EBRD EBRD Financing Wind EnergyFinancing Wind Energy

in Central and Eastern Europe in Central and Eastern Europe

Peter Hobson

EWEC 2006, Athens

EBRD and wind energy: EBRD and wind energy: IntroductionIntroduction

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

EBRD: EBRD: What we doWhat we do

Promoting market development

Enhancing energy sustainability

Leveraging commercial finance

Mobilising technical assistance

Monetising carbon credits

Flexible, Innovative, Connected

EBRD: EBRD: Promoting market developmentPromoting 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

ANALYSIS: Foundations of operationANALYSIS: 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

EBRD: EBRD: Enhancing energy sustainabilityEnhancing 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

ANALYSIS: Parameters of EBRD financingANALYSIS: 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 toaddress smaller projects or larger stakes

EBRD: EBRD: Leveraging commercial financeLeveraging 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

EBRD: EBRD: Mobilising technical assistanceMobilising 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

EBRD: EBRD: Monetising carbon creditsMonetising 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

ANALYSIS: Wind farm exampleANALYSIS: 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

Wind Energy: Wind Energy: Opportunities (1)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

Wind Energy: Wind Energy: Opportunities (2)Opportunities (2)

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Country Assessment

Barriers

Incentives

Current Capacity

Info Availability

Technical Potential

50 points possible

Black & Veatch analysis, 2003

New Member States: New Member States: RES DirectiveRES Directive

RES 2003 (IEA)

2010 target (%)

2010target (GWh) Support

Poland 1.7% 7.5% 10,610 GC

Hungary 1.1% 3.6% 1,479 €92/MWh

CR 2.3% 8.0% 5,361 €87/MWh

Estonia 0.5% 5.1% 421 €52/MWh

Latvia 58.9% 49.3% 3,260 €50/MWh

Lithuania 2.7% 7.0% 837 €75/MWh

Slovakia 12.5% 31.0% 8,966 €75/MWh

Slovenia 23.4% 33.6% 4,765 €61/MWh

New Member States: New Member States: RES DirectiveRES Directive

2003 (IEA) 2010 target Support

Poland 1.7% 7.5% GC

Hungary 1.1% 3.6% €92/MWh

CR 2.3% 8.0% €87/MWh

Estonia 0.5% 5.1% €52/MWh

Latvia 58.9% 49.3% €50/MWh

Lithuania 2.7% 7.0% €75/MWh

Slovakia 12.5% 31.0% €75/MWh

Slovenia 23.4% 33.6% €61/MWh

EBRD Region: EBRD Region: current status (1)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

EBRD Region: EBRD Region: current status (2)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

EBRD Region: EBRD Region: market overviewmarket 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

How we can help: How we can help: FlexibleFlexible

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

How we can help: How we can help: InnovativeInnovative

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

How we can help: How we can help: ConnectedConnected

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

How to contact usHow to contact us

Peter Hobson Senior Banker, Renewable Energy Co-ordinator

Tel: +44 (0)20 7338 6737 Email: hobsonp@ebrd.com

One Exchange Square, London, EC2A 2JN

Mike Rand Associate Banker, Energy GroupTel: +44 (0)20 7338 6267 Email: randm@ebrd.com

One Exchange Square, London, EC2A 2JN