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10/10/20141 European Investment Bank EUROPEAN INVESTMENT BANK Water Sector Strategy and Activities in the New Member States, Candidate Countries, Western.

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Presentation on theme: "10/10/20141 European Investment Bank EUROPEAN INVESTMENT BANK Water Sector Strategy and Activities in the New Member States, Candidate Countries, Western."— Presentation transcript:

1 10/10/20141 European Investment Bank EUROPEAN INVESTMENT BANK Water Sector Strategy and Activities in the New Member States, Candidate Countries, Western Balkans and Eastern Neighbours José Frade, Associate Director Convergence and Environment Department World Bank ECA Region Urban Regeneration and Water Study Tour, Joint Workshop with the European Union and Development Partners 29 May 2009

2 10/10/20142 European Investment Bank EIB annual lending and the financial crisis

3 10/10/20143 European Investment Bank Mandates within and outside the EU Direct loans of EUR 15.7bn in 2008 for environmental sustainability, including climate change mitigation and adaptation

4 10/10/20144 European Investment Bank EIB Lending in the Water Sector (WSS & IWRM)

5 10/10/20145 European Investment Bank Range of Instruments Loans for sovereign, sub-sovereign, corporate clients ; Long tenors and adequate grace periods Investment, programme, framework and global loans Funding of 50 (-75)% of total project cost Co-funding with Commission, IFIs, commercial banks Facilitation of PPP models, where appropriate Support to client throughout the project cycle Due diligence based on technical, financial, environmental, and social criteria (EC Directives, international standards). Special focus on cost recovery and sustainability

6 10/10/20146 European Investment Bank Key challenges facing the water sector The Past : Investment backlog, poor services, inefficiency High inefficiency/wastage of resources Deteriorating infrastructure due to lack of funds The Present & Future: Increasing CAPEX, competition, risks More demanding environmental/service quality objectives Economic growth & urbanisation (water for food, energy…) Adaptation to climate change The “3 G’s”: Gaps of financing, project quality and capacity Grants limited by budget, tariffs by politics, loans by risk Poorly prepared projects cannot attract enough funding Weak regulatory, absorption and implementation capacity Is the water sector financially and operationally unsustainable?

7 10/10/20147 European Investment Bank EIB’s 2008 Water Lending Policy Seven key areas of intervention:  IWRM  Consolidation of Institutional Framework  Adaptation to Climate Change  Water efficiency  Development of new water supply  Wastewater and sanitation services  Research & Innovation

8 10/10/20148 European Investment Bank Implementing the Policy: Key actions (1) IWRM : Promote IWRM + water services provision in a project Support transboundary cooperation Consolidation of institutional framework: Support appropriate level of integration of utilities to improve efficiency and enhance borrowing capacity Enhance financial sustainability (sustainable cost recovery) Adaptation to climate change (CC): Adaptation part of new lending priority in EIB CC Strategy Promoters should consider adaptation in project design EIB supports TA with grants Preparation, implementation of flood risk management projects

9 10/10/20149 European Investment Bank Implementing the Policy: Key actions (2) Water efficiency:  Support efficiency in: i) use by consumers; ii) allocation of resources; iii) systems (losses); iv) management of utilities  Promote principle of cost recovery in line with WFD  Support industries aiming at improving “water footprint” Development of new water supply:  Demand side management and efficiency as 1 st priority  Finance: i) desalination with pre-requisites; ii) dams, basin transfers and fossil water under strict conditions Wastewater and sanitation services:  Always consider them when undertaking DWS projects  Sustainable Cost Recovery (role of subsidies)  Sustainable financing (blend loans, grants)

10 10/10/ European Investment Bank “ECA” Regional priorities : Main drivers EU Member States : Compliance with EC Directives, efficiency gains, CC adaptation (flood management and protection) EU Candidate Countries (Turkey, Croatia, FYROM) and other Western Balkans (Albania, Bosnia and Herzegovina, Montenegro, Serbia and Kosovo): Future compliance, institutional consolidation, pollution reduction, upgrading & maintenance, and extension of services after careful analysis Russia and the Eastern neighbours, i.e. Eastern Europe (Ukraine, Moldova and - subject to future Council Agreement - Belarus) and Southern Caucasus (Armenia, Azerbaijan and Georgia): As above, minus compliance Central Asia (Kazakhstan, Turkmenistan, Uzbekistan, Tajikistan, Kyrgyzstan) : New mandate. To be identified.

