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Section 1 Overview of EBRD in the municipal sector

Working with the Private Sector to Support Investments in PPPs Russian-French Forum Svetlana Radchenko, Senior Banker European Bank for Reconstruction and Development June 2011. Section 1 Overview of EBRD in the municipal sector. Structuring the financing of municipal infrastructure

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Section 1 Overview of EBRD in the municipal sector

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  1. Working with the Private Sector to Support Investments in PPPsRussian-French ForumSvetlana Radchenko, Senior BankerEuropean Bank for Reconstruction and DevelopmentJune 2011

  2. Section 1Overview of EBRD in the municipal sector

  3. Structuring the financing of municipal infrastructure Promoting commercialisation and corporatisation of services Supporting the development of regulatory structures and public service contracts Supporting private sector investment Improving environmental, social, health and safety Facilitating donor grant and commercial loan co-financing EBRD’s role in the municipal sector EBRD helps municipalities meet their infrastructure needs

  4. Key sectors covered • Water & Wastewater – improved quality of service and environmental compliance • Urban Transport – improved public transport services (buses, LRT, metro, ferries, etc.) and more efficient and safe network design • Solid Waste Management – improved efficiency and frequency of collection; adequate disposal; prevention of groundwater contamination • District Heating – renewal of obsolete heating and distribution systems to promote efficiency gains

  5. 190 projects / EUR 3 billion invested

  6. Section 2EBRD’s role in PPPs

  7. Latest EBRD’s track record in PPP structures (Municipal Infrastructure)

  8. Private Sector Participation EBRD’s policy “Financing of Private Parties to Concessions” requires competitive tendering and a specific process: http://www.ebrd.com/downloads/procurement/concess.pdf Which basic conditions foster PPP development: An adequate legal structure Political will to champion PPP processes Robust tariff methodologies and competent regulator Sponsors’ interest, dependent on market and PPP structure Sufficient capital market development (local and international) for LT financing notably in Rubles These conditions are partially achieved in Russia

  9. EBRD support to bidders • EBRD can issue a general letter of interest to be included in the tender • The Bank can have a pre-bidding dialogue with players • Instruments offered: joint equity investment and/or capex loan • Indicative terms: tenor, security • Until tender award, EBRD cannot commit to exclusivity with anyone (‘open support’) • Identical dialogue possible with all bidders • Different teams established to guarantee Chinese walls • After tender award, EBRD negotiates detailed terms and conditions with the preferred bidder subject to detailed due diligence

  10. EBRD Requirements • Open International Tender with pre-qualification (including no discrimination on national grounds) • Balanced Contract between City and Operator in line with best international practice • Good Corporate Governance and high integrity and transparence standards of operators • Commitment to high environment, social, health and safety standards • Objective of operational improvements (e.g. ticketing system, etc.)

  11. EBRD PPP pipeline in Russia (Municipal Infrastructure): St. Petersburg Neva Water PPP • DBFOT PPP Agreement for Northern Water Treatment Plant in St. Petersburg; The Project is aimed at enhancing the quality of potablewater by choosing the most up-to-date water treatment technology; • Roundtable for interested investors 9/10 December 2010 in the EBRD office in London; Pre-qualification submitted 30 May 2011; prefered bidder • Pre-qualification results will be announced 20 June 2011, Bids submission 16 Jan 2012; 1 Oct 2012 – financial closing; St. Petersburg Waste PPP - Yanino • DBFOT PPP Agreement for Waste Utilisation Plant with total capacity to handle 350,000 tonnes of waste per year. • Preferred bidder was selected and PPPA is signed on 16 May; • Financial closing is expected in November 2012. Perm Road PPP – EBRD financing Drafting of Regional PPP Law

  12. Section 3Case Studies

  13. Case study 1: Rosvodokanal • Borrower: Group of companies Rosvodokanal, provides water and waste water services to 5.5 mln. people • EBRD loan: 1.5 bln RUB • Maturity: 13 years • Use of funds: modernisation of water and waste water infrastructure in Krasnodar, kaluga, Tyumen, Orenburg, etc. • Tenders for construction contracts: private procurement; • Transition impact: development of the new agreements between Rosvodokanal and municipalities in accordance with best international practice • Signed 2008

  14. Case study 2: Dalkia Polska • EUR 70 million invested alongside the Dalkia Group for a series of investments in Poland over the 1998-2004 timeframe. • EBRD holds a 35% stake in Dalkia Polska. Dalkia International remains 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.

  15. Case Study 3: United Utilities - Sofia and Tallinn concessions • Equity investments in two water companies in Bulgaria and Estonia with put option to UU at fair market value in year 7 • Sofia • 2000 – EBRD grants a loan to Sofia W to finance capex • 2003 – EBRD indirectly becomes 19% shareholder of Sofia W • 2008 – Revised Concession Agreement signed • 2010 – EBRD sells to Veolia alongside UU • Tallinn • 2002 – EBRD loan to newly privatised Tallinn W • 2003 – EBRD becomes shareholder (12.6%) in Tallinn W • 2005 – EBRD helps initiate IPO of Company for float on Tallinn • 2010 – EBRD sells shares back to UU

  16. Case Study 4: Veolia Voda Equity • EUR 160 million invested In Veolia Voda to finance a series of investments in water and waste water concession in CEE, including Russia, signed in 2007. • EBRD holds a 10% stake in Veolia Voda. Veolia Water remains the controlling partner. • EBRD’s funds allowed Veolia Voda to acquire several concession and lease contracts, including long-term lease contract in Tomsk. • EBRD exit is envisaged in year 7 by selling shares back to Veolia

  17. Case study 5: ‘Aqualia new Europe’ • Creation of a regional investment platform in common between Aqualia (51%) and EBRD (49%) to allow for external growth, acquisitions of concessions and management operation contracts. • EUR 80m EBRD equity commitment to Aqualia New Europe • With the backing of the EBRD, Aqualia intends to expand across eastern Europe, where an improvement in the water management and infrastructures is in high demand. • Aqualia, a subsidiary of Spanish group FCC, currently provides water and wastewater services to over 26,000,000 people in more than 1,100 municipalities worldwide. • Signed in May 2009

  18. Contact details Svetlana Radchenko Senior Banker, Municipal and Environmental Infrastructure Tel: +7 499 270 31 17 Fax: +7 495 787 11 11 radchens@ebrd.com

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