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EBRD EBRD and the and the Infrastructure Infrastructure Financing Financing

Agnieszka SzymczykTel Aviv, 14 June 2012

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Section 1Section 1

Who we are Who we are

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What is EBRD?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 VisionMission and Vision

EBRD’s operations are based on three principlesEBRD’s operations are based on three principles

Promotes transition to market

economies, private ownership and

good governance with respect for

people and environment

Promotes transition to market

economies, private ownership and

good governance with respect for

people and environment

Supports, but does not

replace, private investment.

Provides financing at

reasonable terms, otherwise

not available

Supports, but does not

replace, private investment.

Provides financing at

reasonable terms, otherwise

not availableInvests in

financially viable

projects, together

with the private

sector

Invests in

financially viable

projects, together

with the private

sector Focusing on the triple-

bottom line benefits:

Economic, Social and

Environmental

Focusing on the triple-

bottom 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)

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)

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EBRD projects span every business sectorEBRD projects span every business sector

Transport

Industry, Commerce& Agribusiness

Financial Institutions

Manufacturing & Services

Municipal & Environmental Infrastructure

Power & Energy

Natural Resources

Property & Tourism

Telecommunications, Informatics & Media

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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

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

Benefits of Working with Us

EBRD’s Value-Added: a unique offering

2. EBRD Annual Report 2010

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Section Section 22

Partnering for Partnering for infrastructure infrastructure developmentdevelopment

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The The Infrastructure Business Group Infrastructure Business Group at EBRDat 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…

www.ebrd.com

1- Data at end 2011

Infrastructure at a glance1

• € 14.2 billion invested

• Total project value: € 50 billion

• Over 500 projects

Infrastructure at a glance1

• € 14.2 billion invested

• Total project value: € 50 billion

• Over 500 projects

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Extensive offer of tailored financial productsExtensive offer of tailored financial products

DebtDebt EquityEquity

Loans to the private sector (up to 35%, syndicating the rest)

Debt co-financing, working with commercial banks and IFIs

Project finance loans (incl. PPP)

Hard/local currency. Fixed/floating rates

Syndication under preferred creditor status

Access to capital markets

Investing with majority sponsor to reduce equity burden and add partnership value. No more than 25%

Common or preferred stock

Privatization and initial public offering (IPO)

Mezzanine equity and subordinated debt

Infrastructure funds

PPP

Technical CooperationAs a Multilateral Development Bank, EBRD brings in additional financial capital and technical assistance (TC) to economically viable projects

Technical CooperationAs a Multilateral Development Bank, EBRD brings in additional financial capital and technical assistance (TC) to economically viable projects

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Section Section 33

Financing infrastructure projectsFinancing infrastructure projects

EBRD promotes decentralized EBRD promotes decentralized decision-making and financingdecision-making and financing

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The trend in The trend in infrastructure infrastructure finance in finance in CEECEE

Sovereign-backed loans– Cheap but politicised

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

PPP/concessionaire loans– Private sector indebtedness

DE

CE

NT

RA

LIS

AT

ION

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EBRD EBRD infrastructure infrastructure financing guidelinesfinancing 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? 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 PPPsEBRD support to PPPs

With public authorities

– General advice on acceptable process

– EBRD Policy for Concessions

– Grant funded technical assistance

– General letter of interest to finance

With bidders

– Pre-bidding dialogue with interested players

– Review of financing instruments (equity, debt) and indicative financing terms

– EBRD cannot commit to exclusivity (‘open support’)

– After award, negotiation of detailed terms and conditions with the preferred bidder

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Section Section 44

The case of PolandThe case of Poland

An sophisticated and diverse An sophisticated and diverse financing marketfinancing market

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Selected EBRD projectsSelected EBRD projects

Gliwice Sewerage ProgrammeEBRD loan 15 m Eur, signed 2002Key features: City loan transferable to MPWiK City CEP

•Sopot•Gdansk

•Warszawa

••Rybnik

•Wrocław

•Poznań

•Bydgoszcz

Bydgoszcz Water/Sewerage

EBRD loan PLN 108m, 1999Key features:• First ISPA co-financing• First local currency loan• First MSA backed utility loan• Water company corporate development programme

Gdansk-Sopot Transport

EBRD Loan €12 m, 2001Key features:• Non-sovereign City loan• City creditworthiness Programme• Transport Policy Development

Metro Warszawskie

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

Kraków Urban Transport

EBRD loan €45m, 1998-2002Key features:• First City rating supported by EBRD• City creditworthiness Programme• City transport policy development• One of first syndicated muni loans

Kraków Płaszów Wastewater

EBRD loan €20m, 2000-2010Key features:• MSA structure • corporate governance/cost recovery• Utility corporate development• Dual currency loan

Rybnik Sewerage Programme

EBRD loan €17m, 2001Key features:• City partial guarantee & water loan• Corporate development programme• Model financing for Slask region

Poznan District Heating

EBRD equity €35m, 2002Key features:• One of the first privatisations

Wrocław Flood Damage Repair Project

EBRD loan €16m, 1998Key features:• First IFI muni loan• Creditworthiness Enhancement Programme

Wroclaw Parking PPP

EBRD loans PLN31m, 2011Key features:• First parking PPP• Project finance loan• Non-recourse post completion

Wrocław Water Project

EBRD loan €18m, 2003Key features:• MSA cost recovery, corporate governance aspects• First utility syndicated loan• Outsourcing programme

Wrocław Multi-Sector

EBRD loan €33m, 2000Key features:• 1 loan for 2 sectors/ISPA applications• One of first ISPA co-financings• Waste sector institutional reform

• Kraków

Tramwaje Warszawskie

EBRD loan PLN200m, 2010Key featrures:• non recourse loan to company•Financing of the rolling stock, and rails infrastructure modernization•Carbon monetisation mechanism

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Poland and Poland and infrastructure infrastructure finance (1)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 Poland and infrastructureinfrastructure finance (2) 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 Poland and infrastructure infrastructure finance (3)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 Section 55

Case StudiesCase Studies

Poland and CEE countries

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Dalkia Polska – debt / equityDalkia 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 / equitySofia & 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 loanWarsaw 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 Wrocław Parking PPP – concessionaire loan– 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 youThank you

Agnieszka SzymczykSenior Banker

Tel: +48 22 520 57 00Fax: +48 22 520 58 00 szymczya@ebrd.com

European Bank for Reconstruction and Development