1. The policy of EBRD in the support of infrastructure projects in Bulgaria Iliyana Tsanova Senior banker, EBRD London

2. Challenges in Infrastructure Development in Bulgaria Significant investment needs in the infrastructure sector, which has suffered from investment neglect over the last 20 years Insufficient resources for project preparation and implementation at both the level of the State and the Municipalities Limited financial resources given the investment needs

3. How to address the problem Identification and prioritization of the investment projects in each sector Analysis of the economics of the project and selection of the most suitable financial structure Available sources of financing: –State or Municipal budgets –EU grants –Loans –Public Private Partnerships

4. EBRD sector expertise: Transport –Road construction and rehabilitation –Ports –Airports –Railways – network operations; rolling stock operations Municipal and Environmental Infrastructure –Water and Wastewater –Solid Waste –District Heating –Urban infrastructure –Regional Roads

5. Current financing products used Loans to utilities Lending Equity Partial guarantees Limited or non-recourse project financing to public or privately-owned concession companies Non-sovereign public lending to municipalities or the state EBRD structures each product according to project needs Investment in private sector concession companies Partial risk and credit guarantees Revenue and project bonds Revenue bonds backed by cash flows

6. Attributes of EBRD Finance Strong understanding of market and clients due to long history of working in the sector Close government relationship enables EBRD to play honest broker role between public and private sectors Long term flexible structures with suitable grace periods Pricing is competitive and in line with the market Active in all phases of project, ranging from project preparation to project implementation Direct access to EBRD bankers who provide on-going client support

7. Structuring the financing of municipal infrastructure, equipment and services Promote commercialisation and corporatisation of services Development of regulatory structures Promotion of appropriate private sector involvement Environmental improvement Facilitate donor grant and commercial loan co-financing EBRD’s role in the municipal sector EBRD helps municipalities meet their infrastructure needs

8. EBRD approach to municipal financing: EBRD provides Grant Technical Cooperation for project preparation and implementation (feasibility studies, technical designs, project implementation, training of Project Implementation Units) EBRD lends directly to the local authority or utility company, provided cash flows are sufficient to support debt EBRD will review service agreements to ensure they are structured to balance the needs of the operator and its client base Client assumes responsibility for implementation, resulting in efficient project implementation and less delays in project completion For EU-co financed projects, EBRD can use Bulgarian procurement rules

9. Public-Private Partnership Construction and maintenance of Roads, Water Sector, Transportation Sector, etc A competitively tendered concession or PPP will allow the government to transfer the risks of construction and required maintenance and operation of the assets to an experienced private sector operator As well as the transfer of certain risks, a well- structured PPP will enable the government to account for the asset as an off-balance sheet item on the national budget

10. Public-Private Partnership Government and private sector work together, sharing investment, risk, responsibility and reward. EBRD can provide debt to the Host Government to finance the cost of its own contributions to the PPP and finance to the Project Company –Private Sector driving force of project through financial, management and technical support. –Public Sector provides key project assets (i.e. infrastructure) and establishes legal and contractual framework as well as supporting project development in medium-long term

11. EBRD PPPs Case Studies

12. EBRD PPP Experience: Case Study 1 First PPP tendered as an availability payments concession in the region Underwritten bid meant EBRD came in after award of the concession Value added of Bank’s presence before general syndication EBRD subsequently participated in re- financing of first phase The M6 Motorway received its final licence to operate at the end of 2006 and was successfully opened to traffic EBRD participated subsequently in the financing of M6-M60, a 30 year availability fee-based concession. Hungary: M6 Motorway

13. EBRD PPP Experience: Case Study 2 Project involves design, construction, financing, operation and maintenance of three sections of the R1 expressway between Nitra and Tekovske Nemce, as well as the Banska Bystrica Northern Bypass, for a total length of 51.6 km 30 year availability fee-based concession First concession contract awarded for a PPP structure for motorway projects in the Slovak Republic The motorway will be constructed using private financing. EBRD will finance up to EUR 250 million Senior Loan as part of a Senior Term Loan Facility of EUR 1,050 million. Signed August 2009. Slovak Republic: R1 Motorway

