Power & Energy Utilities

The challenges of financing renewable energy projects in Romania

Wind Power Romania

17-18 January 2012 Bucharest

© European Bank for Reconstruction and Development 2010 | www.ebrd.com

EBRD: Foundations of operations • Apply sound banking principles to all projects – We do not subsidise • Advance the transition to a full market economy – Priority to promote private sector involvement and market expansion • Support. private investment: additionality – Act as a catalyst for higher and riskier involvement of financiers • Achieve environmentally sound and sustainable development . but not replace.

3% of portfolio • Portfolio is 80% Debt.268 projects since 1991* • Private sector > 78. a 77% increase since 2008 * through 07 November.9 bn in more than 3. €30bn base capital • €9bn invested in 2010. 20% Equity • AAA rating. 2011 € billion 12 65 10 55 Annual business volume (ABV) 45 8 35 6 25 4 15 Net cumulative business volume Net cumulative business volume 2 5 0 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 -5 Debt ABV Equity ABV Net Cumulative Business Volume .EBRD invests in times of crisis • Invested €64.

additional funds mobilized through syndication EQUITY • EBRD equity stake typically below 2025% (meaningful. but minority) • Investment through capital increase • Invest in Funds to address smaller projects or larger stakes • Exit through IPO.EBRD Facilities LOANS • Project finance loans • Corporate loans with specified use of proceeds • Tenor of 10-15 years • Margin benchmarked to market • Fixed rate and/or local currency possible • EBRD can directly finance up to 35% of an enterprise's long term capital (or project costs for greenfield projects). trade sale or put/call agreement • Political and regulatory risk mitigation .

a market worth around EUR 24.Some notes on the Romanian Energy Sector Liberalisation: Fairly advanced • electricity market fully liberalized since 2007. according to a 2010 study) Private sector participation: • conventional generation: virtually all state owned • greenfield projects coming slowly online such as Petrom’s 860 MW gas fired plant in Brazi. expected to materialize in 2012-2013. in yearly trades worth over EUR 400m • Green Certificates trade on OPCOM. but ~47% of the market is still regulated • OPCOM trades around 27% of the yearly consumption on DAM (16%) and Bilateral Contracts (11%).000 MW of installed wind capacity. plus other PPP initiatives of the government. • regional distribution: 5 out of 8 utilities .5m in 2011 Infrastructure needs in the sector: • in generation (low efficiency due to old equipment and heavy environmental footprint • distribution and transport (grid cannot safely absorb more than 2.

PPP projects to replace existing power generation infrastructure investment in transmission capacity and regional interconnection focus on strategic projects such as the pump/storage plant in Tarnita renewable sector legislation to start being consistently applied • • • .Some notes on the Romanian Energy Sector Steps that should be taken going forward: • privatisation of generation – either with strategic investors or IPOs.

Grid connection – concluded connection contracts to connect to the local or national grid. performed by companies with sufficient expertise and track record. Environmental and Social Impact Assessment Studies and Environmental and Social Action Plan – based on EBRD’s ToR. . Land situation – the project should have registered rights over the land where it is sited. capable to contribute at least 30% of the total project costs Wind resource – wind measurements for at least 1 year. Stakeholder Engagement Plan (SEP) and Non Technical Summary (NTS) to ensure meaningful public consultation on all projects.Renewables in Romania – an indicative checklist Sponsor – developer / utility will a solid track record in renewable energy.

.3 DSCR at P90. Green Certificates Off-take Agreements . where the dependency on GC prices is substantial.DSCR at P99 or 1.Renewables in Romania – an indicative checklist (2) Technology – Wind Turbines Generators (WTG) with track record (no new. Debt sizing criteria . WTG Supply and LTO&M contracts to be in place by financial closing.difficult to arrange until the GC scheme has more of a track record. but given the legislation. PPAs would enhance creditworthiness of projects. Mandatory for PV projects. Power Purchase Agreements – not a deal breaker. untested or experimental technology is acceptable). if available such would highly improve projects.2/1.

in development at the time of the decision. if overcompensation is determined.Renewables in Romania – financing challenges • Clarity and Predictability of Regulatory Environment Operations: curtailment risk: will projects with contracted output be compensated for the loss of GCs in case of curtailment? Can a wind farm with no contracted output be dispatched and is it entitled to receive GCs? - guaranteed dispatch: by guaranteeing dispatch only for the contracted output of the wind farms. How will ANRE determine what projects. will be affected? - oversupply: what happens to GC prices if there are more GCs than required by the quota system? . the projects will find it difficult to trade electricity on OPCOM and move towards PPAs. - overcompensation: number of GCs is subject to change.

as permits can be withdraw or operators asked to reduce output. - Lack of cumulative assessments and ornithological studies . - Permitted projects developed by locals are being marketed to international companies: Poor EIA could affect the project. - Natura 2000 areas not well defined: EU is commencing infringement action against Romania.Renewables in Romania – financing challenges (2) • Permitting and the status of the distribution / transport network • Environmental due diligence - Projects developed in staged approach: EIA needs to assess full project including infrastructure.

