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German Solar Gains from Cyprus Crisis as Investors Seek Safety

German Solar Gains from Cyprus Crisis as Investors Seek Safety

Germany's solar industry is set to benefit from the financial crisis in Cyprus as investors seek a haven in the guaranteed returns provided by clean-energy plants.

Milk the Sun GmbH, a Berlin-based company that links buyers and sellers of solar projects, had the most inquiries in a year on March 26 as Germans sought to invest, said Chief Executive Officer Felix Krause. That day Cyprus prepared to impose capital controls and a tax on bank deposits of more than 100,000 euros ($128,000).

The uncertainty in Cyprus led to concern across Europe that bank accounts may not be secure. Germany was forced to reiterate a 4 1/2-year-old pledge guaranteeing deposits last week as moves against account holders in Cyprus were debated. A flee to safety could bring funds to Germany's solar industry, the biggest by installed capacity, as investors seek material assets.

"Germans with savings of more than 100,000 euros are increasingly concerned because of Cyprus," Krause said in an interview. "They'd rather put their money in a renewable plant with guaranteed returns than leave it in the bank or invest in stocks."

Cyprus's banks reopened yesterday after shutting March 16, when the European Union presented a proposal to force losses on depositors in exchange for a 10 billion-euro bailout. That plan triggered protests and political upheaval, and was rejected by the country's parliament. A subsequent agreement imposed larger losses on uninsured depositors.

Lower Trust

"The Cyprus crisis has once again reduced trust in the euro, especially in Germany, and that's fueling a flight into material assets," Horst Loechel, economics professor at the Frankfurt School of Finance and Management, said by phone. The bailout deal has increased concern that bank savings accounts may be unsafe, further limiting investment options, he said.

Germany's Secondsol GmbH and ProjectForum4t2, marketplaces for solar products such as cells, panels and power plants, also reported a surge in activity amid the Cypriot crisis.

"For many elderly people from rural areas the crisis is one reason to invest in solar," Secondsol head Frank Fiedler said yesterday by phone after sales almost doubled in three to four weeks. "Other reasons include rising electricity prices in Germany and possible import duties against Chinese modules."

Solar is a safe investment, said Karsten Kreissler, head of ProjectForum4t2, which was founded three years ago in Hamburg.

Material Assets

"We're definitely experiencing a tendency to invest in material assets such as solar plants because of crisis-related fears," Kreissler said by phone. "We felt this trend even stronger during the height of the Greek crisis."

Investors favor plants in Germany, Europe's largest economy, over those in countries such as Spain or Italy because "the perceived investor risk, which in the solar industry is similar to political risk, is lower in Germany," Kreissler said.

Solar developers in Germany, as in other nations in Europe, receive a so-called feed-in tariff, an above-market rate for renewable power. Debt-strapped countries have scaled back the subsidies as they struggle to revive growth.

"While solar is still a good investment, the years of exaggerated returns are over," Kreissler said.

Copyright 2013 Bloomberg

Lead image: Old Greek fishing boat in Polis, Cyprus, via Shutterstock

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