Environmental Assistance to Eastern Europa - Annual Report 1998

5. Stock-taking of the MKØ-scheme at the turn of the year

5. Stock-taking of the MKØ-scheme at the turn of the year

5. Stock-taking of the MKØ-scheme at the turn of the year

Environmental Soft Loan Programme (MKØ)

In the Appropriation Act for 1998, a sum was allocated as part of the Environment and Disaster Relief Facility (EDRF) for Central and Eastern Europe to a “soft-loan scheme”, the Environmental Soft Loan Programme for Eastern Europe with emphasis on the Baltic Sea region (MKØ). The programme is administered by the Danish Agency for Development of Industry and Trade (the Danish State Export Credit Agency) in co-operation with DEPA. For 1998, the appropriation amounts to DKK 45 m, corresponding to an expected project portfolio of DKK 135 m. As a starting point, the individual projects will be subsidised with about 25% of the amount to be financed (project sum minus down payment). Furthermore, a paid-up guarantee equivalent to typically 5% of the project costs is granted.

The purpose of the Environmental Soft Loan Programme for Eastern Europe is to make financing available to environmental projects in Eastern Europe and in that way promote investments in environmental plants. For 1998, water, waste handling and treatment and district heating were selected as areas within which projects would be prioritised. As the scheme consists in subsidised credits, the OECD-rules, the “consensus rules”, apply. The scheme is thus untied, which means that no discrimination may be made between Danish and foreign companies. International tenders must be invited for all applications.

Stock-taking

In March 1998, a round of applications for environmental credits was initiated with May 1998 as deadline for applications. The round of applications was initiated by means of an information campaign aimed at the clients of the Danish Agency for Development of Industry and Trade.

At the expiry of the deadline for applications, 30 applications had been submitted for environmental credits. The applicants were mainly Danish suppliers and consultants, but also potential buyers in Eastern Europe were among the applicants. The projects submitted were practically all geographically placed in the Baltic Sea region. In total, MKØ-assistance to a total amount of about DKK 70 m for projects amounting to about DKK 220 m was applied for. In addition, after the round of applications had been completed, DEPA has identified a number of projects totalling DKK 100 m with expected subsidies of about DKK 30 m.

At the end of the year, five projects had received preliminary approval. The projects comprise two district heating projects in Romania, one geothermal project in Slovakia and two waste water projects in Poland. The projects require total investments of DKK 89.8 m, of which DKK 28.6 m have been promised so far (out of which DKK 7.6 m is in the form of premium subsidies). Of the five approved projects, the geothermal project was identified in connection with the round of applications.

Experience

Originally, the MKØ-scheme was intended as a scheme allowing suppliers, consultants and other Danish actors on the environmental stage to use soft financing for the supply of equipment for environmental projects/plants. The application round was aimed at Danish suppliers and consultants normally making up EU’s customer base.

Besides the application round in Denmark, the scheme has been publicised in e.g. Poland, Estonia and Lithuania with a view to ensuring that the purchasing countries are increasingly involved in identifying projects. Similar projects have been planned for Latvia and the Czech Republic. The MKØ-scheme enters into DEPA’s considerations of financing projects prepared under the DESF-Facility.

Experience from the application round showed that only few of the applications could serve as a basis for a call for tenders in their present form. In DEPA’s assessment, there was a need for more documentation, for a higher degree of finalisation of the projects and for an increase in the amounts applied for.

Efforts have been made to incorporate experience from the 1998 application round in the 1999-scheme. The information material thus describes the requirements regarding completion of the projects in greater detail. Moreover, an attempt has been made to incorporate incentives for the consultants also to prepare applications. Finally, applicants are encouraged to contact DEPA and the Danish Agency for Development of Industry and Trade earlier in the identification phase for an advance assessment of whether the projects may receive favourable treatment.