EIB's Activities in Romania

8/3/2019 EIB's Activities in Romania

1/8


2/8

EIB financing in Romania

After twenty years of financing projects fostering the integration of Romania into the

European Union, the European Investment Banks lending operations now cover all of the

countrys economic sectors, ranging from basic infrastructure to manufacturing and services,including support for small and medium-sized companies through local financial institutions,

and the development of a knowledge-based economy.Since 1990,the EIBs lending in

Romania has reached almost 8 billion euro to finance investment projects relevant for

meeting EU accession criteria.Now that Romania has joined the EU, the EIB expects to play

an important role in supporting the countrys successful development within the Union;

building not only on the Banks past experience in Romania but also with previous

enlargements.E IB

EIB Financing in Romania

The EIB is the European Unions financing institution,set up in 1958 under the Treaty

of Rome.Its mission is to contribute to the realization of the policy objectives of the European

Union by providing long-term finance for sound investment projects.The 27 EU Member

States,including Romania, jointly own the EIB.Within the European Union,the EUs policy

objectives and the Banks lending priorities are:

Regionally balanced economic development and social cohesion in the Union through

support for the economically weaker regions

Support to investments of small and mediumenterprises (SMEs)

Environmental protection and improvement

Strengthening Europes competitiveness by supporting research,development andinnovation

Extension of trans-European transport and telecoms networks

Sustainable, competitive and secure energy

Regional economic development and social cohesion

Financing projects contributing to economic progress in EU assisted areas remains the

key activity of the EIB. The Bank aims to ensure that 40-45%of its total lending inside the

EU goes to regional policys priority regions.The whole territory of Romania consists of

regions qualifying for EIB loans ass well as for allocations from the European Unions

Structural and Cohesion Funds.All of the Banks projects in Romania thus meet the goals ofeconomic and social cohesion and the Bank has been active in support of projects throughout

the country.This includes infrastructure and other projects in Bucharest but also across

Romania,While supporting the extension of the Bucharest Metro system (total loans of EUR

278 M) and district heating and other investments in the capital,the Bank has also provided

loans totaling EUR 180 M for projects in 32 cities and counties for municipal

investments,New investments in the regions also include a recent EUR 50 M loan to Pirelli

for investments in Slatina and projects directly targetingsocial cohesion such as rehabilitation

of 1400 pre-university schools all over the country (EUR 131mil).The Bank provided also a

total of EUR 550 million to implement short term construction measures as well as medium-

term prevention projects to reduce the impacts of natural disasters in Romania and to

reconstruct damages caused by the recent devastating floods in the country.

2


3/8

Financing projects of SMEs

To increase the access of small and medium-sized enterprises (SMEs) to long-term

financing, the EIB closely cooperates with well established financial institutions with market

expertise inRomania,especially in providing those that service small and medium

entrepreneurs through a well-developed network of branches.Through these intermediarybanks, the EIB co-finances smaller projects, mostly in the areas of industry and services,

including tourism, energy and energy savings, environmental protection,as well as

infrastructure in the health, education,urban renewal and social housing sectors.Since 1990,

EIB loans to partner banks in Romania to finance small andmedium-sized investments have

reached EUR 272 million.In 2006,the EIB provided intermediated loans to Banca

Commerciala.Romana (EUR 50 million) and Bancpost (EUR 20 million).

R&D and innovation

In line with the Lisbon strategy of making Europe an innovative and competitive

region, the Bank offers enhanced support for investments in technology, technologynetworks, R&D and innovation under a special programme called the Innovation 2010

Initiative. To support the implementation of the Lisbon Strategy,the EIB has so far lent some

EUR 45.7 billion overall since the start of the current decade.

Trans-European networks

Rehabilitation and extension of trans-European infrastructure,notably transport

corridors, is crucial for the successful development of Romania within the EU single market.

