Working with the European Bank for Reconstruction and Development Matti Hyyrynen 15 th March 2018
EBRD Introduction An international financial institution supporting the development of sustainable well-functioning market economies Highest credit rating (AAA/Aaa) Owned by 66 countries and 2 inter-governmental institutions (the EU and EIB) Capital base of 30 billion 1991 Established 1992 Russia and 11 other members of the former Soviet Union join 2007 The Czech Republic becomes the first country to graduate from the EBRD 2012 Starts investing in Egypt, Jordan, Morocco and Tunisia 2016 25th anniversary; China becomes 67th member 2017 Lebanon and the West Bank and Gaza become countries of operations Shareholding structure Others 11% USA 10% EBRD region excluding EU 7% Japan 9% EU 28 Countries 1 63% 1. Includes European Community and European Investment Bank (EIB) each at 3%. Among other EU countries: France, Germany, Italy, and the UK each holds 8.6% 2
EBRD introduction option 2 IFI with a private sector mandate 25 years of supporting companies in Central and Eastern Europe History Mission Core values Shareholders Client sectors Instruments Staff Locations AAA-rated International Financial Institution founded in 1991 to meet the challenge of rebuilding the post-communist economies of Central and Eastern Europe Foster the transition towards market-oriented economies and to promote private initiatives in countries committed to the principles of democracy Investments must meet strict environmental, social, governance and integrity standards, supporting sustainable development and transparency Includes 65 countries from the Central and Eastern Europe and Southern and Eastern Mediterranean regions, EU member states, G7 members, as well as EIB and EU. China has become the latest shareholder of the Bank in December 2015 All key economic sectors including financial institutions, infrastructure, energy and the general corporate sector, including agribusiness and ICT Long-term market based debt and growth equity financing and technical assistance Over 1,900 employees from all member countries, working in sector, product, regional, support and control functions, including about 30% staff in Countries of Operations 1 Headquarters in London, with 43 resident offices in its 36 countries of operations in Central and Eastern Europe, Central Asia and the Southern and Eastern Mediterranean region Notes: 1 Total number of staff includes regular and fixed term employees, but excludes the President and Vice Presidents, Board members and externally funded positions. Data as of 31 December 2016 3
EBRD Basic Principles Transaction Impact Sound Banking Additionality 4
Our Transition Qualities Competitive Wellgoverned Inclusive Integrated Resilient Green 5
Where we invest Increasing footprint Estonia Latvia Lithuania Russia Poland Belarus Czech Republic Ukraine Slovakia Moldova Hungary Slovenia Romania Croatia Serbia Bosnia and Herzegovina Bulgaria Montenegro Kosovo Georgia Albania Armenia FYR Macedonia Turkey Tunisia Greece Azerbaijan Cyprus Lebanon Morocco West Bank & Gaza Jordan Kazakhstan Mongolia Uzbekistan Kyrgyz Republic Tajikistan Turkmenistan SEMED Western Balkans Cyprus, Greece Turkey Egypt Armenia, Azerbaijan, Belarus, Georgia, Moldova, Ukraine Central Asia (incl. Mongolia) Central Eastern Europe West Bank and Gaza Lebanon 6
EBRD Largest investor in the region Since 1991, EBRD invested over 119 billion in around 5,035 projects 12 130 In 2017 9.6 billion EBRD Top 10 investee countries in 2017 ( m) 1 Turkey 1,540 Annual business investment (ABI) 10 8 6 4 2 0 1,0 1,4 0,7 0,4 1,2 8,5 8,2 8,7 8,5 6,9 2013 2014 2015 2016 2017 Equity ABI Debt ABI (and guarantees) Net Cumulative Bank Investment 110 90 70 50 30 10-10 Net cumulative Bank Investment 412 projects Private sector accounted for share of 71% Debt 88% Equity 5% Guarantee 7% 2 Egypt 1,413 3 Ukraine 740 4 Poland 659 5 Greece 614 6 Kazakhstan 586 7 Romania 546 8 Azerbaijan 456 9 Serbia 382 10 Tunisia 324 Note: unaudited as at 31 December 2017 7
