The European Investment Bank (EIB) has granted a EUR 200 million loan to ICICI Bank of India for projects in the renewable energy sector supporting climate change mitigation.
The main objective of this climate change framework loan is to make long-term finance available for investments in renewable energy projects that mitigate climate change by contributing to the avoidance or reduction of greenhouse gas emissions. This is a framework loan that will finance a number of different projects in the renewable energy sector. The operation will focus on electricity generating projects only, especially solar photovoltaic, biomass and onshore wind. The project will be located in India and will be implemented by private sector companies.
The framework loan will support the EU-India Strategic Partnership, which provides for cooperation in curbing climate change. The sub-schemes eligible for financing will bring economic benefits to the region through the production of energy from renewable resources, the displacement of imported fuel costs, the expanded use of domestic resources and the reduction of greenhouse gas emissions and other airborne pollutants. The EIB will ensure that all projects are economically and financially viable, technically adequate and in compliance with the Bank’s environmental and social requirements.
This loan is being provided under the EUR 4.5bn Energy Sustainability and Security of Supply Facility (ESF). This will be the first operation structured under the ESF in India and the first EIB operation with ICICI Bank, India’s second largest commercial bank and the largest in the private sector.
The European Investment Bank (EIB) is the EU’s long-term financing institution promoting European objectives. Created in 1958, it operates in the 27 EU Member States and more than 130 other countries. Lending operations outside the EU are part of the EU’s cooperation policy with those countries. Since 1993 the Bank has carried out four successive lending mandates for Asia and Latin America. Under the current mandate (ALA IV), covering the period 2007-2013, the EIB is authorised to lend up to EUR 3.8 billion for financing operations that contribute to climate change mitigation or support the EU presence in those regions through foreign direct investment or the transfer of technology and know-how. The EUR 3.8 billion regional ceiling is broken down into indicative sub-ceilings of EUR 1 billion for Asia and EUR 2.8 billion for Latin America.
In addition to the mandate, the Bank is running a Facility for Energy Sustainability and Security of Supply (ESF), a multiannual EUR 4.5 billion facility designed to reinforce the EIB’s contribution to renewable energy and energy efficiency in non-member countries. The facility is used essentially when the Bank does not need the support of the EC guarantee to mitigate sovereign or political risk to protect its own credit standing (i.e. in investment-grade countries or where appropriate security can be provided). In contrast, the resources under the external lending mandate are used when the support of the Community guarantee is needed to mitigate sovereign or political risks (mostly in lower-rated countries) or to support projects in other sectors.