4. Funding Hydropower: Experiences and Strategies of KfW

KfW has a wide experience in financing hydro power projects world wide. The crisis of project finance underlines again the importance of International Finance Institutions (IFI) and development assistance flows for funding power projects. The paper focuses on the perspectives of financing projects in developing and transition countries. For a number of reasons KfW focuses on the rehabilitation of hydro power plants rather than on investing in greenfield projects. Following the profound transformation of the energy sector in most of the transition countries there are now local entrepreneurs that own small hydro power plants (HPP). Increasingly, these local private sector operators are able and willing to invest in their plants. KfW is prepared to provide local banks with refinancing facilities to allow banks to extend longer term loans for the development. Supporting small HPP requires substantial TA for project preparation and to accompany the implementation process including loan management.