Financing and investment projects in the energy infrastructure
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Financing and Investment Projects in the Energy Infrastructure. 4 th April 2006 Deputy DG Dr. Alfred Steffek. Why Investments . Investments in the Energy Infrastructure are necessary. A good Energy Infrastructure is a prerequisite for competitiveness of the economy Security of Supply

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Financing and investment projects in the energy infrastructure

Financing and Investment Projectsin the Energy Infrastructure

4th April 2006

Deputy DG Dr. Alfred Steffek


Why investments

Why Investments

Investments in the Energy Infrastructure are necessary

  • A good Energy Infrastructure is a prerequisite for competitiveness of the economy

  • Security of Supply

  • Diversification of Supply

  • Approach to the Common Market

  • Reach the objectives of the BSEC


Objectives

Objectives

Overall Objectives of the participants

  • Creation of a stable and reliable „Regional Energy Market“

  • Approach & Integration into the EU energy market

  • Development of an adequate and efficient electricity and gas infrastructure in a certain region


How to achieve these objectives

How to achieve these Objectives

  • To achieve these objectives, an attractive and sustainable investment climate for the investments in the electricity grids infrastructure and generation plants needs to be created and ensured

  • Investors like stability

  • More specific objectives are needed


Objectives1

Objectives

Specific Objectives

  • Achieve an integrated wholesale market within a certain period

  • Increase efficiency of transmission network

  • Necessary prerequisite at the operational level


Who is the proper investor

Who is the proper investor

Types of Investments

  • Direct investments by incumbent companies

  • Foreign direct investments (FDI)

    • Cross-boarder acquisition:Entering a foreign market by buying an existing enterprise

    • Greenfield Investments:Direct investment in facilities


Why investments by fdi

Why Investments by FDI

Reasons on Host Country’s side

  • Lack of Capital for implementing necessary investments

  • Raising money by selling companies (cross-boarder acquisition)

  • Raising money by granting permissions

  • Determine the best bidder (company) by call for tender


Why investments by fdi1

Why Investments by FDI

Reasons on Investor’s side

  • To make more profit

  • More Efficiency (Synergy effects)

  • To get a better market position


Invitation to tender

Invitation to tender

Determination on Host Country’s side

  • Quality of the investor

  • Role of the investor

  • Which aims are to be reached

  • Rights of the investor

  • Duties of the investor

  • Prioritise infrastructure projects


Risk allocation a balancing exercise

Risk Allocation – a balancing exercise

Construction risk

Operational risk

Market risk

Political risk

Upstream risk

Counterparty credit risk

Force majeure risk

Technology risk

Exchange rate risk

Cash flow risk

Default risk

Environmental risk

Source: Norton Rose, Presentation at Fourth Asia Gas Partnership Summit on February 20th, 2006


Balance of risks

Balance of Risks

Overall Prerequisite for foreign direct investments (FDI)

  • Harmonized legal framework to reach a sound investment climate in the region

  • Stable, long term forseeable regulatory framework

  • Investment friendly legal framework

  • Protection of investments given by governmental guarantees

  • Duties of investors must be determined clearly


Know how and investments

Know how and investments

Cross-Boarder Exchange: Speak the same Langue

  • Provide trusted market operations by an International Market Operators Cluster (IMO)

  • Coordinated Capacity allocation and ITC mechanisms  IMO

  • Ensure adequate level of cooperation and coordination  IMO


Know how and investments1

Know-How and Investments

Organisation and Operationalization – Grid & Market

  • The „International Market Operators Cluster” (IMO) shall be a joint stock company, owned by stakeholders and investors to ensure independent and transparent operations

  • The IMO shall be in charge of

    • (i) ITC (cross border tarifs), = Inter TSO Compensation

    • (ii) capacity allocation,

    • (iii) cross-border balancing and clearing

      The IMO shall be subject to regulatory control, because only a reliable and transparent energy market attracts investors

  • In the future a migration towards an ISO could be considered (would include network operations)


Know how and investments2

Know-How and Investments

  • Establishing the IMO: “Private Public Partnership” with an eligible investor that

    • has the know how to create a stable regional energy market

    • and enhances the attractiveness of energy related investments

  • Infrastructure and generation investments: The donors support investment projects in the BSCE region and provide

    • Cheap loans and/or grants for grid & other infrastructure investments, market operator‘s investments, generation investments

    • This way grid operations can be provided cheaper  matter of affordability of market prices for grid-utilisation

  • Stable political and economical environment  equal playing field for all investors


Prerequisite in the host country

Prerequisite in the host country

Overall Legislation of the host country

  • Clear law

  • Reliable framework

  • Free transfer of profits

  • Investment friendly law of taxation

  • Plans for transition


Resolving transitional problems

Resolving Transitional Problems

Transitional problems

  • Problems in connection of the changes of the social and economic environment

    • Social problems

    • Economic problems

    • Tensions between winner- and loosergroups

    • Who is responsible for declining of living standard

  • Handling with problems in connection of the changes of the social and economic environment

    • Talks with political opinion leaders

    • Talks with trade unions

  • Plans for transition


Contact

Contact

Federal Ministry of Economics and Labour

Schwarzenbergplatz 1

1010 Vienna

Austria

Dr. Alfred Steffek

Deputy Director General of Energy and Mining

Head of Legal Devision

Tel.: +43 1 71100 Ext.3001

Ext.3007

Fax.: +43 1 717 35 83

E-mail: [email protected]


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