FINANCING OF PROJECTS IN THE BIOMASS SECTOR European Bank for Reconstruction and Development (EBRD) Damir Cengic, Financial Analyst Sarajevo, 13 December 2013
What is the EBRD?
International financial institution, promotes transition to market economies in 34 countries from central Europe to central Asia
Owned by 64 countries and two inter-governmental institutions
Cumulative commitments of €78.9 billion Unaudited as at 31 December 2012
Capital base of €30 billion
How EBRD can support projects in the Biomass sector
Public sector projects (sovereign and sub-sovereign)
Senior loans to private companies
Western Balkans Sustainable Energy Direct Financing Facility (WeBSEDFF)
Western Balkans Regional Energy Financing Facility II (WeBSEFF II)
Local Enterprise Facility (LEF)
Sovereign and sub-sovereign loans
(i) Loans to BiH on-lent to public utility or loan to public utility with guarantee from BiH or (ii) Loans to Entity/Canton/Municipality on-lent to public utility or loan to public utility with guarantee from Canton/Municipality/Entity
Terms: >EUR 4 million, max 15 years repayment (including 3 years grace)
Pricing: (i) sovereign or (ii) commercial
Up to 100% of eligible costs (excl. VAT)
Possible TC and grant funds
Loans to Private companies
Senior loans the private companies
Minimum loan amount of EUR 4-5 million, repayment up to 12 years (including 2-3 years grace)
Pricing: commercial
EBRD participation in total investment costs of up to 50 per cent
Western Balkans Sustainable Energy Direct Financing Facility (WeBSEDFF)
A direct financing facility operated by the EBRD
For (small) renewable energy and (industrial) energy efficiency projects
Senior (secured) loans and project finance arrangements
From EUR 2 million to EUR 6 million EBRD financing (for certain countries from EUR 1 million) with market-based interest rates and EBRD participation of up to 65 per of the total investment costs.
Average (expected) maturity of 6-8 years for energy efficiency projects, with appropriate grace periods and flexible repayment schedules
Supported by TC funds for project identification and preparation as well as by incentive payments based on the estimated CO2 emission reductions generated by each eligible project (up to 10 per cent of loan principal)
Eligible types of projects: Renewable Energy (including biomass systems up to 10 MW) and Industrial Energy Efficiency.
Structure of the WeBSEDFF EBRD
Donor Funded Contract
Loan Agreement
Project Consultant Technical Assistance
€
€
Borrower
Donor Funded Contract
Incentive Payment*
Verification Consultant Implementation Verification
* Incentive payments will be paid upon technical completion of the investments to eligible Borrowers
Western Balkans Regional Energy Financing Facility II (WeBSEFF II)
EBRD financing through participating financial institution (local banks)
For Private sector sub-borrowers
•
–
Privately owned enterprises, subject to credit approval in line with the Participating Bank’s credit process
–
Sub-loan sizes up to €2 million (no working capital finance); Maturity up to 5 years (2 years grace); marketbased interest rates; up to 100 per cent of investment costs
–
Capital investments in premises, equipment, machinery, software, enterprise management systems and general upgrading
–
Renewable Energy projects resulting in significant estimated CO2 emission reductions
For Public Sector Sub-borrowers –
Any public or majority publicly owned entity at national or regional level, or SPV’s with energy management related services for public sector as their main activity (ESCOs)
–
Sub-loan sizes up to €2.5million; Maturity up to 5 years (2 years grace); market-based interest rates; up to 100 per cent of investment costs
–
Capital investments in measures improving energy efficiency
Investment Incentives
– Payment of investment incentives to end-borrowers upon verification of successful project implementation, based on the level of expected CO2 savings • up to 10% of disbursed sub-loan amount for private sector projects
• up to 15% for public sector projects and ESCO projects.
Structure of WeBSEFF II EBRD
EU Funded Contract
Credit Project Consultant Verification Consultant Technical Assistance
€ Line
PFI
Training and Marketing Support
Loan
EU Funded
€ Agreement
Sub-Borrower
Grant funds Investment Incentives to Sub-Borrower
Local Enterprise Facility (LEF)
EBRD-Italy Local Enterprise Facility for small and medium-sized enterprises (SME’s) in Albania, Bosnia and Herzegovina, Bulgaria, Croatia, FYR Macedonia, Montenegro, Romania, Serbia and Turkey
Investment very in size from EUR 1 million to up to EUR 10 million with repayment from 3 to 7 years. Market based interest rates
For Private sector including expansion, restructuring and acquisition of existing private businesses. Funds can be used to purchase assets, equipment, for civil works, patents, trademarks, but also working capital needs and balance sheet restructuring.
Endowed with up to EUR 270 million of loan funds + up to EUR 6 million in Technical Cooperation (TC)
Key requirements for Biomass projects
Biomass supply: – sustainable availability
– adequate quality – long term supply agreements
Financially strong sponsor(s)
Relevant experience
Pale District Heating Project
Sovereign guaranteed loan to the JP “Gradske Toplane” Pale; Project is co-financed with grants from Western Balkans Investment Framework (“WBIF”) and EBRD Shareholder Special Fund (“SSF”); Loan and grant proceeds will be used to:
– Heating Plant: Construction of new boiler house and purchase of new energy efficiency biomass boiler (7.5 MW) and Light Fuel Oil boiler (10.5 MW) for peak and reserve loads – loan financed; – District Heating Network: Replacement of existing dilapidated DH network with preinsulated modern pipes (3.1 km) and network extension through installation of new DH pipes (1.6 km) – loan and grant financed; – Demand Side Measures: installation of individual heating substations (“IHS") at the building level equipped with heat meters, installation of individual heat meters or heat cost allocators at the consumers’ apartments and installation of thermostats on each radiator – grant financed.
Total Project costs of EUR 8.3 million.
Pale District Heating Project (i)
Technical cooperation (“TC”) funds for:
– Preparation of Feasibility Study – Preparation of Detailed design* – Assistance with project implementation including procurement process, supervision of work, and preparation of Financial and Operational Performance Improvement Programme (“FOPIP”) and Public Service Contract (“PSC”) Effectiveness of the loan will be subject to the following conditions precedent (CP’s):
Signed preliminary agreements with 80 per cent of the potential new customers (equivalent to 120.000 m2 of additional area to be heated);
Signed agreements for long term biomass supply in excess of 50,000 m3;
*The Consultant that will prepare Detailed design will also help the Company and the Municipality to meet the above mentioned CP’s.
Pale District Heating Project (ii) Priority Investment Plan Objective
Unit
Current
With Project
Total heated area
m2
48,000
200,000
Households
No.
650
1,800
Commercial Customers
No.
70
300
Public Institutions
No.
5
20
per cent
0
100
Fuel input
MWh
20,400
44,000
Energy supplied to customers
MWh
11,000
36,200
Energy losses total
per cent
47
18
Coal consumption
tonnes
230
0
Light Fuel Oil (LFO) consumption
m3
0
72
Biomass consumption
m3
27,500
62,000
Metered Consumption
Contact us Josip Polic Senior Banker
Damir Cengic Financial Analyst
EBRD Resident Office in BiH Tel: +387 33 667 946 E-mail: policj@ebrd.com
EBRD Resident Office in BiH Tel: +387 33 667 946 Email: cengicd@ebrd.com
For further information: www.ebrd.com