Lithuania: Kaunas to get modern and greener heating with €35 million support from EIB

This article is published in association with European Investment Bank.

• Upgrade of heating and distribution network in Kaunas, Lithuania to increase use of renewable energy for heat generation, reducing emissions of greenhouse gases. 
• Investment in Lithuania’s No. 2 city to accelerate decoupling of domestic economy from fossil fuels and bolster regional cohesion.  
• EIB financing protected by guarantee from European Commission`s InvestEU plan. 

Kauno Energija, the district utility company in the Lithuanian city of Kaunas, will upgrade and extend its district heating and hot water supply system with €35 million in support from the European Investment Bank (EIB). The EIB loan  for the energy improvements in Kaunas, which is Lithuania’s second-biggest city and is located in the central part of the country, is backed by a guarantee from the European Commission’s InvestEU programme.

The project involves refurbishing and expanding the district pipeline network, adding heat storage tanks and incorporating renewable energy sources such as biomass for heat and hot water generation as well as solar power for electricity. It will improve energy consumption, increase the energy mix and reduce reliance on imported natural gas, accelerating the transformation of Lithuania and the European Union into a carbon-neutral economy.

Around 400,000 people living in Kaunas, Kaunas district and Jurbarkas stand to benefit from the project along with thousands of local small and medium-sized businesses.

“This project is very good news for Kaunas, for Lithuania and for the EU,” said EIB Vice-President Thomas Östros. “Living standards in Kaunas will improve with an efficient, reliable and more sustainable district heating network. Operations like this are also major steps towards an energy-independent EU.”

“The loan agreement with the EIB represents a vote of confidence and a consistent continuation of investments in the company’s development,” said Tomas Garasimavičius, General Director of AB Kauno Energija. “With this second phase of investments, we will complete the implementation of major technological innovations and the city’s strategic climate change management objectives. The projects implemented represent a major technological renewal of the company, ensuring reliable, sustainable and efficient heat production and supply.”

Towards energy-independent EU

The EIB investment in Kaunas contributes to the independence of the EU energy sector and the Energy Union priorities, one of the key objectives of European Commission`s InvestEU plan.   InvestEU guarantees allow the EIB to invest more in projects across Europe.

The project in Kaunas also advances Lithuania’s National Energy and Climate targets and the REPowerEU plan.

Background Information

About the EIB

The European Investment Bank (ElB) is the long-term lending institution of the European Union, owned by its Member States. It finances sound investments that contribute to EU policy objectives. EIB projects bolster competitiveness, drive innovation, promote sustainable development, enhance social and territorial cohesion, and support a just and swift transition to climate neutrality.

The EIB Group, which also includes the European Investment Fund (EIF), signed a total of €88 billion in new financing for over 900 projects in 2023. These commitments are expected to mobilise around €320 billion in investment, supporting 400,000 companies and 5.4 million jobs.

All projects financed by the EIB Group are in line with the Paris Climate Accord. The EIB Group does not fund investments in fossil-fuels. We are on track to deliver on our commitment to support  €1 trillion in climate and environmental sustainability investment in the decade to 2030 as pledged in our Climate Bank Roadmap. Over half of the EIB Group’s annual financing supports projects directly contributing to climate change mitigation, adaptation, and a healthier environment.

Approximately half of the EIB’s financing within the EU is directed towards cohesion regions, where per capita income is lower. This underscores the Bank’s commitment to fostering inclusive growth and the convergence of living standards.

The InvestEU programme provides the European Union with crucial long-term funding by leveraging substantial private and public funds in support of a sustainable recovery and growth. It also helps mobilise private investments for the European Union’s policy priorities, such as the European Green Deal and the digital transition. The InvestEU programme brings together under one roof the multitude of EU financial instruments currently available to support investment in the European Union, making funding for investment projects in Europe simpler, more efficient and more flexible. The programme consists of three components: the InvestEU Fund, the InvestEU Advisory Hub and the InvestEU Portal. The InvestEU Fund is implemented through financial partners that will invest in projects using the EU budget guarantee of €26.2 billion. The entire budget guarantee will back the investment projects of the implementing partners, increase their risk-bearing capacity and thus mobilise at least €372 billion in additional investment.

About Kauno Energija

Established in 1963, AB Kauno Energija is the second-largest district heat (DH) production and supply company in Lithuania, based on the number of customers, amount of heat supplied, and turnover. The company serves as the DH system operator for over 124,000 users in Kaunas city, Kaunas district, and Jurbarkas.

AB Kauno Energija holds approximately 20% of the Lithuanian DH supply market. The company has a total power generation capacity of 590 MW and heat supply pipelines spanning more than 450 km. With around 350 employees, the company is committed to providing efficient and sustainable energy solutions.

Aligned with Lithuania’s National Energy Strategy, AB Kauno Energija aims to achieve CO2-free heat generation by 2050. The company is actively implementing low-emission innovative technologies and adopting preventive measures to reduce its environmental impact.

The company’s shareholders include Kaunas city municipality (92.84%), Kaunas district municipality (3.75%), Jurbarkas district municipality (1.74%), and other small shareholders (1.67%).