Investment in infrastructure is important for removing bottlenecks and barriers to the efficient

movement of people and goods, enhancing safety and safeguarding the environment.Up to

the end of 2006, the Bank.Provided 3.1 billion euro for the rehabilitation and extension of the

Romanian transport network.The EIB canal so co-finance projects.EIB financing in Romania

implemented and operated with the help of public-private partnership (PPP) financing

schemes.The EIB is co-financing sections of the motorway on the Pan-European Corridor IV

in Romania to the tune of 660 million euro:The Bucharest-Constanta Motorway (withan EIB

loan of 210 million euro),Constanta Cerna Voda (250 million euro) and the Arad -Timisoara

section (200 million euro). On the same transport corridor the Bank has provided 300 million

euros for the upgrading of the railway section between Simeria and the Hungarian

border.For the development of the countrys local (not trans-European) transport sector, the

EIB provided 450 million euro in 2006 for the rehabilitation of several sections of the

national road network, thus bringing total lending for national roads to 1.3 billion euro.

Memorandum of understanding between EIB and Romania

In October 2006 the EIB and the Republic of Romania signed a cooperation

agreement setting a framework for the EIBs support to the countrys investment programme

over the next years.While financing will be based on specific project proposals,the agreement

indicates that such financing may be in the order of 1 billion euro per year and will be

adjusted in line with evolving needs.The overall cooperation between Romania and the EIB

focuses on the following development objectives:

Offering financing for national priority investments and setting up dedicated co-financing

facilities and new mechanisms for investments that come under the EU Cohesion andStructural funds facilities;

3


4/8

Cooperate closely in the implementation of projects financed by the Bank using the

technical and sectoral experience of the Bank as well for the effective absorption of EU

grants. This includes offering a dedicated pool of expertise for the preparation of selected

Cohesion and Structural Funds projects through the JASPERS National Action Plan

initiative;

Environmental protection

Substantial investment is needed inenvironmental protection and improvement in

Romania, notably to help the country achieve EU environmental standards in terms of air

quality, drinking and Waste water management, and solid urban and industrial waste

processing.The EIB plays an important role in this area.In 2006 the Bank supported the

construction of the Bucharest Glina Wastewater Treatment Plant (25 million euro) and

continued to finance the infrastructure development programme for small and medium-sized

towns that started in 2005 and totals to 42 million euro.In addition, in 2006 the EIB provided

41 million euro for the rehabilitation and expansion of sewerage systems in six Romanian

municipalities.

Framework for future cooperation

Improve the sources of funding for SMEs through the JEREMIE programme with the

participation of the Banks subsidiary EIF,which is specialised in venture capital and

guarantees;

Support sustainable investments in city areas through the JESSICA programme;

Assist the Government and private partners in the structuring and implementation of PPP

projects.

EIB Expertise to Support to PPP Projects

Over the years, the EIB has gained significant experience in cofinancing public-

private partnership projects (PPPs):the Bank has financed PPP projects with a total value

exceeding 20 billion in various countries. The EIB is well able to assess whether a project is

suitable for a PPP structure and if risks and responsibilities between the partners are

appropriately shared.It shares its PPP expertise with clients.In this way, Romania may profit

from the main advantage for using PPPs, which is to make long-term services related to the

use of infrastructure cheaper and more effective than if such services would be provided by

the State.The State defines which services it needs and selects a private company that can

deliver such services for the best value for money. Involvement of a private partner usuallyreduces costs and construction times as well as maintenance expenditures during the project

life.

\

4


5/8

Combining EIB loans with

EU Programmes and Funds

Romania is entitled to 17.2 billion euro from EU funds in the budget period 2007

2013. Through its various loan products, the EIB can provide the financial resources needed

for co-financing projects with the EU Funds and thus contribute to the successfulimplementation of the Romanian National Development Plan.The cooperation between the

Bank and Romania is covered by the Memorandum of Understanding signed in 2006.

