VILNIUS HEATING CAPEX PROGRAMME

The project concerns investments in the construction of new renewable energy sources and to upgrade, renew and refurbish the heat distribution network, including the financing of smart meters and new connections.

Implementation of the project aims at the reduction of losses of heat and at optimisation of heat supply to consumers; it should also increase the reliability of heat supplies. The project will reduce CO2 emissions as well as heat production costs, thereby making the heat more affordable and competitive.

EIB financing will allow the promoter to refurbish and extend the district heating network, construct a new biomass CHP and modernise peak gas-fired boilers in Vilnius. The project contributes to the decarbonisation objectives as stated in the National Energy and Climate Plan for Lithuania which sets a 90% biomass target for the district heating sector by 2030. The financing of this project also contributes to Bank's lending priority objectives on energy as well as on climate action.

Such investment is crucial to improve security, energy efficiency and flexibility of heat supply and meet existing and future demand of heat and hot water. The project addresses a number of marker failures: Low-carbon power and heat projects reduce carbon and air pollution externalities, low-carbon technologies contribute also towards increasing security of supply by reducing dependency on imported fossil based energy. Security of supply can be considered as a public good.

The project is expected to have a good economic justification and generate additional employment in construction. The capacity of the promoter is considered appropriate for the proposed project.

The financial value added provided by the EIB loan includes attractively priced funding with long maturities not available on the Lithuanian bank and/or bond market. The long tenor of the EIB loan is in line with the economic life of the underlying asset and will substantially improve the average maturity profile of Borrower's debt and will accelerate the implementation of the project.

The project is an investment programme comprising numerous sub-operations from the installation of biomass boilers to the modernisation and extension of district heating grids. Some sub-operations may fall under Annex II of the Environmental Impact Assessment (EIA) Directive thus requiring a review by the competent authorities at the planning/consent stage with due regard to the necessity for environmental and biodiversity impact and appropriate assessments. The environmental management capacity of the Promoter and environmental aspects of the investments, including compliance with the Directive (EU) 2015/2193 of 25 November 2015 on the limitation of emissions of certain pollutants into the air from medium combustion plants, and other EU legislative acts, will be appropriately assessed as part of the Bank's appraisal process.

The Bank will require the Promoter to ensure that contracts for the implementation of the project have been/shall be tendered in accordance with the relevant applicable EU procurement legislation (Directives 2014/24/EU and 2014/25/EU, where applicable, as well as the Directive 92/13/EEC) as interpreted by the Court of Justice of the EU, with publication of tender notices in the Official Journal of the EU, as and where required.