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EWEA – EWEC 2007, Milan, 9 th May 2007 New Wind Finance Initiatives from EIB. Christopher Knowles Energy & Environment, Structured Finance and Advisory European Investment Bank. CONTENTS. EIB & Energy Financing  Policy Background EIB’s Loan Products

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Ewea ewec 2007 milan 9 th may 2007 new wind finance initiatives from eib

EWEA – EWEC 2007, Milan, 9th May 2007New Wind Finance Initiatives from EIB

Christopher Knowles

Energy & Environment,

Structured Finance and Advisory

European Investment Bank


Contents
CONTENTS

  • EIB & Energy Financing

  •  Policy Background

  • EIB’s Loan Products

  • Working with Financial Intermediaries

  • Case Study I

  • Case Study II

  • Case Study III

  • Case Study IV


The european investment bank
THE EUROPEAN INVESTMENT BANK

  • The European Union’s financing institution ...

    • Created by the Treaty of Rome in 1958, to provide long-term finance for projects implementing the EU’s policies.

    • Subscribed capital: EUR 164.8bn

    • EIB shareholders: 27 Member States of the European Union.

    • EIB’s annual lending (2006): EUR 45.8bn.

    • Annual lending to the energy sector (2006): EUR 4.1 billion


Renewable Energy Financing in 2006 amounted to EUR524m (32% of EIB’s financing of Electricity Generation projects)

EIB’S ENERGY FINANCING IN 2006


Wind energy projects accounted for 70 of eib s renewable energy financing in 2006
Wind Energy projects accounted for 70% of EIB’s Renewable Energy Financing in 2006

EIB’S RENEWABLE ENERGY FINANCING IN 2006


Eu policy context
EU POLICY CONTEXT Energy Financing in 2006

EU Commitment: 20% reduction of GHG emissions by 2020 compared to 1990

Energy accounts for 80% of greenhouse gas emissions in the EU (European Environment Agency)

EU target: Renewable Energy to account for 20% of EU energy mix by 2020 (up from less than 7% in 2005)

Diversification of energy sources in order to secure energy supply

Combating pollution and energy dependence:


Eib s targets for renewable energy
EIB’S TARGETS FOR RENEWABLE ENERGY Energy Financing in 2006

RE to account for at least 50% of EIB’s lending for Electricity Generation

Annual Target of EUR 6-800m for RE projects

Wind likely to continue to be the main focus for RE lending


Eib s menu
EIB’S Menu Energy Financing in 2006

Equity/Investment Funds

Debt

  • Carbon Finance:

    • Multilateral Carbon Credit Fund - MCCF

    • Carbon Fund for Europe – IBRD

    • EIB – KfW Carbon Finance programme

    • Post 2012 (coming soon)


Eib s loan products
EIB’S LOAN PRODUCTS Energy Financing in 2006

Corporate Loans and Project Finance

Senior and subordinated loans

Sub-investment grade loans fall under Structured Facility Finance (SFF): higher risk margin and loan amount capped at 200m EUR

Loan term up to economic life of the assets

Loan amount generally up to 50% of eligible project costs

Under the Climate Change Finance Facility (CCFF), EIB can finance up to 75% of eligible project costs

General Terms:


Eib s loan products 2
EIB’S LOAN PRODUCTS (2) Energy Financing in 2006

Corporate Loans and Project Finance

Direct Investment Loans

Comprehensive loan appraisal justified by project size

Where EIB takes full project risk, loan may fall under SFF => EIB loan amount capped at 200m EUR (maximum amount could be lower depending on riskiness of project)

Project could consist of single or multiple sites

Large-Scale Projects (typically > 50m EUR investment cost):


Eib s loan products 3
EIB’S LOAN PRODUCTS (3) Energy Financing in 2006

Programme or Framework loan to corporate or intermediary

EIB willing to provide loan facilities to developers for bundling small-scale projects

EIB Strategy:

Increase exposure to small-to-medium scale wind energy projects through intermediated loans on a risk-sharing basis and facilities for developers.

Traditionally, intermediaries were financial entities and => no project risk for EIB. No longer so.

Small-to-Medium Scale Projects (typically < 50m EUR investment cost):


Working with financial intermediaries
WORKING WITH FINANCIAL INTERMEDIARIES Energy Financing in 2006

Multi-scheme facilities for small-scale wind projects

EIB will agree streamlined appraisal process with intermediaries => expertise of intermediary in the wind sector is key in case of EIB risk

Project risk assumed by intermediaries OR EIB shares project risk


Case study i large project finance
CASE STUDY I: LARGE PROJECT FINANCE Energy Financing in 2006

  • 240MW onshore windfarm project in 5 sites

  • Off-take agreement with TSO

  • Total project cost = 390m EUR

  • 20 year project

  • Debt:Equity = 90:10

  • EIB loan: 170m EUR project finance loan secured on project’sassets and revenues

  • Pari passu with other senior lenders

  • Loan Term: 18 years


Case study ii intermediated framework facility
CASE STUDY II: INTERMEDIATED FRAMEWORK FACILITY Energy Financing in 2006

  • Framework loan to finance renewable energy projects, mainly wind energy, in large WE country

  • Loan intermediated by specialised subsidiary of major bank

  • Total Facility Amount: 300m EUR

  • EIB loan amount: 100m EUR

  • Loan Term: 15 years

  • Projects financed by EIB must meet preset criteria => streamlined appraisal process


Case study iii large corporate finance
CASE STUDY III: LARGE CORPORATE FINANCE Energy Financing in 2006

  • Corporate loan to a major Western European electricity producer to finance 3-year investment programme in wind energy

  • Total Programme Cost = 1.1bn EUR

  • EIB loan amount: 450m EUR

  • 2 Tranches:

    • Tranche A: 350m EUR 10 year tenor, corporate risk

    • Tranche B: 100m EUR 15 year tenor, bank guaranteed


Case study iv risk sharing framework facility
CASE STUDY IV: RISK SHARING FRAMEWORK FACILITY Energy Financing in 2006

  • Framework loan to finance on-shore wind on a Pan-EU basis

  • Co-financing arrangement with a leading PF Bank active in RE

  • Total Facility Amount: 200m EUR; provided equally

    • Individual loan tenors of 15 years

    • EIB assuming full project risk, with pricing benefits for individual projects being financed

    • Co-financier acts as Facility Agent

  • Projects financed by EIB must meet preset criteria

    • Co-financier responsible for identifying eligible projects

    • Streamlined project appraisal process


Address Energy Financing in 2006: 100, boulevard Konrad Adenauer,

L-2950 Luxembourg

Contact: Chris Knowles

Tel: 00.352.4379 7306

Fax: 00.352.4379 7292

e-mail: [email protected]

http://www.eib.org


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