The European Bank for Reconstruction and Development (EBRD) is supporting private sector participation in the Macedonian power generation sector with a EUR6 million loan to Mali Hidro Elektrani (MHE), a locally-owned renewable energy company, to finance the development of seven small hydro power plants in the country.

Located on seven different rivers throughout the country the power plants will have a total generation capacity of up to 5.83 MW and will produce on average about 21,630 MWh of electricity per year, EBRD said in a press release on Thursday.

MHE's generating facilities will be interconnected to the Macedonian distribution grid and the company will benefit from the preferential purchase agreements with the Macedonian Transmission System Operator and special tariff scheme for renewable energy projects.

This is the Bank's first private sector energy generation investment in Macedonia and it is being financed through the Western Balkans Sustainable Energy Direct Funding Facility. Upon completion, the project will lead to reduction of CO2 emissions estimated at close to 14,000 tonnes per year.

The project is complemented by technical assistance funds provided by the Western Balkans Fund, the EBRD Shareholders Special Fund and the Norwegian government. Upon successful completion of the project, MHE will be eligible to receive an incentive payment for reducing the CO2 emissions of the Macedonian power sector. This incentive payment is provided by the Western Balkans Fund, the EBRD Shareholders Special Fund and the EU.

"The EBRD is pleased to support MHE with long-term financing for this important project. The investment will demonstrate the commercial viability of small-scale renewable energy projects and will address the growing energy demand in Macedonia," said Elena Urumovska, Head of the EBRD Skopje Resident Office.

"MHE is a special purpose company established by two successful local companies Feroinvest Veles and AD GRANIT Skopje who already have vast experience with investments in small hydro power plants. We are very pleased to cooperate with the EBRD in order to implement this important project. The participation of the EBRD in the project is of crucial importance for its successful implementation given the lack of project financing in the country. It is a special privilege for us to receive an incentive payment for the production of electrical energy from renewable sources," MHE General Manager Todor Angjushev said.

Since the beginning of its operations in Macedonia, the EBRD has committed close to EUR550 million in over 60 projects in key sectors of country's economy, mobilising addition investment worth more than EUR700 million.