EDB to finance construction of two hydropower plants in Karelia

Moscow, 4 August 2016. Eurasian Development Bank (EDB), the International Investment Bank (IIB) and Nord Hydro – Belyi Porog (Nord Hydro) signed a trilateral cooperation agreement and agreed on the indicative terms and conditions of financing the construction of two small hydropower plants, Beloporozhskaya HPP 1 and Beloporozhskaya HPP 2, with a total capacity of 50 MW in the Republic of Karelia (Russia). The total project value is RUB 11.8 billion, including RUB 9.2 billion of capital expenditure. Construction is expected to be completed by end-2019. EDB and the IIB will provide a twelve-year loan of RUB 8.15 billion (50% each). The funding bank will be the BRICS New Development Bank (BRICS Bank) and the co-investor the Russian Direct Investment Fund. The borrower's obligations are planned to be secured in part by the Federal Corporation for the Development of Small and Medium-Sized Enterprises (SME Corporation).

The BRICS Bank will finance the project as part of its programme to support green projects in the member states, including those based on renewable energy sources, aimed at improving energy efficiency and efficient water management, waste processing, etc. EDB and the IIB will provide funds in the US dollars, but the project will be financed in the Russian roubles.

The project is expected to source at least 65% of equipment and construction services in Russia. Beloporozhskaya HPP 1 and Beloporozhskaya HPP 2 will sell electricity in the wholesale market as eligible generating facilities using renewable energy sources under respective power supply agreements.

The project will help to increase power generation in the region, create jobs, and increase budget revenues at different levels. The use of renewable energy for power generation is aimed to optimise the structure of generating facilities, decrease the overall spending of fuel and energy resources, minimise adverse environmental impacts, and reduce greenhouse gas emissions. The project is expected to help to develop infrastructure so as to promote advancements in other sectors and will use the significant hydro potential of small rivers.

Konstantin Limitovsky, Deputy Chairman of the EDB Management Board, pointed out that, "As a development bank, we appreciate that the project aims to create 'green' power generation in a region that lacks sufficient power resources. Our experience and competencies have helped us to devise an efficient multilateral transaction based on the principles of project finance, where risks and liabilities are shared by all project participants. This is the first project of such a scale in Russia's small hydropower and, in addition, the first project in Russia using finance from the BRICS Bank."

Alexander Khudilaynen, Head of the Republic of Karelia, stated that, "The agreement signed today is the beginning of extensive cooperation. We appreciate the trust our partners place with us. The new small hydropower plants in Karelia will be not only new generating facilities. They will mark a new stage in the advancement of the region's energy system with renewable, environmentally friendly sources. This means new quality of life."

Alexey Vinogradov, Managing Director at Nord Hydro, commented that, "The signed agreement with Eurasian Development Bank and the International Investment Bank is an important step for the project's successful fulfilment. In cooperation with these serious financial institutions, the company plans to build a cutting-edge and efficient hydropower plant to the highest international standards, with the use of innovative Russian technology. We believe that our work with international development institutions will help our company to begin exports of Russian technology and hydropower engineering services to international markets in the near future."

"The construction of hydropower plants in Karelia is the first major joint investment programme of the IIB and EDB, funded by the NDB and aimed to benefit the national economy of Russia, which is one of the main shareholders in these three multilateral development banks," Vladimir Liventsev, Deputy Chairman of the Board at the IIB, said. He emphasised that supporting renewable energy initiatives conforms fully to the policies of the renewed IIB as a socially and environmentally responsible development institution.

Additional Information:

Eurasian Development Bank (EDB) is an international financial institution founded by Russia and Kazakhstan in January 2006 with the mission to facilitate the development of market economies, sustainable economic growth, and the expansion of mutual trade and other economic ties in its member states. EDB's charter capital totals US $7 billion. The member states of the Bank are the Republic of Armenia, the Republic of Belarus, the Republic of Kazakhstan, the Kyrgyz Republic, the Russian Federation, and the Republic of Tajikistan.

Nord Hydro – Belyi Porog is a subsidiary of Nord Hydro, the Russian Direct Investment Fund and Chinese partners. The company was set up in 2015 to construct the Beloporozhskaya HPPs. The project originator is Nord Hydro established in 2007 and functioning successfully as a management and engineering company engaged in infrastructure and socially important projects to construct and commission new, and reconstruct and upgrade the existing, small hydropower facilities in Russia. The company has the most significant experience in building "turnkey" small hydropower plants in Russia. In the near future, it plans to begin exports of Russian technology and engineering services to international markets.

The International Investment Bank (IIB)– is a multilateral development institution founded in 1970 based on the intergovernmental Agreement Establishing the IIB and its Charter. The current nine members/shareholders of the Bank are Bulgaria, Cuba, Czech Republic, Hungary, Mongolia, Romania, Russia, Slovakia and Vietnam. The IIB invests in projects benefiting the economies of its member states and fostering economic cooperation between them, and focuses in particular on support for small and medium-sized enterprises, export-import financing and project finance. The Bank has undergone major modernisation since late 2012 and is rated BBB (outlook stable) by S&P, Baa1 (outlook stable) by Moody’s, BBB- (outlook stable) by Fitch and A (outlook stable) by Dagong.

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