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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
slide4
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

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

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

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

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)

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)

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

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
  • 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
  • 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
  • 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
  • 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
slide17
Address: 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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