind energy investments will exceed 300-350 million euros against the backdrop of uncertainty with future gas supplies, rising hydrocarbon prices, and the urgent need to diversify the region’s energy mix.

Coming years can safely be called an ideal time for  new wind farms financing in Austria, as well as for the expansion of existing facilities.

The availability of renewable electricity will be decisive for a region’s economic development in the future. We are talking about increasing installed capacity, expanding electricity grid, bringing wind energy facilities closer to end consumers and stabilizing electricity prices, which have been showing rapid growth across Europe since 2022.

Wind energy investments in Austria are on the rise

Around 65 TWh of electricity are currently consumed in Austria every year.

At the end of 2017, wind turbines provided about 7 TWh, which is only 11% of electricity requirements.

By 2022, wind power could already cover 20% of electricity requirements. If around 120 wind turbines are erected per year by 2030, wind power can cover 26% of Austria’s needs. Obviously, this will require colossal private investment, long-term lending and government support.

In the early 1990s, when wind energy technologies were just beginning to develop, experts considered Austria to be unsuitable for building wind farms on a commercial scale. However, for many years, local enthusiasts financed and conducted research on the wind resources, discovering the great wind energy potential of the foothills of the Alps. The first wind turbine was launched in Austria in 1994, but the booming development of this sector only started in the early 2000s.

Between 2002 and 2012, Austrian legislation in the field of wind energy underwent significant changes, which contributed to a significant acceleration of the development of the technology and the construction of a large number of private projects.

With an amendment to the Green Electricity Act (Ökostromgesetz 2012), which came into force in 2012, preferential conditions for wind energy restored, enabling the further expansion of wind energy in Austria. In the second stage of the expansion, wind energy production doubled in just 4 years.

At the end of 2021, Austria had about 1,300 wind turbines with a total installed capacity of 3.3 GW. According to experts, by the end of 2022, this figure will exceed 3.7 GW.

Today, commercial banks are ready to provide long-term investment loans for the construction of new wind farms in Austria in view of the maturity of the technology and the great prospects of green energy sector.

By 2030, 20% of the energy consumed in the European Union will be provided by renewable energy sources. The federal government’s new program calls for 100% renewable electricity by 2030. This is extremely important for the Austrian energy industry in the context of a sharp rise in natural gas prices due to geopolitical tensions in Eastern Europe.

The main investments in wind power in Styria came in the period 2012-2019, when the total installed capacity grew from 53 MW to 260 MW. It should be noted that in the period from 2019 to 2021, the installed capacity of wind energy did not increase.

This policy is likely to be changed in the near future under the influence of major macroeconomic and political shifts in Europe.

If you are interested in long-term wind farms financing in Austria or other European countries, contact CP Finance UK FINANCE LIMITED.

We offer investment credit up to 90% of the project cost, and we also use flexible project finance tools for large capital-intensive facilities.