Demand for energy and energy savings is growing rapidly in Asia. According to the International Energy Agency the need for investments in the energy sector in the region will be as high as DKK 35,000 billion in the next 20 years. This opens many perspectives for Danish companies – one is the major potential for exporting energy technology and equipment to projects in Asia.
The competition on the international energy market is tough, and the financial crisis has changed the way to operate. It is no longer enough to deliver technology and equipment; the companies also need to contribute with financing to win the lucrative contracts.
However, the Danish energy sector is not prepared to meet the new financing requests, shows a consultation that IFU – Investment fund for developing countries and Nordjysk Elhandel A/S have made among the leading Danish energy exporters.
One example of this is Siemens’ success in the wind energy business, which is partly a result of their ability to offer financing to the many wind projects where they also supply equipment.
A vicious circle
Since the oil crisis, Denmark has been through a massive change-over in the energy sector, and today Danish technology, products, energy saving solutions and expertise are state of the art. This gives a unique position in a global market looking for more climate friendly ways to produce and new ways to save energy.
The challenge is that Danish technology and expertise are not cheap. Therefore, contracts must be won on high quality, low operating costs and not least attractive financing. Danish exporters are however often small and medium-sized companies that do not have the economic power to lend money or invest equity in project companies in Asia. This means that they will often lose international tenders or be unable to participate in privately financed energy projects.
At the same time exporters often experience a vicious circle, because Danish banks see an active Danish co-ownership as important when they are to give a loan commitment, and because Danish investors do not invest without commitments from solid lenders.
A new investment facility
For more than 40 years, IFU has invested in developing countries in Asia, Africa and Latin America. In total IFU has invested in close to 700 projects together with Danish companies, covering all sectors including energy. This has created a solid know-how and expertise when it comes to dealing with investments and undertaking business in difficult markets.
Nordjysk Elhandel A/S has a significant insight into the workings of the energy market and how to handle the business of buying and selling energy, also in connection with climate mechanisms such as CDM projects.
We believe that our combined experience and competences form a solid base that can be used to assist Danish energy exporters and pave the way for more energy and energy saving projects. This will also benefit the development in Asia and secure more climate-friendly energy consumption.
Therefore we are planning to establish a new investment facility that can be used to invest equity in energy projects in Asia.
The new facility will initially be financed by IFU and Nordjysk Elhandel. When the first investment agreements have been signed, the aim is to increase the volume by involving pension funds and other institutional investors and thereby assist in boosting Danish energy export to the growing Asian market.
If you want to learn more about the new investment facility, please contact IFU or Nordjysk Elhandel A/S by calling +45 33 63 75 60 or sending an email to jlu@neas.dk.