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Munich Re To Insure Against Solar Panel Co. Bankruptcies
Munich Re, the world's largest reinsurer, will begin protecting solar farm operators against the risk of their panel suppliers going bankrupt, the company said Wednesday.
Developed jointly with Deutsche Bank AG, the new insurance product found its first customer in a solar park project under development in southern Italy, which is being financed by Deutsche Bank and Rabobank. The new option is meant for solar installations with a capacity over 20 megawatts, Munich, Germany-based Munich Re said.
Since 2009, Munich Re has offered insurance for solar module manufacturers in case their panels don't meet guaranteed output levels, the company said.
Together, the options can help lower the risk profile for developers, calculate bankable returns and boost agency ratings — all of which could make solar projects more attractive to investors, both public and private.
“Coverage of such risks makes it easier to calculate stable, secured cash flows for solar parks,” said Thomas Blunck, a Munich Re board member. “Thus, major projects in particular have better access to financing.”
Companies have long insured solar farms against property damage and theft — an increasingly common problem, according to national brokerage firm Solar Insure — but financial products aimed at investors and stakeholders are growing more common.
Because solar systems have decades-long life spans, insurance lifetime performance is especially important for stakeholders, said Adam Boucher, CEO of Adam Capital Clean Energy Asset Finance LLC, which provides small-scale financing for alternative energy projects.
“It's a long-term purchase, and people want to know that their interests are protected down the road, and manufacturer bankruptcy is one of those concerns,” Boucher said. “If there's more comprehensive insurance that covers more options, that's certainly attractive [to investors].”
Two German solar manufacturers — Solar Millennium AG and Solon SE — filed for insolvency in December, following three major U.S. manufacturers that went bust earlier last year.
The highest-profile was Solyndra Inc., whose bankruptcy filing sparked a firestorm over political favoritism and the future of U.S. energy subsidies. Solyndra received a $525 million loan guarantee from the U.S. Department of Energy, and President Barack Obama had praised it as a model for clean-tech jobs during a 2009 visit to its California factory.
Recent government moves in Europe could threaten some shakier solar manufacturers.
The German government recently reduced subsidies for solar power, cutting its feed-in tariffs by 15 percent. British energy officials announced plans to cut that country's tariffs by half in October, though litigation has stalled the move for now.
Boucher said insolvency insurance could also help companies using newer solar technologies that offer long-term promise despite shorter-term risk of business failure. Solyndra was one of a handful of companies pioneering newer thin photovoltaic cells, and higher costs associated with its riskier technology was a factor in its bankruptcy.
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