Erste: Romania on hold, focusing on Croatia, Serbia


June 29, 2015





June 29, 2015




Due to the volatility of the incentive scheme and the continuous regulatory changes, the financing of new projects in Romania is not an option for the moment for Erste Group Bank AG, Markus Kriegler, its head of project finance, told SeeNews in an emailed interview.

Erste is looking into backing mainly small hydro, biogas and biomass projects in the renewables sector in Serbia and Croatia while putting on hold financing in Romania due to its unpredictable regulatory framework, he said.

Erste Group has so far provided a combined EUR 350 million in funding for renewables projects in Serbia, Croatia and Romania.

Nothing bankable over 0.5 MW

Still, Erste is prudently looking at refinancing operating assets in Romania – among the Austrian group’s biggest markets in Southeast Europe alongside Serbia and Croatia, provided that modest debt levels allow enough comfort with respect to the persistent regulatory risk. At the moment, Erste is considering only a couple of small photovoltaic and micro-hydro projects in Romania, under 5 MW.

Investment in renewable energy projects in Romania has decreased since January 2013, when the government announced its first intention to reduce the incentive scheme. The move had a negative effect on all types of renewables projects, including facilities already in operation, while making new investments in wind, solar and small hydro capacity exceeding 0.5 MW no longer bankable. Although the reduction became effective in July 2013, the installed capacity continued to grow as many projects were already under construction, but at a much lower pace, Kriegler said.

Looking ahead, Erste expects an increase in Romania of cogeneration of heat and power using biomass as this is one of the goals set in the draft of the country’s energy strategy. Kriegler is adamant that to achieve this, a separate incentive scheme has to be put into place as the one based on green certificates is too volatile to attract investors. „Small projects below 0.5 MW may be sustained through a feed-in tariff scheme to become effective in the third quarter of 2015.”

Eyes on legislative boost

In Croatia, Erste is currently looking mainly into small hydro, biogas and biomass. It has approved loans there for two biomass projects, one biogas and three small hydro projects. If the quota for the connection of wind farms to the grid is lifted, there will also be an opportunity to finance further wind power projects with signed power purchase agreements, Kriegler said. Sites suitable for small hydro in Croatia are very limited so the country’s biggest renewables potential lies with wind, followed by biomass and, to a small extent, photovoltaics.

The total demand for new renewable energy project finance in Croatia has decreased since January 2014, mainly because a cap on grid connections for additional wind projects halted the installation of new capacity. In addition, a yearly quota for new PV capacity has been introduced. At the same time, Erste believes other segments of the renewables sector have become more attractive for investors.

In Croatia too, Erste expects an increase in biomass- and biogas-fired cogeneration capacity. Although Croatia has a very good wood and agricultural industry, and generally stable sources for sustainable supply of inputs, long-term supply agreements are not easily obtained for biomass or biogas projects.

The volume of investments in renewables projects in Croatia will depend on a new renewable energy law planned to be effective as of January 2016 which provides for the introduction of a premium incentives system instead of a feed-in tariff. „The new law will also affect existing projects, introducing balancing costs for the producers. The other renewable energy technologies – wind and photovoltaic, should be developed in a more sustainable way in Croatia as there are 395 MW of wind projects with signed purchase power agreements based on a feed-in tariff still waiting for the connection cap, or quota, to be lifted,” Kriegler said.

Serbia’s hydro grows the most

Erste Serbia has so far approved financing for 19 small hydropower plants totaling 18.5 MW, three biogas projects totaling 2.1 MW, two photovoltaic projects totaling 1.35 MW and one wind park project with a 9.9 MW capacity. Serbia, which introduced its first feed-in tariffs in late 2009, has a 500 MW cap on wind, and a 10 MW cap on solar. So far, the biggest number of projects is realized in hydro. Renewable energy sources in Serbia have an estimated technically usable potential of about 5.6 megatons of oil equivalent per year, including biomass potential of approximately 3.4 megatons and 1.7 megatons of oil equivalent of hydro potential. „Serbia has seen only small renewable energy projects so far because banks have considered certain elements of the renewables regulation not bankable. We understand that the Serbian government is currently working to improve the regulatory framework as soon as this year so that we see business potential in wind of up to 500 MW,” Kriegler said. Currently, biomass and biogas and small hydro, in particular, are most bankable due to the large untapped potential in Serbia, the report said.

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