1. July 2012 © European Bank for Reconstruction and Development 2010 | www.ebrd.com Working with the European Bank for Reconstruction and Development Meeting the Challenges of Financing Projects in the Health Sector Matthias Loening Senior Advisor Health & Pharma, Manufacturing & Services

2. 2 Outline Introduction to EBRD EBRD Approach to the Health Sector Investment Projects Projects Financed in Georgia Challenges of Financing Health Projects

3. 3 What is the EBRD? International financial institution, promotes transition to market economies in 29 countries from central Europe to central Asia In 2011, the Bank expanded its operations to include Egypt, Morocco, Tunisia, and Jordan (Southern and Eastern Mediterranean – SEMED region) Owned by 63 countries and two inter-governmental institutions Capital base of €30 billion* Cumulative commitments of €72.4bn Note: Unaudited as at 31 Mar 2012

4. 4

5. 5 EBRD’s 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 public services to improve people’s lives Stronger institutional and legal framework; standards of corporate governance and business conduct Environmentally sound and sustainable development

6. 6 Loans Senior, subordinated, convertible, and other mezzanine Maturities 5 - 15 years (or in specific cases grace periods available) Denominated in major foreign or local currencies Minimum size US$ 7 million (staggered pay-out possible) Equity Common stock or preferred shares Minority position only Minimum investment US$ 5 million Products Offered EBRD financing up to 35% of total project cost or long-term capitalisation

7. 7 Project Financing Guidelines 35% 65% Significant equity contributions (in cash/in-kind) required from sponsor(s) Prudent capital structure (normally 60% long term debt in total financing)

8. 8 The Healthcare sector in which the Bank seeks to invest comprises general hospitals, specialty hospitals, outpatient treatment centres, diagnostic imaging and laboratory facilities, long-term care as well as medical equipment manufacturing. The EBRD’s approach in this sector is to: ̵ finance facilities that complement the existing public health system, rather than duplicate existing infrastructure; and ̵ to serve as a catalyst for improving standards of care and attracting other sources of finance to the sector. By providing investment financing to a private health care provider serving public and private patients alike the Bank seeks to improve access and quality of health services in the Region. Health Sector Approach

9. 9 Health Sector Approach Hospital Infrastructure PPPs Separately, the Bank is considering the financing of Hospital Infrastructure PPPs, which are Facility Management Projects (no medical service provision) EBRD Approach: −PPP tender should be in compliance with the EBRD Concession Policy −Strength and experience of the Sponsors would need to be confirmed −Performance support from the Sponsors −Structure and robustness of the local public health sector and Ministry of Health budget would need to be confirmed. −Adequate FX hedging arrangements −Acceptable EPC arrangements −More than one IFI involvement may be required in certain cases

10. 10 Health Sector Investment Projects YearNameCountrySub-sectorProductUse of FundsProject (m) EBRD (m) 2012MediclubAzerbaijanPaediatric Hospital DebtExpansion of pediatric clinic in Baku $3.4mUS$ 2.7 2012KDLRussiaLabsEquityImplementation of business expansion strategy with focus on the Russian regions. $42mUS $7.7 2010CarapsGeorgia(Specialised)DebtDevelopment of a 90-bed speciality hospital US$ 1.5US$ 0.425 2010HygeiaAlbania(General)Debt220 bed tertiary level hospital€ 57€ 10 2010MedParkMoldova(General)Debt67 bed general hospital€ 14.7€ 7.3 2007MediclubGeorgia(General)DebtDevelopment of a 50 bed general hospital US$ 5.6US$ 2.5 2007HospinvestHungaryPrivate Management of Public Hospitals EquityAcquisition of additional public hospitals to be operated under private management € 8€ 4 2007NairiArmenia(General)DebtExpansion of existing services (additional 45 beds). US$ 1.2US$ 0.6 2006Imedi LGeorgiaInsuranceEquityExpansion of Private Insurance Business US$ 1.5 2006MalayanArmeniaOphthalmology Clinic DebtEquipment AcquisitionUS$ 0.4US$ 0.2

11. 11 Health Sector Georgia Client: Mediclub EBRD Finance: US$ 2.5 million loan Use of Proceeds: To finance a new 50-bed medical clinic in Tbilisi. MediClub Georgia LTD is a provider of medical services in Georgia. The company provides emergency care and occupational health programmes to corporate clients as well as outpatient services to the general population EBRD added value: This was a parallel loan alongside a local bank, part of the Bank’s MCFF programme

