24 Eastern winds - Emerging European wind power markets

Chapter 2: Wind energy financing

European Bank for Reconstruction and DevelopmentEBRD’s sustainable energy investments reached al-most €2.2bn in 2010, up 64% from €1.3bn in 2009. The sustainable energy investments portfolio account-ed 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 com-bined 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.

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

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

Loans and syndicated loans

Other �nancing tools

Direct investment

Maturity Eligibility Criteria Other

Project costs less than 35%

ü Equity less than 25%

ü Equity loansü Guaranteesü Leasing

facilitiesü Trade �nance

€5m to €230m

Five to �fteen 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 bene�ts local economy

ü Project helps develop private sector

ü Banking standardsü Environmental

standards

ü Of�ces in all target countries

ü Online enquiry service

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Eastern winds - Emerging European wind power markets 25

€380m. A further €350m was invested in transmis-sion 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 �nance projects in neighbouring countries. Moreover, the EIB only directly lends sums in excess of €25m. For smaller loans, the EIB can lend to lo-cal commercial banks that can lend on to project developers.

European Investment BankEIB lending to renewable energy has grown dramati-cally 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 �nanced wind farms totalling around 4,000 MW in capacity worth €1.7bn. The Bank has become a key source of �nance for the wind industry in central and south eastern Europe.

Between 2008 and 2012, the EIB �nanced �ve wind farms in the countries considered, disbursing around

TABLE 2.3 SUMMARY OF EUROPEAN INVESTMENT BANK (EIB) FINANCING

LoansOther �nancing tools

Direct investment

Eligibility Criteria Other

Project costs less than 50%

ü Guaranteesü Direct lendingü Loans to

commercial banks

Above €25m ü Private companies

ü Public investors

ü Located in EUü Outside EU

with mandate ü Strong

commercial prospects

ü Project in line with EU priorities for relevant region

ü Of�ces in Luxembourgü Of�ces in EU candidate

countries

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26 Eastern winds - Emerging European wind power markets

Chapter 2: Wind energy financing

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

International Finance CorporationIn 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-�nanced 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 �nancial institutions (EBRD, EIB). IFC engagement has, so far, varied from €20m (combined with a commercial bank investment of €35m) to �nance a 44 MW wind project in Croatia to €31m to �nance wind energy develop-ments in the Kavarna region in Bulgaria.

TABLE 2.4 SUMMARY OF IFC FINANCING

LoansOther �nancing tools

Eligibility Criteria Other

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

ü Equityü Local currency

loansü Trade �nance

ü Large private companies

ü Located in IFC developing countryü Strong commercial prospectsü Technically sound projectsü Project bene�ts local economyü Environmental and social

standardsü Strong wind region, one year

measurement campaign

ü HQ in Washington, regional of�ce in Istanbul

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