Transcript scaling-up sustainable energy investment

SCALING UP PRIVATE INVESTMENT IN SUSTAINABLE
ENERGY: EBRD ACTION AND RESULTS
JOSUÉ TANAKA
MANAGING DIRECTOR
ENERGY EFFICIENCY AND CLIMATE CHANGE
PREPARED FOR PRESENTATION TO
CLIMATE PARLIAMENT
BRUSSELS, 8 MARCH 2013
SCALING-UP SUSTAINABLE ENERGY INVESTMENT:
EBRD RESULTS
EBRD launched the Sustainable Energy Initiative (SEI) in 2006 as part of international
initiative to scale-up financing for energy efficiency and renewable energy.
From launch to end 2012, the following SEI results have been achieved:
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€11 billion of cumulative SEI EBRD financing
602 projects
€61 billion total project value
55 million tons CO2 emissions reduction per year (equivalent to annual emissions of
Sweden)
One quarter of EBRD annual investments in SEI
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EBRD SUSTAINABLE ENERGY INITIATIVE
WHAT WE DO
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WHAT WE DO
EBRD SEI ACTIVITY AREAS
The SEI is structured along activity areas which correspond to specific climate change mitigation
actions. These include:
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Industrial energy efficiency investments in energy-intensive industrial processes such as steel
manufacturing, aluminium smelting, cement and glass production, as well as major transport
investments, such as in railway operating companies.
Sustainable Energy Financing Facilities (SEFFs) through local banks in countries of operations to
support industrial energy efficiency in small and medium-sized enterprises (SMEs), small-scale
renewable energy and building energy efficiency projects.
Power sector energy efficiency to improve the energy efficiency of transmission networks and
thermal power stations which generate the majority of energy in the region.
Renewable energy project financing including technical cooperation to shape the institutional
and regulatory frameworks for renewable energy investment.
Municipal infrastructure energy efficiency including upgrading and development of district
heating, public transport networks and water supply systems.
SEI activities also include climate change adaptation, carbon market development and sustainable
energy policy dialogue supporting transformational change.
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WHAT WE DO
RESULTS BY ACTIVITY AREA BY YEAR
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SEI financing in renewable energy increased by a factor of 12 from less than €100 million per year
during Phase 1 to close to €1 billion in 2011 alone.
SEI financing in sustainable energy financing facilities increased by a factor of 6 from €81 million in
2006 to €518 million in 2011.
SEI financing in industrial energy efficiency trebled from €188 million in 2006 to €578 million in 2011.
The only area with no growth is power sector supply side energy efficiency reflecting decreased
activity in fossil fuelled power generation.
2006 – 2011 (all projects)
3,000
2,500
2,000
€ million
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Municipal Infrastructure Energy Efficiency
Renewable Energy
Cleaner Energy Production
Sustainable Energy Financing Facilities
Industrial Energy Efficiency
1,500
1,000
500
2006
2007
2008
2009
2010
2011
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WHAT WE DO
STRUCTURE OF SUSTAINABLE ENERGY FINANCE FACILITIES
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SEFFs are effective in reaching a wide range of industrial and residential clients.
SEFFs are effective to support commercial banks in providing finance in new areas
such as residential energy efficiency and small scale renewables.
Donor-funded contract
EBRD
Credit line
Project team
Support
Grant incentives
Commercial banks
Sub-loans
Technical support
(project assessment)
Donor-funded contract
Monitoring team
Grant incentives
Sub-borrowers
Technical support
(project verification)
WHAT WE DO
SUSTAINABLE ENERGY FINANCE FACILITIES
SEFF coverage
Armenia
Belarus
Bosnia and Herzegovina
Bulgaria
Georgia
Hungary
Kazakhstan
FYR Macedonia
Moldova
Poland
Romania
Russia
Serbia
Slovakia
Turkey
Ukraine
SEFF results to date
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Operating in 16 countries, via more than 70 financial institutions.
€1.9 billion signed in 2006-12 (through more than 100 loan operations).
More than €1.3 billion has been disbursed to sub-borrowers for energy efficiency
and renewable energy projects in the residential, industrial and municipal sectors.
Estimated energy savings from these projects are of more than 10,000 GWh per
year and represent estimated avoided emissions of 4Mt of CO2 per year.
EBRD SUSTAINABLE ENERGY INITIATIVE
WHERE WE DO
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WHERE WE DO
EBRD SEI ACTIVITY
REGIONAL DISTRIBUTION OF SEI INVESTMENTS (2006-12)
Central Asia
11%
5%
Central Europe and Baltics
17%
20%
Eastern Europe and Caucasus
Regional
Russia
21%
22%
4%
South-Eastern Europe
Southern and Eastern
Mediterranean
Turkey
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EBRD SUSTAINABLE ENERGY INITIATIVE
LEVERAGING PRIVATE SECTOR INVESTMENT
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LEVERAGING PRIVATE SECTOR INVESTMENT
SEI PRIVATE SECTOR SHARE
Reflecting the private sector development and transition focus of the EBRD, the majority of SEI
activity has been in the private sector. Over Phases 1 and 2 EBRD private climate financing reached
€5.4 billion accounting for 62% of total EBRD SEI financing for the period for 325 projects
accounting for 70% of the total number of SEI operations.
% OF TOTAL SEI INVESTMENT BY INVESTMENT CLASS
% OF TOTAL SEI PROJECTS BY INVESTMENT CLASS
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LEVERAGING PRIVATE SECTOR INVESTMENT
RELEVANCE OF PRIVATE SECTOR ROLE
The importance of private sector to climate change mitigation is driven by a range of key factors
including:
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project development and management capacity
very large number of potential implementation channels
focus on risk/return and financial sustainability
dynamic entrepreneurial approach
financial capacity including corporate internally generated cash flow, equity funds, bond
market, stock market and institutional investors
technical knowledge, expertise and innovation across mitigation sectors
responsiveness and activity scaling-up reflecting policy and market signals
By some estimates, the private sector is expected to account for around 85% of the 2020 climate
financing target of $100 billion per year.
