EBRD supporting cross-border activities of Czech companies. EBRD in Latvia. Riga March 2012

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1 EBRD supporting cross-border activities of Czech companies EBRD in Latvia Riga March 2012 European Bank for Reconstruction and Development

2 What is the EBRD AAA/Aaa rated multilateral development bank Founded in billion Owned by 62 shareholders 60 states, EU and EIB Invested over 71 billion in more than 3,600 projects since 1991 Record year in billion invested in 386 projects In billion in 380 projects 77% in the private sector Debt 85% and Equity 15% Annual business volume (ABV) Net cumulative business volume Debt ABV Equity ABV Net Cumulative Business Volume Note: Provisional data as at 30 th June

3 Annual Business Volume 2011 by Region Central Asia 5% Turkey 10% Central Europe & Baltics 15% Eastern europe & Caucasus 20% Russia 33% South-Eastern Europe 17% 3

4 A network of 33 offices in 29 countries More than half our bankers based in the region Where we operate ** Expansion of the Bank s region of operations to include Southern and Eastern Mediterranean, initially Egypt, Morocco, Tunisia and Jordan 4

5 How EBRD adds value Private sector focused Wide product range, currency, tenors, innovative financing programmes Local presence in almost all countries of operations, detailed understanding of local business environment Involved in policy dialogue with regard to regulatory, investment and policy matters Work with locally owned companies as well as cross border investors 5

6 EBRD in the Baltics Annual Business Volume Baltics million Lithuania Latvia Estonia

7 EBRD and Latvia (1) Results of active operation Cumulative Business Volume in Sectors EBRD closed its office in Riga at the end of 2007, but has remained engaged here. ICA 20% Infrastructure 26% Since 1991 EBRD invested EUR 572 million in Latvia in 76 projects of total project value EUR 1.88 billion 65 % of the investments have been in the private sector Current portfolio represents EUR 271 million in 6 projects with Latvian entities (and 23 regional projects having allocations into Latvia) EBRD has invested through equity funds in Latvian 19 companies and is still invested in 8 Financial Institutions 39% ICA, 6.0 Infrastructure, 16.5 Portfolio Distribution, million Regional, 44.3 Power and Energy, Power and Energy 15% Financial Institutions,

8 EBRD and Latvia (2) EBRD prepared to Enhance capital investment Help develop more technology and skill-intensive products Support export-oriented manufacturing and cross border investments Finance renewable energy generation Strengthen the stability of the financial sector Support the development of private equity financing 8

9 EBRD Financing Solutions Loans Senior, subordinated, convertible Long Term Working capital Floating/ Fixed interest rates Major currencies and some local currencies (e.g. Romania, Russia, Poland) Political risk guarantees Equity Common/preferred shares Mezzanine financing Exclusively minority participations (up to 35%) Portage Equity Syndication In-house syndication unit Lender of record EBRD s Preferred creditor status attracts other financiers 9 9

10 EBRD Key Financing Requirements Financing requirements Ensure appropriate returns by carefully assessing the risks: Management strength and strategy Clear business plan and project costs Transparency of operations Disclosed identity of final shareholders and corporate structure Identified and limited tax liability risk Recourse to subsidiaries generating profits and holding assets How to obtain finance? Provide EBRD with an overview of proposed investment Commitment to cooperation clarify role of EBRD mandate to initiate transaction mutual understanding of corporate integrity issues Project / business plan, market analysis, strategy, ownership structure, financial analysis, risk assessment Exit strategy 10

11 Examples of Cross Border Investments within the EBRD Region 11

12 E Energija into Latvia and Ukraine Client: E Energija, a Lithuanian, privately owned multi-utility energy company providing heat and hot water services to residential and industrial customers in Lithuania and Latvia EBRD Finance: 5 mn equity and 15 mn debt Use of Proceeds: To support the company s expansion in Ukraine and energy efficient investments in Latvia and Lithuania Signed in 2007 EBRD Added Value: country knowledge, local presence, risk sharing (equity), policy dialogue Signed in

13 VMG into Belarus Sponsor: Vakaru Medienos Grupe, a Lithuanian privately owned woodprocessing company with a long history of co-operation with IKEA EBRD Finance: Senior loan of 19.5 million and subordinated loan of 6.5 million Use of Proceeds: To finance the development of a green-field, integrated wood processing complex in Mogilev FEZ EBRD Added Value: Political, encouraging FDI into Belarus, needed maturities not available in commercial market, subordinated feature Signed in 2011 Signed in 2011 Associated TC: Energy audit and a Belarus Forestry Sector Study 13

14 SBA into Belarus Client: Mebelain, a wholly owned subsidiary of Lithuanian SBA Furniture Group EBRD finance: Senior loan of 5 million Use of proceeds: to finance a green-field veneer-faced furniture plant in Mogilev FEZ Signed in 2012 EBRD Added Value: Political, encouraging FDI into Belarus, needed maturities not available in commercial market 14

15 Graanulinvest into Latvia Client: Graanulinvest is an Estonian privately owned pellet producer Project description: Construction of two CHPs adjacent to the company s pellet plants in Helme and Launkalne and energy efficiency investments in the pellet plants EBRD Finance: A loan of 34 million, maturity 12 years EBRD Value Added: long maturity, supporting renewable energy and a privately owned energy producer in Estonia and Latvia Signed in

16 Eskaro into Russia and Ukraine Client: Regional manufacturer of architectural coatings (paints and varnishes) with plants in Estonia, Russia, Ukraine, Belarus and Finland Project description: Construction of new distribution centres in Russia and Ukraine; completion of a new manufacturing plant in Ukraine; EBRD Finance: Equity investment of 1.25 million and mezzanine loan of 4.75 million Signed in 2011 EBRD value added: Supporting further regional expansion into the CIS of an originally Estoniabased company and strengthening of environmental standards in particular in the CIS 16

17 Trade Facilitation Programme 17

18 EBRD Trade Facilitation Programme - TFP EBRD supports trade by providing guarantees that cover risks arising from trade finance transactions short-term advances/financing to banks in the Countries of Operation for trade finance purposes TC funded trade finance training and advisory service to local banks 18

19 TFP - Two Main Components Trade Facilitation Programme (EUR 800 million framework) Trade Finance Guarantee Facility (fully operational since 1999) Trade Finance Cash Facility (launched in 2000) 19

20 Obligation Receiving Bank, World Wide EBRD issues a Stand-By Letter of Credit covering the risks of Issuing Bank towards the Confirming bank Banking Instrument Obligation Issuing Bank, Country of Operation Confirmation Application Seller Underlying Trade Transaction Buyer 20

21 TFP Cash facility Local Company Loan repayment Loan disbursement Local Bank (EBRD s borrower) Takes local company risk Borrows from EBRD On-lends to the local company Repayment to EBRD EBRD s disbursement EBRD Takes local bank risk Lends to the local bank against sub-loan reports 21

22 Trade Facilitation Programme in numbers Active Issuing banks: 102 Confirming Banks: 800+ in 77 countries Since 1999, more than 11,600 transactions Supporting 7.8 billion trade volume and Effectively covering 7.1 billion worth of trade finance. Latvia in particular: 24 export transactions from and via Latvia totalling xxx million 3 Latvian Confirming Banks (as of January 2012) SEB Swedbank Unicredit 22

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24 Contact details: Viesturs Bernans Phone: BernansV@ebrd.com Matti Hyyrynen Head of Baltics Phone: Fax: HyyryneM@ebrd.com 24