Summary sheet
The project involves investments in the electricity distribution network in the state of Mecklenburg-Vorpommern for the period from 2025 to 2029.
The project addresses demand growth, facilitates the connection of network users, supports the integration of renewable energy sources, and enhances both the quality of service and operational efficiency.
The Project falls within the InvestEU Regulation's Eligible Areas, namely under the development of the energy sector, and in particular for the development, smartening and modernization of sustainable energy infrastructure, in particular storage technologies, electricity interconnections and smart grids at the distribution level.
The State of Mecklenburg-Vorpommern is a cohesion area and has an average income level below the average level in Germany. The Project will invest in the electricity distribution networks mainly in rural areas in the west of Mecklenburg-Vorpommern, in which investments have been insufficient in recent years. The Project addresses a number of market failures in the area, including the integration of low-carbon renewable energy generation plants, which reduce carbon emissions and air pollution, with positive climate and health externalities, also increasing security of energy supply. The lack of sufficient financing available for the energy transition in Germany is a market failure, as the financial rate of return does not value the public goods (security of supply, the mitigation of climate change) and externalities (the reduction of greenhouse gases and air pollution). This lack of financing is aggravated by the fact that the public utilities operating in this sector have a relatively low level of own funds, which limits their ability to invest, raise debt and the amount of EIB direct financing without the InvestEU guarantee.
The Project must be implemented to achieve the energy and decarbonization targets as set by EU and German law. The foreseen investments will enable the State of Mecklenburg-Vorpommern and Germany to progress on its climate and energy objectives, in particular by supporting the rapid expansion of renewable electricity generation capacity in the north, which would also to a large extent be used to supply the south of Germany. The Project is hence expected to deliver excellent rated economic benefits as well as excellent broader social benefits. The public Promoter is experienced in works of this nature and has a sound project management system in place, thereby ensuring a Project of good quality. The financial support of InvestEU will allow to increase the financing available for investments that have positive externalities.
The additionality element of the EIB financing under InvestEU would be a significantly larger loan facility (i.e. double the amount) to the public utility WEMAG than what the EIB could provide under own risk. In addition, the facility will have a 20-year tenor, which is longer than the average life of loans available to WEMAG on the market, resulting in a good alignment of the repayment profile with the economic life of the Project. Finally, the EIB loan facility will be given to the parent company of the WEMAG Group and will hence be structurally subordinated compared to other loans given to the operational companies of the WEMAG Group (i.e. active in the expansion of the broadband network or in the construction of renewable energy plants).
Moreover, the EIB support to WEMAG is expected to mobilize additional financing, which will further underpin the efforts of the utility to fund its significant capex plan with a strong signal to other lenders and the market regarding the solidity and viability of the business model of WEMAG.
The financing would not have been carried out (to the same extent) by the EIB without the InvestEU support.
The project includes components that may fall under Annex II of the Environmental Impact Assessment (EIA) Directive 2011/92/EU as amended by Directive 2014/52/EU, which requires the competent national authority to determine the need for an EIA. The impacts that can be typically expected for some schemes relate to visual impact, vegetation clearance, collision and electrocution of flying vertebrates, electromagnetic fields, noise nuisance, and disturbances during construction, as well as the possible impacts on protected fauna and flora (Habitats 92/43/EC and Birds 2009/147/EC).
The EIB will require the promoter to ensure that contracts for implementation of the project have been and will be tendered in accordance with the applicable EU procurement legislation: Directive 2014/23/EU / 2014/24/EU / 2014/25/EU as well as Directive 92/13/EEC or Directive 89/665/EEC as interpreted by the Court of Justice of the EU, with publication of tender notices in the EU Official Journal, as and where required.