EBRD and EU agree EUR 50 million financial guarantee to boost renewable energy in EU Neighbourhood
The European Bank for Reconstruction and Development (EBRD) and the European Union (EU) have agreed on a new EUR 50 million programme of financial guarantees aimed at scaling up investment in renewable energy in Ukraine and in the EU’s Southern Neighbourhood with a particular focus on Jordan, Lebanon, and Tunisia.
This is the first EBRD guarantee programme to receive funding through the EU External Investment Plan (EIP), an EU initiative launched in 2017 with the aim to attract more investment, especially from businesses and private investors, into countries neighbouring the EU and in Africa.
Under the new programme, the EBRD will provide guarantees to lenders such as local commercial banks, which will allow them to provide financing to projects alongside EBRD loans. The guarantee is expected to help generate total investments of up to EUR 500 million.
Through the EIP to date, the EU has allocated EUR 4.5 billion in public funds to leverage EUR 44 billion in public and private investment for development in countries neighbouring the EU and in Africa. The EBRD will implement the largest volume and number of guarantees under the EIP in the EU Neighbourhood.
According to the EBRD, the projects under this programme will help “unlock” countries’ substantial renewable energy potential, promote the development of renewable energy more widely and demonstrate how the private sector can help meet the growing demand for energy.
We’re delighted to partner with the EU for such an urgent cause as climate action. Our lending combined with the EU’s financial instruments encourages more participation of the private sector in investments which are very much needed to face the global challenges of the future, including a more sustainable development model. This first agreement is only the beginning of our cooperation with the EU through the External Investment Plan in the EU neighbourhood regions, said Pierre Heilbronn, EBRD Vice President, Policy and Partnerships.
The guarantee is expected to provide 340 MW of additional installed renewable energy capacity. This translates into an extra 970 GWh per year of electricity production from renewable sources, and a cut in annual greenhouse gas (GHG) emissions equivalent to 530 kilotons of carbon dioxide (CO2).
The guarantee agreement will help finance many more renewable energy projects, with private sector financing. It will cut greenhouse gas emissions, first in Ukraine and then in countries in the EU’s Southern Neighbourhood, with a particular focus on Jordan, Lebanon and Tunisia. We’re convinced the guarantee provides sufficient risk cover to attract major private sector investment in countries where not enough such financing is available, therefore we are preparing to support the even greater volume of private investment in sustainable development post-2020, through the European Fund for Sustainable Development Plus, which will also cover enlargement countries, said Olivér Várhelyi, European Commissioner for European Neighbourhood Policy and Enlargement Negotiations.
The programme is anticipated to have an important demonstration effect, introducing a number of new developers and commercial financiers to these markets.
About the EU External Investment Plan
The EU External Investment Plan (EIP) has three pillars. The first is finance. Through financial guarantees, the EU mitigates the risk in countries with difficult environments so that private investors and development banks will lend to entrepreneurs or finance development projects.
The plan’s second part is technical assistance. This fund’s experts who help develop new projects, to the benefit of will authorities, investors and companies.
Technical assistance may include, for example, market intelligence and investment climate analysis, targeted legislative and regulatory advice, support to partner countries in implementing reforms, chains and identification, preparation, and help to carry out necessary investments.
The third part is investment climate support. The EU works closely with governments in partner countries to help them improve the conditions which investors consider when making their decisions. These include the business environment and a country’s political and economic stability. The EU also brings together governments and businesses to discuss investment challenges.