The European Investment Bank (EIB) is helping the Swedish municipality of Östersund, a city of around 60.000 inhabitants in northern Sweden, to construct a biomass fuelled combined heat and power station. This project, for which the EIB offers a loan for SEK 290 million (EUR 33 million), will help increase energy efficiency by encouraging a sustainable use of bio-fuels which should have a favourable environmental impact. EIB Vice President Ewald Nowotny signed the loan in Stockholm last Tuesday.

Östersund is the only major town in the inner parts of northern Sweden and the administrative capital of the County of Jämtland. It is located about 500 km north of Stockholm between Sundsvall (200 km) in the east and Trondheim (260 km) in the west.

The borrower of the loan is Jämtkraft AB, a company owned by the Municipality of Östersund, Sweden's state-owned energy company Vattenfall AB and the Municipalities of Åre and Krokom. Jämtkraft AB is the local energy company in the Östersund region. It's activities are divided into business areas such as electricity generation, electricity networks (Jämtkraft's electricity distribution network covers the area of its three owner municipalities, where the company has about 60 000 customers) as well as district heating (most of Jämtkraft's district heating is produced for the city of Östersund with a total number of households reached of about 19 000).

Reduction of fuel consumption

The project concerns the construction of a bio fuelled combined heat and power plant including a handling system for bio fuels, connections to the electricity and district heat networks. The new plant will be fuelled mainly by woodchips, felling waste, waste wood etc. from the local logging industry and will substantially reduce the fuel oil consumption of the company. The project increases the use of indigenous energy resources and reduces dependence on imported oil. The cogeneration of heat and electricity will contribute to an improvement in the overall energy efficiency of the Swedish energy system, and the sustainable use of bio-fuels should have a favourable environmental impact.

Energy savings

Commenting on this loan, EIB Vice President Mr Ewald Nowotny, who signed the transaction in Stockholm on behalf of the EIB, said: "This EIB loan will diversify the funding and lengthen the average debt maturity of a project of great importance for the environment. It will meet the increasing demand for district heating, replacing bio-fuelled heat-only boilers and oil-fired units".

The project is in line with the policy objectives of the Swedish government and receives significant financial support in the form of capital investment subsidies. It is also to a large extent exempt from the energy and environmental taxes that are applied to fossil fuel-fired power plants. Jämtkraft, the promoter, is well qualified to manage such a project, having successfully completed several similar bio fuel projects in the last 10-20 years. 

The AAA-rated European Investment Bank (EIB), the financial arm of the European Union, contributes by means of its long-term loans towards the integration and balanced development of its Member States as well as in countries outside the Union.

In Sweden, the EIB has extended loans totalling over SEK 35 billion for infrastructure investments, notably roads, railroads, bridges and telecommunication as well as investments within the energy, environment and the industry sector. In addition to large projects, the EIB has financed small and medium-sized public and private investments through credit lines (Global Loans) to financial intermediaries.