EBRD Sustainable Energy Initiative

EBRD Sustainable Energy Initiative

Pathway 2

EBRD: Mission and Operations

4 The European Bank for Reconstruction and Development: Mission and Vision Since its inception in 1991, EBRD s operations are based on three principles: Promoting transition to market economies, private ownership and good governance Invests in financially viable projects, together with the private sector Provides financing at reasonable terms, otherwise not available from private sources Focusing on the triplebottom line benefits: Economic, Social and Environmental

5 The European Bank for Reconstruction and Development: Regional Leader in its Countries of Operations Founded in 1991 after the disintegration of the Soviet Union, EBRD s region of operations cover most countries in Eastern Europe, Central Asia and, since 2008, Turkey

6 The European Bank for Reconstruction and Development: Type of Investments Catalyst for Commercial Investment: Every 1 invested or lent by the EBRD mobilises more than 3 from other sources Debt Equity Debt Equity Debt co-financing: working with commercial banks to provide appropriate debt package Project finance loans Corporate with specified use of proceeds Hard/local currency Investing with majority sponsor to reduce equity burden and add partnership value Common or preferred stock Privatisation and initial public offering Mezzanine equity and subordinated debt Medium/long tenors (>15 years) Fix/floating rates Carbon financing

7 The European Bank for Reconstruction and Development: Modus Operandi $1,000+ Project value $100,000,000+ Technical Assistance Financing Facilities through partner financial institutions individual clients, small size projects and SMEs; up to $ 5 million loans ($ 20 million project value) Direct Lending Facilities limited recourse, mid-sized projects, flexible approval procedure; up to $ 15 million investments ($ 50 million project value) Direct Investment loans and equity investment; investments above $ 15 million for overall project value of $50 million+ Technical Assistance (e.g. energy audits, financial advisory services) applicable to any sector and project size

8 EBRD s Competitive Advantage: Benefits of Working with Us Strong, internationally recognized partner with long term perspective Mitigation of political and regulatory risks Policy dialogue with Government and Regulators Grant-funded technical assistance Finance and operations monitoring Flexible deal structure Debt finance to both public and private sector Syndication under preferred creditor status Catalyst to access additional debt Debt LT Debt Financing EBRD Value-added EBRD value - Shareholder Shareholder s Value Equity Equity Financing Support of strategic investors Perception of quality investment Sector expertise through Board of Directors Good corporate governance Catalyst to access additional equity Positioning as neutral party

The Energy Efficiency and Climate Change Team and EBRD s Sustainable Energy Initiative

10 EBRD Organisational Structure: The Role of the Energy Efficiency and Climate Change team Governors Directors President Evaluation Members * Non-exhaustive EBRD organisational structure Audit Finance Environment Banking OCE OCCO OSG Agribusiness Financial Institutions General Industry Municipal & Env. Infr. Natural Resources Power & Energy Property & Tourism Transport Energy Efficiency and Climate Change

11 EBRD s Sustainable Energy Initiative (SEI): Expanding Investments in Energy for Low-Carbon Growth Launched in 2006 in response to the energy transition needs of EBRD s area of operations. SEI 6 areas of investment were: 1. Industrial Energy Efficiency 4. Renewable Energy Scaleup 2. Sustainable Energy Financing Facilities 5. Municipal Infrastructure Energy Efficiency 3. Power Sector Energy Efficiency 6. Carbon Markets Development

12 EBRD Sustainable Energy Operational Approach: A Successful Trident Strategy Via these three parallel activities SEI accounted for 24% of EBRD s portfolio in 2010 Technical assistance to overcome barriers: market analysis, energy audits, training, awareness raising. Grant co-financing to provide appropriate incentives and address affordability constraints Working with Projects with a range of clients, public and private, with a range of financing instruments governments to support development of strong institutional and regulatory frameworks that incentivise sustainable energy

SEI PHASE 2 IMPLEMENTATION STATUS SEI Phase 2 objectives: SEI EBRD financing: 3 to 5 billion (total project value of 9 to15 billion) Carbon emissions reduction: 25 to 35 million tco 2 e/annum Technical assistance funding mobilisation target: 100 million Investment grant funding mobilisation target: 250 million SEI Phase 2 Results as of end 2010: SEI financing 3.4 billion reaching target Phase 2 range. Total project value reached 18 billion above upper end of target range Number of operations: 187 projects in Phase 2 (compared to 166 for Phase 1 as a whole) Carbon reduction impact of SEI projects signed expected at 16.2 million tco2/annum Funding mobilisation in Phase 2: 102 million for technical assistance 212 million in Investment grants funding

