Draft document reveals EU plans to boost investment in energy infrastructure

A draft document seen by?by revealed that the European Union, and its lending arm European?Investment?Bank, are developing a new suite of?funding mechanisms to support energy infrastructure investment.

Plans are being developed to help reduce the cost of energy for European households and industries, who claim that high bills make it impossible to compete in global markets.

The draft European Commission strategy seen by revealed plans for the EIB in order to mobilize more private investments in the energy sector, where investment in power grids, energy-saving renovations, and other energy-related projects falls short of the levels required to meet EU climate and energy goals.

In a proposed loan securitisation plan, the EIB will facilitate the transfer of existing loans from the banks' balance sheet - freeing lending capacity for new credits. The document stated that some banks have concentration limits which prevent them from lending to power grid operators.

The second facility would offer off-balance sheet financing, by converting the value of future grid operator revenue streams into cash upfront. This way they could access more funding for large infrastructure improvements.

The draft stated that "many operators often face liquidity constraints and have limited space for traditional debt."

A second scheme would allow banks to increase EIB guarantee amounts so that they could?lend money to small energy grid operators. The scheme would also allow small operators to join forces to form joint ventures and standardise the financing terms that are normally out of reach for small players. The draft document didn't'specify' the size of the new facilities. This could change before March when the Commission publishes the plan. Some facilities are expected to be implemented in this year, while others next year.

A spokesperson for EIB declined comment on the document but stated: "The EIB is?ready to collaborate closely with the European Commission to accelerate investments in Europe's energy security.

Un spokesperson for the Commission declined to comment.

Last year, the EIB invested a record 33 billion euros into energy projects across Europe. (Reporting and editing by PhilippaFletcher; Kate Abnett)

(source: Reuters)