EBRD Support for Renewable Energy and Energy Efficiency projects

Ian BrownPower & Energy Utilities Team

Pristina, 14 May 2013

Overview of the EBRD

2

• AAA/Aaa stable rated multilateral development bank owned by 63 countries and the EU and EIB

• Invested over €79 billion in more than 3,644 projects since 1991

• Active in 35 countries.

• AAA/Aaa stable rated multilateral development bank owned by 63 countries and the EU and EIB

• Invested over €79 billion in more than 3,644 projects since 1991

• Active in 35 countries.

Primary objectives in the energy sector

• Support sector reforms that enable energy sectors to function according to market principles (e.g. increased competition, market liberalization and private ownership)

• Strengthen frameworks for regionalisation (trans-border transmission lines, energy trading)

• Prioritise environmental, energy efficiency and renewable energy investments

3

EBRD Power Sector Financing

• Cumulative EBRD financing to power & energy projects since 1992 is €8.1 bn across 170 projects with €28.4 bn total value

• In 2012 invested over €1.0 bn in 23 projects with a total value of €3.2 bn

• In the last five years, number of projects per year has tripled and annual business volume has quadrupled

• Renewables represent an increasing portion of total financing, comprised primarily of wind and hydro but also including biomass and solar

Financing by Sector(2009-2012)

Unaudited as at 31 December 2012Note: Renewable power does not include large hydro.Source: EBRD data

4

Case study: EPCG Montenegro

• EBRD made a loan of EUR 35 million in 2010 to EPCG in Montenegro to install 175,000 smart meters

• Objectives were to improve energy efficiency, reduce distribution losses and improve collections

• Already 80,000 meters have been installed with very interesting results

‒ Distribution losses in areas where all the meters have been changed are coming down to the level of technical losses

‒ Half the loss reduction comes when 80% of meters are changed, the other half from the remaining 20% in an area

‒ Bill collection rates are substantially higher for customers with smart meters

‒ Old debts are being collected

• EBRD have now approved an additional EUR 30 million to complete the smart meter changeover for all consumers in Montenegro

Power sector investments

• Long lived – from 20 years (wind turbine) to more than 60 years (hydropower); long pay-back times

• Large scale – investments range from EUR 10 million to more than EUR one billion

• Natural monopolies – networks obviously but often generation also, especially in small markets

• High political profile – essential utility, viewed as a public service

• Central to resource efficiency and climate change agendas

Regulatory environment is critical

Key regulatory issues

• Overall: a regulatory framework must be clear, predictable, stable and enforced

• Tariff methodology that focuses on transparency and efficiency – social issues dealt with separately. Affordability is a key concern.

• How to deploy renewables without being overwhelmed or paying too much?

Western Balkans Sustainable Energy Direct Financing Facility

• A direct financing facility operated by the EBRD

• For (small) renewable energy and energy efficiency projects

• EUR 100 million of loan funds + up to EUR 21.5 million in Technical Cooperation (TC) and incentive payment funds

• Senior (secured) loans from EUR 2 million to EUR 6 million EBRD financing

• Average (expected) maturity of 6-8 years for energy efficiency and 12 years for renewable energy projects, with appropriate grace periods and flexible repayment schedules

Energy efficiency credit lines project with EU

• EU supported EUR 12 million framework for energy efficiency investments in SMEs and households (with EUR 3 million in EU grant funds) for small energy efficiency projects for SMEs and households

• EBRD recently signed the first credit line with TEB, others to follow

• Initial EUR 5 million is being provided to TEB – this is a pilot project

• EU is providing grant funds that provide up to 20% of the loan principal to the final borrower as an incentive payment

Key Messages

• KEDS privatisation is an important step forward but this is step on the road towards having a financially sound distribution sector, and not an end in itself

• EBRD strongly supports investments in renewable energy and energy efficiency in Kosovo, but as part of a balanced generation mix which uses Kosovo’s available resources, including new higher efficiency lignite fired generation

• The importance of having a stable, predictable and independent regulatory climate cannot be overstated.

Thank you

Nandita ParshadDirector, Power and Energy+44 (0)207 338 6537 parshadn@ebrd.com

Ian BrownSenior Adviser, Power and Energy+381 63 233 954 browni@ebrd.com

11