EBRD Supporting Regional Economies. Venera Vlad Associate Director, MEI

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1 EBRD Supporting Regional Economies Venera Vlad Associate Director, MEI

2 BRD Estonia Latvia Lithuania Russia Public financing institution established in 1991 to foster transition to market economies Owned by 65 countries, the EU and the EIB Operates in 36 countries in Central and Eastern Europe, Central Asia and the Southern and Eastern Mediterranean Poland Belarus Czech Republic Ukraine Slovakia Moldova Hungary Slovenia Romania Croatia Serbia Bosnia and Herzegovina Bulgaria Montenegro Kosovo Albania FYR Macedonia Centene CorporationUzbekistan Georgia Armenia Kazakhstan Kyrgyz Republic Tajikistan Mongolia Tunisia Greece Azerbaijan Morocco Cyprus Jordan Egypt SEMED Western Balkans Turkey Armenia, Azerbaijan, Belarus, Georgia, Moldova, Ukraine Turkmenistan 3 key operational principles Sound banking Transition impact Environmental sustainability Central Asia (incl. Mongolia) Central Eastern Europe

3 The EBRD and its objectives The EBRD is: Objectives: Private sector focused Wide product, currency, tenor range Facilitates inward and cross border investments in the region Promotes policy dialogue with regards to investment climate business environment and policy matter Commercial focus To promote transition to market economies by investing mainly in the private sector To mobilise significant foreign direct investment To support privatisation, restructuring and better municipal services to improve people s lives To encourage environmentally sound and sustainable development 1 October,

4 Portfolio Composition Energy Financial Institutions Industry, Commerce and Agribusiness Infrastructure 30% 27% 13% 30% 1 October,

5 Investment instruments in Romania Special programmes: DFF (Direct Financing Framework) - a delegated facility for equity, quasi-equity investments, as well as tailor-made debt financing for SMEs. Sector Frameworks SBS (Small Business Support) - advisory projects for local companies to support growth and export activities Syndication with other banks and co-investment with PE funds or strategic investors. Indirect financing through funding of financial institutions. 1 October,

6 EBRD Product Flexibility tailored to project needs Debt Equity Guarantees Typical size 10mln + (less in less advanced countries) 5-7mln + (less in less advanced countries) Typically 50 ths 50mln Term 5-7 years (up to years in case of infrastructure investments) Typically from 3-7 years (up to 3) years Currency Major foreign currencies as well as local currency Approach Finance up to 35% of the project (60% with syndication) Minority stake Mainly through Trade Facilitation Programme Structures Senior, subordinated or convertible, Project finance Floating or fixed rates Portage equity finance Risk equity Import/export operations Pure guarantees, cash advance trade finance Applications Greenfield/Brownfield, JVs, Capex for expansion/modernization, including resource efficiency improvements Ownership change: acquisition, consolidation, privatisation PPPs, etc. Issues to international banks Takes the risk of transactions of the banks in the EBRD s countries of operations Exact terms depend on specific needs and market conditions 6

7 How we deliver results: Technical Cooperation Policy Dialogue Development of strong institutional and regulatory frameworks Tariff reform Negotiation PPPs Support to national units Donor funded technical cooperation to overcome barriers and facilitate implementation Project Implementation Corporate Development Stakeholder engagement Projects & Investments 1 October,

8 EBRD in Romania Country of operation since billion invested in Romania in 40 projects to date 73% of the EBRD s investments in Romania are in the private sector 21% of the EBRD s investments in Romania are in equity Team of 30 people (17 bankers) in Resident Office in Bucharest Objectives: promoting stability and expanding products in the financial sector, strengthening infrastructure through improved efficiency and greater private sector involvement, as well as on restructuring the power sector and increasing energy efficiency and sustainability 1 October,

9 EBRD s role in the Municipal & Environmental Infrastructure sector Structuring the financing of municipal infrastructure, equipment and services to improve service levels Promoting the commercialisation and corporatisation of services Developing sound regulatory structures Promoting private sector involvement, where appropriate and local market development Improving environmental, social, health and safety standards Facilitating donor grant and commercial loan co-financing Providing support for project preparation using new Infrastructure Project Preparation Facility EBRD helps local authorities meet their infrastructure needs 1 October,

10 Key municipal sectors covered by the EBRD Water & Wastewater improved quality of service and environmental compliance Urban Transport improved roads and public transport services (buses, trams, LRT, metro, ferries, etc.), efficient and safe network, e-ticketing, parking Solid Waste Management improved efficiency and frequency of collection; adequate disposal; prevention of groundwater contamination District Heating renewal of obsolete heating systems to promote efficiency gains Street Lighting renewal of obsolete street lighting systems Energy Efficiency/GEF Facilities Management PPP Cultural Heritage (pilot) 10

11 Financing Municipal Infrastructure by EBRD: Matching Client Capacity to Project Needs Sovereignbacked loans Cheap but can become politicised Municipal loans or utility loans guaranteed by municipality Independence for self-financing city, but higher cost and burden on public debt book Quasi corporate utility loans Off-balance sheet borrowing for city(1) Need backing of Public Service Contract + Support Agreement Loans to private/ PPP companies Private sector indebtedness Need robust legal, regulatory and contractual framework Borrower: Central Government Municipality Municipality Municipality Utility Company Public Service Contract + Support Agreement PPP Contract (1) Loan within the balance sheet of the utility company Utility Company Private Company EBRD structures projects across the whole spectrum, e.g., from sovereign loans when legally necessary, municipal loans, public utility loans backed by municipal guarantee, operational concessions (DBOM), PPPs based on DBFO to full privatizations. 11

