CWP focuses on South-east Europe

Global Energy Report 2023
15 min read

Renewable energy projects in carbon-intensive economies present opportunities for developers and generators. CWP Europe sees its potential lying in developing wind and solar projects across South-east Europe. By Nick Herbert.

CWP Europe, part of CWP Global, was established in 2019 to refocus the firm’s efforts on full-scale renewables development in South-east Europe. The aim is to deliver a large, diversified portfolio of wind and solar projects in the region.

“Our mission is to decarbonise the region by delivering the technologies, skills and services that will bridge the gap between South-east Europe and the rest of the continent,” said Alex Sekulovic, CFO and COO at CWP Europe.

CWP, Continental Wind Partners, part of sustainable investment group PostScriptum, was founded in 2006 based on the perceived opportunities that could be realised by entering the emerging renewable energy market of South-east Europe.

It quickly became one of the most successful international developers in the region, delivering the largest wind farm projects in Romania and Serbia. The 600MW Fantanele-Cogealac project in Romania – still the largest onshore wind farm in Europe – represented the largest private investment in the country. The project reached financial close in 2008 and became fully operation in 2012. In Serbia, CWP co-sponsored the 156MW Cibuk 1 wind farm alongside Masdar, the UAE government-owned renewable energy company.

In 2008, CWP entered the Australian market, developing a 2GW renewable energy platform and pioneering new business models, such as corporate PPAs and non-recourse financing, based on part-merchant offtake strategies. A merger in 2020 with the Grassroots Renewable Energy Trust, part of private markets investor Partners Group, formed one of the largest independent renewable energy power producers in Australia. The Australia outfit was acquired by Squadron Energy in 2022, leaving CWP Global to focus its efforts on South-east Europe and Hydrogen.

South-eastern promise

CWP, which took a step back from its South-east European endeavours in 2012 due to delays in the introduction of feed-in tariffs (FiTs), has returned its gaze on the region to take advantage of newly established trends.

“We think South-east Europe presents a good opportunity for renewable power because the region is currently home to carbon-intensive economies,” said Roxana Simon-Loeys, head of project finance. “Governments in the region, whether in the European Union or with ambitions to join the EU, have made pledges to achieve certain green targets by 2030. We can see the potential for CWP to help boost the green transition in these countries.”

A massive amount of coal needs to be replaced by renewables. Bulgaria, Serbia, Romania and Ukraine are some of Europe's most carbon-intensive energy markets, with coal still playing a dominant role in their economies. The decarbonisation of these markets is an urgent priority and will require the installation of tens of thousands of megawatts of wind and solar energy.

Armed with the experience gained in Australia, CWP has restarted full-scale development, building up a project portfolio of large-scale wind and solar projects. It has a team of more than 90 people across five countries, with Simon-Loeys leading a team of six analysts.

“We're still building the team as we transition towards developing a more significant presence in the region,” she said.

Tied up

In 2021, CWP announced a 50/50 joint-venture with Mercuria Energy Trading, one of the world's largest independent energy traders, with the firms joining forces to complete development and build out CWP 's portfolio.

“All the development costs are financed on a 50/50 basis,” said Simon-Loeys. “We co-own our entire project pipeline with Mercuria.” Mercuria's broad spectrum of energy trading activities enables CWP Europe to optimise its portfolio of renewable energy assets, better manage market exposure, and develop transactions to enhance its product offering to corporate and industrial power offtakers.

“It's a partnership that will co fund the development cost of our pipeline, but it's also a partnership where Mercuria can contribute its significant trading experience in structuring a commercial strategy for long-term PPAs,” said Simon-Loeys. “Mercuria can help us with the offtake strategy in some of our projects.” The partnership also marks a change in strategy for the developer. “We used to sell our projects but now we are trying to keep a significant stake in them,” she said.

