1. EBRD and the Infrastructure Financing
Agnieszka Szymczyk Tel Aviv, 14 June 2012

2. Section 1 Who we are

3. 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 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 4

4. Mission and Vision EBRD’s operations are based on three principles
Transition Impact
Sound Banking
EBRD
Addition-ality
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
Invests in financially viable projects, together with the private sector
Focusing on the triple-bottom line benefits: Economic, Social and Environmental

5. 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

6. EBRD projects span every business sector
Transport
Municipal & Environmental Infrastructure
Property & Tourism
Financial Institutions
Natural Resources
Telecommunications, Informatics & Media
Manufacturing & Services
Power & Energy
Industry, Commerce & Agribusiness

7. EBRD’s Value-Added: a unique offering
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
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
Competitive advantage
2. EBRD Annual Report 2010 7

8. Section 2 Partnering for infrastructure development

9. 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
€ 14.2 billion invested
Total project value: € 50 billion
Over 500 projects
1- Data at end 2011 4

10. Extensive offer of tailored financial products
Debt
Equity
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 Cooperation As a Multilateral Development Bank, EBRD brings in additional financial capital and technical assistance (TC) to economically viable projects 10

11. Section 3 Financing infrastructure projects
EBRD promotes decentralized decision-making and financing

12. The trend in infrastructure finance in CEE
DECENTRALISATION
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

13. 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

14. 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

15. EBRD support to PPPs With public authorities With bidders
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

16. Section 4 The case of Poland
An sophisticated and diverse financing market

17. Selected EBRD projects
Gliwice Sewerage Programme
EBRD loan 15 m Eur,
signed 2002
Key features:
City loan transferable to MPWiK
City CEP •
Sopot
Gdansk
Warszawa
Rybnik
Wroc ł aw
Pozna ń
Bydgoszcz
Bydgoszcz Water/Sewerage
EBRD loan PLN 108m, 1999
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, 2001
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,
First City rating supported by EBRD
City transport policy development
One of first syndicated muni loans
Kraków Płaszów Wastewater
EBRD loan €20m,
MSA structure
corporate governance/cost recovery
Utility corporate development
Dual currency loan
Rybnik Sewerage Programme
EBRD loan €17m, 2001
City partial guarantee & water loan
Corporate development programme
Model financing for Slask region
Poznan District Heating
EBRD equity €35m, 2002
One of the first privatisations
Wrocław Flood Damage Repair Project
EBRD loan €16m, 1998
First IFI muni loan
Creditworthiness Enhancement Programme
Wroclaw Parking PPP
EBRD loans PLN31m, 2011
First parking PPP
Project finance loan
Non-recourse post completion
Wrocław Water Project
EBRD loan €18m, 2003
MSA cost recovery, corporate governance aspects
First utility syndicated loan
Outsourcing programme
Wrocław Multi-Sector
EBRD loan €33m, 2000
1 loan for 2 sectors/ISPA applications
One of first ISPA co-financings
Waste sector institutional reform
Kraków
Tramwaje Warszawskie
EBRD loan PLN200m, 2010
Key featrures:
non recourse loan to company
Financing of the rolling stock, and rails infrastructure modernization

18. Poland and infrastructure finance (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)
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

19. Poland and infrastructure finance (2)
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.

20. Poland and infrastructure finance (3)
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.
Privatisation (mostly district heating sector)
Successful wave of privatisations in late 1990s/early 2000s
Second wave in 2011 with SPEC

21. Poland and CEE countries
Section 5 Case Studies
Poland and CEE countries

22. Dalkia Polska – debt / equity
EUR 70 million invested alongside Dalkia Group for a series of investments in Poland over the 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.

23. 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

24. 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

25. 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

26. Thank you Agnieszka Szymczyk Senior Banker Tel: +48 22 520 57 00
Fax:
European Bank
for Reconstruction and Development