Tag Archives: Private investment

The Global Energy Efficiency and Renewable Energy Fund

The Global Energy Efficiency and Renewable Energy Fund

Outline of the Community (European Union) legislation about The Global Energy Efficiency and Renewable Energy Fund

Topics

These categories group together and put in context the legislative and non-legislative initiatives which deal with the same topic.

Development > Sectoral development policies

The Global Energy Efficiency and Renewable Energy Fund

Document or Iniciative

Communication from the Commission to the Council and the European Parliament of 6 October 2006: “Mobilising public and private finance towards global access to climate-friendly, affordable and secure energy services: The Global Energy Efficiency and Renewable Energy Fund” [COM(2006) 583 final – Not published in the Official Journal].

Summary

The Global Energy Efficiency and Renewable Energy Fund (GEEREF) proposed by the European Commission will help mobilise private investments in energy efficiency and renewable energy projects.

Boosting such projects will substantially contribute towards sustainable development. It will provide benefits in terms of the environment, climate change and air quality and will also have social and economic benefits in terms of business, job and income creation at local level. It will also help to stabilise energy supply in the poorest regions of the world.

Overcoming investment barriers

Boosting renewable energy and energy efficiency technology calls for investment, in particular in developing countries and emerging economies. Although the prospects are promising, several factors block the participation of private-sector investors and projects and businesses have major difficulties in raising risk capital, which provides vital collateral for lenders.

One of the key reasons causing this block to investments is the significantly higher cost of initial investment in renewable energy generation than for conventional energy. While these costs are compensated by much lower running costs, private-sector investors still regard the longer repayment periods as too risky.

The various risks in developing countries are another hurdle, which means that investors look for additional reassurances.

Moreover, renewable energy technologies are often suited to small and medium sized projects with less than 5-10 million in total capital, whilst international finance institutions and the private sector traditionally do not invest in such small-scale projects.

The GEEREF, a public-private partnership.

The GEEREF will establish a public-private partnership by offering ways of risk sharing and co-financing for projects investing in renewable energy and energy efficiency.

It will mainly target the raising of “patient” risk capital, in other words, capital invested with a long-term prospect of return on the investment. GEEREF participation will range from between 25 and 50 % for medium to high-risk operations to 15 % for low-risk operations. Provision will also be made for dedicated technical assistance funds.

Rather than providing finance directly to projects, GEEREF will help create and fund regional sub-funds or scale up similar existing initiatives. Sub-funds will accommodate the specific conditions and needs of each region.

Beneficiaries

The GEEREF will support projects and businesses engaged in improving energy efficiency and renewable energy. Priority will be given to deploying environmentally sound technologies with a proven technical track record. Special focus will be given to investments of less than 10 million since they are often ignored by commercial investors and international financial institutions.

Regional sub-funds will be set up for the African, Caribbean and Pacific (ACP) region, North Africa, non-EU Eastern Europe, Latin America and Asia.

Incentives to support and contribute to the Fund

The minimum funding target for the GEEREF was set at 100 million for it to have a meaningful impact at global level and to be sufficient to establish a public-private partnership that will be self-sustaining over time.

An initial budget of 100 million should be enough to harness additional risk capital, through the sub-fund structure, of 300 million and, in the long term, up to 1 billion.

The European Commission intends to contribute 80 million to the GEEREF for the period 2007-10 with an initial contribution of 15 million proposed for 2007. It hopes that other public and private sources will contribute towards meeting the 100 million target set for the GEEREF.

International financial institutions, such as the European Investment Bank (EIB) and the European Bank for Reconstruction and Development (EBRD), private-sector investors and other financial intermediaries have already expressed their intention to contribute to this initiative.

Member States, members of the European Economic Area (EEA) and other financial institutions are also invited to participate.

Background

The constant increase in demand for global energy has serious consequences, in particular in terms of air quality, resources and access to energy. The need to ensure sustainable development requires not only combating climate change but also eradicating energy poverty and securing energy supply. It is therefore essential to harness investments in energy efficiency and renewable energy.

The GEEREF initiative is an integral part of the approach put forward in the Green Paper ” A European Strategy for Sustainable, Competitive and Secure Energy “.