CWP sold the Fantanele-Cogealac facility to Czech energy utility CEZ Group and the Cibuk wind farm is now owned by Tesla Wind, a JV between Abu Dhabi's Masdar, Finnish developer Taaleri Energia and Germany’s DFI KfW. The strategic change reflects increasing power prices, something to make equity returns more interesting. Higher output prices must be weighed against increasing capex costs, however.

“This strategy is not set in stone,” said Simon-Loeys. “It will vary from country to country, from project to project, from technology to technology. But we are trying to build out our own projects and to establish a presence in the regional renewable markets.” Opportunities will be assessed in-house to see whether it makes sense to stay with a project.

Bottleneck busting

The region’s renewable energy needs present opportunities but the potential is not always easily realised.

“The bottleneck is the offtake strategy,” said Simon-Loeys. “Investors need certainty and stability in the future cashflow.” To meet 2030 EU targets for 32% renewable energy, Romania is developing a contracts for difference (CfD) mechanism to encourage investment in the low-carbon generation technologies needed in its energy sector. A CfD scheme is also coming in Serbia.

Cashflow certainty can be achieved through contracts for difference (CfDs) or through bilateral power purchase agreements (PPAs) with a creditworthy utility or corporate offtaker, or through a financial hedge.

“The problem with PPAs in this part of the world is that there is not much of a track record,” said Simon-Loeys. “It's a nascent market, the government, the corporate offtakers, the generators are just learning how to do it. It’s a slow process.”

There are some examples of solar power PPAs in Bulgaria, however. “But it takes a long time to negotiate them, a lot of resources, and legal fees,” said Simon-Loeys. “And now there’s also the issue of price caps that were instigated by governments to protect customers following the Russian invasion of Ukraine.”

The price cap affects behaviour. “Why would industrial customers enter a long-term PPA when there’s price protection from government?” asked Simon-Loeys. It’s difficult to find industrial buyers willing to engage in a 10 year offtake with a power producer on a project that is not yet up and running. But it’s not the only challenge for developers.

“Offtakers don't want to take the construction risk of the project they are sourcing their power from. Even if they wanted to, there’s the matter of the offtaker’s credit worthiness,” said Simon-Loeys. “When you go to lenders with a PPA the first thing they want to do is determine the credit worthiness of the offtaker. And some of the potential offtakers in the region – such as steel mills or aluminium plants – are not sufficiently creditworthy.”

The right blend

CWP is attempting to overcome the offtake conundrum by blending a PPA with merchant risk. CWP created structures with virtual PPAs in Australia that it believes are 100% compatible with the market design in Romania, Bulgaria, and Serbia, and can be translated to Europe. The target is to develop utility-scale, subsidy-free renewable energy in the region.

The project gets a fixed price from the electricity buyer and the electricity buyer bears the risk of variable prices. There is no physical delivery, only a cashflow exchange. The project sells electricity physically to the organised day-ahead market. If the achieved price on the day-ahead market is higher than the price defined in the agreement, the difference is paid to the buyer. “It's a financial hedge,” said Simon-Loeys. “It’s the most you can achieve in our markets right now. And lenders, the commercial banks, are open to embrace some merchant risk – not 100% but maybe up to 50%.”

“It’s a question of how you manage the merchant risk,” she said. “How do you get to a deal where you have significant leverage and a little bit of merchant risk to enable some equity upside as well?” The amount of merchant risk affects the leverage in the project.

“When you have a significant portion of merchant risk, your leverage does not get to the level you envisaged,” said Simon-Loeys. “The equity holder would like 70%–80% leverage, but with merchant risk the maximum you can get, even in the best circumstances, is 60%.” And while junior debt funds are being raised to help increase the leverage on renewable projects in OECD markets, the prospect of finding such a lender in South-east Europe is minimal.

“There is a clear gap in the market here that could be filled by this type of junior lender,” she said. That said, there is plenty of money looking to be put to work in the region and exposure to its renewables space provides added allure.

