Financing Wind Energy in Emerging Markets and Developing Countries

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1 Financing Wind Energy in Emerging Markets and Developing Countries Dr. Jens Drillisch GIZ Renewable Energy Week Berlin, 26 th September 2012

2 KfW's promotional activities worldwide Tasks of the different banks within the group Tasks Financial cooperation with developing countries Entrepreneurial cooperation with developing countries International export and project finance Objectives Promotion of reform processes, investments and advisory services in cooperation with governments and public sector institutions in developing and emerging countries Promotion of the private sector in developing and transition countries Financing of investments and advisory services for small and medium-sized enterprises International lending in the interest of the European, in particular the German economy, to promote exports and foreign investments Economic sectors Social infrastructure Economic infrastructure Financial systems Climate/environment All economic sectors Climate/ environment Infrastructure Transport Manufacturing Energy/trade Telecommunications Health Raw materials Market entry Very early stage Early Stage More mature markets KfW Entwicklungsbank Target markets Developing country DEG KfW IPEX-Bank Emerging country Industrialised country 2

3 Financing Instruments of KfW Entwicklungsbank Tailor-made Financings for Every Partner Country Financial Cooperation (FC) Budget funds (2011: EUR 1,614 million) KfW funds (2011: EUR 2,575 million) Concessional finance 1. Budget funds only 1.1. Grants: EUR 1,336 million 1.2 Loans at IDA conditions: EUR 133 million 1.3 Loans at FC standard conditions: EUR 12 million 2. FC development loans 2.1 Mixed financing 2.2. Composite finance 2.3. Reduced-interest loans Budget funds: EUR 134 million KfW funds: EUR 1,579 million 3. FC promotional loans EUR 996 million Excluding Mandats in 2011 (EUR 343 million). 3

4 FC Energy Commitments FC Energy Total ( ): 5166 Mio. erneuerbare Energien: 3149 Mio. Geothermal 1,3% Solar 5,5% Wind 6,3% Biomass 0,6% Sector Policy (incl. Demand-Side Energy Efficiency) 14,8% Hydropower 10,9% Other Conventional Plants 0,8% Coal Power Plants 2,6% Gas Distribution 2,2% Electricity Transmission 17,8% Clean Technology Fund 8,5% Other Renewable Energy 28,7% 4

5 Commitments Wind Energy Projects since 2000 (without credit lines) Country Project Year Loan (D) Commitment Grant (Z) (Mio. EUR) Wind Park Zafarana II 2001 D 15,3 Wind Park Zafarana II 2001 Z 5,1 Wind Park Zafarana III 2003 D 15,3 Wind Park Zafarana III 2003 Z 5,1 Egypt Wind Park Zafarana IV 2005 D 74,9 Renewable Energies Program (VF) 2010 D 104,0 Großwindpark Gulf of el Zayt 2010 D 87,5 Renewable Energies Program - Wind Farm Gulf of el Zayt (NIF) ,0 Subtotal 317,3 Morrocco Parc Eolien de Essaouira 2004 D 50,0 Parc Eolien de Tanger II 2006 D 50,0 Subtotal 100,0 Bosnia- Wind Farm Mesihovina (CM) 2010 Z 1,0 Wind Farm Mesihovina 2010 D 71,0 Herzegovina Subtotal 72,0 Macedonia Energy Efficiency/Renewable Energies II 2011 D 32,9 Subtotal 32,9 China Windpark III (Inner Mongolia) 2001 D 3,5 Wind Energy Programme 2008 D 20,5 Subtotal 23,9 Total 546,1 5

6 Financing Wind Energy Professional project preparation required: site selection; wind measurements, land acquisition, feasibility studies, social and environmental studies, licenses, Risk mitigation needed for risks during construction phase, cost-increases, timing-risks, risks during operation, debt-service and interest coverage Policy matters: clear market rules and regulations (strong institutions, PPAs, support mechanisms, etc.) needed including licensing and approval mechanisms KfW / FC wind energy financing - from public to private borrowers: First projects: Grants and or IDA-/standard loans for public utilities backed by government guarantee of the respective host country Next step: development loans (KfW-funds) backed by government guarantees of host country and specific guarantee facility of the German Government (a) to public utilities and (b) to local/regional banks as credit-lines Upcoming: loans / grants to public entities, which provide equity to SPVs (Special Purpose Vehicles), dominated by private player/consortium With larger volumes, financing consortiums become common more complex financing engineering (EU, EIB, EBRD, Regional Development Banks, World Bank, CTF, ) 6