AICEP BUSINESS OPPORTUNITIES SEMINAR – EBRDLisbon, 22nd of November 2012

© European Bank for Reconstruction and Development 2010 | www.ebrd.com

Municipal and Environmental Infrastructure Team

Susan Goeransson, Senior Banker

© European Bank for Reconstruction and Development 2010 | www.ebrd.com

2

15 years of municipal finance at EBRD

• Structuring the financing of municipal infrastructure, equipment and services to improve service levels

• Promote commercialisation and corporatisation of services

• Development of regulatory structures

• Promotion of private sector involvement, where appropriate

EBRD’s role in the municipal sector

3

• Environmental, social, health and safety improvement

• Facilitate donor grant and commercial loan co-financing

EBRD helps local authorities meet their infrastruct ure needs

s local authorities meet their infrastructure needs

400

500

600

700

3000

3500

4000

4500

5000� Activity started in 1994

� 300 deals signed

� €5bn committed by EBRD

– 50% municipal clients

€€ billionbillion

Ann

ual b

usin

ess

volu

me

Net cum

ulative business volume

A fast growing businessA fast growing business

4

0

100

200

300

400

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

0

500

1000

1500

2000

2500

3000

Business volume Net Cumulative Business Volume

– 50% municipal clients

– 30% private clients/PPPs

– 20% sovereign

� 2011 record year with €600m invested

Ann

ual b

usin

ess

volu

me

Net cum

ulative business volume

Key sectors covered

Water & Wastewater – improved quality of service and environmental compliance

Urban Transport – improved public transport services (buses, LRT, metro, ferries, etc.) and more efficient and safe network design

5

Solid Waste Management – improved efficiency and frequency of collection; adequate disposal; prevention of groundwater contamination

District Heating – renewal of obsolete heating and distribution systems and significant efficiency gains

MEI is a valuable partner with a unique offering

Commitment The EBRD is a strong, internationally recognised partner with a long term perspective

SupportUnparalleled presence in the region provides mitigation of political and regulatory risk with close proximity to both local country markets and foreign investor community

6

Awareness

EngagementStrong and demonstrable track record with governments, key operators and local companies. MEI has dedicated bankers in 14 resident offices.

EBRD responded vigorously to the impact of the crisis, financing a record number of projects between 2008-2011, taking overall investments to unprecedented levels

DesignFlexible deal structuring and product matching services. Strong credit awareness. Access to substantial sources of grant funding for technical assistance and capital grants. Ability to lend in local currency

Municipal projects in 28 countries…

Russia, 24%

Central Asia, 5%

Ukraine, 4%

Other Balkans, 3%

Caucasus, 1%Turkey, 4%

7

Romania, 15%

Poland, 12%

Regional, 7%

Croatia, 6%

Other CEE, 5%

Serbia, 5%

Baltics, 5%

Bulgaria, 5%

…and across urban infrastructure

District Heating

Solid waste & other13%

Water and Wastewater

8

Urban Transport

24%

Heating17%

Wastewater46%

…with diversified structures

9

Private Sector Participation

� EBRD’s policy ‘Financing of Private Parties to Concessions’ requires competitive tendering and a specific process:

– http://www.ebrd.com/downloads/procurement/concess.pdf

� Which basic conditions foster PPP development:

– An adequate legal structure http://www.ebrd.com/pages/sector/legal/concessions/assessments.shtml

10

– Political will to champion PPP processes

– Robust tariff methodologies and competent regulator

– Sponsors’ interest, dependent on market and PPP structure

– Sufficient capital market development (local and international) for LT financing notably in local currency.

EBRD can support PPPs

With public authorities

• General advice on acceptable process

• EBRD Policy for Concessions

• Grant funded technical assistance

With bidders

• Pre-bidding dialogue with interested players

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

• EBRD cannot commit to exclusivity

11

• General letter of interest to finance

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

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

MEI in the SEMED region

MEI initially looking at opportunities in the water and urban transport sector in the SEMED region, where it will have a two–pronged approach•Working with traditional utilities, where EBRD will focus on fiscal decentralisation and sub-sovereign approaches•Supporting PPPs given scope to involve the private sector in key sectors•Key themes include resource efficiency and long term

12

•Key themes include resource efficiency and long term sustainability

Potential projects include :

• New Cairo WWTP through its investment with Aqualia (private, equity)

• Yarmouk Water, which provides services to nearly one quarter of the country’s population, through a sub-sovereign loan (sub-sovereign, debt)

MEI financing parameters

Maturity Between 10 – 15, with some loans extending to18 years

Amount Flexibility on commitment (no 35% rule for public sector)