Pipeline development

The multilateral development banks (MDBs) are active. The EBRD, which is committed to increase the proportion of its green investments to at least 50% of its total by 2025, is a big lender in the region and has been involved in previous CWP deals. The EBRD also provides technical assistance to governments in their attempts to create an investable regulatory framework for projects.

It was a lender to the €300m Cibuk 1 wind farm alongside the IFC and commercial banks. The EBRD provided a €107.7m syndicated loan under an A/B loan structure. The IFC’s €107.7m financing package comprised a direct €52.7m senior loan, a €36.7m loan provided through its Managed Co-Lending Portfolio Program and a €18.3m B loan under its syndication umbrella.

Simon-Loeys, who gained experience in a broad range of transactions as part of the Energy Team at the EBRD, sees the development banks playing an ongoing role in financing the region’s transition and helping governments provide the necessary legal framework and security to attract private investors.

“But I have to say that commercial lenders are also increasingly active: the regional commercial lenders, for instance, ones with a local presence in the countries,” she said. “They love renewables, and they all have strategic ambitions to participate in the energy transition.” The €205m refinancing of the 158 MW Cibuk wind farm, for example, was provided by a consortium of banks consisting of UniCredit, Credit Suisse, Eurobank and OTP Bank.

Increasing interest

Higher levels of inflation – and the corresponding moves in interest rates – also present challenges for project developers. Inflation is adding to development costs while higher interest rates add to the cost of financing them.

“Borrowing is not as cheap as it was,” said Simon-Loeys. “In this region, most banks will only lend up to 15 years and then they usually require a swap to fixed rate for up to 10 years. In this high interest rate environment, that's a significant cost you’ve committed to for the next 10 years. Two years ago, it could have been done at half the price.”

The increase in costs eat into the potential equity returns. “The new reality of rising financing costs is designing a favourable offtake strategy that would allow sufficient leverage levels, while also providing required sponsor returns,” said Sekulovic.

Sun and wind

CWP remains positive on the region’s wind and solar potential.

In Romania, CWP Europe has acquired the 134MW Studina solar project from a local developer. CWP plans to project-finance the development. And it entered the Montenegrin market in February 2023 with the €360m 400MW Montechevo solar project, the largest in the country.

CWP is targeting financial close on up to four renewable projects in South-east Europe this year, two in Serbia and two in Romania.

It is looking to close non-recourse project financing for the 150MW Solarina solar plant in Serbia by June and project finance a 291MW wind scheme in Romania. It was initially reported that it was looking at non-recourse PF for the 300MW Vetrozelena project in Serbia too, however the company said it is not disclosing how Vetrozelena will be financed following the entry of new majority partner PowerChina Resources (PCR) in the project. PowerChina Group's subsidiary PCR signed in mid-April an investment agreement to acquire 51% of the wind power plant. PCR and CWP are finalising equipment supply and maintenance contract for the turbine manufacture.

It is also working to secure permits for the largest wind farm planned in Bulgaria, the US$614m 592MW Dobrotich scheme.

Battery storage will be considered where it can add value to a project. “Batteries are more viable in some countries than others,” said Simon-Loeys. “The regulatory environment in Romania is more advanced than in Serbia, for instance. This part of the world still needs a little bit more technical assistance to develop the regulatory framework for the battery storage market."

Governments in the region can do more. “Markets are not yet mature enough and suffer from multi-year and complex permitting processes and lack of grid connection availability,” said Sekulovic. It’s a question of offering schemes that enable renewables to return a stable cashflow and attract investors. “More education on corporate PPA would also help, so that regional industrial players – aluminium smelters, steel mills, car manufacturers – are incentivised to decarbonise and use green power,” she said. “And the energy price cap needs to be removed. That would be a good incentive.”

To see the digital version of this report, please click here.

To purchase printed copies or a PDF of this report, please email

Land area in Europe the night © Romolo Tavani |