EWEA – EWEC 2007, Milan, 9 th May 2007 New Wind Finance Initiatives from EIB

1. EWEA – EWEC 2007, Milan, 9th May 2007New Wind Finance Initiatives from EIB Christopher Knowles Energy & Environment, Structured Finance and Advisory European Investment Bank

2. CONTENTS • EIB & Energy Financing •  Policy Background • EIB’s Loan Products • Working with Financial Intermediaries • Case Study I • Case Study II • Case Study III • Case Study IV

3. THE EUROPEAN INVESTMENT BANK • The European Union’s financing institution ... • Created by the Treaty of Rome in 1958, to provide long-term finance for projects implementing the EU’s policies. • Subscribed capital: EUR 164.8bn • EIB shareholders: 27 Member States of the European Union. • EIB’s annual lending (2006): EUR 45.8bn. • Annual lending to the energy sector (2006): EUR 4.1 billion

4. Renewable Energy Financing in 2006 amounted to EUR524m (32% of EIB’s financing of Electricity Generation projects) EIB’S ENERGY FINANCING IN 2006

5. Wind Energy projects accounted for 70% of EIB’s Renewable Energy Financing in 2006 EIB’S RENEWABLE ENERGY FINANCING IN 2006

6. EU POLICY CONTEXT EU Commitment: 20% reduction of GHG emissions by 2020 compared to 1990 Energy accounts for 80% of greenhouse gas emissions in the EU (European Environment Agency) EU target: Renewable Energy to account for 20% of EU energy mix by 2020 (up from less than 7% in 2005) Diversification of energy sources in order to secure energy supply Combating pollution and energy dependence:

7. EIB’S TARGETS FOR RENEWABLE ENERGY RE to account for at least 50% of EIB’s lending for Electricity Generation Annual Target of EUR 6-800m for RE projects Wind likely to continue to be the main focus for RE lending

8. EIB’S Menu Equity/Investment Funds Debt • Carbon Finance: • Multilateral Carbon Credit Fund - MCCF • Carbon Fund for Europe – IBRD • EIB – KfW Carbon Finance programme • Post 2012 (coming soon)

9. EIB’S LOAN PRODUCTS Corporate Loans and Project Finance Senior and subordinated loans Sub-investment grade loans fall under Structured Facility Finance (SFF): higher risk margin and loan amount capped at 200m EUR Loan term up to economic life of the assets Loan amount generally up to 50% of eligible project costs Under the Climate Change Finance Facility (CCFF), EIB can finance up to 75% of eligible project costs General Terms:

10. EIB’S LOAN PRODUCTS (2) Corporate Loans and Project Finance Direct Investment Loans Comprehensive loan appraisal justified by project size Where EIB takes full project risk, loan may fall under SFF => EIB loan amount capped at 200m EUR (maximum amount could be lower depending on riskiness of project) Project could consist of single or multiple sites Large-Scale Projects (typically > 50m EUR investment cost):

11. EIB’S LOAN PRODUCTS (3) Programme or Framework loan to corporate or intermediary EIB willing to provide loan facilities to developers for bundling small-scale projects EIB Strategy: Increase exposure to small-to-medium scale wind energy projects through intermediated loans on a risk-sharing basis and facilities for developers. Traditionally, intermediaries were financial entities and => no project risk for EIB. No longer so. Small-to-Medium Scale Projects (typically < 50m EUR investment cost):

12. WORKING WITH FINANCIAL INTERMEDIARIES Multi-scheme facilities for small-scale wind projects EIB will agree streamlined appraisal process with intermediaries => expertise of intermediary in the wind sector is key in case of EIB risk Project risk assumed by intermediaries OR EIB shares project risk

13. CASE STUDY I: LARGE PROJECT FINANCE • 240MW onshore windfarm project in 5 sites • Off-take agreement with TSO • Total project cost = 390m EUR • 20 year project • Debt:Equity = 90:10 • EIB loan: 170m EUR project finance loan secured on project’sassets and revenues • Pari passu with other senior lenders • Loan Term: 18 years

14. CASE STUDY II: INTERMEDIATED FRAMEWORK FACILITY • Framework loan to finance renewable energy projects, mainly wind energy, in large WE country • Loan intermediated by specialised subsidiary of major bank • Total Facility Amount: 300m EUR • EIB loan amount: 100m EUR • Loan Term: 15 years • Projects financed by EIB must meet preset criteria => streamlined appraisal process

15. CASE STUDY III: LARGE CORPORATE FINANCE • Corporate loan to a major Western European electricity producer to finance 3-year investment programme in wind energy • Total Programme Cost = 1.1bn EUR • EIB loan amount: 450m EUR • 2 Tranches: • Tranche A: 350m EUR 10 year tenor, corporate risk • Tranche B: 100m EUR 15 year tenor, bank guaranteed

16. CASE STUDY IV: RISK SHARING FRAMEWORK FACILITY • Framework loan to finance on-shore wind on a Pan-EU basis • Co-financing arrangement with a leading PF Bank active in RE • Total Facility Amount: 200m EUR; provided equally • Individual loan tenors of 15 years • EIB assuming full project risk, with pricing benefits for individual projects being financed • Co-financier acts as Facility Agent • Projects financed by EIB must meet preset criteria • Co-financier responsible for identifying eligible projects • Streamlined project appraisal process

17. Address: 100, boulevard Konrad Adenauer, L-2950 Luxembourg Contact: Chris Knowles Tel: 00.352.4379 7306 Fax: 00.352.4379 7292 e-mail: c.knowles@eib.org http://www.eib.org