 

Developing Public Private Partnerships

Developing Public Private Partnerships

Outline of the Community (European Union) legislation about Developing Public Private Partnerships

Topics

These categories group together and put in context the legislative and non-legislative initiatives which deal with the same topic.

Internal market > Businesses in the internal market > Public procurement

Developing Public Private Partnerships

Document or Iniciative

Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions of 19 November 2009 – Mobilising private and public investment for recovery and long term structural change: developing Public Private Partnerships [COM(2009) 615 final – Not published in the Official Journal].

Summary

Public Private Partnerships (PPPs) are innovative financing solutions promoted by the European Union (EU). In particular, they can contribute to:

  • facilitating projects in the public interest, notably infrastructures and cross-border public services;
  • sharing financial risks and reducing the costs of infrastructure which are normally fully funded by the public sector;
  • supporting sustainable development, innovation, research and development through competition and commitments from private enterprise.
  • enlarging European companies’ market shares in government procurement in countries outside the EU.

PPPs within the EU

These partnerships must be compatible with the rules of the EU as regards:

  • the operation of the internal market;
  • the Stability and Growth Pact;
  • Community legislation on public procurement and concessions;
  • competition rules, insofar as PPPs carry out economic activities.

EU financing can be used to co-finance PPPs. National public and private stakeholders can benefit from:

  • structural funds associated to PPPs, and the JASPERS, JESSICA and JEREMIE initiatives;
  • European Investment Bank (EIB) funds and the European Investment Fund (EIF). The EIB has also established a European PPP Expertise Centre (EPEC) to assist in creating PPPs;
  • the financial instruments of the trans-European transport network (RTE-T network), which encourage the contribution of private financing, risk capital and the granting of bank loans;
  • the 7th Framework Programme for Research and Development and the Joint Technological Initiative (JTI).

The EU also recommends the use of instruments for innovation:

  • the Risk Sharing Finance Facility (RSFF), set up by the Commission and the EIB in order to facilitate access to loans. The European Economic Recovery Plan foresees an accelerated implementation of the RSFF;
  • the instruments of the Competitiveness and Innovation Framework Programme (CIP), which support PPPs in the areas of research, technological development and innovation.

PPPs outside the EU

PPPs can be set up as part of enlargement strategy and external cooperation actions. The EU also contributes to the Global Energy Efficiency and Renewable Energy Fund, an international PPP for investors in developing countries.

Finally, the EU promotes improved transparency and operation of PPPs in its international trade relations.

Obstacles to the creation of PPPs

The economic crisis has limited access to financing due to:

  • the increase in the cost of credit;
  • a reduction in bank maturities to reduce the duration of loans;
  • a lack of financing at the outset for public procurement processes.

It is for this reason that the Commission has presented a temporary Community framework for State aid to support access to finance in this period of economic crisis.

Setting up PPPs often involves:

  • considerable financial resources;
  • expertise and specific training in the public sector;
  • complex financial arrangements;
  • long-term commitments from the authorities.

PPPs in the field of technological innovation are essential for EU competitiveness. The Commission is to build a specific framework to:

  • facilitate their creation and ensure that risks and responsibilities are shared between public and private stakeholders;
  • guarantee access to finance through grants, public procurement or investment.

Measures taken by the EU

The economic crisis has a negative impact on public finances and on projects requiring long-term investment. Thus in 2010, as part of the Economic Recovery Plan, the Commission plans five specific actions to foster the setting up of PPPs:

  • the creation of a group for dialogue and exchange between the stakeholders involved in a PPP;
  • an increase in available financial resources through existing European instruments and by developing specific instruments;
  • an assurance that public and private management bodies are to be treated equally with regard to European funding;
  • the promotion of innovation, in particular by allowing the EU to participate in private law bodies and directly invest in projects;
  • a proposal for a new legal instrument relating to public service concessions awarded to the private sector.

The Commission is also to evaluate a series of additional measures before the end of 2011. These concern:

  • extending the scope of European financial instruments;
  • completing the impact assessment concerning the initiative relating to the award of service concessions;
  • improving accounting practices;
  • disseminating specialised knowledge and know-how;
  • promoting information and communication technologies and innovation.