EBRD Experience in Financing Renewable Energy Projects. Gurugram, December 8, 2017

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1 EBRD Experience in Financing Renewable Energy Projects Gurugram, December 8, 2017

2 EBRD at a glance EBRD is an AAA/Aaa Aaa rated bank with a capital base of 30 billion. Annual EBRD s Investments and Operations, (EUR in million, number) Operating in 36 countries from central Europe to central Asia, EBRD promotes: Transition to market economies; Mobilisation of significant FDIs; Improvement of people s lives through municipal services enhancement; Environmentally sound and sustainable development. EBRD has invested over 111 billion in more than 4,616 projects since EBRD is owned by 65 countries and two inter-governmental institutions. In January 2016 China became the 67th member of the Bank. 12,000 10,000 8,000 6,000 4,000 2, ,920 8,498 8,853 9,378 9, EUR mil Number of Operations EBRD shareholder structure, 2016 USA, 10.1% Others, 8.7% EBRD region excluding EU 13.8% Japan, 8.6% EU 27 Countries 58.7%

3 Striking a Balance TRILEMMA

4 Global Energy Sector Challenges Rapidly changing environment Global financial and economic crises Climate change agenda Dramatic growth in renewable energy generation Smart infrastructure and decentralized energy systems Unanticipated revolution of unconventional reserves Persistent challenges Small markets, not cost-reflective prices and limited private participation, damaging explicit and implicit subsidies Security, affordability and sustainability Operational approach

5 EBRD s Green Economy Transition approach The EBRD has been engaged in sustainable energy finance since its establishment. In 2006, the EBRD launched the SEI to address the twin challenges of energy efficiency and climate change. The EBRD was the first MDB with a dedicated pool of technical experts inhouse. In 2009, the EBRD became the first MDB to set itself a carbon emissions target. In 2013, the Sustainable Resource Initiative was launched which expands the focus from energy to include water and materials. The EBRD s engagement in the context of its countries of operations: high share of heavy industry ageing infrastructure high energy intensity a lack of market-based pricing for energy 22.4 billion GET finance since 2006 In 2015, the Green Economy Transition approach was launched under which the EBRD s green financing is to reach 40% of total annual business volume by

6 Renewables: Operational approach Policy dialog Promoting sustainable energy Honest broker role Sharing experience and best practice Technical cooperation Development equity Mezzanine Project finance Corporate loan Equity Investment Regulatory frameworks PPA drafting Grid absorption studies 6

7 Catalysing new markets First utility scale renewables in the region, building on years of discussion and consultancy advice to prepare the regulatory and contractual framework First private renewable projects and design and implementation of the regulatory framework First private renewable projects after years of support to put in place the renewable regulatory framework. First solar projects, following detailed engagement with the government on PPA drafting. Support for development of the NREAP First private renewable projects, coupled with policy dialogue and consultancy advice on the underlying regulations First private-to-private windfarm, alongside extensive consultancy advice to open up MV and LV networks. First private renewable projects, building on three years of support to the government on PPA drafting, grid code and environmental assessment. Selected examples show how in key countries EBRD combines policy dialogue and consultancy advice to create the enabling framework, before supporting first of a kind projects. 7

8 The leading financier of renewable energy in its region 1,083 MW wind 130 MW biomass 557 MW wind 50 MW solar 381 MW wind 20 MW biomass 79 MW wind 23 MW solar 22 MW biomass 50 MW wind 100 MW hydro 100 MW solar 158 MW wind 184 MW hydro 332 MW wind 48 MW wind 120 MW wind 120 MW Hydro rehab 216 MW wind 26 MW hydro 12 MW solar 750 MW solar 278 MW wind 150 MW geothermal 78 MW hydro 214 MW solar 82 MW wind 150 MW wind 142 MW 297 MW hydro hydro 20 MW wind 127 projects in 23 countries 6,500 MW of renewable capacity EUR 4.1 billion of EBRD investment EUR 12 billion total project value MW total is greater than totals shown on map due to regional projects not included and other minor adjustments. 8

