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)

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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

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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

SUPPORTExplained…

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 2007-2013

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)

http://ec.europa.eu/europeaid/where/neighbourhood/regional-cooperation/irc/investment_fr.htm

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

Ouarzazate solar power

plant (NIF)Project example

Solar power plant with initial capacity of 125-160 MW in Morocco. Reduces dependence on energy imports and avoids the generation of at least 250000 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)

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GEEREFExample 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: EuropeAid-NIF@ec.europa.eu

• GEEREF: http://www.geeref.com

• Délégation de la l’Union européenne en Tunisie :• Stefano.Corrado@eeas.europa.eu

Thank you for your attention