(Bloomberg) -- BNP Paribas SA has struck a deal with Swedish heat pump manufacturer and installer Aira with the goal of making it cheaper for households to move away from high-carbon heat sources.
Aira, a startup created in 2022 by Swedish private equity firm Vargas, said in a statement on Tuesday it has secured €200 million ($217 million) in commitments from the European Union's biggest bank. The money will go toward installing heat pumps in thousands of homes across Germany, according to the statement.
Heat pumps offer a more efficient way to keep homes warm in winter and have been touted as a key technology in the fight against climate change. However, adoption has been slow and in some cases has even moved backward. In the UK, applications for subsidies for heat pumps remain well below the government's target, despite having doubled over the past year.
Eirik Winter, chief executive of BNP Paribas's Nordic operations, said the partnership with Aira "not only aligns with our strategic goals of fostering sustainable investments but also represents the opportunity to develop an innovative asset class in Europe."
"Transforming residential heating will require substantial financial investments, not just to develop and install the technology, but also to make it accessible and affordable for everyone," Ane Launy, Aira chief financial officer, said in emailed comments to Bloomberg
BNP Paribas is providing a warehouse financing facility that "aims to bridge this financial gap" and which allows Aira to draw funds as needed to finance heat pump installation, said Launy. The French bank is providing the most senior tranche in the vehicle and a mezzanine, or lower-rated tranche, may be added in the coming months, said Launy.
The securitization will package installment purchase agreements of as many as 20,000 Aira customers in Germany. The company plans to serve 5 million households over the next decade and as such "will need to raise multiple similar facilities in the coming years," said Launy.
"We endeavor to make heat pump technology accessible to every home," said Martin Lewerth, Aira's CEO. "With substantial debt financing facilities from partners like BNP Paribas, we are set to remove one huge barrier to heat pump adoption and turbocharge our rollout across Europe."
--With assistance from Olivia Rudgard.
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