Why Environmental due diligence matters? Dobrogea region: key bird migratory corridor of international importance. hence: • EIA required for major wind farms • Minimal bird and bat assessment – 1 year minimal baseline data before operation • Appropriate Assessment under Habitats Directive required when in/near Natura 2000 area. transmission lines • Public consultations also for local communities . substations. • EIA to evaluate associated infrastructure—roads.

Grant funding should be available for Dobrogea SEA. and on cumulative assessment . EBRD considers all projects in Dobrogea major (“Category A” under the Bank’s Environmental and Social Policy) Developers to be aware of designated Natura 2000 areas (notably for birds or bats) Developers should screen consultants carefully for expert ornithologists and past success both in successful Romanian permitting AND in satisfying IFI due diligence requirements .Pending completion of SEA.EBRD’s Environmental Due Diligence – way forward Romanian Wind Association should develop dialogue with stakeholders and develop best practice guidance: .BirdLife/Romanian Ornithological Society keen to assist Strategic Environmental Assessment (SEA) is recommended for Dobrogea and other wind-rich areas of Romania . .Ultimate goal: local guidance on how and where to develop wind farms.

EUR 42.Margonin 120 MW Turkey .EUR 60 mln .Grupo Enhol .Iberdrola Renovables .EUR 50 mln .Iberdrola Renovables .EUR 19 mln Debt Equity .Raisner OU 130 MW .Rotor 135 MW .Cernavoda 138 MW .7 mln .EUR 25 mln .EDP Renovaveis .Various .EBRD: Wind farms financed Project Romania .EUR 75 mln (in PLN) .AES Sponsor .9 mln .Pestera 90 MW .EDP Renovaveis EBRD Investment .Iberdrola Renovables .EUR 45 mln .EUR 70 mln . Nikola 156 MW Bulgaria .EUR 0.Tychowo 50 MW Poland .EUR 45 mln (in PLN) .FreEnergy .Nelja Energia Hungary Estonia .Zorlu Enerji .Wind farm portfolio .EUR 30 mln (in PLN) .EUR 26.4 mln .Enercap RE Fund Regional .St.Suvorovo 60 MW .Wind farm portfolio .Global RPI .

38% of consumption from renewables. environmental friendly. financed EDPR’s 228 MW wind parks at Cernavoda and Pestera (Dobrogea). signed in June 2011. including 1 year’s grace The construction of two wind parks with a total installed capacity of 228 MW .1 mln Banks: € 49. • They contribute to EBRD’s objective to support clean. Romania • The loans.1 mln IFC: € 69. EDPR is the world’s third largest onshore wind farm owner and operator • The projects represent the first project finance transactions in the energy sector in Romania and in renewables.EDP Renovaveis (EDPR) Wind Farms.Floating rate. • The project supports also EDPR’s investment strategy in Central and Eastern Europe.Project Finance . by 2020. renewable energy sources and to Romania’s strategy of achieving. hedged .Repayment in semi-annual installments Project Structure . Facility Details Borrower Lenders Tenor Cernavoda SPV / Pestera SA EBRD: € 69.8 mln 15 years.

EUR 0.RusHydro .EUR 110 mln Albania .Vez Svoghe 26 MW .Petrovilla .EUR 56 mln Georgia Armenia .000 MW .Various .Stejaru 210 MW Sponsor .EUR 110 mln Debt Equity Romania Bulgaria .RusHydro Bond Issue .Okami and Lopota HPPs 3.EUR 47 mln Russia .5 MW .EUR 30 mln .KESH .RusHydro .2 mln .Govt of Georgia .EUR 5 mln .Various .Power Sector Reconstruction 800 MW .Hydro OGK 10.EBRD: Hydropower plants financed Project .20 Various HPPs 56 MW .Enguri HPP Rehab .EUR 53 mln .Hidroelectrica EBRD Investment .

renewable energy sources and to Romania’s strategy of achieving. Comm. Facility Details Borrower Lenders Tenor Hidroelectrica SA EBRD: € 70 mln Comm. Hidroelectrica is the largest Romanian power generation company. 38% of consumption from renewables. will finance the rehabiliitation of Hidroelectrica’s 210 MW Stejarul Bicaz Hydro Power Plant. • The project represents the one of the largest transactions concluded by the EBRD in the renewable energy sector in Romania.Unsecured Senior Loan .Floating rate . by 2020. • The project supports also Hidroelectrica’s ambitious investment strategy. • It contributes to EBRD’s objective to support clean. Banks: 10 years The rehabilitation of the 210 MW Stejarul Bicaz Power plant Project Structure . Romania • The loan.Hidroelectrica. banks: € 40 mln EBRD: 13 years.Repayment in semi-annual installments . signed in July 2011. environmental friendly.

com .Thank you! Mihnea Craciun Principal Banker Power & Energy Utilities +40 21 202 7138 craciunm@ebrd.

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