Tunis, 4 October 2012 Innovative financing in renewable energy The EU approach

Challenges for Financing RE Risks and costs Investment needs are huge, but high costs and uncertainty hold back public and private investments Upfront costs are high, while cash flows are limited The high price often requires public subsidies to protect consumers Public financing can only cover a fraction of the needed investments Political risk scares off private investors and has been increased by recent events The economic crisis lead to additional supply side constraints (liquidity, risk-aversion) 2

What role for donor grants? Should be used strategically Grants cannot finance project alone The strategic use of a grant element can unlock additional non-grant financing The EU has set-up flexible mechanisms to provide grants in the form of innovative financing The grant element can bridge financing gaps, it can address risk constraints and help ease the burden for consumers The so called EU Regional Blending Facilities now have a worldwide coverage; the Neighbourhood Investment Facility (NIF) includes the Neighbourhood region 3

Blend EU grants with additional non- grant resources such as loans from public finance institutions as well as commercial loans and investments. Strategic use of grant element can make projects financially viable.  leveraged development impact Financial and non-financial leverage (e.g. improved project sustainability) Cooperation and coordination between European and Non--European aid actors (donors and public finance institutions).

Since 2007 in the facilities for Africa, the Neighbourhood, Latin America and Central Asia, €760 million of grants were committed to more than 100 projects. The grants were blended with additional non-grant resources and thereby leveraged total project financing of €26 billion.

The regional blending facilities already provide substantial grant support to: a)Projects with a positive impact on Climate Change (60% of all grant contributions) b)Energy projects (37%) The Commission is working on extending the use of innovative financial tools such as the blending facilities, e.g. by providing risk-sharing mechanisms to unlock private financing.

TYPES OF GRANT SUPPORT Explained… Grants used as direct investment grant and interest rate subsidy decrease the investment cost for the beneficiary. Technical assistance can accelerate projects and improve the quality, efficiency as well as sustainability. Risk capital (i.e. equity & quasi-equity) aims at crowding in additional market financing for development. Currently this is exclusively used to support SMEs. Guarantee mechanisms aim at unlocking market financing for development that is held back by high risk perception.

  Pays partenaire de la PEV ayant signé un plan d’action avec l’UE   Enveloppe de 700m EUR pour la période   Financer, en associant prêts et dons, des projets d’infrastructures prioritaires nécessitent d’importantes ressources financières   10 institutions financières européennes éligibles FACILITÉ D’INVESTISSEMENT POUR LE VOISINAGE (FIV)

FACILITÉ D’INVESTISSEMENT POUR LE VOISINAGE (FIV) Transport Energie Environnement Actions sociales Développement du secteur privé

FACILITÉ D’INVESTISSEMENT POUR LE VOISINAGE (FIV) Banque Européenne d'Investissement (EIB)EIB Banque Européenne pour la Reconstruction et le Développement (BERD)BERD Banque de Développement du Conseil de l'Europe (BDCE)BDCE Nordic Investment Bank (NIB)NIB Agence Française de Développement (AFD)AFD Kreditanstalt für Wiederaufbau (KfW)KfW Oesterreichische Entwicklungsbank AG (OeEB)OeEB Società Italiana per le Imprese all'Estero (SIMEST)SIMEST Sociedade para o Financiamento do Desenvolvimento (SOFID)SOFID Agencia Española de Cooperación Internacional para el Desarrollo (AECID)AECID

Ouarzazate solar power plant (NIF) Project example Solar power plant with initial capacity of MW in Morocco. Reduces dependence on energy imports and avoids the generation of at least tons of CO².

Part of the Moroccan Solar Plan. If fully developed (2GW target capacity), the largest solar power plant in North Africa. Project promoter is the Moroccan Agency for Solar Energy (MASEN). Independent power producer (IPP) to implement the project is determined by MASEN through competitive bidding. The NIF direct investment grant to bring down the cost of electricity during the initial stage of the project. Total project volume: approx. €807 million Grant contribution: €30 million Involved EFIs: EIB, AFD, KfW Ouarzazate solar power plant (NIF) Project example

Other Blending Mechanisms A 15 years Fund-of-Funds with €108 M (target €200 M+) in commitments Target: Private Equity Funds dedicated to small and medium sized projects in the renewable energy and energy efficiency sector Investors: EU (€75 M), Germany (€24 M) and Norway (€9 M) Advisors: Global Energy Efficiency and Renewable Energy Fund (GEEREF) 13

GEEREF Example from Latin America Cleantech Latin America Fund II (CTLAF II) is a private equity fund investing primarily in renewable energy infrastructure and, to a lesser extent, in growth stage clean-tech companies in Latin America and the Caribbean, with a strong focus on Mexico, Brazil and Peru.

Contacts NIF Secretariat: GEEREF: Délégation de la l’Union européenne en Tunisie : Thank you for your attention