9 EBRD and Renewables What role can we play? Bankable transactions attracting other lenders and third party finance Promoting dialogue amongst Sponsors, Governments, Civil Society Help organise independent due diligence and in introducing international public procurement principles Experience in transactions with complicated environmental aspects Addressing project problems through technical design improvements Assisting in preparation of feasibility studies (e.g. wind and solar reports) Project implementation assistance Technical co-operation: policy dialogue & finance 9

10 Case study 1: Egypt 10

11 Egypt FiT Programme: Overview EBRD developed an ambitious and comprehensive policy dialogue effort from PPA Support with local authorities Grid code for solar power integration / Strategic ESIA in Benban and East Nile FiT 2 nd Round Financing which lead to the structuring and negotiation for the financing of the largest solar complex in Africa. 986 MWp USD 1,130 million USD 368 million USD 476 million Across 16 Projects Total Projects Cost EBRD Debt Investment Mobilised Co-Financing Co-Lenders Sponsors 11

12 Egypt FiT Programme: Success Factors Outstanding Resources Egypt has one of the best solar resources in the world, which allowed the Benban projects to obtain a yield of 3000kWh/m2/year Indexed Tariff The FiT is paid in local currency, but is 70% indexed to USD, hence minimising the foreign exchange risk of the projects Competitive Tariff The Round 2 FiT minimised retroactive change risk as it was competitive with short-run cost of gas power plants. Take-or-Pay Framework The projects electricity generation offtake is structured as take-or-pay thus protecting the projects against volume risk and curtailment Stable Environment The political situation in Egypt has improved since 2011 resulting in a gradual return to political stability, thanks among other to strong IMF support Engagement The programme was able to attract strong international, regional and local sponsors, relentlessly working for the successful implementation of the programme 12

13 Egypt FiT Programme: Project Structure Lenders and Sponsors provide funding to the Project Company to build the Project The Project s offtake is ensured via the Power Purchase Agreement, signed with EETC, the single transmission operator in Egypt, and guaranteed by the Ministry of Finance Connection is also ensured between EETC and the Project Company via a Network Connection Contract The land is owned by the New and Renewable Energy Authority (state-owned) and leased to the Project via an Usufruct Agreement The cost of associated and necessary infrastructures to the Project are shared by all projects which have to sign a Cost Sharing Agreement with NREA and EETC All agreements signed between the Project and EETC or NREA benefit from an associated Direct Agreements Lenders and Sponsors Loan Agreement (Lenders) Shareholders Agreement (Sponsors) Project Company Power Purchase Agreement (EETC & MoF) Network Connection Contract (EETC) Usufruct Agreement (NREA) Cost Sharing Agreement (EETC and NREA) EETC Ministry of Finance NREA Power Purchase Direct Agreement Network Connection Contract Direct Agreement Usufruct Direct Agreement Cost Sharing Direct Agreement Lenders 13

14 Case 2: EBRD s RES projects in Kazakhstan Yereymentau Wind Farm (50MW) first large-scale wind farm in Kazakhstan EBRD loan EUR 59 MM CTF loan EUR 18 MM Shardara Hydro Power Plant EBRD loan EUR 46 MM Burnoye Solar Park (50MW) first large-scale PV power plant in Kazakhstan EBRD loan USD 76 MM CTF loan USD 15 MM Burnoye extension Solar Park (50MW) EBRD loan USD 44 MM CTF loan USD 10 MM 14

15 Case 3: EBRD s RES projects in Georgia Enguri Hydro Power Rehabilitation Co-financing with EU, Japan, KfW and GoG Construction of Dariali run-of-the river HPP (108MW) First syndicated loan for limited recourse project EBRD A/B loan USD 80 million Construction of Shuakhevi HPP (185MW) EBRD loan USD 87 million Construction of Paravani HPP (90MW) EBRD loan USD 63.5 million EBRD equity: 10% Construction of Gori Wind Power Plant (20MW) First wind farm in Georgia EBRD A/B loan USD 22 million Construction of Akhmeta SHP (9MW) and Pshavela SHP (2MW) EBRD loan USD 4.4 million 15

16 Contacts Marat Yelibayev Principal Banker Energy & Natural Resources Russia, Caucasus & Central Asia EBRD HQ One Exchange Square London, EC2A 2JN United Kingdom 21