EUROPEAN INVESTMENT BANK Supporting energy investments...

EUROPEAN INVESTMENT BANK

Supporting energy investments in Ukraine

14 September 2017European Investment Bank Group 11

2

EIB at a Glance1

EIB support to Ukraine

EIB and the energy sector

EIB support to energy projects in Ukraine

3

The EIB: the EU bank

Largest multilateral lender and

borrower in the world

Shareholders: 28 EU Member States

HQ in Luxembourg with 40 local

offices

Around 3000 staff (finance

professionals, but also engineers,

sector economists and socio-

environmental experts)

Around 450 projects each year in

over 160 countries

AAA-rated by the three major rating

agencies

European Investment Bank

The EIB: capital breakdown

European Investment Bank Group 4

5

Our Priorities in 2016

SMEsInfrastructureEnvironment Innovation

EUR

16.9bn

EUR

19.7bn

EUR

13.5bn

EUR

33.6bn

EIB Activity outside EU

6

Outside EUEuropean Union

EUR 75.4bn

Outside

EU

EUR

8.3bn

Eastern

Neighbours

EUR 1.6bn

Africa,

Caribbean,

Pacific,

South Africa

EUR 0.8bn

EFTA &

Enlargement

Countries

EUR 3.3bn

Southern

Neighbours

EUR 1.6bn

Asia and

Latin America

EUR

1.0bn

• The EIB finances projects in nearly 140 non-EU countries.

• In 2016 EIB lending outside the EU accounts for 10% of its global activity.


7

EIB at a glance



EIB support to Ukraine2

Ukraine Special Action Plan - EUR 3bn for 2014-2016

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Investing in Ukraine’s Future ! Ukraine Task Force

Created to focus on the Special Action Plan Ukraine2014 – 2016 and beyond.

Additional EIB sector experts based in Kyiv andconsultancy support

Through cooperation with all relevant stakeholders,instrumental in addressing specific needs of Ukrainiancounterparts.

As a result, several innovative projects were broughtto implementation stage:

Ukraine Agri-Food Loan Ukraine Higher Education

Early Recovery Programme Municipal Infrastructure Programme

March 2014

The European Commission announced acomprehensive EUR 11bn assistance plan tosupport Ukraine .

March 2014

EIB pledged to finance EUR 3bn new investmentsover the period 2014 – 2016.

December 2016

EIB fully delivered on its promise:₋ Signed 15 transactions for more than EUR 3bn

across various sectors₋ Provided advisory support alongside its financing


Ukraine Special Action Plan - EUR 3bn for 2014-2016

9

Development of the

local private sector, in

particular SMEs

Development of social

and economic

infrastructure

Climate change

adaptation and

mitigation

625 640

413

940

1 258

826

0

200

400

600

800

1 000

1 200

1 400

2011 2012 2013 2014 2015 2016

Ukraine Special

Action Plan

External Lending

Mandate

Loans portfolio development

(EUR m)

Loan portfolio

breakdown


10

EIB at a glance



EIB and the energy sector3


EIB Energy Lending 2012-2016

Energy sector lending in 2016 reached EUR12.3bn

• More than 90% within EU countries

• 15-20% total lending

• substantial technical assistance

• Significant part of Climate Action lending (>25% total lending)

• EIB’s energy lending policy approved after public consultation (2013)

• Energy lending criteria aligned with 5 dimensions of Energy Union

• Prioritise EE, RE, Energy Networks & RDI

• EE: “mainstreaming”, TA & tailored instruments

• RE: support to mature & emerging technologies

• EPS for power generation

• Safeguard the environmental sustainability of hydrocarbon projects


EIB Energy Lending Criteria

Eligibility & Appraisal

Requirements for Projects :

• Meet at least one of the EIB’s objectives; and Article 309 of the Treaty on Functioning of the European Union

• Be technically sound, at appropriate stage of development• No late financing

• Be financially and economically viable

• Meet environmental, procurement, social standards and regulations• For electricity generation : compliance with EIB Emission Performance

Standard threshold of 550 gCO2/kWh

• Local content requirements not accepted

Financing

• Lowest between Eligible Project Cost & 50% of total Project Investment Cost• Purchase of existing assets and land acquisition are excluded

• Derogations up to 75% for RES/EE and 100% natural disasters subject to conditions

• Loan tenor as a function of Project Economic Life / Financial Life / Physical Life of asset


EIB’s Environmental & Social Framework

Lisbon Treaty Charter of Fundamental

Rights of the EU

EIB Statement of Environmental and Social

Principles and Standards (2009)

10 EIB E&S Standards

Good practice

IFI’s Standards

UNGPs


Climate Action Eligibility

• Adaptation & Mitigation projects

• All Energy Efficiency projects with acceptable economic return

• Renewable energy projects and related components (manufacturing, transmission)

• Hydropower plants with water storage, geothermal and biomass/biofuel facilities with a net decrease of GHG emissions

• Sustainable biofuel production compliant with Directive 2009/28/EC, i.e. with GHG savings of at least 50%

• RDI & technological deployment in energy efficiency and low-carbon technologies

• Climate adaptation e.g. flood control and drought management

• Transmission and distribution leading to quantifiable reductions in GHG

• RES connection or integration

• Smart grids

• Enabling technologies higher participation of consumers in energy markets generating energy savings


Energy Investments by Sector

• Fossil fuel, hydrocarbons

• Energy efficiency

• Renewable energy

• Electricity and Gas Networks

16European Investment Bank Group

Power Generation

General

• Emission Performance Standard: CO2 emission < 550 gCO2/kWh• Also applicable to Geothermal

• Cost-benefit analysis including a externalities which reflect the marginal damage of each unit harmful emissions (CO2, NOX, SOX, particles ..).

