20 October 2016 / 0 Comments
Portugal EFSI: Putting out fires in the forests and the economy
The Investment Plan for Europe aims to boost employment, growth and innovation. In Portugal, it also helps fight forest fires
This August and September in Portugal, hundreds of wildfires broke out, as temperatures reached 40C and winds fanned the flames. At least 3 people were killed, with many more injured. Hundreds of homes were lost. Thousands of firefighters worked day and night to contain the fires on the mainland and the island of Madeira. An area the size of London burned to the ground.
One of the reasons Portuguese forests are so prone to the extremely fast spread of fire is that landowners have neglected to clear the dead branches, brush and other easily flammable material from their forests. Indeed, much of the forestland has been inherited by younger people living in cities such as Lisbon or Porto who may know neither what land they own, nor the responsibilities that go with it.
To help fight the fires and support victims, Real Madrid star Cristiano Ronaldo, who was born on Madeira, donated EUR 112,000, alongside financial assistance from several countries. But the European Investment Bank has found another way to reduce the risk of future blazes. With the backing of the Investment Plan for Europe’s European Fund for Strategic Investments (EFSI), the Bank is investing in two biomass energy plants, which will in turn create demand for 320,000 tons of brushwood from the forests every year, creating a financial incentive for land-owners to start clearing the scrub from their forests and reducing risk of fire. Joaquim Da Costa Pedroso, loan officer for the Iberian region in the EIB’s Lisbon office, says some forest management companies are likely to offer their services to land-owners free, just as long as they can keep the forest residues and biomass they bring out of the forest and sell it to the energy generators.
Portugal EFSI to trigger EUR 5 billion investment
The biomass plants are just one example of 13 EFSI projects and financial transactions the EIB has approved in Portugal with a total investment of more than EUR 1.3 billion. That, in turn, is expected to mobilise more than EUR 5 billion in investment in sectors such as renewable energy, water supply, urban regeneration, new technologies and innovation.
What impact has the Investment Plan for Europe already had? The licences for the two biomass plants were awarded in a competitive tender in 2006. But the initial winners of the tender couldn’t get financing for the construction of the plants. Eventually they decided to sell the licences to one of the largest international groups in the renewable energy sector, Gestamp Renewables, along with a smaller Portuguese company focused on developing, constructing, maintaining and operating power plants, FPT – Energia e Ambiente.
International banks all but exited the market during the financial crisis, leaving behind a market gap in long-term lending that domestic players were unable to fill. Only now, with EFSI guaranteeing the EUR 50 million loan, will the total investment of more than EUR 100 million come together. The biomass plants investment will also create jobs near Fundão and Viseu, at the plants and also in additional economic activity such as cleaning the forests. In rural Portugal, where unemployment is high, this will have a visible impact on the economy.
“This is a great example of the Investment Plan for Europe really unblocking investment,” says the EIB’s Da Costa Pedroso.
Better housing with Portugal EFSI
It’s not the only example. One of the most important EFSI projects aims to transform the Portuguese capital, Lisbon. The Lisbon Urban Regeneration Climate Housing project will invest EUR 250 million to improve the quality of public spaces and to better prepare the city for floods and storms by upgrading the drainage system of central neighbourhoods. The project also seeks to modernise Lisbon’s social housing with new energy efficiency solutions.
Other projects in Portugal are already providing funds for SMEs, midcaps, and start-ups through local banks to contribute jobs. Funds from the Portugal Employment and Start Ups Programme under EFSI will go to start-ups and companies employing young people and the long-term unemployed, as well as businesses run by the self-employed. Projects already signed are expected to benefit for close to 600 SMEs and create 700 jobs, according to European Commission data.
EIB President Werner Hoyer points out that the EIB has been investing in Portugal for 40 years this autumn. “During these past 40 years we have supported more than 25,000 Portuguese SMEs and have contributed to financing the country’s infrastructure and industry. We are here today to show the commitment of the EIB Group to supporting the Portuguese economy,” Hoyer says.
Portugal EFSI creates jobs
Could some of the jobs to be created be the jobs of Formula 1 drivers?
One of the investments approved recently in Portugal and in France is a new manufacturing plant for Mecachrome Group. The company built several engines that powered a number of drivers to F1 championship titles. But Mecachrome’s core business is building engine components for airplanes, and the new plant in Évora, Portugal will produce metal components for the aeronautic industry, creating 200 non-race-car-driver jobs in the process.
The Investment Plan for Europe aims to close the investment gap in Portugal. Maybe it will even help it fly, like the planes Mecachrome’s components build.