"The war in Ukraine has made energy security a front-burner concern," Ruhe told SeeNews in an interview on the sidelines of the bank's annual meeting in Marrakech, Morocco, last week.
In respect to energy security, the EBRD will be supporting projects in energy storage, including gas storage and batteries, renewable energy and connectivity. All projects that the bank backs need to be aligned to the Paris Agreement, which aims to hold the increase in the global average temperature to less than 2°C above pre-industrial levels, and the countries' national climate plans.
"We are working with the government of Bulgaria under the Recovery and Resilience Plan on the battery storage programme to complement investments in renewable energy [...]. In both Bulgaria and Romania there are plans to build renewables plants on former coal mine areas. I think it makes a lot of sense," Ruhe said.
In Croatia, the EBRD has wind power projects in the pipeline and in the Western Balkans it will be working on a move from a feed-in tariff to an auction system for renewable capacity, replicating a successful model introduced in Albania in 2021. In Albania, the EBRD is also backing a floating solar plant, its first-time investment in such a project.
MORE DEMANDING ENERGY EFFICIENCY STANDARDS NEEDED
The shift to renewables should be paralleled by energy efficiency steps, Ruhe stressed.
"We will continue to work with governments to move away from coal and to set more demanding energy efficiency standards. If you have cheap energy and there are no energy efficiency standards, then why would you invest in energy efficiency? It doesn’t make sense. So if you are driven both by a cost of energy which actually reflects the market price and you had requirements for industry or housing to meet certain energy efficiency standards, then the investment would become much more sensible," she commented.
In gas, the EBRD board of directors is discussing a project for a gas interconnector between North Macedonia and Greece.
"We are hoping that we will be able to secure the approval for that and take it forward later this year but it is still at an early stage," Ruhe said.
"We want to do more on energy transmission and distribution investments, in particular transmission connectivity across borders […]. We need for the countries to be able to rely on their neighbours and to have easier trading across borders."
The EBRD would also consider participating in a project to expand the capacity of the Trans-Adriatic Pipeline, provided that it could also carry hydrogen, Ruhe noted, adding that the discussion is still at a very early stage.
The EBRD is also working on a feasibility study for the Southern gas interconnector from Croatia to Bosnia and Herzegovina.
EBRD READY TO BUY BIGGER STAKES IN BOND ISSUES, URGES COVERED BONDS LAWS
Capital market operations will be another important focus for the EBRD, especially in the context of the Ukrainian war impact, as the bank will be ready to participate in issuance with a larger stake than is its usual practice.
"We are ready to step in and support investments with a larger stake than is our norm. Normally, in a capital market issuance we would take up to 20%, if it is a local currency issuance, for example in Romanian lei, we could take up to 30%, but we have flexibility in our Resilience package if needed to take up more," Ruhe said.
In April, the EBRD invested 27.33 million lei (5.5 million euro) in a 555 million lei ten-year municipal bond issuance by the Bucharest city government.
Ruhe also noted that certain legislative moves are still needed to support the capital markets in the region, such as adopting legislation on covered bonds.
"After years of working on the legislation, we were happy to finance a covered bond in Romania. [...] In low-interest environments covered bonds were not so much needed by the banks but now with interest rates rising I think that they will come into play," she said. "We have also work to do on this in Bulgaria and Croatia, which has passed a covered bond law. We haven't done any covered bonds in either country."
To address the problems of low liquidity, the fragmented capital markets in the region should consolidate by establishing a new entity with all exchanges as shareholders, the EBRD official stressed.
"More broadly, there needs to be market consolidation, there should be fewer stock exchanges that are working like the Euronext. I think that instead of being linked, if these exchanges were actually unified because then you would have more liquidity, more issuances, and more activity across the region," Ruhe said.
Digitalisation and e-government is one of most important reforms that is happening in some places but not enough of it and it should be happening everywhere, Ruhe said.
"And yet digitalisation reduces cost, increases efficiency, reduces corruption, increases transparency. It’s a no-brainer and we are ready to support governments that want to move in that direction," she added.
SUPPORT FOR MUNICIPALITIES TO COPE WITH REFUGEE INFLUX
In Bulgaria and Romania, which have received refugees in substantial numbers, the EBRD will be looking at strengthening the ability of municipalities to cope with the increase in populations.
"This will be first through rapid needs assessment that we can conduct for them, then we will be providing working capital as many of their services may be strained. We are looking at caps that might be required in those places where refugees are expected to stay," she explained.
In the private sector, the EBRD will be assisting businesses whose markets are directly impacted by the war, and companies planning to hire Ukrainian refugees with financing and advisory services.