EIB and the energy sector financing Krzysztof Szyszko Warsaw, 23 rd November 2005

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 163.7bn.  EIB shareholders: 25 Member States of the European Union.  EIB’s annual lending (2004): EUR 42bn.  Annual lending to the energy sector of EUR 3 billion.

THE EIB IN THE EU Borrowings  Largest supranational borrower.  Benchmark issuer, sovereign issuer alternative.  Low borrowing costs.  Wide range of EIB products. Loans – Core Objectives  Economic and social cohesion in an enlarged EU.  Environmental protection and improvement.  Development of Trans-European and access Networks.  Implementation of the “Innovation 2010 Initiative” (i2i).  Support for EU development aid and cooperation policies.  A “presence” on the financial markets in support of EU policies - a policy driven Bank.

EU POLICY CONTEXT Combating pollution and energy dependence: Electricity produced from renewable energy sources should represent 22% of electricity consumption by Overall emissions of greenhouse gases should be reduced to at least 5% below 1990 levels on average over the period 2008 to Diversification of energy sources in order to secure energy supply. Share of renewable energy in gross domestic energy consumption should reach 12% by 2010.

INCREASE IN RENEWABLE ENERGY LENDING  New target (May 2004) to allocate up to 50% of lending for generation investments to the renewable sector by In 2004: 33% Lending targets increased in line with EU policy objectives:  Initial target to double lending for renewable energy over the period  Lending during increased to M EUR, equivalent to 14.0% of total energy sector lending (c.f. 7.9% for ).  From 1993 to 2004, more than EUR 3.0 billion in individual loans for 58 major projects (32 in the EU and 26 outside) in the renewable energy sector.

Climate Change Financing Facility (CCFF)  500 M EUR dedicated facility.  Projects sponsored by companies operating within the EU emissions trading scheme.  Project cash flow enhanced by GHG reduction.  Loan repayments tailored to generation of allowances.  Increased loan proportion (up to 75%). EIB INITIATIVES FOR GREENHOUSE GAS-RELATED LENDING OPERATIONS Pan-European Carbon Fund  Various options under consideration – focus on co-operating with existing funds to secure revenues from carbon credits resulting from EIB financed projects.

Evolving legislation/markets  National RE support frameworks.  Kyoto mechanisms.  EU Emissions trading scheme.  Carbon market. Technological advances  Lower costs, increased efficiency etc. Industrial development  Funding of R&D programmes.  Financing of manufacturing facilities. Smaller scale de-centralised projects  EIB support by on-lending via specialised intermediaries. DRIVING FORCES FOR FUTURE INVESTMENT

Prudent and rational utilisation of natural resources. Tackling Climate Change. Support research, development and manufacturing of renewable energy technology. Renewable Energy projects to meet the following EIB policy objectives: Operational priority - environmental protection and improvement. EIB POLICY OBJECTIVES

EIB eligibility Banking criteria Monitoring Board of Directors Loan approval Staff teams Economic Financial Technical/Enviro. Management Committee Lawyers Contract negotiation Project Borrower Guarantor Promoter’s proposal An appropriate time-span for reaching a decision Contract signature Commission’s and Member State’s opinion Project list THE PROJECT CYCLE AT THE EIB

Technically and environmentally sound. Financially and economically viable. Able to show an acceptable economic return (including an appropriate assessment of external costs and benefits). Compliant with all relevant national and international legislation. Promoted by an experienced sponsor. PROJECT REQUIREMENTS Grid access issues resolved.

Accessible for companies from all countries (with some restrictions according to individual mandates). In the project’s interest. Procurement needs to be in line with EU and national legislations: Open, transparent and competitive. The EU Official Journal and/or its web site is the required procurement billboard for EIB projects. PROCUREMENT RULES For further details see EIB Procurement Guide on:-

THE EIB LOAN PRODUCTS Guaranteed loans a corporate or bank guarantee invloved. term up to economic life. attractive interest rates. Single signature loans max. term up to 15 years or economic life attractive interest rates + risk margin Lower investment grade only proven technology max. loan amount EUR 200m Solid investment grade early-stage & proven technology max. loan amount > EUR 200m

THE EIB GROUP LENDS To public and private sector bodies and enterprises.  Directly for projects larger than EUR 25m.  Indirectly - for smaller projects, between EUR and EUR 25m, e.g. through Global Loans.  EIB participation up to 50% of a project’s cost. Subject to adequate security

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