Karbenn: “Promissory note loans are an option”

Promissory note loans can represent a meaningful financing instrument for energy utilities. This was emphasized by Frank Karbenn, Managing Partner at the advisory firm HKCF Corporate Finance GmbH (HKCF), in a conversation with energate. However, he noted that there are several specific considerations to keep in mind.

HKCF recently advised the State Capital Düsseldorf in placing a large-volume promissory note loan of €599 million on the capital market. The placement was prompted by an internal infrastructure transaction, in which the city transferred sewer infrastructure assets — previously accounted for in the core municipal budget — to a municipal enterprise. These assets include wastewater pipelines, treatment plants, pumping stations, and several plots of land, which had previously been leased by the city’s wastewater utility from the municipality.

One of the Largest Municipal Financing Projects
With a volume of nearly €600m, the transaction is among the largest municipal financing projects of recent years, Karbenn explained. The loans carry maturities ranging from ten to fifty years. The lender base consisted primarily of insurance companies, with banks participating to a lesser extent. “Investor demand for the transaction was extremely high and the issuance was more than four times oversubscribed,” the financing expert noted. As a result, the average interest rate achieved was significantly below the original budget assumptions.

Shorter Maturities More Common in the Energy Sector
According to Karbenn, promissory note loans are also a widely used financing tool in the energy sector. “However, we often observe shorter maturities and more bullet repayment structures.” In contrast to infrastructure projects, where insurance companies are key investors, energy utilities tend to attract more interest from banks and savings banks. “Loan terms with interest rate fixings of up to 20 years remain feasible,” Karbenn said. Additionally, energy companies can secure alternative financing instruments under structured processes, particularly by involving public development banks and funding institutions — often at highly attractive conditions, he added.

Source: energate messenger+