EIB and the energy sector financingKrzysztof Szyszko

Warsaw, 23rd November 2005

THE EUROPEAN INVESTMENT BANK

The European Union’s financing institution

Created by the Treaty of Rome in 1958, to provide long-term finance for projects implementing the EU’s policies.

Subscribed capital EUR 163.7bn.

EIB shareholders: 25 Member States of the European Union.

EIB’s annual lending (2004): EUR 42bn.

Annual lending to the energy sector of EUR 3 billion.

THE EIB IN THE EU

• Borrowings Largest supranational borrower. Benchmark issuer, sovereign issuer alternative. Low borrowing costs. Wide range of EIB products.

• Loans – Core Objectives Economic and social cohesion in an enlarged EU. Environmental protection and improvement. Development of Trans-European and access Networks. Implementation of the “Innovation 2010 Initiative” (i2i). Support for EU development aid and cooperation policies.

A “presence” on the financial markets in support of EU policies - a policy driven Bank.

EU POLICY CONTEXT

Combating pollution and energy dependence:

Electricity produced from renewable energy sources should represent 22% of electricity consumption by 2010.

Overall emissions of greenhouse gases should be reduced to at least 5% below 1990 levels on average over the period 2008 to 2012.

Diversification of energy sources in order to secure energy supply.

Share of renewable energy in gross domestic energy consumption should reach 12% by 2010.

INCREASE IN RENEWABLE ENERGY LENDING

New target (May 2004) to allocate up to 50% of lending

for generation investments to the renewable sector by 2010.

In 2004: 33%

Lending targets increased in line with EU policy objectives:

Initial target to double lending for renewable energy over the period

2002-2007.

Lending during 2002-2004 increased to - 1570 M EUR, equivalent to 14.0% of total energy sector lending (c.f. 7.9% for 1997-2001).

From 1993 to 2004, more than EUR 3.0 billion in individual loans for 58 major projects (32 in the EU and 26 outside) in the renewable energy sector.

Climate Change Financing Facility (CCFF)

500 M EUR dedicated facility. Projects sponsored by companies operating within the EU emissions trading scheme. Project cash flow enhanced by GHG reduction. Loan repayments tailored to generation of allowances. Increased loan proportion (up to 75%).

EIB INITIATIVES FOR GREENHOUSE GAS-RELATED LENDING OPERATIONS

Pan-European Carbon Fund

Various options under consideration – focus on co-operating with

existing funds to secure revenues from carbon credits resulting from

EIB financed projects.

Evolving legislation/markets

National RE support frameworks.

Kyoto mechanisms.

EU Emissions trading scheme.

Carbon market.

Technological advances

Lower costs, increased efficiency etc.

Industrial development

Funding of R&D programmes.

Financing of manufacturing facilities.

Smaller scale de-centralised projects

EIB support by on-lending via specialised intermediaries.

DRIVING FORCES FOR FUTURE INVESTMENT

Prudent and rational utilisation of natural resources.

Tackling Climate Change.

Support research, development and manufacturing of renewable energy technology.

Renewable Energy projects to meet the following EIB policy objectives:

Operational priority - environmental protection and improvement.

EIB POLICY OBJECTIVES

EIB eligibility

Banking criteria

Monitoring

Board ofDirectors

Loan approval

Staff teams EconomicFinancial

Technical/Enviro.

ManagementCommittee

LawyersContract

negotiation

ProjectBorrowerGuarantor

Promoter’s proposal

An appropriate time-span for reaching a decision

Contractsignature

Commission’s and Member State’s opinion

Project list

THE PROJECT CYCLE AT THE EIB

Technically and environmentally sound.

Financially and economically viable.

Able to show an acceptable economic return (including an appropriate assessment of external costs and benefits).

Compliant with all relevant national and international legislation.

Promoted by an experienced sponsor.

PROJECT REQUIREMENTS

Grid access issues resolved.

Accessible for companies from all countries (with some restrictions according to individual mandates).

In the project’s interest.

Procurement needs to be in line with EU and national legislations:

Open, transparent and competitive.

The EU Official Journal and/or its web site isthe required procurement billboard for EIB projects.

PROCUREMENT RULES

For further details see EIB Procurement Guide on:-

http://www.eib.org/publications/thematic/publication.asp?publ=44

THE EIB LOAN PRODUCTS

Guaranteed loans • a corporate or bank guarantee invloved.

• term up to economic life. • attractive interest rates.

Single signature loans• max. term up to 15 years or economic life

• attractive interest rates + risk margin

Lower investment grade• only proven technology

• max. loan amount EUR 200m

Solid investment grade• early-stage & proven technology• max. loan amount > EUR 200m

THE EIB GROUP LENDS

To public and private sector bodies and enterprises.

Directly for projects larger than EUR 25m.

Indirectly - for smaller projects, between EUR 40 000 and EUR 25m, e.g. through Global Loans.

EIB participation up to 50% of a project’s cost.

Subject to adequate security

http://www.eib.org

Address: 100, Boulevard Konrad Adenauer, L-2950 Luxembourg

Contact: Krzysztof SzyszkoTel: 00.352.4379 7459Fax: 00.352.4379 7498

e-mail: szyszko@eib.org