Expert interview on Opportunities and Challenges in the American Market

Timo Hellwig, CFA, the Head of the Representative Office at KfW IPEX-Bank New York, shares insights on the work in New York/North America.

Timo, how would you describe the current business and policy environment in the United States from your vantage point in New York?

The current business and policy environment in the US can be characterized by a complex interplay of economic, legal, and political factors. While the US boasts a strong economy, it also faces challenges such as inflation, potential economic downturn, and political polarization. Having said that, with the recent passage of the budget bill and trade framework agreements some previous uncertainty was alleviated and overall, the business environment is generally more positive than not.

In what ways are recent policy shifts in the US shaping the landscape for export and project finance?

There are a few notable policy shifts implemented by the administration via the recently signed budget bill or via executive orders. In general, there is a trend away from subsidizing renewable energy in favor of traditional energy sources. The bill may set off a rush to start construction of more solar and wind projects by the end of 2025 / mid-2026 to still qualify for tax credits (to qualify, solar and wind projects need either be under construction by July 2026 or they must be in service by the end of 2027). Furthermore, executive orders on offshore wind effectively paused the development of new projects.

Moreover, the recently achieved trade framework between the European Union and the US continues to create incentives to manufacture in the US.

Are there any particular sectors or themes gaining momentum in the US market that German exporters should be aware of?

From a project finance point of view, we see strong momentum in the energy and digital infrastructure sectors. Energy project finance as a whole – and within that especially for Liquified Natural Gas (LNG) – is a key growth market currently. We are seeing many large-scale LNG transactions coming to market with European and German offtake. Within the digital infrastructure space, we see a strong focus on datacenter transactions primarily driven by the expanding demand for AI infrastructure and cloud services.

Moreover, as part of the revitalization of domestic manufacturing and production, the steel industry is set to benefit from the new budget bill and within it the Buy American mandate, e.g. via mandatory use of American-made steel in certain sectors.

Looking ahead, how do you see the role of the US evolving in global infrastructure and energy projects over the coming years?

Let’s have a look at the projected electricity demand growth in the US. US electricity demand is projected to increase significantly, with forecasts ranging from a 25% increase by 2030 to a 35-50% surge by 2040. This growth is driven by several factors, including datacenter demand. The US is expected to be at the forefront of the AI revolution and is spending multiple hundreds of billions of dollars per year on advancing AI. In project finance we are discussing and seeing first projects bundling electricity production with a datacenter offtake bridging the gap between energy and digital infrastructure project financings.

Additionally in Germany and Europe, LNG is being utilized as a transition fuel, aiming to diversify energy sources while shifting further toward renewable energy. The US is expected to become a major partner to Germany and Europe for their LNG needs and US LNG production capacity and exports are expected to grow with double digits in the next few years.

Feel free to get in touch with Timo Hellwig and talk about the current topics!