Interview with Heinz Olbers, Director of the EIB's Eastern Neighbourhood & Central Asia Department
Natural Gas Europe had the pleasure to interview Heinz Olbers, Director of the European Investment Bank’s (EIB) Eastern Neighbourhood & Central Asia Department. We spoke about the bank's role in promoting Europe's energy security, about some current projects, and about EIB's view on the Southern Corridor. "The Southern Corridor is a PCI and a key source of gas supply diversification for the EU. The EIB is prepared to discuss the component projects with the promoters" he said. Doing so, he underlined that the EIB can complement EU funds on certain projects, but that each financed project has to meet its economic and financial criteria. "We’ve appraised a project in Armenia for the Caucasus transmission network, and a project in Ukraine is also officially being appraised" he also said, adding that the EIB is increasing its exposure to Ukraine. The bank did indeed agree to a EUR 3 billion lending plan to Ukraine for the years 2014-2016.
The European Investment Bank (EIB) is the world’s largest multilateral borrower and lender and it is at the same time owned by the 28 EU member states. Security of energy supply is an EIB’s objective for both lending outside the EU and within the EU. Given European efforts to promote an Energy Union, do you think that the organisation’s structure is compatible with an even stronger focus on energy?
The EIB is the world’s largest lender to renewables and invests in different types of energy-related projects, from linking up networks, like the LitPolLink for example, to grid infrastructure and indeed wind parks or other renewable energy sources. So apart from already having a very strong focus on energy - over the last 5 years (2010-2014) out of EUR 333.4 billion of total lending some EUR 55.9 billion went towards energy projects – an even stronger focus could also be accommodated by our organisational structure. We’re ready to deliver even more, but we are demand-driven: projects have to be proposed to the Bank for us to be able to lend to them.
Are there any projects that you would be particularly interested in? If you had to deliver a message to energy companies, what would you tell them? How to create positive synergies to increase energy security in Europe?
The EIB has been a significant financier of energy projects. For the period 2007 to 2014, EIB lending to energy represented EUR 96 billion (about 90% of which in the EU) of which ca. 45% for RE and EE and 40% for energy networks including many TEN-e projects. The EIB continues to track the progress of PCI and other energy projects and maintains dialogue with promoters. The EIB is open to discuss these with interested promoters.
If the five dimensions articulated in the Energy Union strategy (solidarity, integrated energy market, energy efficiency, decarbonisation, RDI) are indeed enacted by those who have the ability to do so, synergies for reinforced energy security in the EU will be created.
Can a mix of EIB loans and European support be the model for cash-poor countries that want to realise new projects? Is it this the case for LNG projects in the Baltic, in the Mediterranean and in the Balkans?
There have already been many cases of EIB and other EU funds being blended for projects. This can be one mechanism for certain projects, but it should be borne in mind that the EIB requires any projects that it finances to meet its technical, economic and financial criteria irrespective of the sources of finance.
Keeping in mind that EIB’s financing operations are also meant to trigger European integration and social cohesion, what is the role of the Luxembourg-based bank in energy projects in South Eastern Europe? Do you think that the EIB can help pushing this region closer to the rest of Europe? Do you have any timeline in mind? Are you negotiating loans there?
We invest in energy projects around Europe and the world, we’ve appraised a project in Armenia for the Caucasus transmission network, and a project in Ukraine is also officially being appraised. What we can do is help to bring about a closer integration of these countries with the EU on an economic, energy and social level, for mutual benefit. There is currently no timeline for this. Yes, we negotiate loans in South Eastern Europe as we negotiate them all around the world where we have a mandate to do so.
Could the European Investment Bank help promoting complex infrastructural projects connecting this gas-rich area to Europe? Do you have any message to send to companies having an interest in the Southern Corridor?
The Southern Corridor is a PCI and a key source of gas supply diversification for the EU. The EIB is prepared to discuss the component projects with the promoters. The projects would need to meet the EIB’s requirements – technical, economic, environmental, social and procurement.
