ENTSOG TYNDP 2017 - Main Report

5.3.3. FINANCIAL ENVIRONMENT

Gas infrastructure projects are capital intensive assets with a very long economic lifetime therefore project financing is a major part of the process of enabling the investment. Financial tools put in place to support new investments are not always attractive to investors.

6

11

Availability of funds Amortisation rates Other

%

83

Figure 5.6: Overview of the Financing related project barriers

The number of proposed projects submitted for TYNDP 2017 illustrates the willing- ness of promoters to invest in European gas infrastructures. There is sufficient capital in the financial market to fund a significant proportion of these projects, the challenge is to ensure that these projects access funding. The main prerequisite to unbridle this financial potential is a stable and attractive regulatory framework for investors. However, as also mentioned before, not all Member States offer a regula- tory environment with conditions favouring investments. Project amortisation rates and long-term capacity contracts associated with projects differ significantly. Infrastructure assets economic lifetime tends to last more than capacity and supply contracts. The amendment of the Capacity Allocation Mechanism Network Code (CAM) will introduce a new standard procedure for allocating incremental capacity, this procedure will only allow to book incremental capacity for a maximum duration of 15 years, in exceptional cases 20 years. Then, there will be a gap of more than 30 years in which there is no explicit commercial commitment for a new asset. This raises the question of whether a project promoter should be entitled to recover investment expenditures within a limited time-framework and recoup as much commitments as possible in the available contractual timeframe, due to the lack of certainty in the long term. The solution would also avoid cross-subsidies between different categories of users (present/future, infrastructure users/general system users, etc.). This situation of general uncertainty is also triggered by negative signals from carbon emissions prices due to ongoing European ETS policies. The streamlined permit granting introduced by the Energy Infrastructure Guidelines for Projects of Common Interest (PCI) is a concrete step in the right direction. Nevertheless many Member States are late in establishing such arrangements, especially when permits are expected at different levels (from local to national level). Such situation results to be detrimental to the development of necessary infrastruc- tures as streamlined permitting is especially important for cross-border projects where the phasing of stages in each country is a key factor in delivering the benefits of the projects. These arrangements are intended to strike a balance between public consultation and certainty on the duration of the process. If these arrangements deliver expect- ed benefits, they should be enlarged to Non-PCI projects as well.

5.3.4. PERMITTING

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Ten-Year Network Development Plan 2017 Main Report