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Monday, August 07, 2006

European Bank for Reconstruction and Development seeks Clean Energy Investments

Europe looking to invest in alternative, renewable power


The EBRD aims to promote environmentally sound and sustainable development in the full range of its activities. One of the Bank's objectives is to improve environmental performance of the power sector, including supporting actions to address the climate change issue.

As part of this objective, the EBRD is actively pursuing renewable energy projects.

The Bank is participating in the International Conference for Renewable Energies in Bonn. The EBRD's Action Plan for Bonn (0.1Mb) includes new initiatives for supporting renewable energy projects.

Submitting a proposal for a renewable energy project

The EBRD encourages developers to submit a proposal for renewable energy project funding.

Challenges of renewable energy projects

The founding agreement of the EBRD requires that all of the projects it finances meet sound banking principles. Considering the generally low level of power tariffs in the countries of operation and the lack of developed legislation to support renewable energy projects, the EBRD and project developers have faced significant challenges in identifying those projects with sufficiently robust economics to make financing possible.

However, the climate for renewable energy projects in the EBRD countries of operation is starting to improve.

As part of the accession of the first group of Eastern European countries to the EU, new members will set targets to generate a certain percentage of power from renewable sources. This should enable these countries to adopt legislation to support the development of renewable energy projects. Other countries in the region are also starting to look at ways of making renewable energy projects possible.

Renewable energy projects

Mutnovsky Geothermal Power Plant
One of the first independent power projects in the Bank’s countries of operation, the project consists of the construction and installation of a geothermal power plant located in Mutnovsky, southern Kamchatka, Russian Federation. More information can be found in the Showcase page.

Hydro rehabilitation

The Bank has also financed 7 projects involving completion and rehabilitation of the hydro power stations in Albania, Azerbaijan, Georgia, Latvia, and Slovenia. Total investment in these projects is €480 million of which the EBRD has contributed €206 million.

How the EBRD is increasing its portfolio of renewable energy projects

The EBRD is taking active measures to expand the number of renewable energy projects which would be eligible for Bank financing.

Strategic Renewable Energy Assessment

This is a comprehensive study of the renewable energy resources in the countries of operation, completed last year by Black and Veatch and financed by the USAID. More information can be found on the Strategic Renewable Energy Assessment website.

The Bank is now considering a second phase of the study, which will focus on distributing information about renewable energy projects in the Bank’s countries of operation and identifying those projects in which to invest.

Carbon finance

Carbon finance provides another opportunity for the Bank to enhance the economics of the renewable energy projects to make their financing possible.

The Bank has been facilitating the development and sale of carbon credits on a project by project basis. It has also been involved in the creation of one of Europe's first carbon trading funds. More information is available on the Carbon finance page.

Bulgarian Energy Efficiency and Renewable Energy Credit Line
This €50 million facility was launched early in 2004 with the participation of several Bulgarian banks. It provides loans for small and medium sized energy efficiency and renewable energy projects in Bulgaria.

Project owners and participating banks also benefit from assistance from the Kozloduy International Decommissioning Support Fund (KIDSF). KIDSF provides technical assistance to fund project appraisal and also provides a rebate incentive to project developers - a cash rebate of up to 20% of the investment cost for renewable projects.

Renewable Energy Financing Entity

The EBRD is seeking to invest in a renewable energy fund to be financed by the Bank and other investors. The fund will undertake equity and quasi-equity investments in creditworthy small- and medium-sized renewable energy projects throughout the Bank’s countries of operation. The EBRD is envisaging an initial total amount in the range of €30 to €50 million. The Bank is also seeking to raise technical assistance of up to €5 million for the fund. The technical assistance will be used by the fund to carry out legal, technical and commercial due diligence of selected projects. In the emerging markets of the Bank's countries of operation, these costs are significant and are often a major obstacle for project developers who are trying to raise additional equity and debt to carry out full project development.

The Bank has invited proposals and expressions of interest from financial partners with a view to co-investing in the proposed fund and from potential operators or managers of the fund and is currently discussing various proposals.

Armenia Renewable Energy Fund

The Bank plans to establish a Renewable Energy Fund in Armenia capitalized by a combination of blended funding from the International Development Agency and the Global Environment Facility and other donor funds.

The EBRD will provide a dedicated debt facility of up to €7 million to the Fund which will then extend affordable long-term loans to qualified renewable energy projects: mini-hydro, wind, and biomass projects. The Fund will be managed by experienced personnel that will help local developers in negotiating and closing the deals.

The Bank hopes to close the Fund and have the project operational by the end of 2004 with the World Bank commitment approved and disbursed by mid-2005. Fund operating costs and development work will be funded by USAID and advanced disbursements from World Bank and GEF.

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