14. EBRD PPP Experience: Case Study 3 Project involves rehabilitation & commercial exploitation of 3 Czech Railway Stations: Prague, Marianske Lazne & Karlovy International public tender of 10+30 year concession with no public sector involvement State has no investment obligations, but has some participation in the profit of the SPV after a certain number of years EBRD’s first equity investment in a transport PPP, provided in 2004. EBRD relies on dividend income and long term exit returns EBRD is a financial partner with a seat on the Supervisory board Long-term debt financed by commercial banks Milestone opening of Prague New Hall achieved in July 2009 Czech Republic: Grandi Stazioni

15. EBRD provided support to Government & advisers at an early stage; tender successful & compliant with Bank’s standards EBRD combined state guaranteed & private funding for construction of access road in addition to funding for airport terminal - Phase 1 Much interest was raised by this well-structured project, with American Albanian Bank, Alpha Bank & DEG participating Excellent example of a complex project properly run in an “Early Transition Country”, with strong demonstration effect Phase 2 (terminal extension) financing and Phase 1 refinancing closed in March 2008. The extension opened to traffic in September 2009, earlier than expected Albania: Tirana International Airport EBRD PPP Experience: Case Study 4

16. Sofia Water System Concession Bulgaria €31 million syndicated loan December 2000 Privatisation of Sofiyska Voda Sofia Water System Concession Bulgaria €31 million syndicated loan December 2000 Privatisation of Sofiyska Voda Brno Waste Water Treatment Plant Czech Republic €47.5 million syndicated loan December 1999 Operation wastewater treatment plant Brno Waste Water Treatment Plant Czech Republic €47.5 million syndicated loan December 1999 Operation wastewater treatment plant Zagreb Waste Water Treatment Plant Croatia €170.4 million syndicated and co-financed loan December 2001 Construction and operation of wastewater treatment plant Zagreb Waste Water Treatment Plant Croatia €170.4 million syndicated and co-financed loan December 2001 Construction and operation of wastewater treatment plant Maribor Waste Water Concession Slovenia €41.1 million syndicated loan April 1999 Construction and operation of wastewater treatment plant Maribor Waste Water Concession Slovenia €41.1 million syndicated loan April 1999 Construction and operation of wastewater treatment plant Tallinn Water Limited Privatisation Estonia €89.7 million syndicated loan October 2001 Partial privatisation of AS Tallinna Vesi Tallinn Water Limited Privatisation Estonia €89.7 million syndicated loan October 2001 Partial privatisation of AS Tallinna Vesi Selected Water and Wastewater Projects Budapest Wastewater Services Privatisation Hungary €11.9 million equity investment December 1998 Partial privatisation of waste- water services companies Budapest Wastewater Services Privatisation Hungary €11.9 million equity investment December 1998 Partial privatisation of waste- water services companies St Petersburg South-West Wastewater Treatment Plant Russian Federation €35.5 million loan November 2002 Construction and operation of wastewater treatment plant St Petersburg South-West Wastewater Treatment Plant Russian Federation €35.5 million loan November 2002 Construction and operation of wastewater treatment plant Apa Nova Water Treatment Plant Romania €73.9 million syndicated loan December 2002 Modernisation of the Crivina Treatment Plant Apa Nova Water Treatment Plant Romania €73.9 million syndicated loan December 2002 Modernisation of the Crivina Treatment Plant

17. District heating and energy efficiency projects Meeting environmental and public health standards Need to increase investment in modernization of heat generation facilities, rehabilitation of distribution networks and installation of control equipment Improve efficiency of energy and water usage Improve heating and hot water standards for the consumers Improve operational and financial performance of municipal district heating companies Investment challenges

18. EBRD’s approach: sustainable investments Promoting efficient water use, improved services and reduced pollution Improving services without straining state budgets Decentralisation: responsibility close to point of delivery Commercialisation: provide quality services as cost- effectively as possible Development of regulatory structures

19. EBRD CONTACTS Iliyana Tsanova Senior Banker Municipal Infrastructure Team +44 20 7338 7483 tsanovai@ebrd.com Doncho Barbalov Principal Banker Municipal Infrastructure Team +359 2 9321 407 barbalod@ebrd.com