Banks eye Balkans after moves in Montenegro


November 20, 2015

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It is summer holiday season, so what better time to take a break in the balmy Balkans? You can look at some deals while you’re there.

This month, developer Krnovo Green Energy secured €97m in two loans for the first utility-scale wind project in Montenegro. The European Bank for Reconstruction & Development and German bank KfW IPEX-Bank each lent €48.5m to the subsidiary of Akuo Energy. It is the first significant investment by commercial banks in wind in the Western Balkans.

This is a small deal in a small country — Montenegro has a population of just 621,000 — and, in global terms, the project is small too, at 72MW. But it is the first major investment in electricity generation in Montenegro since the 1980s; and it represents 8% of the country’s total installed electricity generation capacity and 6% of the country’s total electricity use.

EBRD also said the deal is significant because it could open up the region to investment in wind farms by commercial banks. This includes Serbia (population: 7.2million); Bosnia & Herzegovina (3.8million); and Albania (2.8million).

But you should not expect colleagues to pack up their bags and head en masse to Belgrade, Sarajevo and Tirana just yet.

This is not the first time major investors have eyed this market. It benefits from similar wind as fellow Balkans nations Bulgaria and Romania, so it has attracted interest. The problem is most of the schemes mooted in the Western Balkans haven’t gone anywhere.

Let’s look back to 2013, when a subsidiary of US-based Continental Wind Partners said it would invest €450m in two projects in Serbia by 2017. It sounded positive but the subsidiary, Continental Wind Serbia, has said very little about the schemes since.

Likewise, work started on a 102MW project in Plandiste in southeast Serbia in September 2013 and commissioning was scheduled for early 2014. We have heard nothing more.

This is not just because the developers are publicity-shy. Official statistics show that Serbia has just 20MW of installed wind capacity; Albania has 42MW; and Montenegro and Bosnia & Herzegovina do not even register.

There are two likely reasons why we have not seen much activity over there. The first is that investors in these markets face trouble getting reliable access to the grid, which has certainly held back Serbia even while it is looking to grow the amount of renewables.

And the second reason for lack of activity is that investors simply do not find it as attractive as other markets.

Investors from the European Union would rather invest within the EU because it is easier for them to do business with fellow EU nations. If they look outside the EU then it makes most sense to invest in nations with fast-growing energy demand, such as South Africa or Turkey. Western Balkans nations are not in this league.

If governments in the region are serious about wind then they need interest from investors, reliable grid connections, and supportive policies working in tandem. This is not currently happening.

We respect the aim of Akuo and its backers to open the region to commercial bank investment in wind. First, they have to prove that commercial wind works. Completing in Krnovo would be a big step.

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