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Financing Wind Energy in CEEFinancing Wind Energy in CEE

Grzegorz Zielinski, EBRDGrzegorz Zielinski, EBRD

EWEC 2010 EWEC 2010 WarsawWarsaw, , 21 April21 April 20 201010

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AgendaAgenda

1. What is EBRD?

2. EBRD Financing Capabilities

3. Financing Terms and Due Diligence

4. Recent RE deals in CEE

5. More on Current Pricing and Off-takes

6. Contacts

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1. What is EBRD?1. What is EBRD?

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What is the EBRD?What is the EBRD?

AAA-rated international financial institution, promotes transition to market economies countries from central Europe to central Asia

Owned by 61 countries and two inter-governmental institutions

Asset base: approx. 2,500 transactions worth €50 bn signed through 2009

Capital base: €20 bn dedicated exclusively to the region

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EBRD: EBRD: Regional LeaderRegional Leader

A network of 33 offices in 30 countries

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Strong commitment to the regionStrong commitment to the region

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EBRD: EBRD: Foundations of OperationsFoundations of Operations

Apply sound banking principles to all projects

– We do not subsidize

Advance the transition to a full market economy

– Priority to promote private sector involvement and market expansion

Support, but not replace, private investor: additionality

– Act as a catalyst for higher and riskier involvement of financiers

Achieve environmentally sound and sustainable development

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2. EBRD Financing Capabilities2. EBRD Financing Capabilities

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EBRD FacilitiesEBRD Facilities

EquityEquity

Project finance loan

Corporate loan with specified use of proceeds

Hard/local currency

Medium and long tenors (up to 15 years)

Floating/fixed rates

Carbon finance

Common stock or preferred

Quasi-equity

LoansLoans

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EBRD: EBRD: Country Specific Value AddedCountry Specific Value Added

Regional expertise means key structuring skills

Good relationship with Governments, regulators

EBRD positioning as a neutral party

Mitigation of political and regulatory risks

Access to policy dialogue

Strong local presence

Catalyst to access additional equity, debt and trade finance Risk sharing through equity participation

Flexible deal structures

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3. Financing Terms and Due Diligence3. Financing Terms and Due Diligence

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EBRD Debt FinancingEBRD Debt Financing

Key Terms and Conditions: Tenor - 10-15 years Margin - benchmarked to market Fixed rate possible Secured on Project Assets Quality off-take EBRD can directly finance up to

35% of total project costs

(additional funds mobilised

through syndication) For project finance loans, at least

30% of total project costs to be

contributed by sponsor equity Portfolio financing

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EBRD Equity FinancingEBRD Equity Financing

Key Features:

EBRD equity stake typically at

around 20-25% (meaningful, but

minority)

Investment trough capital

increase

Invest in Funds to address

smaller projects or larger stakes

Exit through IPO, trade sale or

put/call agreement

Key Requirements: Nomination of at least one

director to the Board but not

actively engaged in

management Shareholders agreement Share subscription agreement

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Wind Farm Due Diligence RequirementsWind Farm Due Diligence Requirements

Technical

Feasibility StudyEPC / O&M ArrangementsGrid ConnectionWind Study

Price ProjectionsSupply/Demand Balance

Environment / Social

ESIAStakeholder EngagementEU+

Market

Financial ModelOfftake ArrangementsSponsor Information and Experience

Legal

Project Permits/LicensesSponsor InformationRenewable Energy Legislation

Financial

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CEECEE: : current statuscurrent status

Poland – many local and international developers, matured GC market, 2017 question

Hungary – tight market limited by terms of operating licenses, 2nd tender still o/s Slovakia – not much success Baltics – good potential with several small and mid size projects now under

construction Croatia – government supportive, 12-year feed-in tariff, some local and

International activity Bulgaria – attractive market, supportive government, re-thinking regulatory

approach and several large projects Romania – large market, large deals Ukraine – very large potential, renewable energy framework approved in October

2008, but good secondary legislation still pending

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CEECEE : : In practiceIn practice

Some legislative gaps: e.g. Estonia has set low feed in tariff caps, but is revising its position

Licensing issues: e.g. Hungary wanted to limit amount of wind energy to enter market so trimmed down size and economics of qualifying projects making some uneconomic

