Business strategy for energy sector to spot high-mandate investment needs

In early 2010, NIB launched a business strategy for the energy sector. Based on the targets and priorities of the member countries, this approach will help the Bank to identify energy investment projects, where NIB's contribution makes a difference.

Energy has been a focus sector for NIB's lending operations for many years now. For instance, from early 2008 until the end of 2009, NIB financed 36 energy projects in the framework of its Climate Change, Energy Efficiency and Renewable Energy lending facility, CLEERE.

That array of projects included the launch of the world's largest offshore windmill farm Horns Rev II, a solar-grade silicon factory in Norway, the refurbishment of hydropower plants in Finland and Latvia, better energy efficiency of buildings in Lithuania, as well as many other actions. The total amount of loan financing within CLEERE was EUR 1 billion.

What's the idea?

So if the business strategy is not to redirect NIB's activities, shift its focus or shape a new priority for the Bank, what's the idea behind it?

Yngve Söderlund, Senior Manager at the Bank's Business Development Unit and the leader of a working group that developed NIB's business strategy for the energy sector, explains:

"The new approach will help us increase proactivity and ensure that projects the Bank finances in this sector are in line with our mandate and have a good risk quality."

"We are dealing with huge investment needs in the energy sector. A proper prioritisation of NIB's energy investment portfolio is, therefore, crucial," he adds.

NIB's energy lending focuses on NIB's member countries as well as the other countries of the larger Baltic Sea region: Poland, Northwest Russia and Ukraine.

"With regard to the security of supply and the reduction of the greenhouse gas emissions, the energy sector projects are becoming increasingly pan-regional," Mr Söderlund continues.

Priority areas

Among the priority areas in the energy sector, NIB favours projects that improve energy efficiency through energy savings, by increased use of district heating/cooling and cogeneration, power plant modernisation and improving manufacturing methods.

Another area of the Bank's priorities is the strengthening of electricity transmission networks and interconnections. In particular, NIB will continue financing projects within the integrated Nordic, Baltic and Polish networks.

"This is a key to an increased use of renewable energy, market integration and the security of supply," explains Mr Söderlund. "NIB is set to contribute to meeting the targets of the EU Baltic Energy Market Interconnection Plan, BEMIP, for full integration of the three Baltic countries into the European energy market and strengthening of electricity and gas interconnections within the EU."

"One important task, for instance, is to facilitate the integration of the offshore wind energy produced in the Baltic Sea and North Sea into the European grid," he adds.

Security of energy supply

The security of energy supply is another crucial subject in relation to the Bank's strategy for the energy sector. NIB's focus will remain on promoting power generation from renewable sources and carbon neutral technologies as well as the diversification of energy resources.

"These investments are vital for reaching the EU targets for climate change mitigation and promoting sustainable development. We will also support the balancing of power by financing new capacity based on suitable conventional technologies on a case-by-case basis," says Mr Söderlund.

NIB will also extend its loan financing to projects aimed at connecting gas pipeline systems and improving the storage capacity in the Baltic Sea region, including Norway and Denmark.

"The integration of the gas networks and a larger storage capacity will reduce the risk of short-term interruptions of gas supplies," Mr Söderlund explains.

Support for innovations

NIB remains a devoted supporter of the development of innovative and environment-friendly energy solutions and technologies. This support is also included as a priority in the business strategy. According to it, the Bank supports the transfer of modern technologies between its member countries as well as from a member country to a focus non-member country.

"For the member countries, as it is often the case in advanced economies, being innovative is the ultimate recipe for increasing productivity. This is, therefore, a key to maintaining the competitiveness of the individual countries as well as of the whole Baltic Sea region," concludes Mr Söderlund.

April 2010

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