EBRD Financing Wind Energy in Central and Eastern Europe Peter Hobson EWEC 2006, Athens

EBRD and wind energy: Introduction What does the EBRD do: promoting market development, enhancing sustainability, catalysing commercial finance, mobilising technical assistance, monetising carbon credits Wind energy in central and eastern Europe: the opportunities and challenges How can the EBRD help: flexible, innovative, connected

EBRD: What we do Promoting market development Enhancing energy sustainability Leveraging commercial finance Mobilising technical assistance Monetising carbon credits Flexible, Innovative, Connected

EBRD: Promoting market development Established in 1991 by 62 national and supra- national shareholders Exclusively investing in the 27 countries of Central & Eastern Europe and CIS Cumulative commitments of €25.3 bn in more than 1,100 projects to date of which €1.3bn in sustainable energy Commercial banking discipline with a regional risk appetite

ANALYSIS: Foundations of operation Apply sound banking principles to every project – We do not subsidise Advance the transition to a full market economy – Priority to promote private sector and market expansion Support, but not replace, private investors (additionality) – Catalyst for higher and riskier private sector involvement

EBRD: Enhancing energy sustainability €1.3bn invested in sustainable energy to date, of which €337m in renewable energy Both direct project financier or equity investor in renewable projects, and indirect investor via funds and local banks Wind sector remains in early development stage in the region, and a key priority for EBRD Delivering innovative financing to sustainable energy projects

ANALYSIS: Parameters of EBRD financing Can invest up to 35% of project cost Typical minimum investment amount €5m but sustainable energy priority means smaller transactions are possible Flexible investment type: debt, mezzanine, equity Minority equity investor up to 49% Invest in Funds and through local Banks to address smaller projects or larger stakes

EBRD: Leveraging commercial finance Catalyst for commercial investment: Every €1 invested or lent by the EBRD mobilises €3.1 from other sources Equity: by investing with majority sponsor we reduce the equity burden and provide support Debt syndication: The EBRD can syndicate all or part of the senior debt under A/B structure Debt co-financing: The EBRD will work with or alongside other commercial banks as part of the debt package

EBRD: Mobilising technical assistance Access to Government grant funding Funds available for technical assistance such as environmental assessments, baseline studies … Assisting committed sponsors in early project development phases Entrusted with grant funding to overcome transition challenges

EBRD: Monetising carbon credits Manager of €32m Dutch Carbon Fund buying carbon credits from Joint Implementation Projects Contracting carbon purchase with EBRD at time of financing adds certainty to cashflow In-house expertise to guide clients through monetisation of carbon Well-structured carbon transactions to further enhance project viability

ANALYSIS: Wind farm example Typical 60MW wind project might expect to generate 100k tonnes CO2 reductions per year giving potential to cover 5% - 10% of project cost Fund will work with project Sponsor to estimate carbon emission reduction potential Support from EBRD fund to prepare Project Idea Note and Project Design Document Will contract to buy credits up front including partial up front payment

Wind Energy: Opportunities (1) EBRD assessed renewable energy potential throughout its region in 2003: In general moderate potential for wind energy throughout the region but hardly exploited yet Good opportunities in Poland, Hungary, Croatia, Bulgaria, Romania, Czech Republic Key driver now EU legislation and RE targets

Wind Energy: Opportunities (2) Black & Veatch analysis, 2003

New Member States: RES Directive RES 2003 (IEA) 2010 target (%) 2010 target ( GWh )Support Poland1.7%7.5%10,610GC Hungary1.1%3.6%1,479€92/MWh CR2.3%8.0%5,361€87/MWh Estonia0.5%5.1%421€52/MWh Latvia58.9%49.3%3,260€50/MWh Lithuania2.7%7.0%837€75/MWh Slovakia12.5%31.0%8,966€75/MWh Slovenia23.4%33.6%4,765€61/MWh

New Member States: RES Directive 2003 (IEA)2010 targetSupport Poland1.7%7.5%GC Hungary1.1%3.6%€92/MWh CR2.3%8.0%€87/MWh Estonia0.5%5.1%€52/MWh Latvia58.9%49.3%€50/MWh Lithuania2.7%7.0%€75/MWh Slovakia12.5%31.0%€75/MWh Slovenia23.4%33.6%€61/MWh

EBRD Region: current status (1) Poland – many local developers seeking strategic partners, GC market in early stages, financing and construction activity starting now, anticipated growth 100MW – 300MW pa Hungary – tight market will be limited by terms of operating licences, first awards anticipated 2006Q2 Czech Republic/Slovakia – active development, mostly smaller projects Baltics – good potential but governments slow to clarify licensing regimes or cautious to award licences

EBRD Region: current status (2) Croatia – government supportive and preparing new renewable regulation, some local activity Bulgaria – supportive government, re-thinking regulatory approach Romania – new legislation for GC, good time now to enter the market Russia/Ukraine – very large potential, no sign of regulatory support yet, but keep monitoring

EBRD Region: market overview Slow progress in recent years but now moving rapidly in new member states, albeit on small scale Good growth potential and strong advantage for early movers, particularly in less developed markets of Bulgaria, Romania and Croatia Very significant potential further east – Ukraine, Russia and central Asia. Experience in more advanced transition countries will be a valuable stepping stone Security of supply concerns place new emphasis on RES

How we can help: Flexible Wide palette of financial instruments: Debt & equity; guarantees; credit lines; equity funds Long-term partner: Offering longer tenors than market norms; partnering at an early stage Public and Private: Invest with and through public and private operations; engaging with Government bodies on projects and policy

How we can help: Innovative Developing new instruments: Renewable energy fund, EE/RE Credit Line (e.g. Bulgaria – Establishing new activities: Developing carbon finance capability under Bank operations EBRD Renewable Development Initiative: Website pooling latest information on regional renewable activities.

How we can help: Connected In-depth understanding of region: 36 offices across region; experience through “rough and smooth” from Russian crisis to EU Accession Working with governments and the EU: on going policy dialogue at country level and continuous discussions with EU on implementation of renewables framework and problems encountered Extensive commercial expertise: Team staff from leading banks, funds and industry

How to contact us Peter Hobson Senior Banker, Renewable Energy Co-ordinator Tel: +44 (0) One Exchange Square, London, EC2A 2JN Mike Rand Associate Banker, Energy Group Tel: +44 (0) One Exchange Square, London, EC2A 2JN