Long term contracts: e.g. Polish disco’s in oligopolistic market for long term green certificate offtakes

“Many developers, many financiers, increasing number of constructed projects”

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44. Recent . Recent RE RE dealsdeals in CEE in CEE

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EBRD: Wind Farms FinancedEBRD: Wind Farms Financed

Bulgaria

Turkey

Poland

- St. Nikola 156 MW

- Suvorovo 60 MW

Project

Hungary

Estonia

EBRD InvestmentSponsor Debt Equity

- AES

- Grupo Enhol

- EUR 70 mln

- EUR 60 mln

- Raisner OU 130 MW - Iberdrola Renovables - EUR 0.9 mln

- Wind farm portfolio - Iberdrola Renovables - EUR 50 mln

- Tychowo 50 MW

- Wind farm portfolio

- Global RPI

- Iberdrola Renovables

- EUR 30 mln (in PLN)

- EUR 75 mln (in PLN)

- Rotor 135 MW - Zorlu Enerji - EUR 45 mln

Regional- Enercap RE Fund

- FreEnergy

- Various

- Nelja Energia

- EUR 25 mln

- EUR 19 mln

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EBRD: EBRD: RecentRecent RE deals RE deals

Saint Nicholas Wind Farm – Bulgaria (October 2008)– Construction and operation of a 156MW wind farm in the Kavarna region – Financing: EUR 90 million of long-term debt– Sponsor: AES GEO Energy Ltd

Iberdrola Estonia Wind – Estonia (November 2008)– Development of the 150MW Lüganuse Windfarm project located

approximately 120 km east of Tallinn, and close to the Baltic Sea shore – Financing: EBRD provided EUR 900,000 of development equity

Tychowo Wind Farm – Poland (April 2009)– Construction and operation of a 50MW wind farm in Northern Poland– Financing: long-term debt financing of PLN 126 million– Sponsor: RP Global of Spain

Rotor Wind Farm – Turkey (May 2009)– Construction and operation of a 135 MW project in Southern Turkey– Financing: EUR 45 million of long-term debt– Sponsor: Zorlu Elektrik Uretim A.S.(Zorlu Enerji)

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EBRD: EBRD: Recent RE dealsRecent RE deals

FreEnergy – Estonia (June 2009)– Equity investment in the portfolio of 15 wind farm projects located across

the Baltic States.– Financing: EUR 18.8 million equity– Co-investor: founders and initial investors in FreEnergy

Suvorovo Wind Farm – Bulgaria (January 2010)– Construction of a 60 MW wind farm – second largest after St Nikola

project– Total debt finance: EUR 71 million senior debt provided by EBRD,

BSTDB and UniCredit with a 15 year tenor (A loan) and 12.5 year tenor (B loan)

– Total project cost EUR 108 million, Enhol Group provided 31% as equity

Iberdrola Equity – Poland and Hungary (February 2010)– EUR 125 million acquisition of 25% equity stake in Iberdrola’s Polish and

Hungarian wind farm portfolio

Seven more wind farm projects to be financed in the next 6 months

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5. More on Current Pricing5. More on Current Pricing and and Off-takes Off-takes

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Long Term DebtLong Term Debt

Q1 2008 Q1 2009 Now

15-18 yrs 5-10 yrs 12-15 yrs C.S.

80/20 70/30 70/30

100-130bps 300-500bps 300-390bps

70-100bps Up to 200bps 150-180bps

local Euro local/Euro

… at what price?

Shorter tenors

Lower leverage

Higher margins

Higher FEF

Currency

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Off-takesOff-takes

In Poland and Romania

– Long-term and fixed-price - covering both, electricity and GC

– Semi merchant - e.g. mid-term GC/electricity off-takes, higher revenues vs. lower leverage

– Fully merchant - very few in EU15 and North America, hopefully one day in CEE (full CO2 pricing in place)

Other CEE countries with feed-in tariff

– Merchant tail

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66. Contact details. Contact details

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How to contact usHow to contact us

Grzegorz Zielinski

Senior Banker,Renewable Energy & CEE Coordinator

+48225205700

zielinsg@ebrd.com

WFC, E. Plater 53, 00-113 Warsaw, Poland

www.ebrd.com

www.ebrdrenewables.com

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Thank YouThank You