2 davor kunc wbif presentation to undp edited

EU Enlargement

Sustainable Energy in the Enlargement

Context

UNDP Conference on Sustainable Energy in SEE9-10 December 2013

EU Enlargement

Content

• Strategy and Policy: energy acquis (4 mins)• Operations: energy project portfolio (10 mins)• Going forward (3 mins)

EU Enlargement

Strategy and Policy: Union's Energy Acquis

EU Enlargement

• Energy Community Treaty• Guiding the energy policy in SEE• Signatories: EU and the countries of SEE

• Energy Community• extends the EU internal energy (electricity and gas) market to South East Europe and

beyond• overall framework to guide the necessary reforms and promote investments• makes a significant contribution to security of supply in the wider Europe

• Energy Community Secretariat• supports the Contracting Parties in fulfilling their obligations and has established a

number of working groups and task forces to facilitate their efforts: Gas, Oil, Electricity, Investments, Energy Efficiency, Renewable Energy, Security of supply, Competition, Environment, Regional Energy Strategy.

Energy Policy in South East Europe

EU Enlargement

SEE 2020: RE and EE Targets

• Energy efficiency: • savings of 9% of final energy consumption, by 2018

• Renewable energy: • to be achieved by 2020• Albania 38 %, Bosnia and Herzegovina 40 %, Croatia 20 %, Former Yugoslav

Republic of Macedonia 28 %, Montenegro 33 %, Serbia 27 %, Kosovo* 25 %

• Energy intensity of GDP: reduce to the World average (in 2010: 0.25 tonnes of oil equivalent per 1000 USD (2005) of GDP).

• Unit cost of energy: decrease by improving average electricity thermal generation efficiency to 38% and increasing utilization rates to over 74%.

• Terms of trade in energy: improve (natural gas import price to NBP index and electricity export prices to over EEX average).

• Hydro power: create more value by increasing share of variable energy to over 45%.

EU Enlargement

• Instrument for Pre-Accession (IPA) recognises that infrastructure investments are vital for:

• socio-economic growth;

• integration of the region into the EU’s internal market for energy (ECT); and

• to facilitate diversity and security of supply for the EU

• Support has been available under national IPA and multi-beneficiary (regional) IPA

Importance of Infrastructure Investments

EU Enlargement

Projects of Energy Community Interest (PECIs)

• Priority energy infrastructure investments• Endorsed by all SEE6 beneficiary countries• Used to determine eligibility for grant support• Mirroring similar PCI list of the EU• However, SEE6 not having the equivalent Connecting

Europe Facility: available to EU MS as grants for studies, special lending, various forms of loan guarantees, risk sharing facilities, eventually project bonds

EU Enlargement

Operations: IPA Regional - WBIF, REEP, GGF

EU Enlargement

Sectoral approach • Component structure replaced by comprehensive country strategies

• Move towards a logic of (co)financing policy strategies instead of individual projects

Single pipeline• Rolling investment plans for each sectors linking to regional strategies

(TEN-T Transport, Energy)

• Coherence of assistance and IFI/donor coordination

Increased role of WBIF• High Level Meeting confirmed central role of WBIF as main vehicle to

reinforce cooperation on investments in the region

• More resources to be channelled through WBIF

Programming of IPA 2

EU Enlargement

• Total IPA budget ~€12 billion• 7 bio for TR, 5 bio for SEE6 /7 years• 715 mio for SEE 6 p.a. /6 countries• 120 mio for SEE 6 per country p.a. /2 (REG vs. NATL)• 60 mio for per country annually for regional IPA

• Estimated investments needed in energy: between € 30-40 bio over 2014-2020

IPA 2: Figures

EU Enlargement

• Western Balkans Investment Framework: overarching financial vehicle of regional IPA

• WBIF blends grants and loans to expedite priority investments in key sectors

• WBIF Stakeholders: beneficiary countries, EC, IFIs and bilateral donors

• Applications for support come from beneficiary countries

What is the WBIF?

EU Enlargement

WBIF Operating Framework - Stakeholders

EU Enlargement

WBIF Operating Framework – Application Process

Co

nst

ruct

ion

Joint Lending Facility•Loans

•EC IPA

•Government funding

Project Preparation •Feasibility studies

•Designs

•Tender documentation

•Supervision

•Assistance to PIUs

Joint Grant Facility •Technical Assistance

•Investment grants

•Interest rate subsidies

•Assistance to financial intermediaries

Beneficiaries

National and regional projects

Resources

Bilateral donors EU IPAIFI grants

EU Enlargement

WBIF Operating Framework – Governance Structure

WBIF Secretariat – DG EnlargementSupports the administration of the WBIF

Technical AssistanceInfrastructure Project Facilities I, II and IIIIFI Coordination Office