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LEVERAGING PRIVATE SECTOR INVESTMENT
PRODUCT STRUCTURE
The majority of EBRD SEI financing was provided in the form of debt which accounted for 83% of SEI financing.
Equity investments included:
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Direct equity investment in private renewable energy projects in Estonia, Hungary, Mongolia and Poland
Direct equity investment in multi-project facility for private district heating and water network operating
companies across EBRD region of operations
Direct equity investment in corporate entity for industrial, building, power generation and transport energy
efficiency
Investment in equity funds for renewable energy
There was very limited use of guarantees. In the case of SEFFs this reflected the preference of local banks for debt
rather guarantee.
Equity/debt share (2006-2011) only private
by number of projects
equity
36
11%
debt
289
89%
by SEI finance
equity
€ 900.5
million 17%
debt
€ 4486.5
million
83%
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LEVERAGING PRIVATE SECTOR INVESTMENT
THE ROLE OF CONCESSIONAL FINANCE
Concessional finance has been part of the SEI strategy from its inception to address specific barriers
to energy efficiency and renewable energy investment.
Concessional finance has been used in SEI for two main purposes:
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grants for technical assistance including energy audits and technical studies; and
investment grants.
Technical cooperation (TC) is a fundamental and integrated part of EBRD’s SEI business model. TC
supports the scaling up of sustainable energy investments by :
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decreasing information barriers
fostering policy dialogue
building local institutional and organisational capacity
supporting project preparation and implementation
identifying sustainable energy investment opportunities
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LEVERAGING PRIVATE SECTOR INVESTMENT
THE ROLE OF INCENTIVES
The financing approach used by the SEI includes, where necessary, selective and smart
use of incentives to address specific barriers and market failures. In this context,
incentives can:
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mitigate perceived risks
provide tenor extensions
bridge capital gaps
mitigate technology risks
provide risk cushions
reduce costs
be used as payment performance fees to banks
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LEVERAGING PRIVATE SECTOR INVESTMENT
PRIVATE FINANCING LEVERAGING RESULTS
For renewable energy, one euro of grant for technical assistance related to a
privately financed renewable energy project has led to:
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72 euros of EBRD SEI financing
172 euros of total investment in renewable energy
For sustainable energy financing facilities through banks in EBRD countries of
operations, one euro of grant for technical assistance has led to:
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45 euros of EBRD SEI financing
83 euros of total investment through sustainable energy financing facilities
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EBRD SUSTAINABLE ENERGY INITIATIVE
PROJECT EXAMPLES
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SEI PROJECT EXAMPLE
POLSKA WIND (POLAND)
PROJECT
IMPACT
DESCRIPTION
Capital increase for minority equity stake in IBR
Polska, set up in 2001 to develop, construct and
operate wind farm projects in Poland
ESTIMATED ENERGY SAVINGS
509.2 ktoe per year
FINANCIAL STRUCTURE
EBRD
of which SEI component
Co-finance Iberdrola Renovables
Total project value
€ 75 million
€ 75 million
€ 225 million
€ 300 million
ESTIMATED CO2 REDUCTIONS
765 ktonnes CO2 per year
FINANCIAL LEVERAGE
4: 1 Total investment: EBRD finance
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SEI PROJECT EXAMPLE
BIOMASS USE IN INDUSTRY: SATURN (POLAND)
PROJECT
IMPACT
DESCRIPTION
Modernisation of existing combined heat and
power facility and conversion of existing coal
boiler into biofuel boiler with 80 MWth capacity
FINANCIAL STRUCTURE
EBRD
of which SEI component
BRE Bank loan
Kasa Opieki loan
Polish Energy Partners
Total project value
€ 5 million
€ 35 million
€ 39 million
€ 33 million
€ 26 million
€ 133 million
ESTIMATED ENERGY SAVINGS
49 ktoe per year
ESTIMATED CO2 REDUCTION
142 ktonnes CO2 per year
FINANCIAL LEVERAGE
3.8 : 1 Total investment: EBRD finance
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SEI PROJECT EXAMPLE
MID-SIZED SUSTAINABLE ENERGY FINANCE (TURKEY)
PROJECT
IMPACT
DESCRIPTION
Long-term financing facility for sustainable energy
investments through EBRD financing to Denizbank who
will on-lend funds to sub-borrowers to finance
sustainable energy investments on market terms
ESTIMATED ENERGY SAVINGS
42 ktoe per year
FINANCIAL STRUCTURE
EBRD
€ 75 million
of which SEI component € 75 million
DEG
€ 25 million
IFC
€ 50 million
WestLB
€ 75 million
EIB
€ 75 million
Total project value
€ 300 million
ESTIMATED CO2 REDUCTIONS
150 ktonnes CO2 per year
FINANCIAL LEVERAGE
4 : 1 Total investment: EBRD finance
TECHNICAL ASSISTANCE
Implementation support to partner banks and subborrowers. TC support for capacity building and raising
standards of sub-project appraisal in commercial banks.
In addition, TC support for development of voluntary
carbon market by assisting sub-borrowers to structure
and register their carbon transactions
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WHAT YOU CAN DO
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WHAT YOU CAN DO
Moving the policy context from third-best to first-best:
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Remove fossil fuel subsidies
Price carbon
Long-term stable policy and regulatory framework
Promote energy efficiency to manage down demand for energy
Support provision of concessional finance for technical assistance for project
preparation and implementation
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