EIB Products

Advantages of EIB loans

The Bank is a major international borrower, which has been consistently awardeda

first class (AAA) credit ratingby the leading rating agencies.This enables the EIB to borrow

large volumes of funds on advantageous terms.The Bank on-lends these resources on a not-

for-profit basis with only a small mark-up to cover its administrative costs. This makes it

possible to provide medium and long-term loans for up to 20 or more years at attractiveinterest rates with appropriate grace periods for repayment of principal.The EIB supports the

new Member States, including Romania,by not only increasing its lending operations in these

countries,but also by contributing to the development of domestic capital markets. The Bank

is actively supporting the development of the local Romanian Lei bond market through a first

time RON 300 million (88 million euro)domestic bond issue in 2007, which has set a new

maturity benchmark. As a result, it is expected that the Banks lending activity will also

develop in Romanias national currency, thus helping to avoid exchange rate risk for project

promoters.The EIB can normally finance up to 50% of the eligible cost of a project,making

additional finance from other sources necessary.This can be extended up to 75% for priority

trans-European network investments and projects under the Banks Innovation 2010

Initiative. The EIBs technical and economic due-diligence appraisal of all projects by its

teams of sector engineers and economists usually gives comfort to other sources of finance

participating in the financial arrangements.

Who can benefit from EIB loans?

The EIB provides loans to public promoters, including municipalities,and to private

companies.All customers with eligible projects located in the EU Member States are treated

on the same terms.The financial and economic viability of a project are the most important

criteria for granting a loan. Every project has also to be technically as well as

environmentally sound.

Types of loans provided

Individual loans: large projects exceeding total costs of around 25 million euro are financed

individually by the Bank.Loans may also take the form of:

Grouped loans for financing a number of smaller projects that do not meet the criteria for

individual loans interms of the amount of the investment.Such projects have to be identified

before hand and are to be implemented by a single promoter.

Framework loans are intended to finance a set of small and medium-scale schemes,

unspecified in advance and presented by a single promoter.Such loans are generally

channelled through a public-sector promoter.

5


6/8

Intermediated loans are arrangements for financing small and medium-sized projects with a

total investment cost of normally less than EUR 25 million.These are usually promoted by

small and medium-sized companies (SMEs) and smaller municipalities.Intermediated loans

are arranged with an EIB partner bank (or intermediary bank) operating in the region. The

intermediary banks on-lend EIB funds to borrowers at their own risk, assessing each project

individually. Promoters of small to medium-scale projects have to address EIB partner banksdirectly.

Cooperation with the banking community in the new Member States

Building on its experience in the EU-15, the EIB is developing its partnership with

commercial banks in the new Member States along three main lines:

Co-financing - as other sources of finance are required for any project involving the EIB,

additional funds may often be provided by commercial banks.Although the security is

specific to each party, a certain degree of consultation and coordination takes place between

the co-lenders.

Guarantee structure EIB financing requires inadequate security structure for the loan. Thissecurity is often provided by an acceptable commercial bank (or a group of banks, usually in

the form of a syndicate).There are cases where partner banks both co-finance with the EIB

and guarantee its loan.

Intermediation - this can take the form of a intermediated loan,a line of credit typically

directed towards financing a number of SMEs and smaller projects; or, in the case of larger

projects, an indirect loan to be on-lent for the purpose of a specific project.

Project cycle, project appraisal

When a project supports the economic priorities of the EU and in the country

concerned,multidisciplinary professional teams from the Bank, usually consisting of a

financial analyst, an economist and an engineer, carry out appraisals.All project appraisals

include an environmental impact assessment with identification of possible problems as well

as solutions.The Bank requires that all projects respect the EU environmental standards. If an

appraisal is positive,the EIBs Management Committee submits the project to the Board of

Directors, which decides on the granting of the loan.