11 10/10/ European Investment Bank New Member States : Instruments and Activities Process driven by compliance with EC Directives & grant availability. The EC is the main financier and sets the rules. Role of other agencies is to help accelerate grant absorption, i.e. help countries meet EC requirements and procedures. Availability of grant is now a precondition for co- financing with other financial resources. EIB is the standard co-financier for Cohesion Fund projects through sovereign loans, including framework loans EIB has also begun to undertake sub-sovereign lending (Romania, Poland, the Czech Republic) The Bank applies its technical knowledge to upstream project development either directly (e.g. flood management and protection) or under the joint instrument JASPERS

12 10/10/ European Investment Bank NMS: EIB Contribution to Flood Risk Mitigation Flood management and protection projects form part of adaptation to CC in new water sector lending policy Bank’s experts advise on capacity building, give support to strategies, technical and economical studies, and support implementation “Value added” incl. sector know-how, worldwide project experience, and good contacts with EC and other IFIs “Guide for preparation of flood risk management schemes” published in 2007 JASPERS advises new Member States on EC grant applications for, inter alia, flood risk mitigation projects

13 10/10/ European Investment Bank NMS: What is JASPERS ‘Joint Assistance to Support Projects in European Regions’ Objective: increasing capacity of beneficiary countries to make the best use of EU Structural Grant funding TA partnership to prepare major projects between DG REGIO, EIB and EBRD. KfW a partner in July 2008 Value added: draws on past experience and expertise of the EIB, EBRD, and KfW JASPERS is managed within the EIB but is separate from its lending activities

14 10/10/ European Investment Bank Candidate Countries and Western Balkans: Instruments and Activities A tailored approach: “distance” from Accession determines focus on convergence and compliance with EU standards as well as the availability of EC grants Infrastructure is a key focus area for EC and its cooperation with EIB and other IFIs: a Western Balkans Investment Framework is being developed, while its precursors – the Infrastructure Projects Facility (TA instrument) and Municipal Window (grants) – are operational EC, EIB and EBRD are discussing with Member States a Joint Grant Facility (JGF), and related European Western Balkans Joint Fund to pool grant resources in support of priority investment projects in the region (first focus on infrastructure, then extend) EIB can adopt a programmatic approach to invest in small and medium towns, coupled with TA and a grant element (Bosnia, Montenegro). EIB supports the strengthening of the sector, e.g. to reduce excessive fragmentation when this threatens cost-effectiveness, sustainability and the ability of countries to implement ambitious plans and absorb EC funds

15 10/10/ European Investment Bank Russia, Eastern Neighbours & Central Asia: Instruments and Activities EIB activities in Russia and Eastern Neighbours guided by EU policies and initiatives: (i) European Neighbourhood Policy, (ii) Black Sea Synergy Initiative, (iii) Eastern Partnership mandate for EUR 3.7bn for projects of significant interest to the EU in infrastructure Water: approach will be to focus on rehabilitation and efficiency of water utilities as well as issues such as climate change adaptation. Modest volumes, apart from Russia: operations in St. Petersburg with EBRD. First Finance Contract (EUR 25 M) in 2003 for SW Wastewater Treatment Plant - with NIB, EBRD, EC, Finnfund, NEFCO, Swedfund. Ukraine: recent progress in Mykolaiv, where projects for co-financing with the EC and national/local funds are under appraisal Central Asia: operations started in 2009 MoU (2006) between EC, EBRD and EIB: (i) Steering Committee meets regularly, (ii) EIB and EBRD carry out joint missions and coordinate appraisal work, but each has independent credit and project analysis

16 10/10/ European Investment Bank Cooperation with the WB: Some Examples Moldova: EIB relying on sector work done by the WB Albania: Coastal Cities project (co-funded with WB/GEF) progressing after severe delays. Collaboration is excellent. FYROM, Montenegro: contacts made for possible co- financing, but at early stages Romania: WB provides TA to regional water companies - will feed into grant application process supported by JASPERS Poland: WB coordinating with JASPERS to accelerate implementation of ODRA flood protection project Bulgaria : WB financing Master Plans not fully coordinated with partners present in the country

17 10/10/ European Investment Bank A few questions for the discussion How can we all contribute to filling the 3 G’s? How can we help implement IFinRM? How does the WB see its comparative advantage and role in different sub-regions? What about the other partners?


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