BRNO DISTRICT HEATING AND BIOMASS

The project will finance the upgrade of the heat generation and distribution system in the City of Brno, including construction of a new biomass combined heat and power (CHP) unit.

The aim is to increase the heat production from renewable fuel through construction of a biomass CHP unit, decrease network losses through the modernisation of the grid and elimination of steam pipelines and connect new customers.

EIB financing will allow the promoter to construct a new biomass CHP unit, and refurbish and extend the district heating network. The project will increase the share of renewable energy sources in Czechia's heating sector, which is currently at 23.5% and the 2020 National energy and climate plan expects to reach 30.7% by 2030.

The financing of this project will contribute to Bank's priority objectives on energy, climate action and cohesion priority regions. Such investment is crucial to improve security, energy efficiency and flexibility of heat supply and meet demand for heat. The project addresses several market failures: Low-carbon projects reduce carbon externalities, they contribute also towards security of supply by reducing dependency on imported fossil fuels. Security of supply can be considered as a public good.

The financial value added provided by the EIB loan includes attractive pricing, long maturity and flexible drawdown conditions. The tenor of the EIB loan is in line with the economic life of the underlying assets and will provide sufficient financial capacity to implement the project and retain healthy financial condition of the borrower. The project has excellent economic justification and generates additional employment in construction. The capacity of the promoter is considered appropriate for the proposed project.

Some schemes of the investment programme may fall under Annex II of the Environmental Impact Assessemnt (EIA) Directive 2014/52/EU amending the EIA Directive 2011/92/EU, thus requiring a review by the competent authorities at the planning/consent stage with due regard to the necessity for environmental and biodiversity impact and appropriate assessments. The environmental aspects of the programme will be appropriately assessed as part of the EIB's appraisal process. As the Project includes the investment in a biomass-fired CHP unit among other schemes, the assessment will concern also the sustainability of biomass.

The Bank will require the Promoter to ensure that contracts for the implementation of the Project have been and will be tendered in accordance with the relevant applicable EU procurement legislation (Directives 2014/25/EU, and/or 2014/23/EU where applicable, as well as the Directive 92/13/EEC and/or Directive 89/665/EEC), as interpreted by the Court of Justice of the EU, with publication of tender notices in the EU Official Journal, as and where required.