Public Procurement EBRD procurement rules for public sector projects

13

Public Procurement Rules (PPR)

EBRD procurement rules for public sector projectsCompetitive selection for private partners in PPPsPossibility for local rules when financing alongside EU projects

Pricing & Securities Aligned with the market

Currency Local, where possible

Equity vs. Debt Equity investments, where appropriate

Things MEI will look at before investing in a project:

• Investment needs to make economic sense:• Long sustainability of the project

• Affordability concerns: • Changes in tariffs should not particularly impact vulnerable

and low income groups

• Procurement for public sector clients:

14

• Procurement for public sector clients:• With the client, not EBRD

• For PPPs contracts must be balanced:• Fair risk sharing and performance-based contracts

• Preference for revenue generating projects:• Search for cost-efficiencies through improvements in tariffs

and collection rate

15

CASE STUDIES

Poland: Wrocław Parking PPP 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

16

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

Turkey: TASK Water PPP loans

TASK Group, a privately owned water and wastewater operator in Turkey

EBRD project financing:• TASK Güllük (Bodrum) EUR 2.5 million

loan to upgrade water and wastewater facilities at the Güllük municipal concession

• TASK Dilovasi (Marmara) EUR 13.5 million loan to finance a WWTP BoT

17

loan to finance a WWTP BoT

Bank partnered with Akfen, a pioneer and leader of the PPP business in Turkey, and Tahal, a water operator and engineering firm with broad-based geographic experience

Aim is to assist in increasing private sector parti cipation in the water market in Turkey by supporting the Company’s ongoin g investment plans

Romania: EU Cohesion Fund Co-Financing

• EUR 330 million Framework to provide co-financing toregionalised water companies to co-finance their EUCohesion Fund projects

• Framework was approved in 2010 and expanded in2012 as fully utilised

• Loans on a corporate basis to public utilities withoutrecourse to central or local governments

• Benchmarking programme to improve transparency and

18

• Benchmarking programme to improve transparency andincrease competitiveness of the regionalised watercompanies

• To date, 14 loans signed for EUR 214 million

• 6 additional loans planned to be signed in 2012/13

Moldova: Regional Water Project

• EUR 15 million project to improve water supply and waste water treatment infrastructure in selected municipalities in Moldova: Floresti, Soroca, Hancesti, Leova, Orhei and Ceadar-Lunga

• In addition to EBRD finance, project is co-financed with EIB and NIF grant funds

19

• Focus on establishing cost recovery tariffs as well as introducing measures to improve long term viability, including regionalisation.

• Project will strengthen the municipal utilities to ensure provision of adequate supply of drinking water and improve wastewater treatment facilities with environmental benefits for local river basins (as key sources of drinking water) and ultimately the Black Sea basin

Poland: Dalkia Polska debt / equity

EUR 70 million invested alongside Dalkia Group for a series of investments in Poland over the 1998-2004 timeframe.

EBRD holds a 35% stake in Dalkia Polska. Dalkia International remains the controllingpartner with a 65% stake.

20

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.

Kazakhstan: CAEPCO DH – equity/debt

EUR 46 million equity investment in JSC Central-Asian Electric Power Corporation (CAEPCO)

EUR 23 million loans to Pavlodar and Petropavlovsk DH companies guaranteed by CAEPCO

Capital increase proceeds towards CAEPCO’s investment programme aimed at modernising the

21

investment programme aimed at modernising the district heating networks in Pavlodar, Petropavlovsk, and Ekibastuz.

Bank’s participation is important to provide political and regulatory comfort to the private investor.

EBRD’s participation is important in attracting further interest from strategic investors and IFIs.IPO is the ultimate goal.

Turkey: Istanbul Ferries LBO loan

2011 privatisation of 100% of IDOThe world’s largest municipal ferry operator

Inter & inner city services across the Bosphorus and the Marmara Sea 51 mln passengers a year 52 vessels and 35 ferry terminals

Award for USD 861 mln to TASS

22

Award for USD 861 mln to TASSTepe-Akfen-Sera and Brian Souter

Introduction of new demand-driven ticket tariffs, c reation of new routes and intermodal passenger transportation services

EBRD-led acquisition financing of USD 750 mln EBRD junior loan USD 50 mln, 7 yearsEBRD senior loan USD 100 mln + Turkish banks USD 600 mln, 12 yearsCurrency and interest rate hedging facilities

Contacts

Susan GoeranssonSenior Banker, MEItel: +44 20 7338 7940email: goeranss@ebrd.com

European Bank forReconstruction and Development

23

Reconstruction and DevelopmentOne Exchange SquareLondon EC2A 2JN