Transcript Title of presentation

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EBRD
and the Infrastructure Financing
Agnieszka Szymczyk
Tel Aviv, 14 June 2012
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Section 1
Who we are
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What is EBRD?
The European Bank for Reconstruction and
Development:

International financial institution dedicated to
promote transition to market economies by
investing mainly in the private sector
development and entrepreneurship.

Established in 1991. Headquartered in London,
the Bank has 36 regional offices.

Owned by 63 countries and two
intergovernmental institutions (AAA rated)

Largest single investor in the region (30
countries from Central Europe to Central Asia):
€71.2bn in more than 3,389 projects since 1991
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Mission and Vision
EBRD’s operations are based on three principles
Promotes transition to market
economies, private ownership and
good governance with respect for
people and environment
Transition
Impact
Invests in
financially viable
projects, together
with the private
sector
EBRD
Sound
Banking
Supports, but does not replace,
private investment. Provides
financing at reasonable terms,
otherwise not available
Additionality
Focusing on the triplebottom line benefits:
Economic, Social and
Environmental
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Founded in 1991 after the disintegration of the
Soviet Union, EBRD’s region of operations
covers most countries in Eastern Europe, Central
Asia and Turkey.
The Bank now intends to extends its mandate to
SEMED (Morocco, Tunisia, Jordan, Egypt)
Monday, February 27, 2012
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EBRD projects span every business sector
Transport
Financial Institutions
Manufacturing
& Services
Municipal & Environmental
Infrastructure
Property & Tourism
Natural Resources
Telecommunications,
Informatics & Media
Power & Energy
Industry, Commerce
& Agribusiness
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Benefits of Working with Us
EBRD’s Value-Added: a unique offering

Strong, internationally recognized partner with long term
perspective

Higher risk appetite than other lenders.

Long established policy dialogue with Government and Regulators

Unparalleled presence in the region provides mitigation of political
and regulatory risks

Preferred creditor status in all countries of operations

2. EBRD Annual Report 2010
Catalysts to access additional finance (every € 1 financed by
EBRD leads to mobilize € 3 from other sources2)

Flexible deal structure and product matching services

Dedicated team with expertise in a variety of sectors and countries

Donor funded Technical assistance available for economically
viable sustainable development projects
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Section 2
Partnering for infrastructure
development
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The Infrastructure Business Group at EBRD

EBRD Infrastructure Business Group covers Transport and Municipal and
Environmental Infrastructure

More than 60 banking and sector professionals.

Headquartered in London, with dedicated sector coverage bankers in
regional offices

Dedicated in-team specialists to support project needs including
procurement, sustainable strategies and monitoring

EBRD offers banking services (debt and equity) to clients across every
infrastructure mode: railways, maritime, aviation, roads, water and waste
water, district heating, solid waste and urban transport.

More info at…
Infrastructure at a glance1
www.ebrd.com
• € 14.2 billion invested
• Total project value: € 50 billion
• Over 500 projects
1- Data at end 2011
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Extensive offer of tailored financial products
Equity
Debt

Loans to the private sector (up to 35%,
syndicating the rest)

Debt co-financing, working with
commercial banks and IFIs
Investing with majority sponsor to
reduce equity burden and add
partnership value. No more than 25%


Common or preferred stock

Project finance loans (incl. PPP)


Hard/local currency. Fixed/floating rates
Privatization and initial public offering
(IPO)

Syndication under preferred creditor
status

Mezzanine equity and subordinated
debt

Access to capital markets
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Infrastructure funds

PPP
Technical Cooperation
As a Multilateral Development Bank, EBRD brings in additional financial capital and
technical assistance (TC) to economically viable projects
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Section 3
Financing infrastructure projects
EBRD promotes decentralized
decision-making and financing
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The trend in infrastructure finance in
CEE

Sovereign-backed loans
– Cheap but politicised
DECENTRALISATION

Municipality / central government loans
– Self-financing independence for cities
– Higher cost and burden on city debt book