SEI CUMULATIVE RESULTS 2006-2010 REGIONAL COMPOSITION SEI ACTIVITIES COVERED 29 COUNTRIES OF OPERATIONS South-Eastern Europe 15% Russia 31% Western Balkans 7% Central Asia 6% Regional 2% Central Europe and Baltics 11% Eastern Europe and Caucasus 28% ALBANIA ARMENIA AZERBAIJAN BELARUS BOSNIA AND HERZEGOVINA BULGARIA CROATIA CZECH REPUBLIC ESTONIA FYR MACEDONIA GEORGIA HUNGARY KAZAKHSTAN KYRGYZ REPUBLIC LATVIA LITHUANIA MOLDOVA MONGOLIA MONTENEGRO POLAND ROMANIA RUSSIA SERBIA SLOVAK REPUBLIC TAJIKISTAN TURKEY TURKMENISTAN UKRAINE UZBEKISTAN

CCS Activities 15

16 EBRD CCS Objectives 1. Assess the technical and economic feasibility of the transport and storage of CO2 as a solution for future development of the electricity generation sector 2. Assist countries in formulating a sustainable position at the EU level, focused on the opportunity of CO2 transport and storage development 3. Participate in financing certain projects with good potential to demonstrate the technological potential and economic viability based on the sound banking principles that the Bank uses in every project: Sound Banking, Transition Impact & Additionality. CASE STUDY for Bulgaria, in four major tasks: Review and preliminarily assess Technical Options for CO2 Capture, Transport and Storage Assess the Bulgarian Capacity for Storage of CO2 Gain stakeholders' support for CCS Assist the Bulgarian Ministry for Economy and Energy through various EU initiatives

17 CCS for Bulgaria Sources 1. No power plant is considered CCSready according to the IEA s definition 2. TPP Maritsa East II and TPP AES-3C Galabovo where selected for evaluation 3. Criteria: a) Use of local coal b) Mini plant lifetime of 30yrs c) Proximity of the two plants to potential CO2 storage sites d) Plant pre-investments are in place e) The plants are or will be listed among the highest CO2 producers in the country; f) CCS will lower their impact and their contribution to industrial air pollution, which will help improve public opinion. g) The TPP AES Galabovo will be the newest fossil-fuelled power plant in the country and will be CCSready. h) Both plant facilities & infrastructure possess in place to accommodate the requirements of a CCS demonstration project.

18 CCS for Bulgaria Storage Sites 1. Three storage areas, Galabovo Maritsa, Pavlikeni and Yambol-south Cherkovo, 2. Criteria: a) Storage capacity (50 Mt of stored CO2) over more than 20 years b) Maximum distance of 150 km from the CO2 source The following are the three selected CCS demonstration project scenarios: Scenario 1: TPP AES Galabovo Galabovo/Maritsa storage sites Scenario 2: TPP Maritsa East II Pavlikeni storage site Scenario 3: TPP Maritsa East II Yambol-south/Cherkovo storage sites

CCS for Bulgaria: Full Chain 19

20 CCS for Bulgaria: Description of Scenarios Scenario 1 Scenario 2 Scenario 3 Source TPP AES Galabovo TPP Maritsa East II TPP Maritsa East II Emitted CO2 (Mt/yr) Capture CO2 (Mt/yr) 90% eff. 2.35 2.93 2.93 2.12 2.64 2.64 Storage Area Galabovo/Maritsa Pavlikeni Yamboulsouth/Cherkovo Estimated Storage Capacity (Mt) Pipeline Length (km) 157-195 460 41-51 18 130 93

21 CCS for Bulgaria: Storage Conclusions Scenario 1: TPP AES Galabovo Galabovo/Maritsa storage sites, presently an insufficient understanding of the geological model exists for the storage sites although there is potentially good storage capacity. Scenario 2: TPP Maritsa East 2 Pavlikeni storage site, presently has the best level of understanding of the geological model and the best (preliminary) storage site suitability, and likely offers the highest storage capacity. Scenario 3: TPP Maritsa East 2 Yambol-south/Cherkovo storage sites, is promising, but the geological model of the storage sites is poorly understood and is only conceptual at this stage. From a strictly technical point of view, storage viability must be given preference over transport feasibility. At this stage, the promising storage sites under Scenario 3 and the storage sites under Scenario 1 should not be dismissed due to their relative proximity to the emission sources

22 CCS for Bulgaria: Economics & Next step Scenario 1 Scenario 2 Scenario 3 Source TPP AES Galabovo TPP Maritsa East II TPP Maritsa East II Storage Area Galabovo/Maritsa Pavlikeni Yamboulsouth/Cherkovo CCS Investment Costs (M$) 390-660 496 746 472 740 Capture Plant (M$) 295-489 343-568 343 568 Transport (M$) 7.4 97.1 46.9 Storage Determination (M$) 88.3-162 56.2 81.7 83 125.8 Next step: Feasibility Study to define the most feasible and cost-effective integrated solution based on the results thus far.

23 EBRD: CCS Next Steps Capacity Building within countries in similar studies Policy Dialogue with national authorities Discussions with projects sponsors on potential investments based on EBRD Principles: Sound Banking: Private sector involvement Additionality: Reasonable terms, otherwise not available from private sources Transition Impact: market economies, private ownership and good governance Triple-bottom line benefits: Economic, Social and Environmental