February 2014 Sustainable Energy Finance Update

Sustainable Energy FinanceFebruary 2014: Throughout the month of February, the World Bank, the Inter-American Development Bank (IDB), the Asian Development Bank (ADB), the European Bank for Reconstruction and Development (EBRD), the European Investment Bank (EIB), the Global Environment Facility (GEF), and the Secretariat of the Pacific Regional Environment Programme (SPREP) undertook a number of activities and approved funding for sustainable energy projects in a range of countries, including: Pakistan, India, Nepal, Turkey, Ukraine, Poland, Croatia, Brazil, and in the Latin America and the Caribbean (LAC) region.

In Pakistan, EIB granted a €100 million long-term loan to the Keyal Khwar Hydropower project to feed into the national electricity grid. The plant will be a 128 megawatt (MW) run-of-the-river plant and a small regulating reservoir. Pakistan's Water and Power Development Authority (WAPDA), will carry out construction to be completed in January 2017. The project is also receiving support from Germany's KfW development bank. [EIB Press Release: Pakistan]

In India, EIB is providing a €200 million long-term loan to the Indian Renewable Energy Development Agency (IREDA) for renewable energy and energy efficiency projects. The loan is part of the EU-India Strategic Partnership in the area of climate change. It will be a multi-investment scheme that will cover up to 50% of total costs of projects proposed by IREDA, and for which due diligence will be carried out be EIB. The long-term nature of the loan will allow IREDA to provide longer term loans for renewable energy and energy efficiency projects than they would otherwise be able to. [EIB Press Release: India]

The World Bank announced results of micro-hydro projects in Nepal implemented through the Alternative Energy Promotion Center (AEPC), which has constructed over 1,000 micro-hydro plants in 52 districts using an inclusive community-driven model. Presenting the example of Darbang, Myagdi District, the World Bank noted economic growth due to industrial expansion, environmental benefits from reduced kerosene and wood fuel usage, and as well as quality of life benefits. [World Bank Press Release: Nepal]

In Turkey, the EBRD's Turkish Sustainable Energy Financing Facility (TurSEFF) has ended its first phase. Since 2010, the TurSEFF has provided Turkey with US$289 million in project finance, reduced carbon dioxide emissions by 650,000 tons per annum, and saved the Turkish economy US$145 million in avoided costs on oil. With active participation from national banks, the Facility is seen as having played a major role in mainstreaming renewable energy and energy efficiency investment opportunities in the country, and illustrates the feasibility and important role of combining multilateral development bank with private sector financing to ramp up investments in clean energy. [EBRD Press Release: Turkey]

In Ukraine, EBRD, as part of its new Sustainable Energy Financing Framework, has launched the US$100 million Ukraine Sustainable Energy Financing Framework, which is being complimented by technical cooperation from Austria. The programme aims to build capacity into Ukraine's energy sector and will also back project finance offered by Ukrainian banks. The Raiffeisen Bank Aval is the first bank to sign up to the scheme, and has received EBRD financing of US$20 million. [EBRD Press Release: Ukraine 3 February 2014]

Additionally, EBRD is now planning the second phase of its Ukraine Sustainable Energy Lending Facility (USELF). USELF has thus far delivered 200 gigawatt hours (GWh) of renewable energy via EBRD commercial financing, technical assistance and concessional grant co-financing. After a slow start due to the under-developed renewable energy sector in Ukraine, USELF has financed seven projects in its first phase, including biogas, biomass, small hydro, wind, and solar energy for heat and power. The Facility's first phase was financed with €50 million from EBRD, €20 million from the Clean Technology Fund, €30 million of sponsor equity, with technical assistance of €6.62 million financed by the GEF. Phase 2 is planned for a similar size and targets. EBRD plans to begin phase two of its lending in 2014, subject to EBRD internal and CTF approvals. [EBRD Press Release Ukraine, 14 February 2014]

In Poland, EBRD has provided €22 million in financing for a the first phase of a 37.5MW wind project in eastern Poland that will avoid approximately 57,400 tons of carbon dioxide emissions annually. To date, regulatory uncertainty has limited investor interest in investing in renewables in Poland, whose energy infrastructure is dominated by fossil fuels. This EBRD financing aims to help overcome this hurdle and facilitate rapid progress on the renewable energy investments required for Poland to meet targets agreed at the European Commission to reach a 20% share of renewable energy in the energy mix by 2020. The EBRD supported-phase will see 22.5MW installed by December 2014, with completion of the full project slated for mid-2015. [EBRD Press Release: Poland]

In Croatia, under its Western Balkans Sustainable Energy Efficiency Facility II (WeBSEFF II), EBRD is providing a long-term €10 million loan and technical expertise to Erste Bank Croatia for lending to the private sector and municipalities for investments in energy efficiency and renewables. [EBRD Press Release: Croatia]

In Brazil, IDB has created a Green Line Partnership with Banco Pine S.A. to facilitate investment in green projects, focusing on biofuels and renewable energy. The partnership will see an unsecured, long-term loan of US$125 million to Banco Pine S.A. that will be leveraged to increase its green portfolio by US$600 million over the next five years. [IDB Press Release: Brazil]

In the broader Latin America and Caribbean (LAC) region, IDB and Novozymes, a bioenergy company, have partnered to support development of sustainable, advanced bioenergy to foster progress on UN Secretary-General's Sustainable Energy for All (SE4ALL) initiative. IDB and Novozymes aim to organize workshops, build capacity, provide technical assistance, and share best practices on sustainable bioenergy in the region. They will also collaborate on identifying specific opportunities to collaborate at the national level on clean cooking, waste to energy, and advanced biofuels for transportation. [IDB Press Release: Novozymes]

In the Cook Islands, Kiribati and Samoa, SPREP has made available an additional US$1 million for solar power, bioenergy and biofuel projects under the Pacific Islands Greenhouse Gas Abatement through Renewable Energy Project (PIGGAREP). Nearly half of this amount will be spent on a solar system for the island of Palmerston in the Cook Islands to assist in meeting their aims of generating 50% of their electricity from renewable energy by 2015 and 100% by 2020. One fourth will be facilitate the installation of a biofuel mill for electricity generation on Abemama Island in Kiribati. US$300,000 will also support a biogas electricity generation system on Samoa. [SPREP Press Release]

This 'Sustainable Energy Finance Update,' a new feature of Sustainable Energy Policy & Practice, will provide a monthly overview of investments by international financial institutions (IFIs) as they relate to sustainable energy and energy efficiency.