Utility loans supported by cities
– Off-balance sheet borrowing for the city
– Need to be backed by PSC + MSA

Utility corporate loans or bonds
– Self-financing independence for utilities
– Entirely based on company creditworthiness / PSC
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PPP/concessionaire loans
– Private sector indebtedness
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EBRD infrastructure financing guidelines

Minimum size EUR 10 million

Maximum size
– Up to 100% for small public sector infrastructure projects
– Up to 35% for large infrastructure projects (public or PPP)

Maturities between 10 to 20 years

EBRD procurement rules for public sector and competitive selection
for PPP partners

Market pricing linked to risk level

Security linked to creditworthiness

Local currency, where possible
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What makes PPPs successful?

An adequate legal framework

Political will to champion the PPP process

Reliable revenue streams
– Contractual payments
– Tariff methodology + competent regulator

Sponsors’ interest ensuring competition
– Need the right risk allocation

Sufficient loan or capital market development
– Long term money
– Local currency available
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EBRD support to PPPs

With public
authorities
– General advice on
acceptable process

With bidders
– Pre-bidding dialogue with
interested players
– EBRD Policy for
Concessions
– Review of financing
instruments (equity, debt) and
indicative financing terms
– Grant funded technical
assistance
– EBRD cannot commit to
exclusivity (‘open support’)
– General letter of
interest to finance
– After award, negotiation of
detailed terms and conditions
with the preferred bidder
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Section 4
The case of Poland
An sophisticated and diverse
financing market
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Selected EBRD projects
Bydgoszcz Water/Sewerage
EBRD loan PLN 108m, 1999
Key features:
• First ISPA co-financing
• First local currency loan
• First MSA backed utility loan
• Water company corporate
development programme
Gdansk-Sopot Transport
Tramwaje Warszawskie
Metro Warszawskie
EBRD Loan €12 m, 2001
Key features:
• Non-sovereign City loan
• City creditworthiness Programme
• Transport Policy Development
EBRD loan PLN200m, 2010
Key featrures:
• non recourse loan to company
•Financing of the rolling stock, and
rails infrastructure modernization
•Carbon monetisation mechanism
EBRD loan PLN322m, 2011
• Loan for Transport comp. w/o recourse
• Financing of a rolling stock acquisition
for Metro lines I & II
• Carbon monetisation mechanism
•Sopot
•Gdansk
Kraków Urban Transport
Poznan District Heating
EBRD equity €35m, 2002
Key features:
• One of the first privatisations
•Bydgoszcz
•Poznań
Wrocław Flood Damage
Repair Project
•Warszawa
EBRD loan €45m, 1998-2002
Key features:
• First City rating supported by EBRD
• City creditworthiness Programme
• City transport policy development
• One of first syndicated muni loans
Kraków Płaszów Wastewater
•Wrocław
EBRD loan €16m, 1998
Key features:
• First IFI muni loan
• Creditworthiness Enhancement
Programme
•
•Rybnik • Kraków
Wrocław Multi-Sector
Wrocław Water Project
Wroclaw Parking PPP
EBRD loan €33m, 2000
Key features:
• 1 loan for 2 sectors/ISPA
applications
• One of first ISPA co-financings
• Waste sector institutional reform
EBRD loan €18m, 2003
Key features:
• MSA cost recovery, corporate
governance aspects
• First utility syndicated loan
• Outsourcing programme
EBRD loans PLN31m, 2011
Key features:
• First parking PPP
• Project finance loan
• Non-recourse post completion
EBRD loan €20m, 2000-2010
Key features:
• MSA structure
• corporate governance/cost recovery
• Utility corporate development
• Dual currency loan
Gliwice Sewerage Programme
Rybnik
Sewerage
EBRD
loan
15 m Eur,Programme
signed 2002
EBRD loan €17m, 2001
Key
Keyfeatures:
features:
City
transferable
towater
MPWiK
• Cityloan
partial
guarantee &
loan
City
CEP development programme
• Corporate
• Model financing for Slask region
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Poland and infrastructure finance (1)
1.
Projects implemented and financed on the municipal
budgets (loans and municipal bonds):
 Cheapest form of financing, competitive offers from commercial
banks, attractive funding from EIB (or financing on Euro markets)
2.
Projects implemented and financed by municipal
utility companies (off-budget financing, financing on
the balance sheet of the companies)
 Reliance on the PSC and a municipal support agreement
 more and more often utilised by public transport companies,
municipal sewerage companies, local district heating companies
 Often combined with EU grant funds
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Poland and infrastructure finance (2)
3.
Revenue bonds (off-balance)
 Revenue bonds are still rarely utilised due to the requirement
of the proper scale and rating of the project involved.
 Due to the specific structure (security over revenues), lack of
possibility of incurring additional debt, revenue bonds require
long-term planning of financial needs.
 Revenue bonds are addressed to municipalities/companies
with large investment needs and a higher level of risk involved
(requirement of maintaining a debt service reserve account).
 Structuring of transactions, where many sources of revenues
are involved, is more difficult – hence the preference of the
market to change from revenue bonds to municipal bonds.
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Poland and infrastructure finance (3)
4.
PPP (depending on the structure, possibility of
classifying off municipal/national budget)
 PPP has been to date rarely utilised, however the interest in
this form of financing is growing. It requires a thoroughly
thought through structuring, balanced division of risks and
long-term planning as well as implementation.
 Hybrid PPP (involving EU grant funds) is a challenge of the
new financing perspective.
5.
Privatisation (mostly district heating sector)
 Successful wave of privatisations in late 1990s/early 2000s
 Second wave in 2011 with SPEC
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Section 5
Case Studies
Poland and CEE countries
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Dalkia Polska – debt / equity

