EBRD Financing Wind Energy in Central and Eastern Europe

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EBRD Financing Wind Energy in Central and
Eastern Europe

• Peter Hobson
• EWEC 2006, Athens

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EBRD and wind energy Introduction

• What does the EBRD do promoting market
  development, enhancing sustainability, catalysing
  commercial finance, mobilising technical
  assistance, monetising carbon credits
• Wind energy in central and eastern Europe the
  opportunities and challenges
• How can the EBRD help flexible, innovative,
  connected

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EBRD What we do

• Promoting market development
• Enhancing energy sustainability
• Leveraging commercial finance
• Mobilising technical assistance
• Monetising carbon credits
• Flexible, Innovative, Connected

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EBRD Promoting market development

• Established in 1991 by 62 national and
  supra-national shareholders
• Exclusively investing in the 27 countries of
  Central Eastern Europe and CIS
• Cumulative commitments of 25.3 bn in more than
  1,100 projects to date of which 1.3bn in
  sustainable energy
• Commercial banking discipline with
• a regional risk appetite

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ANALYSIS Foundations of operation

• Apply sound banking principles to every project
• We do not subsidise
• Advance the transition to a full market economy
• Priority to promote private sector and market
  expansion
• Support, but not replace, private investors
  (additionality)
• Catalyst for higher and riskier private sector
  involvement

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EBRD Enhancing energy sustainability

• 1.3bn invested in sustainable energy to date, of
  which 337m in renewable energy
• Both direct project financier or equity investor
  in renewable projects, and indirect investor via
  funds and local banks
• Wind sector remains in early development stage in
  the region, and a key priority for EBRD
• Delivering innovative financing to
• sustainable energy projects

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ANALYSIS Parameters of EBRD financing

• Can invest up to 35 of project cost
• Typical minimum investment amount 5m but
  sustainable energy priority means smaller
  transactions are possible
• Flexible investment type debt, mezzanine, equity
  
• Minority equity investor up to 49
• Invest in Funds and through local Banks to
• address smaller projects or larger stakes

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EBRD Leveraging commercial finance

• Catalyst for commercial investment Every 1
  invested or lent by the EBRD mobilises 3.1 from
  other sources
• Equity by investing with majority sponsor we
  reduce the equity burden and provide support
• Debt syndication The EBRD can syndicate all or
  part of the senior debt under A/B structure
• Debt co-financing The EBRD will work with or
  alongside other commercial banks as part of the
  debt package

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EBRD Mobilising technical assistance

• Access to Government grant funding
• Funds available for technical assistance such as
  environmental assessments, baseline studies
• Assisting committed sponsors in early project
  development phases
• Entrusted with grant funding to
• overcome transition challenges

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EBRD Monetising carbon credits

• Manager of 32m Dutch Carbon Fund buying carbon
  credits from Joint Implementation Projects
• Contracting carbon purchase with EBRD at time of
  financing adds certainty to cashflow
• In-house expertise to guide clients through
  monetisation of carbon
• Well-structured carbon transactions to
• further enhance project viability

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ANALYSIS Wind farm example

• Typical 60MW wind project might expect to
  generate 100k tonnes CO2 reductions per year
  giving potential to cover 5 - 10 of project
  cost
• Fund will work with project Sponsor to estimate
  carbon emission reduction potential
• Support from EBRD fund to prepare Project Idea
  Note and Project Design Document
• Will contract to buy credits up front
• including partial up front payment

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Wind Energy Opportunities (1)

• EBRD assessed renewable energy potential
  throughout its region in 2003 www.ebrdrenewables.
  com
• In general moderate potential for wind energy
  throughout the region but hardly exploited yet
• Good opportunities in Poland, Hungary, Croatia,
  Bulgaria, Romania, Czech Republic
• Key driver now EU legislation and RE targets

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Wind Energy Opportunities (2)
Black Veatch analysis, 2003
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New Member States RES Directive
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New Member States RES Directive
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EBRD Region current status (1)

• Poland many local developers seeking strategic
  partners, GC market in early stages, financing
  and construction activity starting now,
  anticipated growth 100MW 300MW pa
• Hungary tight market will be limited by terms
  of operating licences, first awards anticipated
  2006Q2
• Czech Republic/Slovakia active development,
  mostly smaller projects
• Baltics good potential but governments slow to
  clarify licensing regimes or cautious to award
  licences

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EBRD Region current status (2)

• Croatia government supportive and preparing new
  renewable regulation, some local activity
• Bulgaria supportive government, re-thinking
  regulatory approach
• Romania new legislation for GC, good time now
  to enter the market
• Russia/Ukraine very large potential, no sign of
  regulatory support yet, but keep monitoring

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EBRD Region market overview

• Slow progress in recent years but now moving
  rapidly in new member states, albeit on small
  scale
• Good growth potential and strong advantage for
  early movers, particularly in less developed
  markets of Bulgaria, Romania and Croatia
• Very significant potential further east
  Ukraine, Russia and central Asia. Experience in
  more advanced transition countries will be a
  valuable stepping stone
• Security of supply concerns place new emphasis on
  RES

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How we can help Flexible

• Wide palette of financial instruments Debt
  equity guarantees credit lines equity funds
• Long-term partner Offering longer tenors than
  market norms partnering at an early stage
• Public and Private Invest with and through
  public and private operations engaging with
  Government bodies on projects and policy

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How we can help Innovative

• Developing new instruments Renewable energy
  fund, EE/RE Credit Line (e.g. Bulgaria
  www.beerecl.com)
• Establishing new activities Developing carbon
  finance capability under Bank operations
• EBRD Renewable Development Initiative Website
  pooling latest information on regional renewable
  activities. www.ebrdrenewables.com

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How we can help Connected

• In-depth understanding of region 36 offices
  across region experience through rough and
  smooth from Russian crisis to EU Accession
• Working with governments and the EU on going
  policy dialogue at country level and continuous
  discussions with EU on implementation of
  renewables framework and problems encountered
• Extensive commercial expertise Team staff from
  leading banks, funds and industry

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How to contact us

• Peter Hobson Senior Banker, Renewable Energy
  Co-ordinator
• Tel [phone] Email hobsonp_at_ebrd.com
• One Exchange Square, London, EC2A 2JN
• Mike Rand Associate Banker, Energy Group
• Tel [phone] Email randm_at_ebrd.com
• One Exchange Square, London, EC2A 2JN