International wind energy Finanting Institutions.

Chapter 2: Wind energy financing

2.2 International Financing Institutions International financial institutions (IFIs) address wind energy finance risks through a combination of investment, technical assistance and policy dialogue. Where financing cannot be offered by commercial banks, IFIs step in either as syndication partner or as provider of mid to long term finance. The three main IFIs financing wind energy projects in central and Eastern Europe are the European Bank for Reconstruction and Development (EBRD), the European Investment Bank (EIB) and the International Finance Corporation (IFC).

European Bank for Reconstruction and Development EBRD’s sustainable energy investments reached almost €2.2bn in 2010, up 64% from €1.3bn in 2009.

The sustainable energy investments portfolio accounted for 24% of the Bank’s annual business volume across all sectors of activity. In 2010, EBRD mobilised €363m for renewable energy projects, among these the Magyar wind project in Hungary and the Polska and Margonin wind farms in Poland. In total the EBRD enabled the construction of wind farms with a combined capacity of almost 1,300 MW from 2008-2012 in its countries of operation.

The aim of the EBRD is to stimulate the local economy and help develop the private sector. Consequently, along with environmental criteria, projects need to demonstrate their value for the national or local economy.

TABLE 2.2 SUMMARY OF EUROPEAN BANK FOR RECONSTRUCTION AND DEVELOPMENT (EBRD) FINANCING

Loans and syndicated loans

Other financing tools

Direct investment

Project costs less than 35%

ü Equity less than 25% ü Equity loans ü Guarantees ü Leasing facilities ü Trade finance

€5m to €230m

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Maturity

Eligibility

Criteria

Other

Five to fifteen years

ü Private companies or ventures ü Public investors

ü Located in EBRD country ü Strong commercial prospects ü Equity contributions in cash or in kind equal to or above EBRD contribution ü Project benefits local economy ü Project helps develop private sector ü Banking standards ü Environmental standards

ü Offices in all target countries ü Online enquiry service

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European Investment Bank EIB lending to renewable energy has grown dramatically over the last few years to reach €6.2bn in 2010.

The share of renewable lending in the overall EIB energy portfolio tripled from below 10% in 2006 to more than 30% in 2010. In 2011 the EIB invested €18bn in climate protection projects. Among these, it has financed wind farms totalling around 4,000 MW in capacity worth €1.7bn. The Bank has become a key source of finance for the wind industry in central and south eastern Europe.

€380m. A further €350m was invested in transmission system infrastructure in Serbia, Ukraine and Croatia.

The EIB generally only lends to projects within the EU. However, with a mandate from the EU institutions, it can finance projects in neighbouring countries.

Moreover, the EIB only directly lends sums in excess of €25m. For smaller loans, the EIB can lend to local commercial banks that can lend on to project developers.

Between 2008 and 2012, the EIB financed five wind farms in the countries considered, disbursing around

TABLE 2.3 SUMMARY OF EUROPEAN INVESTMENT BANK (EIB) FINANCING

Loans Project costs less than 50%

Other financing tools

Direct investment

ü Guarantees ü Direct lending ü Loans to commercial banks

Above €25m

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Eligibility

Criteria

Other

ü Private companies ü Public investors

ü Located in EU ü Outside EU with mandate ü Strong commercial prospects ü Project in line with EU priorities for relevant region

ü Offices in Luxembourg ü Offices in EU candidate countries

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Chapter 2: Wind energy financing

International Finance Corporation In 2010 the IFC invested a total of $18bn in projects worldwide. Around 10% ($1.6m) supported climate change businesses. Between 2008 and 2012 the IFC co-financed four wind sector transactions valued at around $300m in central and eastern Europe. These four projects were co-funded by commercial banks (large eastern European banks) and other financial institutions (EBRD, EIB). IFC engagement has, so far, varied from €20m (combined with a commercial bank investment of €35m) to finance a 44 MW wind project in Croatia to €31m to finance wind energy developments in the Kavarna region in Bulgaria.

IFC financing is available where commercial banks cannot provide loans by themselves due to the level of risk. The IFC’s criteria are that financing should go to projects that enable private sector investment that would otherwise not happen. The IFC focuses increasingly on renewable energy and energy efficiency projects and aims to increase its investments in climate change businesses to 20% of all investments in 2013.

TABLE 2.4 SUMMARY OF IFC FINANCING

Loans Project costs between 25% (if loan is less than $50m) and 35% (if loan is more than $50m)

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Other financing tools ü Equity ü Local currency loans ü Trade finance

Eligibility

Criteria

Other

ü Large private companies

ü ü ü ü ü

Located in IFC developing country Strong commercial prospects Technically sound projects Project benefits local economy Environmental and social standards ü Strong wind region, one year measurement campaign

ü HQ in Washington, regional office in Istanbul

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