Moscow, 3 April 2017. Eurasian Development Bank (EDB) and the International Investment Bank (IIB) entered into a loan agreement with Nord Hydro – Belyi Porog (NHBP) to finance construction of small hydropower plants, Beloporozhskaya HPPs 1 and 2, in Karelia. The loan totalling RUB $8.15 billion was extended for twelve years. The total project value is RUB 11.8 billion
The agreement was signed on 3 April 2017 in Moscow. The signatories were Konstantin Limitovsky, Deputy Chairman of the Management Board, for EDB; Denis Ivanov, Deputy Chairman of the Board, for the IIB; and Alexei Vinogradov, General Director, for NHBP. Artur Parfenchikov, Acting Head of the Republic of Karelia, took part in the signature ceremony.
Eurasian Development Bank is the arranger, credit agent and collateral manager.
The project was initiated by Nord Hydro, a Russian private hydro generation and engineering management company engaged in the construction, reconstruction and upgrade of small hydropower facilities.
The financial investors in the project are the Russian Direct Investment Fund (RDIF) and its foreign partners, including leading Near East sovereign funds and SINOMEC, China’s state-owned corporation. The Federal Corporation for the Development of Small and Medium-Sized Enterprises (SME Corporation) will provided a RUB 4.07 billion guarantee as security for NHBP’s loan of RUB 8.15 billion. The participation in the transaction of three development institutions (the SME Corporation, EDB, and the IIB) ensures risk distribution among the parties and makes it possible to offer comfortable terms to domestic and foreign investors.
The aggregate capacity of Beloporozhskaya HPPs 1 and 2 will be 49.8 MW. They will supply electricity to the wholesale market as eligible generating facilities using renewable energy sources under respective power supply agreements. The project is among the top priorities of the Federal Targeted Programme for the Development of Karelia until 2020.
In October 2016, the lenders and the borrower signed a letter of intent setting forth the general terms and conditions of the transaction, which has become a starting point for investors. By now, temporary facilities necessary to begin dam construction have been built and a concrete plant is being installed. Construction is planned to be completed by end-2019. The project aims to enhance electricity generation in a region that lacks sufficient power resources. The new power plants will create hundreds of jobs. Government budgets at different levels are expected to receive over RUB 2 billion in fiscal revenues over the project period.
The signatories emphasised that the project would promote the building of infrastructure necessary to develop other industries and ensure the efficient use of the hydro potential of small rivers. The construction of the Karelian plants is expected to advance the domestic manufacture of equipment for small hydropower.
A peculiarity of the project is that, according to the requirements for eligible generating facilities using renewable energy sources, it is expected to ensure high localisation of equipment manufacture and construction in Russia (over 65%). The project suppliers will be Russia’s largest producers of power generators, turbines and hydropower equipment. The initiators involved the sector’s leading enterprises to select necessary equipment since 24.9 MW power plants are not typical of the Russian hydropower sector.
The construction of small hydropower plants in Karelia is the first project in Russia, for which the New Development Bank (NDB) established by the BRICS countries, will extend finance.
“It is important that the construction of new generation facilities in a region that lacks sufficient power resources will be with the use of renewable energy sources,” Konstantin Limitovsky, Deputy Chairman of the Management Board at Eurasian Development Bank, said. “This will help to limit man-made effects on the environment and preserve Karelia’s attractiveness for domestic and foreign tourists. It is planned that Eurasian Development Bank’s competencies and experience in arranging project finance for and fulfilling the Beloporozhskaya HPPs project will be utilised in similar projects in other Russian regions as well as other member states of the Bank, and will boost the advancement of small hydropower and comprehensive use of the hydro potential of small rivers in the EAEU.”
“This is at present the IIB’s pioneering, biggest and ‘greenest’ infrastructure project in Russia. In addition to its significant innovative and social components, the construction of Beloporozhskaya HPPs will be important to people living in Karelia and the international investment partnership. The scheme of multilateral cooperation used in this project guarantees risk coverage and will ensure the most efficient use of the extended finance.
“The project is compliant with all the environmental responsibility criteria the IIB adheres to in its investment activities, in the first place as concerns renewable energy sources and the efficient use of water resources. At the same time, the bank helps to ensure an integration effect, if to take into consideration that the construction of the plants will involve the use of complementary high-tech solutions offered by manufacturers from Russia and other IIB member countries,” Denis Ivanov, Deputy Chairman of the Board at the IIB, commented.
“The government of Karelia supports the construction of Beloporozhskaya HPPs in the republic,” Artur Parfenchikov, Acting Head of the Republic of Karelia, said. “The growing prices and lack of conventional energy sources, as well as apparent environmental challenges associated with their use make us search for alternative energy sources. Our task is to make the most efficient use of the existing potential of renewable energy sources, including wind generation.” Our task is to make the most efficient use of the existing potential of renewable energy sources, including wind generation."
“The construction of new power plants in the republic will give an additional impetus to the development of new projects in priority economic sectors as well as small and medium-sized enterprises,” Sergei Suchkov, Member of the Board of the SME Corporation, stated “The Corporation plans to enhance the provision of guarantees for high-tech investment projects initiated by small and medium-sized enterprises, including with the use of instruments with preferential interest rates for investment credits.”
“It was joint work by the region, development institutions and investors that made it possible for all of us to approach one of the key phases of the project,” Alexei Vinogradov, General Director of NHBP, commented. “We’ll need to continue to work in a similar, coherent manner in the future to achieve project objectives. We hope that the construction of Beloporozhskaya HPPs will help to solidify trust of foreign investors who plan to invest in Russia.”