KfW 270

The pass-through principle

The application does not go to KfW but to a credit institution, which advances the loan to the applicant and refinances itself with KfW. The credit decision and the security package therefore sit with that institution, while KfW sets the frame: eligible projects, tenors, maximum amounts and the logic of the pricing.

Two things follow in practice. First, a bank willing to take the project on is required; without one there is no access to the programme at all. Second, the pack is not built for KfW but for that bank, and it contains what any financing pack contains: yield report, debt service calculation, contracts, security.

Terms and deadlines

Investments can be funded up to a maximum amount per project, with long tenors and several interest-only years at the start. The rate is not uniform: it follows a pricing system built on credit standing and collateral, applied by the bank. Two applicants with the same project therefore receive different terms, and the spread is material.

One deadline binds and is regularly missed: the application has to be filed before the project starts. A project already begun or ordered is no longer eligible, and the start is defined not by breaking ground but by concluding the supply or works contract.

Where it sits in the capital stack

The programme does not replace a structure, it makes one cheaper. It occupies the senior debt position and leaves everything else untouched: the equity share, the coverage ratios, whether the financing has recourse to the sponsor, and how the revenue side is secured.

The benefit gets overstated in project packs, because the published best rate is the one quoted. That rate belongs to the best pricing class with solid collateral; a young project company with no track record sits several classes above it, and that distance is what decides debt service.

The second point is sequence. Because the application has to precede the start of the project, approaching banks belongs before signing the supply contract. Projects that conclude the EPC contract first lose the option without noticing.

For the pack itself little changes: the bank assesses the project, not the eligibility. The sober order is therefore to show financeability on conservative assumptions first, and to treat the programme as what it is, a reduction in cost.