EUR 70 million invested alongside
Dalkia Group for a series of investments
in Poland over the 1998-2004 timeframe.

EBRD held a 35% stake in Dalkia Polska
where Dalkia International remained the
controlling partner with a 65% stake.


•
EBRD’s funds allowed Dalkia Polska to
invest throughout the region in ESCO type
projects as well as district heating
opportunities (privatisations, concessions,
lease contracts).
EBRD exit in mid 2010 by selling shares back to Dalkia
EBRD’s involvement has enabled increased private sector participation,
as well as improved energy efficiency and cost effectiveness at
operating companies.
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Sofia & Tallinn Water – debt / equity

Loan and equity investments in two water
concessions established by United Utilities

Sofia
– 2000 – EBRD loan to Sofia W to finance capex
– 2003 – EBRD becomes 19% shareholder
– 2008 – Revised Concession Agreement signed
– 2010 – EBRD sells to Veolia alongside UU

Tallinn
– 2002 – EBRD loan to newly privatised Tallinn W
– 2003 – EBRD becomes 12.6% shareholder
– 2005 – EBRD helps initiate IPO of Company
– 2010 – EBRD sells shares back to UU
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Warsaw Tramways – company loan

Modernisation of tram tracks and
acquisition of 186 new articulated
low-floor trams

PLN 1.9bn project, financed by
EU grants, EIB and EBRD loans
and company funds

EBRD PLN 200m loan to Warsaw Tram company
– Signed April 2010
– Backed by public service contract and municipal support agreement
– 15 years tenor with 3 years grace
– Methodological support to monetise carbon credits from modal
switch from car transport to electric transport
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Wrocław Parking PPP – concessionaire loan

Design, construction and operation of an
underground parking facilities of 331
places in close proximity to the historical
centre of Wroclaw
– Ease traffic congestion caused by drivers
searching for scarce parking
– Enforcement of traffic laws and restrictions

SPV supervised by Mota-Engil Group

Tenor of the concession – 40 years

EBRD Loan signed in 2011
– PLN 31.3m (equivalent to EUR 8m)
– Tenor – 15 years, including a 3 year grace period
– Pledge of selected assets
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Thank you
Agnieszka Szymczyk
Senior Banker
Tel: +48 22 520 57 00
Fax: +48 22 520 58 00
[email protected]
European Bank
for Reconstruction and Development