SOUTH-WEST EUROPE RENEWABLE ENERGY PF ENVELOPE

The lending envelope will support mid-sized greenfield wind and solar plants projects to be carried out by private companies in South-West Europe, mainly Spain, Italy, Portugal, Ireland and France.

The aim is to enhance access to loan finance to the projects' promoters to support their investments in the field of renewables.

The project falls under the InvestEU objectives as it concerns the generation, supply or use of clean and sustainable renewable and safe and sustainable other zero and low-emission energy sources and solutions.

This operation increases renewable energy generation capacity in the EU and contributes to the EU 2030 climate objectives. The financing of this operation is in line with the Bank's lending priority objectives on Renewable Energy as well as on Climate Action, Environmental Sustainability and Social and Economic Cohesion. Furthermore, this operation will contribute towards the Bank's objective in the context of the REPowerEU Plan.

The operation will result in the financing of multiple renewable energy projects, each of them producing electricity from low carbon sources (onshore wind and solar PV plants). This will address the market failure of negative climate and environmental externalities, through the reduction of carbon emissions and other air pollution (compared to fossil-fuel generation).

The sub-projects will likely rely on revenues from the market at least in part (the wholesale market and unsubsidised commercial PPAs), in a sector characterised by incomplete markets (illiquid intraday markets, limited forward/hedging markets, lack of scarcity pricing and lack of transmission pricing). It thereby contributes to the policy objective to support the market integration of renewable energy projects

A number of the to-be-financed projects are expected to be located in EIB Cohesion Priority regions.

EIB's support to a large number of renewable energy projects will have a strong signalling effect and shall crowd-in other financiers, which is particularly relevant in a landscape of enhanced targets of renewable energy generation capacity under REPowerEU.

The Bank's financial contribution to the sub-projects will be delivered under numerous forms: construction bridge facilities taking full merchant risk, or long-term Project Finance structures with an extended exposure to merchant risk after expiration of sub-projects Power Purchase Agreement, are offered by a limited number of lenders only, due to the volatility of electricity price coupled with uncertainty of revenue cannibalisation over a long time horizon. The EIB is committed to deliver such tailor-made structures at the best possible financial cost, in an environment of high interest rates, bringing financial value to the sub-projects.

Sub-projects, included in the Framework Operation and presented under InvestEU, would not have been carried out (to the same extent) by the EIB without the InvestEU support.

The EIB will require that sub-projects financed under this lending envelope comply with the domestic and EU applicable legislation, as appropriate. Solar photovoltaic and onshore wind plants are expected to fall under Annex II of the Environmental Impact Assessment (EIA) Directive 2011/92/EU, as amended by Directive 2014/52/EU, leaving it to the competent authority to determine based on the criteria listed in Annex III whether an environmental impact assessment report is required. Some associated transmission lines could fall under Annex I. The EIB will assess compliance with applicable EU Directives during the appraisal of each sub-operation, in particular concerning cumulative impacts and potential impacts on nature conservation sites.

The EIB will require that sub-projects financed under this lending envelope comply with the domestic and EU applicable legislation, as appropriate. The promoters are expected to be private companies and the schemes envisaged for this operation are market-based renewable energy projects, which do not enjoy any special or exclusive rights. Therefore, private sector procurement procedures should apply. This will be further reviewed during the appraisal of each sub-operation.