Portfolio distribution by sector and region EBRD Portfolio (at 31 December 2017): 41,435 million Sector Region 24 % 22 % 18% 10% 3% 12% 14% 29 % 25 % 19% 7% 18% Financial Institutions 22% (Depository credit (banks), Leasing finance, non-depository credit (non-bank), Insurance, Pension, Mutual Funds) Corporate 25% (Manufacturing/Serivces, Agribusiness, Equity funds, Property & Tourism, Information & Communication technology) Infrastructure 29% (Municipal & Environmental infrastructure, Transport) Central Asia 10% Central Europe & Baltics 3% Cyprus & Greece 14% Eastern Europe & Caucasus 18% Russia 7% South-Eastern Europe 19% Southern Eastern Mediterranean 12% Turkey 18% Note: unaudited as at 31 December 2017 8
Projects in all key business sectors Transport Municipal & Environmental Infrastructure Property & Tourism Financial Institutions Natural Resources Telecomms, Informatics & Media Manufacturing & Services Power & Energy Industry, Commerce & Agribusiness 9
Working Together Approval process and due diligence Our approval process Signing Board Approval Final Review Structure Review Final Documentation & Public Disclosure Due Diligence & Term Sheet negotiation EBRD Due Diligence Process Technical Environ. & Social Financial Market Feasibility study Completion risk Production capacity Air / water pollution Discharge Health & Safety Communities / Stakeholders Historical financials Projections Financial Model Supply-demand Competitive analysis Reserves report Management Energy Audits Management systems ESAP / Gap Analysis Equal Opportunities / Inclusion Credit Ratios (debt) Valuation (equity) Price risk FX risk Concept Review Legal & Contracts Security Incorporation and Domiciliation Ownership and title Licenses, permits Legal agreements Insurance 10
The EBRD Its key strengths and objectives Key strengths Objectives Long-term perspective Regional integration Commercial basis Policy dialogue Invest both in the private and state sectors Commercial basis Work with governments and shareholders 25 years experience Improve people's lives Private sector development Local presence in 36 countries Structuring expertise Catalyst to mobilise finance for both private and public sector clients Innovate Foreign direct investment 11
EBRD working with commercial investors The EBRD does not compete with commercial investors invites other banks to participate in its operations leads the market with innovative products and longer tenors employs donor grant funds to blend with its projects cooperates with other investors (supporting strategic equity investors) investment of 1 mobilises another 3 for the project provides assistance in structuring and executing investments with significant energy and resources efficiency gains does not lend or invest when commercial banks or private investors can do it alone 12
Working with the EBRD Investment Policy dialogue Procurement Trade facilitation 13
EBRD Product Flexibility tailored to project needs Exact terms depend on specific needs and market conditions Debt Equity Guarantees Typical size 10mln + (less in less advanced countries) 5-7mln + (less in less advanced countries) Typically 50k 50mln Term 5-7 years (up to 10-15 years in case of infrastructure investments) Typically from 3-7 years 1.5-2 (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 14
EBRD financing instruments Loans Equity Senior, subordinated, convertible Floating/Fixed rates Long term (up to 10y or more) or short term revolving Choice of currencies (, US$, EGP) Common stock or preferred Minority position only (up to 35%) Mezzanine debt Technical Cooperation EBRD has a strong track record to mobilize grant monies to support technical assistance to its projects Other Guarantees, currency swaps, trade facilitation programme etc. 15
What the EBRD can finance What we finance Projects may be considered for EBRD assistance if they: are located in an country where the EBRD works are bankable projects have significant equity contributions in cash or in kind from the project sponsor would benefit the local economy satisfy the EBRDs environmental standards as well as those of the host country STOP! Defence-related activities Tobacco industry Substances banned by international law Gambling facilities Environmental harmful projects (or if adverse impact cannot be adequately mitigated) 16
Growth opportunities in the EBRD region Market Liberalisation Consumer Industries Regional Consolidation Growth opportunities Knowledge Economy Financial Intermediation Infrastructure and Energy 17