EBRD: Supporting investment in the
Serbian Energy Sector
Ian Brown, Senior Adviser, Power and Energy Utilities
26th February 2013
AGENDA
I.
Overview of EBRD: Mission and Guiding Principles
II. EBRD in Serbia
III. Power & Energy Utilities: Focus and experience
IV. Investment in Generation: Issues and Experience
V.
Financing renewable energy in Serbia
2
AGENDA
I.
Overview of EBRD: Mission and Guiding Principles
II. EBRD in Serbia
III. Power & Energy Utilities: Focus and experience
IV. Investment in Generation: Issues and Experience
V.
Financing renewable energy in Serbia
3
EBRD’s objectives achieved through
financing the private sector
• AAA/Aaa stable rated
multilateral development
bank owned by 63
countries and 2
multinational entities
• Invested over €78.9 billion
in more than 3,644
projects since 1991
• In 2012:
– €8.9 billion invested in
393 projects in 2012
– Private sector accounted
for 80% share
– Debt 87.5%; Equity
12.5%
Note: Provisional data as at 31 December 2012
€ billion
34 countries of operation and 39 resident offices
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AGENDA
I. Overview of EBRD: Mission and Guiding Principles
II. EBRD in Serbia
III. Power & Energy Utilities: Focus and experience
IV. Investment in Generation: Issues and Experience
V. Financing renewable energy in Serbia
6
EBRD in Serbia
•
Country of operation since 2001
•
Total cumulative commitments of € 3.11bn as of Dec 2012
•
Private sector participates with 45% in total cumulative commitments
Total outstanding portfolio of € 2.34bn, comprised of 123 active
operations
•
In 2012, invested € 270 million in 20 projects
•
In 2013, plan to invest € 300 million in 20 projects or more
•
Team of 22 people in Resident Office in Belgrade
•
Objectives: To promote a sound investment climate, good corporate
governance and stronger institutions
Serbia: Cumulative Commitments
Composition (€ m)
452
15%
1,086
35%
716
23%
852
27%
Infrastructure
Financial Institutions
Industry, Commerce and Agribusiness
Power and Energy
EBRD Facilities
LOANS
• Project finance loans
• Corporate loans with specified use of
proceeds
• Tenor of 10-15 years
EQUITY
• EBRD equity stake typically below 2025% (meaningful, but minority)
• Investment through capital increase
• Invest in Funds to address smaller
projects or larger stakes
• Margin benchmarked to market
• Fixed rate and/or local currency
possible
• Exit through IPO, trade sale or put/call
agreement
• Political and regulatory risk mitigation
• EBRD can directly finance up to 35% of
an enterprise's long term capital (or
project costs for greenfield projects);
additional funds mobilised through
syndication
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Leveraging commercial finance
• Catalyst for commercial investment: Every €1 invested or
lent by the EBRD mobilises €3.1 from other sources
• Equity: by investing as a minority shareholder we reduce the
equity burden and add value through partnership
• Debt syndication: The EBRD can syndicate all or part of the
senior debt under A/B structures
• Debt co-financing: The EBRD will work with or alongside
other commercial banks to provide the appropriate debt
package
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AGENDA
I. Overview of EBRD: Mission and Guiding Principles
II. EBRD in Serbia
III. Power & Energy Utilities: Focus and experience
IV. Investment in Generation: Issues and Experience
V. Financing renewable energy in Serbia
11
Primary objectives
• 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
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Financings by sector
Financing by Sector
(2009-2012)
Natural Gas
Distribution
2%
Electric
Power
Distribution
13%
Renewable
Power
27%
• 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
Electric
Power
Transmission
9%
Electric
Power
Generation
49%
• Renewables represent an increasing
portion of total financing, comprised
primarily of wind and hydro but also
including biomass and solar
Unaudited as at 31 December 2012
Note: Renewable power does not include large hydro.
Source: EBRD data
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Focus on renewables
Renewables financing by technology
(2009-2012)
Wind
72%
Hydro
16%
Various
7%
1
Biomass
4% Solar
1%
• In 2012 the EBRD signed €305mln of
financing for 14 renewables deals with a
total gross project value of €960 mln
• Notable transactions in 2012 include the
following wind farms: Salkhit (Mongolia),
Kukinia (Poland), Chirnogeni
(Romania), Bares (Turkey)
• Technologies financed to date include
wind (about 72%), hydro (about 16%),
biomass (about 4%) and solar (less
than 1%). Note that hydro includes
greenfield small hydro and hydro
rehabilitation, but not greenfield large
hydro
Unaudited as at 31 December 2012
Note: Renewable power does not include large hydro.
Source: EBRD data
(1) Various includes investment in funds that finance a mix of technologies.
• The EBRD has been most active in
financing renewables projects in Poland,
Ukraine, Turkey and Romania
AGENDA
I. Overview of EBRD: Mission and Guiding Principles
II. EBRD in Serbia
III. Power & Energy Utilities: Focus and experience
IV. Investment in Generation: Issues and Experience
V. Financing renewable energy in Serbia
15
Broad and extensive support for the region
Western Balkans
- Albania Vlore TPP
(€40mn)
Bulgaria
- Saint Nikola Wind
Farm (€70mn)
- Maritza East 1
(€96mn)
- Maritza East 2
(€22mn)
- Maritza East 3
(€28mn)
- Vez Svoghe Hydro
(€34mn)
Generation
- Serbia EPS
(€60mn)
Transmission
- Serbia EPS
Reconstruction
(€100mn)
- BiH Power
Reconstruction
(€68mn)
Note: Selected projects after 2000; figures shown are EBRD financing
Romania
- Turceni Rehab
(€80 of 170mn debt)
Regional
- Joint Power
Venture (€60mn)
- PETROM CCGT
(€200 of 400mn
debt)
- Transelectrica
(€13mn)
- NPGC (€33mn)
- FYROM
Transmission
Interconnection
(€41mn)
Investment in Generation: Some
Considerations
• In the Western Balkans the looming end 2017 deadline for the EU LCP
Environmental Directive should be concentrating minds: hydro generation
park is old and lignite fired.
• Investment opportunities – Substantial investment needs (Serbia has EUR
7 billion of ‘priority’projects), many feasibility studies, and MoUs signed,
and even tenders launched, very little signs of concrete investment going
forward.
• Effects of the financial crisis - not insurmountable: EBRD has syndicated
projects in the region, but they really need to prove themselves (merit,
efficiency, off-take, and/or regional); debt pricing remains high
• What to expect in the near future – continuing increase in emphasis on
RES and Energy Efficiency; greenfield lignite power generation has to be
highly efficient and financing is difficult. Progress in liberalisation: erratic.
• Note strong opposition to new lignite fired generation (and hydro) from
NGOS, this is an important consideration for IFIs: EIB and (with the
exception of Kosovo) World Bank cannot finance coal fired generation
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Key current regulatory challenges
• How to deploy renewables without being overwhelmed or
paying too much?
• Consider auctions in early stages
• Caps on specific technologies with “use it or lose it” permitting
• Aggressive reduction in support for fast-changing technologies
• How to support conventional capacity in an era of high
fuel price volatility and increasing renewables
penetration?
• Wide availability of information on network development
• Capacity payments or deep ancillary services/reserve market
• How to promote cross-border trade?
• Clear, transparent rules on capacity allocation
• Mechanisms to allow merchant lines
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AGENDA
I. Overview of EBRD: Mission and Guiding Principles
II. EBRD in Serbia
III. Power & Energy Utilities: Focus and experience
IV. Investment in Generation: Issues and Experience
V. Financing renewable energy in Serbia
19
What is WeBSEDFF?
 A direct financing facility operated by the EBRD
 For (small) renewable energy and energy efficiency projects
 In the Western Balkans (Albania, Bosnia and Herzegovina,
Croatia, FYR Macedonia, Montenegro and Serbia, including
Kosovo, under UNSCR 1244)
 Endowed with up to EUR 100 million of loan funds + up to
EUR 21.5 million in Technical Cooperation (TC) and
incentive payment funds
Financing instruments
 Senior (secured) loans and project financing arrangements
 From EUR 2 million to EUR 6 million EBRD financing (for
certain countries from EUR 1 million)
 Average (expected) maturity of 6-8 years for energy efficiency
and 12-15 years for renewable energy projects, with
appropriate grace periods and flexible repayment schedules
 Market based interest rates
 Supported by TC funds for project identification and
preparation as well as by incentive payments based on the
estimated CO2 emission reductions generated by each eligible
project
Structure of the WeBSEDFF
EBRD
Donor
Funded
Contract
Loan
€
Donor
€
Payment*
Agreement
Project
Consultant
Technical Assistance
Incentive
Funded
Contract
Borrower
Verification
Consultant
Implementation Verification
* Incentive payments will be paid upon technical completion of the investments to eligible
Borrowers
Positioning of the WeBSEDFF
• WeBSEDFF is part of a broader Sustainable Energy
Initiative of the EBRD for the Western Balkans, including
also:
• The WeBSEFF – a credit line facility of up to EUR 60 million for
financing industrial energy efficiency and small renewable
energy projects through Participating Banks (in BiH, FYR
Macedonia, Montenegro and Serbia) with individual loans
between EUR 100 thousand and EUR 2 million, TC assistance
and incentive payments
• An institutional capacity building component of up to EUR
3.5 million to address deficiencies in the regulatory framework
and other obstacles to the development of the market for
sustainable energy projects (17 assignments already completed
or underway)
Eligibility criteria (1)
Eligible types of projects:*
• Renewable Energy – run-of-river hydro power plants; wind farms;
solar systems; biomass systems generating heat and electricity,
etc.
• Industrial Energy Efficiency – on site co- or tri-generation;
rehabilitation of boilers, compressed air systems and steam
distribution systems; chillers; installations for heat recovery from
processes; various other EE improvement measures or
combinations of them
• ESCO projects – energy saving projects based on guaranteed
savings, implemented by private companies in the public or
private sector
* Full list is available upon request
Eligibility Criteria (2)
In order to qualify for financing and incentive payments under
WeBSEDFF the projects should meet certain eligibility criteria: *
Technical criteria - defined in terms of:
• At least 20 percent of energy savings for industrial energy efficiency
projects;
• A minimum efficiency (utilization) rate for renewable energy projects;
Financial criteria – sound financial / economic structure and sufficient
equity capital contributed to the project by the Sponsor;
Other criteria – for projects requiring concessions, licenses and
permits, those should be obtained in compliance with the relevant EBRD
requirements (transparent and competitive process, among others)
* Detailed information on the eligibility criteria can be provided upon request
Operational Arrangements (1)
Project consultants will screen and evaluate potential
projects. Their role will be to:
• Verify the compliance of the project with the technical and other
eligibility criteria
• Help project sponsors to define the scope of their projects (including
by performing an Energy Audit) and assist them in applying for
financing
• Estimate the potential CO2 emission reductions by each project on
the basis of which the incentive payments can be calculated
• Provide guidance to the project sponsors about the best practices in
the field and help them to implement their projects;
Operational Arrangements (2)
Approval Process and Other Features:
• A two-stage approval procedure carried out in London
• Expected duration from initial discussions to final approval: 4
– 9 months
• Legal costs: to be covered by the EBRD (subject to certain
constraints)
• Interest rates: market based, depending on the type and risk
profile of the project, the Sponsor and other considerations
Thank you
Nandita Parshad
Director, Power and Energy
London
+44 (0)207 338 6537
parshadn@ebrd.com
Ian Brown
Senior Adviser, Power and Energy
Belgrade
+381 63 233 954
browni@ebrd.com
Simon Lorenzetti
Intern
EBRD Belgrade
lorenzes@ebrd.com
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