The European Investment Bank (EIB) and Portuguese electric utilities company EDP have entered two loan agreements totalling €700m ($726.8m) for the rollout of renewable energy projects and expansion of the power grid in southern Europe.

The loans will support EDP Renewables’ energy projects in Portugal, Spain and Italy, alongside the expansion and modernisation of EDP’s electricity distribution networks in Spain and Portugal.

A €500m ($519.1m) loan has been granted as the first tranche of an approved €900m green framework loan.

This will boost renewable energy generation through EDP Renewables’ solar photovoltaic and onshore wind plants in Portugal, Spain and Italy. Each country will contribute one-third to the total planned installed capacity of 1,943MW.

The new installations will deliver green energy equivalent to the average annual consumption of more than one million households.

The initiative aligns with EDP’s target of adding 18GW of renewable capacity by 2026. The project aims to roll out 1,559MW of photovoltaic capacity and 384MW of onshore wind between 2024 and 2026.

EIB Portugal lending division head Nuno Ascenso Pires stated: “The European Investment Bank is very pleased to support EDP in its efforts to scale up renewable energy production and expand network distributions in Europe.

“These projects will help accelerate Europe’s green transition, a strategic objective for the European Union. The projects will also contribute to reducing Europe’s dependency on fossil fuel imports and strengthen its power grids and thus increase energy security.”

A second €200m loan was signed as the first tranche of an approved investment loan of €800m.

This will fund the expansion, development and digitalisation of EDP’s power grids in Spain and Portugal.

EDP Group CFO Rui Teixeira stated: “These loans revive the long-term relationship between EDP and EIB and are totally aligned with the group’s financial policy to extend the average maturity of its debt portfolio, reinforcing its financial flexibility.”

The project will cater to the growing demand and distributed renewable generation, enhancing the resilience of distribution networks.

The project includes modernising critical infrastructure, refurbishing and expanding overhead lines and underground cables, upgrading substations and transformers, and implementing digital solutions such as smart meters.

These measures will enable smarter energy management, reduce network losses and facilitate the integration of renewable energy sources.

The initiatives being undertaken are pivotal in accelerating Europe’s energy transition by leveraging the renewable energy potential of southern European countries and expanding network distribution.

The financing operations contribute to EIB’s climate action goals, reinforcing its position as “the climate bank,” a priority in its 2024 to 2027 strategic roadmap.

All associated investments will primarily occur in cohesion regions, where per capita income is below the EU average, highlighting EIB’s commitment to economic, social and territorial cohesion.

The loans are part of EIB’s action plan to support REPowerEU, enhancing energy security by boosting renewable energy generation and reducing the EU’s reliance on fossil fuel imports.