Cash plentiful for projects in developing countries

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The number of foreign financing instruments for renewable energy projects in developing countries has grown to an "impressive" number, according to Jasper Abramowski from the German agency for technical co-operation, Deutsche Gesellschaft für Technische Zusammenarbeit (GTZ).

"There are sufficient private and public sources of funds for the construction and operation phase of renewable energy projects," Abramowski says. He stresses that "a close co-operation between the instruments is necessary since the instruments available are insufficient on their own to allow renewables projects to be run economically." Private capital has shown itself to be indispensable for renewable energy projects in countries lacking funds and know how, he says.

But investors have hesitated from pouring money into these projects because of the risks in getting secure, high returns. Outside financing is thus needed. It is generally given in forms with little or no liability for repayment, whereby the financier's security is the expected dividend to the project company. Banks are prepared to lend but "to spread the risk, they often demand that public institutions also become involved in the project."

Abramowski, who also spoke on the matter at the September Husum Wind conference, says the risks have decreased with the increasing number of international financing projects. But he warns that a crucial gap in the support system has yet to be bridged -- the planning phase.

"A suitable location has to be found, potential partners sounded out, contracts negotiated and the risks and benefits divided amongst the project players," he says. The most obvious renewables project investors -- the host country's government and Western plant suppliers -- "don't have the necessary means and experience for this phase."

More technical support in the preparatory phase is now needed to stimulate foreign investment, Abramowski believes. The International Energy Agency has made a start by setting up a forum for its wind energy programme. Here, investors can share experiences in turbine financing in developing countries.

The GTZ, under the auspices of Germany's Ministry for Economic Co-operation, also offers support through its Terna programme. Terna helps utilities in developing countries to research their feasibility for wind energy generation. "Terna is there to help in the decision over whether or not to build wind power stations," says Rolf Posorski of the GTZ. In this pre-feasibility stage, he says, many issues have to be considered, including whether the country's political framework allows for independent power projects, and what kind of wind station operator arrangements are possible. The programme also includes consultancy, training, wind monitoring and mediation in the search for potential financiers. Actual project financing is not supported, however.

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