In an intervention in the European Parliament earlier this year, Werner Hoyer, President of the European Investment Bank, made clear that the Bank is intentioned to capitalise on its technical experience both inside and outside Europe. How will it happen? Could you please share two or three main points of EIB’s strategy?
The Bank’s staff comprises a large number of experts in a very wide range of fields, from economists to environmentalists and engineers for example, who all give their input for each appraisal the Bank does when necessary. This capital in technical experience is something that the Bank is always happy to put to work and it does so through its advisory services. These are made available for each project that is proposed for appraisal but also by means of the Advisory Hub of the InnovFin – EU finance for innovators programme.
The Bank supports several projects by providing its advisory services and helping ensure the project is in the best possible shape to receive funding.
Finally, what about EIB’s role in Ukraine? Do you plan to invest there in energy projects? The European Bank for Reconstruction and Development is taking an active approach in the country, would cooperation with the EBRD possible there? How?
Yes, the Bank has a pipeline of projects in Ukraine that it is currently appraising; one of these concerns a hydropower plant in Central Ukraine. The EIB is always looking to do more where it can, so any new proposal that is put forward to us will be looked at by our experts. We already cooperate closely with the EBRD in Ukraine as well as with the European Commission. Cooperation can range from financially supporting the same initiatives to sharing knowledge and best practices. The EIB has already committed loans amounting to a cumulative amount of EUR 675 million in the energy sector in Ukraine.
Regarding our current engagement in Ukraine, the Bank has awarded over EUR 2.6 billion worth of loans over the last five years (2010-2014) and is appraising, or has already approved but not signed, several new projects in the country at the time of writing.
Overall, we recognise the difficult situation that the country is in and the Bank has agreed to a EUR 3 billion lending plan to Ukraine for the years 2014-2016.
Generally speaking, are you negotiating loans in Ukraine? Why? When will we know more about it?
Yes, the Bank has a pipeline of projects in Ukraine, some of which have been already approved but not signed and others which are currently officially under appraisal by the Bank’s experts, such as the Kaniv pumped storage plant (http://www.eib.org/projects/pipeline/2013/20130184.htm) and a municipal infrastructure framework loan. For all projects in the pipeline, please look here.
As to why we are negotiating loans in Ukraine: in principle we can negotiate loans around the world, except for countries which the EU has barred, such as the People’s Republic of North Korea. We do business worldwide in line with the guidelines of the European Commission so there’s no reason why we shouldn’t be negotiating loans in Ukraine. In the case of Ukraine, in March 2014, the European Commission announced a comprehensive assistance package amounting to EUR 11 billion for 2014-2016 to support Ukraine under certain conditions. For its part, the EIB is contributing to this package by lending up to EUR 3 billion over the next three years, should political and operational conditions allow.
The upcoming dates for signings are hard to predict as negotiations are under way, but we still hope to do more in a country that is in a very dire situation right now.
Considering Russian interest in re-routing gas supplies for European markets away from Ukraine, some journalists recently pointed at the risk connected to investments in modernising Ukraine’s gas transmission system. Do you agree? Do you consider this potential source of risk in your investment decisions in the country?
The Bank approved its first operation in the Ukrainian gas sector in late 2014 – the financing of repairs to the Urengoy-Pomary-Uzhgorod gas pipeline. This investment serves two purposes: the ability to safely maintain transit to the EU as well as the ability to safely supply gas to Ukraine. It is important to remember that Ukraine also requires security of energy supply and the Bank analysed this in financing this project.
Sergio Matalucci is an Associate Partner at Natural Gas Europe. He holds a BSc and MSc in Economics and Econometrics from Bocconi University, and a MA in Journalism from Aarhus University and City University London. He worked as a journalist in Italy, Denmark, the United Kingdom, and Belgium. Follow him on Twitter: @SergioMatalucci