EU Enlargement

169 grants supported by WBIF 300 M€ grants allocated to approved projects More than 2.7 billion € loans signed to date WBIF pipeline contains more than 13 billion € total

estimated investments

Select achievements – WBIF grants to date

EU Enlargement

Distribution of grants by TYPE

EU Enlargement

Distribution of grants by SECTOR

EU Enlargement

Distribution of grants by BENEFICIARY

EU Enlargement

Tracking development of the WBIF pipeline

EU Enlargement

Joint Lending Facility Growth in signed loans (€ billion)

EU Enlargement

• 41 grants awarded for energy related projects• Grant support € 71.8 million, 27% of all grants• Total signed loans € 270 million; estimated total

investment € 3.6 billion• Projects include electricity transmission (11), gas

transmission (8), district heating (7), renewable energy (10), energy efficiency (5)

Energy in the WBIF

EU Enlargement

Growth in signed loans by sector (€ billion)

Data for November 2011, 12, 13

EU Enlargement

Growth in total estimated investment of WBIF pipeline (€ billion)

Data for November 2011, 12, 13

EU Enlargement

• Pipeline has grown steadily over total 10 rounds of calls for proposals

• Pipeline of loans currently 3 times larger than original target

• Project preparation is progressing• Signed loans increasing, currently at > €2,7 billion from

2,3 billion in 2012• 34 projects at tendering/construction

Select achievements – WBIF pipeline

EU Enlargement

Initiated 2013 with EBRD. Total EC contribution €23,5 mio. Window I – Policy Dialogue

• €6m for technical assistance, facilitate policy dialogue with all the authorities• regulatory frameworks, market barriers, investment in EE, ESCO markets

Window II – Credit Line (WeBSEFF II)• €75m credit line framework • to local financial institutions for onlending to smaller EE and RE projects; private, public• WBIF in addition provides €11.5m grant funding for TA and investment incentives

Window III – Direct Financing (WeBSEDFF)• €50m to replenish WeBSEDFF funding• medium scale RE and EE improvements in industrial enterprises; ESCO projects• Grants to the amount of €6.35m to fund TA and investment incentives

Investment Facilities: Regional EE Program (REEP)

EU Enlargement

Initiated 2009 with EIB, KfW. Total EC contribution €20 mio.

Difference: investment fund. EU's 20/20/20 energy targets: financing for EE and RE

projects to reduce CO2 emissions and energy consumption Credit lines via local commercial banks Direct financing TA Facility

Investment Facilities: Green for Growth (GGF)

EU Enlargement

Select achievements in EE and RE:Example 1: Plum Factory (WBIF/REEP, Serbia)Example 2: Furniture Factory (WBIF/REEP, Serbia)Example 3: Wind Farm (WBIF, Macedonia)

EU Enlargement

Select achievements – WBIF projects under construction

Wind Park Bogdanci – the Former Yugoslav Republic of Macedonia

Installation of 16 machines with a capacity of 36.8MW and an annual output of 100GWh of renewable energy

Will eventually grow to 25 machines with a capacity of 52.5MW

WBIF support: i) Feasibility study; ii) Wind measurement studies; iii) Environmental and social impact analysis; iv) Optimal machine positioning and site layout

Financesi) WBIF- IPA grant: € 400,000ii) IFI loan (KfW): € 33,000,000

Estimate total investment: € 75,000,000

Project partners: ELEM | KfW

Status: Constructed – Wind Park stated operations in Summer 2013

EU Enlargement

WBIF Going Forward: Adapting to a Changing Operating Environment

EU Enlargement

Macro-economic Outlook – Growth projections in the SEE6

• Recession in Euro area has affected growth prospects for SEE6 countries.

• IMF predicting very modest economic recovery. • Will affect:

Investments - public and private Private Consumption Scope for government activities

EU Enlargement

• Immense scale of financing required• Rising public debt, several countries nearing or exceeding 60%

of GDP• Impact of IMF programmes• Current expenditure increasing, capital expenditure being cut• Overall investment climate & competitiveness• Limited fiscal space & scarcity of grant funds

Issues Arising

EU Enlargement

Fiscal SpacePublic Debt as % of GDP 2012 (IMF)

EU Enlargement

GDP Growth (Source IMF)

EU Enlargement

Macro-economic Outlook – Implications for the WBIF

Austerity programmes were implemented mainly at the expense of public infrastructure development.

Greater emphasis on the need for proper prioritisation of investment projects (current and planned)

Enhance links with regional, national and sectoral policies and strategies (SEE 2020, ECT, Transport. CEFTA etc)

Shift of focus to expediting priority investments under preparation

EU Enlargement

•Detailed Review of the WBIF Pipeline•Assess options to use innovative financing facilities (starting with PPPs)•Recommend changes to WBIF structures and procedures to take account of lessons learnt & impact of external environment & processes

WBIF Task Force – Main Tasks

EU Enlargement

WWW.WBIF.EU