INTERVIEW - CWP Europe sees opportunity in SEE markets' lack of maturity

The carbon-intensive nature of the economies in Southeast Europe (SEE), coupled with the green pledges of pro-EU governments and the availability of bank financing, is the combo that makes this region a good destination for renewable energy endeavours, says a company with a history of substantial investments in SEE.

CWP Europe is a SEE-focused renewables developer, which, since late 2021, has been operating as a 50/50 joint venture between global renewable energy company CWP and commodity trading major Mercuria Energy Trading. Renewables Now spoke with CWP Europe and its COO and CFO, Alex Sekulovic, about the specifics of the region when it comes to renewable energy development.

Asked about the challenges of operating in this particular region, Sekulovic said the following:

“The major challenge in the new reality of rising financing costs is designing a favorable offtake strategy (contracted vs merchant), which would allow sufficient leverage levels, while also providing required sponsor returns. The choice between contracted and merchant offtake agreements can have a significant impact on project economics. At the same time, it is important to note that the availability of interconnection capacities enable geographical smoothing of generation profiles that substantiate our offtake strategy,” he commented.

The company notes that Mercuria contributes with its significant experience in structuring a commercial strategy for long-term power purchase agreements (PPAs) and supports CWP’s offtake strategy in some of the projects.

“On the ground, we are seeing that the markets are not yet mature enough – multi-year and complex permitting processes and lack of grid connection availability. This is of course not only a challenge but also an opportunity,” added Sekulovic, who is anything but a stranger to the renewable energy sector, having led a few segments within General Electric’s (GE) onshore wind business for years prior to joining CWP Europe.

At present, CWP Europe has more than 6 GW of renewables under development in the markets of Serbia, Bulgaria, Romania, Montenegro, Albania, Bosnia and Herzegovina, Slovenia, Moldova, and Ukraine. It is the company behind Europe's current largest onshore wind farm -- the 600-MW Fantanele-Cogealac facility in Romania which was developed more than 10 years ago and sold to CEZ Group. Most recently, CWP Europe announced an investment agreement with PowerChina Resources Ltd to deliver the 300-MW Vetrozelena wind project in Serbia.

As per the factors that affect the process of making final investment decisions (FIDs), the company stated:

“Markets with a stable regulatory environment allow for speedier investment decisions. However final decisions should take into account all aspects of the project like profitability, bankability, offtake, construction timeline, etc. In the past, we have successfully closed transactions in Serbia, Romania and Bulgaria. These markets remain our core focus, and we use the experience we have gained to deliver new projects in other countries in the region as well.”

CWP’s current strategy is to keep a significant stake in its projects. Its approach to financing involves the use of non-recourse debt based on a mix of contracted and merchant revenues.

Also on the topic of financing, CWP Europe points out that both development banks and commercial lenders are increasingly active in this SEE sector. “Commercial lenders are also increasingly active in the region and they have strategic ambitions to participate in the energy transition,” a company representative stated.

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