New Financing of Wind Energy Projects – Slide 1 EWEA – EWEC 2007, Milan, 9 th May 2007 New Wind Finance Initiatives from EIB Christopher Knowles Energy

New Financing of Wind Energy Projects – Slide 1

EWEA – EWEC 2007, Milan, 9th May 2007

New Wind Finance Initiatives from EIB

Christopher Knowles

Energy & Environment,

Structured Finance and AdvisoryEuropean Investment Bank

European Wind Energy ConferenceMilan, 9th May 2007


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 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

EIB Energy Financing 2006

Conventional Energy

33%

Renewable Energy13%

Distribution48%

Refineries & Other6%



Wind Energy projects accounted for 70% of EIB’s Renewable Energy Financing in 2006

EIB’S RENEWABLE ENERGY FINANCING IN 2006

EIB Renewable Energy Financing 2006

Hydro17%Solar

13%

Wind70%



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

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:

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

EU POLICY CONTEXT



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

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

Annual Target of EUR 6-800m for RE projects

EIB’S TARGETS FOR RENEWABLE ENERGY



Equity/Investment Funds

Carbon Finance:

Multilateral Carbon Credit Fund - MCCF

Carbon Fund for Europe – IBRD

EIB – KfW Carbon Finance programme

Post 2012 (coming soon)

Debt

EIB’S Menu



Corporate Loans and Project Finance

Loan term up to economic life of the assets

Loan amount generally up to 50% of eligible project costs

Senior and subordinated loans

EIB’S LOAN PRODUCTS

General Terms:

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

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



Corporate Loans and Project Finance

Project could consist of single or multiple sites

Direct Investment Loans

EIB’S LOAN PRODUCTS (2)

Comprehensive loan appraisal justified by project size

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

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)



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

Programme or Framework loan to corporate or intermediary

EIB’S LOAN PRODUCTS (3)

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

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

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



Multi-scheme facilities for small-scale wind projects

Project risk assumed by intermediaries OR EIB shares project risk

WORKING WITH FINANCIAL INTERMEDIARIES

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



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’s

assets and revenues Pari passu with other senior lenders Loan Term: 18 years



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

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

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



http://www.eib.org

Address: 100, boulevard Konrad Adenauer, L-2950 Luxembourg

Contact: Chris KnowlesTel: 00.352.4379 7306Fax: 00.352.4379 7292

e-mail: [email protected]

Documents

New Financing of Wind Energy Projects – Slide 1 EWEA – EWEC 2007, Milan, 9 th May 2007 New Wind Finance Initiatives from EIB Christopher Knowles Energy