EBRD – Supporting Regional Economies

Venera Vlad

Associate Director, MEI

Russia

KazakhstanMongolia

—Kyrgyz Republic

—Tajikistan

—Moldova

—Jordan

Azerbaijan

—Morocco

Belarus

Ukraine

—Romania—Serbia

—Kosovo Georgia—

Armenia—

Tunisia—

Croatia—Bosnia and Herzegovina—

Montenegro—

Albania—

FYR Macedonia

—Turkmenistan

—Bulgaria

Estonia—

Latvia—

Lithuania—

Poland

Slovenia—

Czech Republic—

—Slovakia

—Hungary

Uzbekistan—

Central

Eastern EuropeSEMED Western Balkans Turkey

Armenia,

Azerbaijan,

Belarus,

Georgia,

Moldova,

Ukraine

Central Asia

(incl. Mongolia)

Egypt—

EBRD

Greece

Cyprus

Centene Corporation

3 key operational principles

• Sound banking

• Transition impact

• Environmental sustainability

• 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

The EBRD and its objectives

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The EBRD is:

• 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

Objectives:

• 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

Portfolio Composition

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27%

13%

30%

30%

Energy

Financial Institutions

Industry, Commerce and Agribusiness

Infrastructure

• 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.

Investment instruments in Romania

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EBRD Product Flexibility tailored to project

needs

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Typical size

Term

Approach

Currency

Applications

Structures

5-7 years

(up to 10-15 years in case of

infrastructure investments)

€10mln +

(less in less advanced

countries)

Finance up to 35% of the

project (60% with syndication)

Major foreign currencies as well as local currency

• Greenfield/Brownfield, JVs,

• Capex for expansion/modernization, including resource

efficiency improvements

• Ownership change: acquisition, consolidation, privatisation

• PPPs, etc.

Typically from 3-7 years

€5-7mln +

(less in less advanced

countries)

Typically €50 ths – €50mln

1.5-2 (up to 3) years

• Issues to international banks

• Takes the risk of transactions of

the banks in the EBRD’s

countries of operations

Mainly through Trade Facilitation

Programme

• Senior, subordinated or

convertible,

• Project finance

• Floating or fixed rates

•Portage equity finance

•Risk equity

• Import/export operations

•Pure guarantees, cash

advance trade finance

Minority stake

Debt Equity Guarantees

Exact terms depend on specific needs and market conditions

How we deliver results:

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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

Policy

Dialogue

Technical

Cooperation

EBRD in Romania

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• Country of operation since 1992.

• €8 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

EBRD’s role in

the Municipal & Environmental Infrastructure sector

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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

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Key municipal sectors covered by the EBRD

✓ Water & Wastewater – improved qualityof service and environmental compliance

✓ Urban Transport – improved roads andpublic transport services (buses, trams,LRT, metro, ferries, etc.), efficient and safenetwork, e-ticketing, parking

✓ Solid Waste Management – improvedefficiency and frequency of collection;adequate disposal; prevention ofgroundwater contamination

✓ District Heating – renewal of obsoleteheating systems to promote efficiencygains

✓ Street Lighting – renewal of obsoletestreet lighting systems

✓ Energy Efficiency/GEF

✓ Facilities Management PPP

✓ Cultural Heritage (pilot)

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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

Sovereign-backed 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

Financing Municipal Infrastructure by EBRD:

Matching Client Capacity to Project Needs

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.

(1) Loan within the balance sheet of the utility company

Central Government

Municipality

Utility Company

Private Company

Municipality

Utility Company

Public Service Contract

+ Support Agreement

Municipality

PPP Contract

Borrower:

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Water sector – Long Term Partner

MUDP* I&II

(1995-1999)

MELF**

(2000-2009)R2CF I&II***

(2010-2015)

• 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

• 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

• Limited recourse non-

sovereign 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

* Municipal Utilities Development Programme

** Municipal Environmental Loan Facility

*** Romania Regional EU Cohesion Fund Cofinancing Framework

****Sustainable Water Infrastructure Facility for Transition

SWIFT

(2018-2022)

• Long Term Asset

Management

Plans

• Private Sector

Participation/PBC

• New Financing

Mechanisms

• Further

Consolidation,

Benchmarking

Urban transport sector – key figures

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• 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)

SMART Framework – EUR 120 mil.

Waste management sector

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• 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

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1. Industrial

Energy

Efficiency

4. Renewable

Energy Scale-

up

2. Sustainable

Energy

Financing

Facilities

5. Municipal

Infrastructure

Energy

Efficiency

3. Power

Sector Energy

Efficiency

6. Carbon

Markets

Development

Energy Efficiency Facilities

Looking forward: Smart Cities

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• 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.

▪ 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.

Financing solutions: Sob-sovereign Bonds / City

of Bucharest LCY Bond

Publicly Traded Securities

Replicability

Zagreb Holding

Euro-clearability & Repo Eligibility

City of Bucharest

Municipal Bonds

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Green Cities Framework - GrCF

Delivery of strategy and policy support

Green City Action Plans (GCAP)

Policy dialogue

Facilitating and stimulating Green City

infrastructure investments

Building capacity of city administrators

and key stakeholders

€250m Framework to support cities to identify,

benchmark, prioritise and invest in Green City measures

to improve urban environmental performance through:

Urban transport

District heating

Solid Waste

Water & Wastewater

Building energy efficiency

Street Lighting & Roads

@EBRD #EBRDgreen #GreenCities 181 October, 2018

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

PPP: What models?

Degree of Private Sector InvolvementDegre

e o

f P

rivate

Secto

r R

isk

Public Sector

Service Contracts

Management Contracts

Design-Build

Operational Concession

Design-Build-Operate-Maintain

Design-Build-Finance-Operate

Build-Operate-Transfer

Build-Operate-Own

Privatisation

Realm of PPPs

Adapted from P. Livesly.

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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

Constanta/RAJA

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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.

MUDP* I&II

(1995-1999)MELF**

(2000-2009)

R2CF – part of a long term support to the Romanian water sector.

R2CF &II***

(2010-2016)SWIFT

(2017-2023)

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

Business Opportunities / Contracting Strategy

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• Check EBRD website and sign up for alerts

• Sign up at www.ebrd.com/procurement

• 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.

Instead of conclusion…

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Romania - a country with huge economic potential.

Constanta – regional hub for investment and innovation?

Contacts

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Venera VladAssociate Director – Senior Banker

Municipal and Environnemental

Infrastructure

vladv@ebrd.com