Lending conditions-Individual Loans

For investments exceeding EUR 25million

Types of investment Infrastructure of any type. Energy production and transport,

environmental protection, industry and services,research and development, health and

education Beneficiaries Public promoters, including municipalities, Private companies and

banks Financing framework No upper limit to absolute amount.However, standard maximum

of 50% of total cost of an investment.Loan period usually from 5 to 12 years in the case of

industry projects; 15 to 25 years for infrastructure and energy projects- with loan periods

tailored to the project Interest rate Fixed interest rate (with or without revision clause) or

variable interest rate.The interest rate corresponds to the cost of funding plus a small margin

to cover administrative costs Currencies Loans can be provided in one or more currencies

(Euro, British Pound, US Dollar, Swiss Franc, Japanese Yen, etc.)

6


7/8

Repayment Usually fixed annual or semi-annual instalments.Tailored repayments including

grace period for repayment of principal are possible Guarantees Guarantees are negotiated

individually and usually involve a bank guarantee or other first-class security.

Intermediated Loans

For investments from EUR 40 000 to EUR 25million

Types of investment Investments, especially by SMEs and municipalities, in the areas

of industry and services, advanced technologies, energy saving, environment, water treatment

and local infrastructure, including health and education beneficiaries Small and medium-

sized enterprises, public promoters, including municipalities Financing framework Up to 50%

of total project cost.Loan period,interest rates,repayment,currencies,

guarantees,Provisions/fees Determined by the EIB partner bank.

Concrete Case-EIB supports the development of automotivesector in Romania

The European Investment Bank (EIB) is lending EUR 400 million to Ford Romania

SA for the expansion and refurbishment of the companys existing car assembly plant located

in Craiova in the South-West of Romania. The Republic of Romania is providing a State

guarantee for 80% of the loan under the European Commissions temporary framework for

State aid measures, which gives Member States additional scope to facilitate access to

financing in the present economic and financial crisis.The EIB loan will finance investments

in the Craiova Ford plant for the facilities and tooling needed for the production of a new B-

segment vehicle with a start of production in the near future and production of the existing

model of the light commercial vehicle and a new model scheduled to be launched later. EIB

funds will also help to introduce the production of a new small, advanced-technology petrol

engine with low fuel consumption. It is envisaged that expanded production capacity willrepresent an annual output of up to 300 000 vehicles and 300 000 engines.

The EIB has also approved - in principle - a loan of EUR 200 million that will finance

research, development and innovation towards the development of vehicles and engines to be

produced in the Craiova plant. However, these activities willl be carried out in Fords

facilities located mainly in Germany.The vehicles and engines to be manufactured in the Ford

Craiova plant will incorporate the latest safety (EURO NCAP 5), environmental (EURO 5

stage) standards and other new technology features and will support Ford in going beyond

compliance with the EU regulation concerning CO2 emissions.

EIB Vice-President Matthias Kollatz Ahnen, responsible for lending in Romania,stated:EIB funds, together with the Romanian State support, provided on favourable terms at

a time of difficult market conditions, will both help the Romanian economy to better face the

consequences of the current economic crisis and contribute to the production of more

environmentally friendly cars. Automotive sector is a priority of the EIB in this respect: in

2009 the Bank loans for this sector amounting to EUR 8.2 billion.

"We are very pleased concerning the provision of the loan, and want to thank both the

European Investment Bank and the Romanian government for their support," said Wolfgang

Schneider, Vice President, Governmental and Legal Affairs, Ford of Europe and

continued: "The loan will help to assist in the plant's ongoing transformation into a world-

class manufacturing facility for vehicles and engines.Our guiding principle is that products

built in Craiova deliver what customers expect from us: great products offeringenvironmentally-advanced technologies at affordable prices."

7


8/8

Conclusion

European Investment Bank has been supporting Romania for twenty years financing

any project which could improve the countrys prosperity.For the future EIB executives hope

that Romania will go forward as rapid as in the previous years so that in a good day they

could say weve made the best investment possible when we came to Romania.

References:

1.www.comunicatemedia.ro

2..http://www.eib.org3.www.europa.eu

8
http://www.eib.org/projects/publications/financing-provided-by-the-european-investment-bank-in-romania.htmhttp://www.eib.org/projects/publications/financing-provided-by-the-european-investment-bank-in-romania.htm

Documents

EIB's Activities in Romania