Poland is finally being properly perceived, according to ING's Clara B Alvarez Courtesy of ING Commercial Banking

Martyna Olik: Could you describe the process of financing a wind-energy project?

Clara B Alvarez: We get all sorts of potential clients, but the usual client for us is the large corporate client. They come to us with a project that is usually very well developed, very much advanced, that they are hoping to be able to finance within the next four to six months. When we’re talking about projects that are located in places like Poland, companies usually come to us earlier, because they want help and advice on how to get the thing done in an environment that is usually new to them.

The companies are very good at the technical part, but when they get into a new regulatory environment there’s always a big question about whether that new environment is going to be bankable. We access the project and whatever information they give us and then we determine if the project could potentially meet the requirements that we need for bankability. We focus on the quality of due diligence, the technical, environmental and engineering issues, the wind resources, legal framework and … what kind of financing it will allow us to put in place.

Is due diligence done differently in Poland than in the West?

Yes, that is the challenge in Poland for international companies that come here to develop their projects. They realize that the due diligence is in many of the cases short of what they would have done in other countries or of what they are used to.

In what sense?

The quality, the kind of work that is being done, the depth of the investigation in terms of, for example, the geological study of the site. That is something that is often missing – the studies are not of good quality or are very superficial.

Wind resource data and the quality of this is questionable in many projects. It takes quite some time to get that data properly because the standards of financing require on-site wind data measurement for at least 12 months. That is the standard for project financing [set] by international banks. It’s been proven that even that is not enough, that sometimes 18 months is required, depending on the area. …

We require an entire year at the very least and then there has to be long-term data from another source used as a reference to cross-check the correlation and derive long-term projections. And in Poland that data is not as easy to obtain as it is in other countries.

Because of a lack of experts? Inexperienced regulators?

I think it’s just a new industry. Wind energy is an everyday thing in countries like Germany or Spain, but not in other countries. It sounds easier than it really is – it’s quite a complicated business that requires a lot of technical expertise.

What other challenges are there in Poland?

Well there is one very interesting aspect. Some companies don’t have local presence in Poland. And it’s only when it’s been months and they cannot get things done that they realize that having a local aspect to their team is vital. Vital is not even the word – it’s critical to have Polish staff. The firm will get nothing done otherwise.

The way things are done, how you prepare the information package, how you deal with the staff at the department that issues the permits – that requires a cultural element that is really important. And people miss that point.

How many Polish projects have you invested in so far?

I have been looking at projects constantly since 2007. We are just now working on our first Polish project.

We have looked through many other projects. Several failed because the equity investor withdrew, because in due diligence they found something that was not feasible to solve within the near future, or because when they looked exactly at the wind resource they realized that the data was not reliable and they couldn’t close the business on that. And the economic crisis is also an issue – it didn’t hit Poland nearly as hard as Western Europe, but the investors come from there.

How does the Polish market compare to others in CEE?

It’s the best in CEE. Wind resources are very good, the legal framework is the most regulated and well established. From the start the framework was very clear and good.

But if we compare investing in wind in Poland to Romania or Bulgaria, Poland is way ahead. You can see the figures of international investors who really try hard to get something done in Poland. They want to invest here, but it takes time because of the way the permitting process is done here. The wind regime is good; not wonderful I’m not going to compare it to the wind regime in Spain or Germany, but it’s good. And it’s enough for a good return on equity.

But as you say, only one project for now.

Because it is difficult. The quality of due diligence is vital, and international banks have very clear parameters when it comes to that – it’s critical to assess the economics of the project and its ability to make money to repay the loan. That needs to be proven beyond reasonable doubt.

Will Poland reach its 2020 renewable energy goal?

At this pace? It’s going to be difficult. Poland will have to accelerate. And the first thing you have to do is to provide clarity with respect to the timeline for the quotas on renewable power requirements from distribution companies. Because right now the quotas are only until 2017. Nowhere does it say that that’s the end, but there is still a question mark.

What can Poland do to speed up the investment process?

Prepare the post-2017 regulations, improve the grants system by making the process clearer. There is no handbook that tells you exactly what to do and when – you have to ask and check what others have done. Also, the permit process needs to be more efficient and uniform.

Poland is finally being properly perceived in terms of better quality of risk, financing-wise. One thing that helped Poland was the economic crisis. The figures show that Poland remained very stable – that was proof positive for those who still needed it, that Poland is a very large and very promising economy.

It’s now the market that everybody’s looking at.