News

MunichRe contributing to German geothermal drilling fund

Alexander Richter Alexander Richter 25 Feb 2009

Munich Reinsurance is skipping in EUR 20 million (US$25.5m) to a German geothermal drilling fund. The share of the company in that fund is one third of the total amount.

Announced today in Business Insurance, Munich Reinsurance is skipping in EUR 20 million (US$25.5m) to a German geothermal drilling fund. The share of the company in that fund is one third of the total amount.

Based on the article, “Munich Reinsurance Co. is contributing a third of a €60 million ($76.9 million) fund to spur investment in geothermal power projects in Germany.

The fund is being offered in conjunction with the German Federal Ministry for the Environment and state-owned KfW Bankengruppe in Frankfurt to help finance deep geothermal wells and minimize the productivity risk of the projects.

Each of the parties is contributing €20 million ($25.6 million) to the fund, according to a Munich Re spokesman. Munich Re will also use its expertise to evaluate the productivity risk of geothermal well projects before a subsidized loan is granted, the reinsurer said.

“This cooperation is intended to be a start-up, which will make it easier to finance projects in the field of renewable energy,” said Thomas Blunck, a member of Munich Re’s Board of Management, in a statement.

“We see climate change not only as a risk but also as a great opportunity, because if climate protection is pursued resolutely, it will lead to enormous growth potential in new technologies like the generation of power from renewable sources.”

Geothermal heat is viewed as an inexhaustible source of energy. Germany has three regions that are considered particularly suitable for deep geothermal projects: the Molasse Basin, south of Munich, the Upper Rhine Rift, and the North German Plain.”

Worldwide geothermal groups have been stressing the issue of drilling risk that made investments in and the development of geothermal projects difficult to finance. While there have been efforts through private insurance products, e.g. through Marsh in Germany, which simply are seen by many to be too expensive, international offers were limited to geographic areas, e.g. developing countries in the GeoFund of the World Bank.

So after Australia’s geothermal drilling fund, there is now a German approach, which has been in the making and discussion for a long time. It will be interesting to see what impact the fund will have to drive development in Germany.

Source: Business Insurance