EBRD Natural Resources Activities ECSEE Meeting, Zagreb 28 September 2004

2 What is the EBRD? International financial institution, owned by 60 countries and two inter- governmental institutions Promotes transition to market-based economies in 27 countries from central Europe to central Asia Capital base of € 20 billion Cumulative commitments € 21.7 billion

3 Catalyst for change EBRD investments have attracted an additional € 45.8 billion from domestic and foreign investors The EBRD uses donor funding to assist project preparation and catalyse foreign investment Cumulative additional funds mobilised € 45.8 billion

4 How EBRD can assist industry players

5 Strengths of the EBRD Risk mitigation –Willing to share risks, including political risks –Preferred Creditor Status in all countries of operation –Excellent working relationships with governments –Excellent working relationship with banks. –Experience gained in problem resolution

6 Strengths of the EBRD (cont’d) Deal Facilitation –Door opener for foreign private investors –Strong, internationally recognised financial partner with long-term perspective and mission –Nationals from our countries of operations are among the multi-national staff –Extensive knowledge of local economy, business environment and practices

7 EBRD facilities Loans Guarantees Equity All risk guarantees Specific risk guarantees (e.g. political) Commodity-backed instruments Trade facilitation programme Non/partial recourse to sponsors Project specific Hard/local currency Medium and long term Floating/fixed rates New equity Privatisation Quasi-equity

8 Funding Guidelines EBRD funds up to –35% of total project costs for a greenfield project –35% of long-term capitalisation of an established corporate Minimum amounts: –Usually minimum involvement of EBRD is €5 million –Minimum financing size is €18 million –Smaller financing requirements are met by financial intermediaries funded by EBRD

9 EBRD in the Natural Resources sector

10 EBRD Natural Resources portfolio €1.7 billion committed to €10 billion projects Future portfolio will be more diversified: –60% oil / 40% gas –20% pipeline and downstream projects –significant growth in “regional” projects involving several countries Oil and Gas Extraction Metal Ore Mining Pipeline Transportation Petroleum Refineries

11 EBRD risk profile EBRD Takes financial risks Takes political risks both on sovereign and sub-national basis Accepts long maturities Shares equity risk Sponsors Bring strong management Assume construction risks Commit to sound environ- mental practice

12 Examples of EBRD investments EBRD’s relationships –Exxon-Mobil, BP Amoco, Shell, ConocoPhillips, LUKoil, Gazprom-Rosneft, etc. Project highlights –Russia: Sakhalin II, Polar Lights, LUKoil –Caspian: AIOC/Chirag, Dragon Oil, Baku-Tbilisi- Ceyhan Pipeline, Shah-Deniz –C&EE: Gastransit (Ukraine), SNP Petrom (Romania)

13 Romania: SNP Petrom Project Details:  Pre-privatisation transaction to support restructuring of national oil and gas company in view of successful privatisation within an agreed timetable  Use of proceeds: modernisation of refining assets for total project of $150 million EBRD Investment:  $100 million EBRD senior loan  EUR 40 million syndicated loan (A/B structure)  $10 million co-financing BSTDB Financing Structure:  Lending based on strong cash flows  Disbursements against specific milestones of restructuring, privatisation and corporate governance  Government acting in commercial capacity, as performance guarantor Latest Developments:  EBRD Board has approved taking up to USD 73m in equity of SNOP Petrom alongside strategic investor

14 Ukraine: Balkan Gastransit Project Details:  Long term 2 Phase facility to support gas pipeline upgrade in Ukraine  Use of proceeds: construction of compressor station and parallel pipeline for total project cost of $190 million  Strong demonstration effect- only current international investment in Balkan gas pipeline project. EBRD Investment:  Phase I: $40 million EBRD 9 year senior loan and $ 12 million BSTDB parallel loan  Phase II: $51 million 12-year EBRD senior loan, $ 6 million BSTDB facility and $ 40 million commercial Bank co-financing Financing Structure:  Security based on gas export contracts  Revenues based on transportation and compression payments  Strong sponsor support (Gazprom, Naftogas Ukraine, Transbalkan)

15 Project details Construction of facilities including use of off-shore platform for oil and gas production off the Sakhalin coast Involvement of key sponsors: Shell, Mitsui, Mitsubishi Total Phase I investment: approx $ 1 billion Demonstration effect of successful use of PSA framework to potential Phase II project involving LNG facilities and pipelines EBRD investment US$116 million senior debt Parallel lending of $ 116 each from JBIC and USEXIM 10 year maturity with 3-year grace period Financing Structure Appropriate completion obligations and debt servicing covenants Comprehensive security package Russian Federation: Sakhalin II

16 EBRD Transition Objectives, and Support for gas market development in the SEE region

17 EBRD Transition Objectives Policy dialogue for gradual gas market liberalisation in the Russian Federation (TC Study) Advisory for oil & gas regulatory body in the Republic of Kazakhstan (AMA TC Study); On-going policy dialogue with regional SEE Governments on prices liberalisation; Co-operation with EU (DG-TEN); Pursuing LNG projects in Russia and new export routes from Central Asia (including BTC and Nabucco projects);

18 European Oil & Gas networks

19 European Gas Supplies

20 Forecast of Gas Supply – OECD Europe

21 Nabucco Gas Pipeline (proposed route)

22 Contacting EBRD

23 EBRD Natural Resources Team Bert van der Toorn, Deputy Director –Tel: