EBRD Support for Renewable Energy and Energy Efficiency projects Ian Brown Power & 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 ( ) Unaudited as at 31 December 2012 Note: 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 Parshad Director, Power and Energy +44 (0) Ian Brown Senior Adviser, Power and Energy