Tamega Iberdrola Hydropower and Storage Portugal. Credit: European Investment Bank.

The European Investment Bank (EIB) has agreed to provide a loan of €650m to energy company Iberdrola to support a major hydro electrical project in Portugal.

As part of an agreement between both parties, EIB has provided a €500m loan to Iberdrola, representing the first tranche of the loan.

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The money will be used for the construction of three new dams and hydropower plants, including a pump storage plant to be built on the Tâmega and Torno rivers in northern Portugal.

The three dams, Alto Tâmega, Daivões and Gouvães, will be built in the Douro River Basin and are expected to provide an average of 1,760GWh per year to the Iberian market.

“This financing agreement is another step in our collaboration with the EIB and marks a new milestone in one of the largest energy projects in the history of Portugal.”

The project is said to be part of the Portuguese National Programme for Dams with High Hydroelectric Potential (PNBEPH), where Iberdrola will be responsible for designing, building and operating the plants following a competitive tendering process.

Iberdrola chairman and CEO Ignacio Galán said: “This financing agreement is another step in our collaboration with the EIB and marks a new milestone in one of the largest energy projects in the history of Portugal.

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“The development of the Tâmega hydropower scheme involves three of Iberdrola’s core strategic undertakings: investing in clean generation capacity, the development of new storage capacity – with pumped hydro being the only technology to store large amounts of energy efficiently- and sustainable financing.

“23% of our financing is already green which highlights our commitment to sustainable development.”

With an investment of around €1.5bn, Iberdrola’s new infrastructure will have the capacity to generate 1,158MW and is expected to commence its commercial operations from 2023.

Iberdrola’s project is expected to create 13,500 direct and indirect jobs and will contribute to the economic, social and territorial cohesion of the EU.

Upon completion, the project is expected to further enhance energy storage capacity in the European Union (EU), as well as provide services to the Iberian grid operators and aid the increase of renewables in the Portuguese energy mix.