12 Water sector Long Term Partner MUDP* I&II ( ) Financing of priority investment programmes in 15 cities First loans by an IFI in the water sector Water utility corporatisation programmes Introduction of credit for municipal financing Implementation of creditworthiness enhancement programmes MELF** ( ) Move towards lifting sovereign guarantee for selected cities and replacing it by municipal guarantees Water sector capital investments Utility corporatisation and implementation support programmes (FOPIP) Continued support to strengthen creditworthiness R2CF I&II*** ( ) Limited recourse nonsovereign lending to water utilities Assist utilities in their regionalisation process Prepare ground for private sector participation Facilitate private sector involvement through outsourcing selected services Regionalisation, Benchmarking SWIFT ( ) Long Term Asset Management Plans Private Sector Participation/PBC New Financing Mechanisms Further Consolidation, Benchmarking * Municipal Utilities Development Programme ** Municipal Environmental Loan Facility *** Romania Regional EU Cohesion Fund Cofinancing Framework ****Sustainable Water Infrastructure Facility for Transition 12

13 Urban transport sector key figures SMART Framework EUR 120 mil. Key factor in promoting economic growth Rehabilitation of public transport in urban areas and need to replace obsolete equipment Improve financial performance of transport operators Introduce public service contracts Investment in public transport, key to sustainable urban development. FW: SMART (120 mil. EUR) 1 October,

14 Waste management sector Projects focused on rehabilitation and construction of sites as well as implementing efficient waste systems Focus on meeting EU waste standards Efficiency and frequency of collection of waste Improve adequacy of waste disposal Need to organise waste management systems on a regional level 1 October,

15 Energy Efficiency Facilities 1. Industrial Energy Efficiency 2. Sustainable Energy Financing Facilities 3. Power Sector Energy Efficiency 4. Renewable Energy Scaleup 5. Municipal Infrastructure Energy Efficiency 6. Carbon Markets Development 15

16 Looking forward: Smart Cities Integrated concept to enhance competitiveness and quality of life Application of real-time urban data analytics to improve the efficiency, reliability and quality of urban infrastructure and associated public services for users. 1 October,

17 Financing solutions: Sob-sovereign Bonds / of Bucharest LCY Bond City Bucharest case - EBRD multi-departmental cooperation, deal origination/execution one-stop shop ready to facilitate: High level policy dialogue engagement; Client capacity building; Arranger interface; Hedging strategy; Repo-eligibility; Investor presentation; Euro-clearability. Sub-sovereign bonds - potential benefits: Positive impact on fiscal policy solidity municipal entities that pursue responsible fiscal policy are able to reach an enhanced rating and lower yield; Support long-term financial planning; A bond issuance increases the demand for financial transparency (incl. financial statements disclosure); Bonds can target a greater range of potentially interested investors. City of Bucharest Municipal Bonds Euro-clearability & Repo Eligibility Replicability Zagreb Holding Publicly Traded Securities 17

18 Green Cities Framework - GrCF 250m Framework to support cities to identify, benchmark, prioritise and invest in Green City measures to improve urban environmental performance through: Delivery of strategy and policy support Green City Action Plans (GCAP) Policy dialogue Facilitating and stimulating Green City infrastructure investments Urban transport District heating Solid Waste Water & Wastewater Building energy efficiency Street Lighting & Roads Building capacity of city administrators and key #EBRDgreen #GreenCities 1 October,

19 PPP. IPPF Preparation of bankable PPPs and commercialised public sector projects EUR 40m Facility, directly funded by EBRD, applicable to all Countries of Operation of EBRD Efficient mobilisation of world-class consultancy Dedicated IPPF Team within EBRD s Infrastructure Business Group; works closely with other IFIs

20 Degree of Private Sector Risk PPP: What models? Privatisation Build-Operate-Own Realm of PPPs Build-Operate-Transfer Design-Build-Finance-Operate Design-Build-Operate-Maintain Operational Concession Design-Build Management Contracts Service Contracts Public Sector Degree of Private Sector Involvement Adapted from P. Livesly. 20

21 EBRD- RO Government Memorandum of Understanding (MoU) Water sector Benchmarking and support to IDAs PSP options UT sector SUMPs PSC Energy Efficiency Residential areas Public buildings 21

22 Constanta/RAJA R2CF part of a long term support to the Romanian water sector. MUDP* I&II ( ) MELF** ( ) R2CF &II*** ( ) SWIFT ( ) Main objective - to help RAJA and LAs meet compliance with the EU water and wastewater standards, through: Co-financing large investments alongside EU; direct loans to regional water operators (ROCs) Supporting the water service regionalisation policy Implementation of a sector benchmarking programme FOPIP - local capacity building Benchmarking Main achievements (with EBRD s significant support): Regional Operators - means to provide service to small communities; Long term investment planning at regional level, including multi-annual tariff policies (not available before); Capability of meeting EU W & WW Directive; compliance met in most of the urban agglomerations with a population above 10,000; Improved financial and management performance; Improved lending capability; unsecured loans; Lead in the benchmarking programme facilitated by EBRD. 22

23 Constanta: SUMP Long Term Planning : To support mobility in the region, as a pre-requisite for economic development To support access to transport for all 22.5 mln. financing to the City to purchase of Euro-6 buses, Support for metropolitan transport - institutional Support for Commercialisation of PT Services Support the Public Service Contract between the City and the Company

24 Business Opportunities / Contracting Strategy Check EBRD website and sign up for alerts Sign up at Research market and competition. Collaborate with larger firms/local firms. Contact local agents/register local office (may be required for tax/vat). Remember client is responsible for procurement contact client directly. 1 October,

25 Instead of conclusion Romania - a country with huge economic potential. Constanta regional hub for investment and innovation? 1 October,

26 Contacts Venera Vlad Associate Director Senior Banker Municipal and Environnemental Infrastructure 1 October,