• Comply with CCS, large combustion plants, industrial emissions and ETS Directives.

• Flexible design: to meet policies and market potential changes• « No Regrets » approach

Eligibility

• Yes Gas fired CCGT and CHP, high efficiency coal/lignite fired CHP, coal/lignite plants with CCS and some coal/lignite stations co-fired with biomass

• No most unabated power-only coal or lignite fired power stations

• Exceptions• Technical constraints – isolated networks

• Outside EU : “Substantial contribution” poverty alleviation – UN LDCs and World Bank “low income”. Excludes all European and North African countries


Emission Performance Standard

0

100

200

300

400

500

600

700

800

900G

as -

CC

GT

CH

P -

co

al

Bio

mas

s &

Co

al Oil

Co

al

Lign

ite

gCO2/kWh Standard emissions

CHP = Combined Heat & Power


Energy Efficiency

Projects rationale consistent with:

• pre-defined list of EE measures or

• Energy audit or

• Legal and regulatory requirements in line with EU Directives 2012/27 (EED) and/or Energy Performance of Building Directive 2010/31 (EPBD)

Economic justification - Cost Benefit Analysis to demonstrate

• NPV energy saved > NPV project cost

• Energy savings > 50% of investments cost (for multipurpose project)

Eligibility – specific cases

• Buildings

• Meet national minimum requirements or cost-optimum levels

• Limited eligibility for new buildings e.g. NZEB

• Public Lighting – refurbishment of existing networks only


Renewables

All projects:

• Environmental requirements

• Protected areas, Bird Directive, Habitat Directive, Strategic Environmental Assessment, Water Framework Directive, etc.

• LCOE below threshold – except for emerging technologies

• Existing technologies: proven technology/process, good track record

• Grid connection – bottlenecks, curtailment, compliance with grid code

• Priority to Rehabilitation vs Greenfield

Major renewable technologies

• Hydro: Regional master planning; River basin & Flood management plan; climate change impact

Concession awarding process

• Geothermal: Resources availability and re-injection methodology

• Wind: Measurement mast on site (<3km, 2/3 of hub height) and independent wind studies

Wind turbine Type certification

• Solar: Sustainable tariff

• Biomass & Biogas: Fuel availability and backup strategy

Exposure to bio-fuel market i.e availability, volume, price risks


Energy Networks


Electricity

• Enable RES integration, support integration among markets, supply reliability

• In particular Projects of Common Interest (PCIs)

• Smart grid demonstration projects and deployment, including roll-outs of smart meters

• Electricity storage projects;

• RDI activities in the upstream manufacturing industry, where needed and commercially feasible.

Gas

• Security of supply and diversification of sources

• Increase the market liquidity, foster integration of EU market

• Environmental benefit: displace other more costly and polluting energy sources

• Greenfield distribution tested against RES alternatives

• Priority projects:

• bi-directional flow pipelines, import and interconnection gas transmission pipelines (prioritizing PCIs);

• LNG regasification plants;

• underground gas storages; and

• compressed natural gas facilities and LNG refueling stations (mainly for ships).

22

EIB at a glance



EIB support to energy projects in Ukraine4

Projects under implementation

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Amount , EUR

750kV Ryvne – Kyiv High Voltage line750 kV electricity transmission line between the Rivne and Kyivsubstations and related transmission investments.

150m

750kV Zaporizhzhia-Kakhovska Line High Voltage Transmission Project in Southern Ukraine 175m

Hydro Power Plants RehabilitationUpgrade and refurbishment of 22 hydropower units owned byUkrhydroenergo along the Dniepr river.

200m

Urengoy-Pomary-Uzhgorod Gas PipelineUrgent repairs on the Ukrainian part of the Urengoy – Pomary –Uzhgorod natural gas pipeline.

150m

Guarantee for Economic Development in Ukraine

EIB guarantee in favour of IBRD, covering five investment loans inUkraine contributing to the development of economicinfrastructure, enabling IBRD to provide a USD 500m guarantee tosupport gas purchase by Naftogaz.

458m

Ukraine Higher Education ProjectThe project concerns energy efficiency investments in teaching,research and supporting facilities of Ukrainian universities.The EIB loan would be entered into with Ukraine.

120m


EIB potential support to projects under the Energy Strategy of Ukraine:

Power generation: renewable (wind, solar), hydropower

Power transmission: enhanced reliability of network, backbone corridors, ENTSO-E synchronization

Increase of domestic gas production

Gas transmission: interconnection, increase of reliability

Energy Efficiency

Projects under appraisal

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Ukraine Security of Gas SupplyIncrease natural gas production by installing new gas compressorunits and gas treatment facilities in some Ukrainian gas fields.

Substations Reliability Enhancement ProgrammeRefurbishment existing substations in order to increase energyefficiency through shifting the substations in remote control modeand replacement of energy-intensive equipment.

Kaniv Pumped Storage PlantConstruction of a pumped storage hydropower plant in CentralUkraine and its interconnection to the national power grid.

Kahovska Hydropower Plant ExpansionConstruction of 235 MW of additional capacity on the existing damwith additional units as an extension to the existing Kahovskahydropowerplant (South of Ukraine).


Thank you for your attention!

EIB Resident Representation in Kyiv101, Volodymyrska Str

UA-01033 Kyiv

Ukraine

Phone: +380 443908018, e-mail: [email protected]

25


98-100, boulevard Konrad Adenauer

L-2950 Luxembourg

www.eib.org


mailto:[email protected]

http://www.eib.org/

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