12. 12 Health Sector Georgia Use of Proceeds: To finance the construction and equipping of a 90 bed hospital. Caraps Medline is one of the leading and most reputable clinics in Georgia, specializing in traumatology, gynaecology, mammology, ophthalmology, reconstructive and plastic surgeries and providing ambulatory care. EBRD added value: This was a parallel loan alongside a local bank, part of the Bank’s MCFF programme. Client: Caraps Medline EBRD Finance: $0.425 million Signed in 2010

13. 13 Challenges in Financing Projects Health Sector Challenges in Financing Projects Strong Sponsors Revenue Stream Reimbursement Levels Overcapacity Changes to Gov’t Policy & Regs Need for Level Playing Field

14. 14 The Team Peter Stredder is the Senior Banker in the EBRD’s Manufacturing & Services Team responsible for the Healthcare & Pharma Sector. He has worked at EBRD for more than 18 years and has extensive experience in financial institutions, equity funds, and debt, equity and mezzanine transactions with a variety of manufacturing and service sector companies. He has spent some three years based in the Bank’s countries of operation, principally Ukraine and Romania. In the Healthcare & Pharma sector his experience is primarily in pharmaceutical manufacturing, wholesaling and retailing. By product he has a focus on equity and mezzanine financing. Matthias Loening is the Senior Advisor for the Healthcare & Pharma Sector. He joined EBRD in 2006 and has 10 years experience in the health and pharmaceutical industry in the international environment including North America, Western and Eastern Europe, Middle-East, Africa and Asia. Matthias’ role at EBRD is to provide support in the evaluation and structuring of investment projects. Matthias has also acted as an advisor to the International Finance Corporation and World Bank in privatization/PPP transactions in the health sector. He has an MA from the Johns Hopkins University School of Advanced International Studies (SAIS), an MHA from the University of Iowa and a PhD from the London School of Economics.

15. 15 Contacts Peter Stredder Senior Banker Manufacturing and Services EBRD 1 Exchange Square London EC2A 2JN United Kingdom Tel: +44 20 7338 6824 Email: StreddeP@ebrd.com Matthias Loening Health & Pharma Advisor Manufacturing and Services EBRD 1 Exchange Square London EC2A 2JN United Kingdom Tel: +44 20 7338 6536 Email: LoeningM@ebrd.com

16. 16 Health Sector Russia Client: KDL Test EBRD Finance: $7.7 million Use of Proceeds: The transaction comprises: a two-stage acquisition of the existing shares and subscription to the newly issued shares to finance the business expansion of the Investee during 2012-2014. EBRD Added Value: The sector of lab diagnostics in Russia is at an early stage of development and has been experiencing significant lack of financing up to now. In Russia this will be the first transaction of this kind and as such it will result in a strong demonstration effect. By co-investing alongside private equity funds like UFG and CapMan, the Bank is being additional through addressing the finance gap that would otherwise arise in KDL’s acquisition and in implementation of its business expansion strategy.

17. 17 Health Sector Azerbaijan Client: Mediclub EBRD Finance: $2.7 million Use of Proceeds: The project will expand Mediclub’s existing paediatric clinic located in Baku. It will result in the increase from 7 inpatient beds to 12 inpatient beds, expand the Paediatric emergency room from 1 bed to 3 beds and increase in the size of the paediatric Intensive Care Unit (ICU). The company plans to additionally recruit additional doctors and nurses once the project is completed. EBRD added value: The project will provide financing to a medium sized enterprise, include improving reporting standards (IFRS), and the project has substantial sustainable energy component.

18. 18 Health Sector Albania Client: Hygeia EBRD Finance: €10 million Use of Proceeds: To finance a greenfield 220-bed hospital in Tirana, Albania. The Hospital will initially operate with 120 beds. In order to accommodate future needs, the building is designed to expand accordingly without major construction modifications. The hospital opened in July 2010 EBRD added value: The project, a parallel loan alongside the Black Sea Trade & Development Bank, represents the largest private health care investment in Albania to date and one of the largest direct investments in the country

19. 19 Health Sector Moldova Client: Medpark EBRD Finance: US$ 7.3 million loan Use of Proceeds: To finance the construction and equipping of a modern private general hospital (69 beds) with a total area of 12,286 sqm, located in Chisinau’s centre EBRD added value: The project will provide financing to a medium sized enterprise, include improving reporting standards (IFRS), and the project has substantial sustainable energy component.