MIJNWATER SUSTAINABLE HEATING AND COOLING

The project consists of an investment programme for the expansion of a fifth generation district heating and cooling network system supplied by underground waters from closed coal mines in the Province of Limburg (NL).

In line with the EU and national renewable energy targets, the investment plan will mostly substitute individual gas heating with a more sustainable and efficient centralised heating/cooling system, resulting in primary energy savings and reduction of emissions of greenhouse gases. The project will also contribute to progressing early-deployment of fifth generation district heating and cooling network in Europe, thus contributing to learning-by-doing and positive knowledge externalities.

The Project concerns the expansion of the Mijnwater existing fifth generation district heating and cooling (5GDHC) system and associated heating and cooling generation capacities (from subsurface water in abandoned coal mines) in the Municipality of Heerlen in The Netherlands. The RE share in the DH system is already at 100% and will remain as such after the Project completion, which will allow for further replacement of natural gas heating and the provision of higher shares of sustainable energy for heating and cooling in the Municipality.

The Project is in line with EU and EIB policy objectives on climate action (mitigation) and is also fully in line with national and regional heat decarbonisation targets. It generates both environmental and health benefits, in particular by replacing natural gas with the integration of sustainable, baseload renewable sources for heating and cooling and by extending existing networks. It will also improve energy efficiency of heating and cooling supply as the system is considered highly efficient. The Project also contributes at maintaining or increasing safe delivery of heat/cool supply and reducing carbon and air pollution externalities. The Project will also contribute at increasing leaning-by-doing, which should support costs reductions over time.

The financing of this Project is therefore in line with the Bank's lending priority objectives for Energy (Securing the Enabling Infrastructure, Decarbonising Energy supply and Innovation) as well as the transversal objectives on Climate Action (mitigation), despite fair quality ratings at this stage, due to its early-deployment status and the fact that the Project quality is expected to improve through the densification of customers' connections and further deployment.

In terms of project results, the Project is expected to have a "fair" economic return, based on a hybrid quantitative-qualitative assessment. Combined with a quantitative assessment of expected financial returns, the Project is expected to generate a "fair" social benefit.

The investment loan will have a positive financial contribution for the Borrower as the EIB will be able to offer attractive interest rates compared to the debt capital markets. In addition, the finance contract will offer flexible disbursement conditions and long maturities. The EIB term loan is innovative for the client as it is currently not available in the banking market.

Based on the technical characteristics of the project, only the deep geothermal wells (> 500 m depth) fall under Annex II of the Environmental Impact Assessment Directive (EIA) 2014/52/EU (amending 2011/92/EU), which requires the competent national authority to determine the need for an EIA. The first deep drilling was screened-out from a full EIA process and the competent authorities confirmed that it will not have any cumulative impact on sites of nature importance, including Natura 2000. As the project consists of a wider programme which includes the above-mentioned deep wells subject to Annex II of the EIA Directive, this programme is also subject to the Strategic Environmental Assessment (SEA) Directive 2001/42/EC. Based on available information at this stage, the environmental impacts of the project are expected to be minor and related mainly to noise, vibration, dust, and traffic disruption, and mostly temporary during the construction, which will be mitigated through appropriate site organisation and construction management. Risks related to subsurface (such as potential shallow aquifer contamination, release of gases, pressure/temperature variations, corrosion, drilling losses or blow-outs) are managed through industry-standard designs, drilling industry safety standards and adequate operational and reservoir management strategies. There is a risk of induced seismicity, which was assessed as low for the first drilling combined with the existing wells. Appropriate environmental and seismic monitoring measures will be undertaken by the Promoter and subject to regular control by the competent authorities. For the remaining deep wells (four), the EIA screening decision, the Appropriate Assessment, the SEA and the induced seismicity risk assessment processes are on-going and will be subject to disbursement conditions.

As a public undertaking operating in the utility sector, the Promoter is subject to public procurement and its procurement procedures need to be in line with the relevant applicable EU procurement legislation (Directives 2014/24/EU and/or 2014/25/EU, where applicable, as well as Directive 92/13/EEC), as transposed in the national legislation under the Dutch Public Procurement Act 2012 (amended 1 July 2016), with publication of the tender and award notices in the Official Journal of the European Union, as and where required.