Raiffeisen Bank International AG (RBI) is an Austrian banking group covering 12 countries in Central and Eastern Europe (CEE) with subsidiary network banks and an overall representation spanning 24 markets globally. RBI has committed to promoting sustainable energy through a particular focus on expanding its credit exposure in the area of wind and solar energy while reducing its carbon finance activities. Patrick Golkowsky is Project & Infrastructure Finance Lead within RBI Group’s Project & Structured Finance department.
Mr. Golkowsky, RBI Group has committed to improving its green footprint. Within the CEE countries where you are present, what on the project and infrastructure finance side is RBI’s current approach to support climate neutrality?
As a signatory of the UN Principles for Responsible Banking and a leading bank with regard to ESG in CEE, supporting climate neutrality is one of our main goals and is embedded in our DNA. By nature, investments into existing and new energy infrastructure are the main enablers on the way to climate neutrality and have always been a strong focus for us. The developments with the commitment to the Paris Climate Agreement, the EU’s energy transition program and the REPower EU program all underscore the urgency to invest in the energy transition.
Paired with the required structuring know-how, RBI Group’s project and infrastructure financing experts support investments into renewables, energy and digital infrastructure, as well as electrification, thereby significantly contributing to RBI’s overall goal of supporting climate neutrality.
Can you tell us about the main types of renewable projects that the bank finances in SEE and Romania and Croatia in particular?
With a strong track record of financing renewables across Europe and the region, we currently focus on established technologies like wind power and PV across SEE including, of course, the booming markets of Romania and Croatia.
In order to offer tailored financing solutions, we developed a comprehensive renewables strategy together with our local network banks that considers market specifics and clearly defines structuring principles for each country.
At the same time, we can accommodate a broad range of financing solutions ranging from short-term (construction bridge/mini-perms) to long-term project finance, including local projects accounts, project guarantees and hedging. Especially in times of quickly changing parameters (electricity prices, inflation, interest, etc.), we can quickly adapt structures to new circumstances and find the best solutions for each customer.
Romania and Croatia in particular show a significant growth potential and a strong pipeline of renewables projects in development. This is exactly where our group expert approach and our 25+ years of presence in those countries provide our customers with the largest benefits. For larger transactions in our core regions, we also offer syndication, trade and export finance and portfolio financing.
In financing renewables, do you only bank on contracted revenues (e.g. CfDs, PPAs, etc), or do you also consider financing on a merchant price basis?
Benefitting from secured and predictable cash flow financing based on contracted revenues like PPAs or CfDs is, of course, still the market standard when it comes to financing renewable energy projects.
Nonetheless, the European energy sector was certainly confronted with significant changes in 2022 that will have a lasting impact on the future of our energy production. As a result, we were confronted with skyrocketing electricity prices and a challenge to reasonably project prices into the future that at the same time allow for reasonable financing structures acceptable to investors. In such an environment we offer solutions that give our customers space to benefit from higher electricity prices and at the same time present an acceptable proposition for us, as the financing bank.
We are therefore able to offer a broad range of structures based on a mixture between PPA and merchant prices, or in some cases, even fully merchant-based.
Do you see the current political, economic, and legislative landscape of Southeast Europe as fertile ground for financing renewable energy projects and what are some hurdles that you had to overcome in this respect?
We see a huge potential in the region and a significant interest of international players to enter the SEE markets.
I think it is worth mentioning that the renewables sector in the region was in the past strongly impacted by regulatory changes that influenced the economic viability of renewables projects. Nowadays, thanks to a solid financing structure, the improvement of technologies and the resulting strong decrease in necessary investment costs, renewables projects are less dependent on state support and are even viable on merchant terms. Especially looking at the development of the levelised cost of electricity for PV and wind, we see that projects in renewables are profitable even under conservative electricity price assumptions, where even traditional technologies have difficulties being competitive. This gained independence from regulatory support systems facilitates the development and financing of new renewables projects.
One of the main credit enhancement and risk mitigating features utilised by investors and financings banks alike are structures involving KfW, ECA coverage, EBRD or others IFIs. Also there, RBI can look back at a strong track record and close cooperation with the international institutions supporting investments in renewables in the SEE region.
In our view, one of the crucial restrictive aspects for the future growth of renewables in the region is grid access and the necessary strengthening of the existing network infrastructure that RBI would be happy to support on the financing side.
Your portfolio includes financing of the recent acquisition of a 45 MW solar park in Giurgiu, Romania by Portugal’s GreenVolt. What are other noteworthy REN projects RBI has been financing in the SEE region?
We are quite active in the SEE region. One project worth mentioning is the financing of one of the largest wind parks in Serbia closed in the beginning of 2023. Raiffeisen Bank International AG and Raiffeisen banka a.d. Beograd are acting as Mandated Lead Arrangers and closed a landmark transaction in Serbia in the total amount of EUR 155 mln together with Erste Group, Erste Banka Srbija, NLB d.d., NLB Komercijalna banka and Oesterreichische Entwicklungsbank AG - OeEB - The Development Bank of Austria.
The funds are financing a 105.6 MW wind park in Krivaca, located120 kilometres southeast of Belgrade. It is the first-ever commercial Power Purchase Agreement-based (“PPA”) renewable energy project in Serbia. The investors behind the project are Serbia’s MK Group and Slovenia’s ALFI Green Energy Fund, which acquired the project in the first half of 2022.
The project underlines our pioneer role in the region and our capability to structure deals on a commercial basis.
Out of the RES projects you finance in SEE, what is the proportion between domestic and direct foreign investment? Do you see foreign investors reaching for greenfield or brownfield investments when it comes to RES projects?
The RES projects we finance show a good balance between domestic and international investors. We currently observe an increasing interest from international investors to enter the SEE market. This refers to both brownfield and greenfield investments. From our perspective, we see a stronger activity in greenfield investments, reflecting the above-mentioned need to build up renewable energy infrastructure.
In comparison with previous years, we also notice an increase in the size of single projects and a strong interest for portfolio financing solutions. This represents quite a paradigm shift in comparison to the long-term project financing based on regulated tariffs that used to be the standard in the past.