Financing Projects in the Energy Infrastructure Louis Borgo Senior Banker, Power & Energy Utilities Bucharest, Roman

1. Financing Projects in the Energy InfrastructureLouis BorgoSenior Banker, Power & Energy UtilitiesBucharest, Romania4th April 2006

2. Content About the EBRD Power and Energy Utilities Reform and Restructuring Example Projects

3. A network of 32 offices in 27 countries

4. EBRD Facilities Loans Equity Guarantees • Partial risk guarantees(e.g. political) • Extension of loan maturities • Non/partial recourse to sponsors • Project specific • Hard/local currency • Medium and long term • Floating/fixed rates • New equity • Privatisation • Quasi-equity

5. Our Clients in the Energy Field

6. Content About the EBRD Power and Energy Utilities Reform and Restructuring Example Projects

7. Power & Energy Utilities - Objectives • Support sector reforms • Accelerate competition & market liberalisation • Foster privatisation & private investment • Finance reinforcement of grid & inter-connection • Prioritise environmental & energy efficiency investments

8. Power & Energy Utilities – Key Issues • Evolving regulatory environment and market • Subsidised tariffs: high energy consumption • Market Infrastructure: Critical under-investment • Ageing assets, low efficiency, high losses • Environmental standards

9. Content About the EBRD Power and Energy Utilities Reform and Restructuring Example Projects

10. Sector and Tariff Reforms are Essential to Mobilise Financing and Investment Needed: a combination of • Price reform, accompanied by measures that provide social protection for the vulnerable, • Measures to raise collection rates • Introduction of new institutions designed to provide appropriate regulatory supervision • Tariff reform and clear regulations, free of political interference, will attract long term Strategic Investors

11. Why Power Sector Reform? • Increase efficiency • Technical and non-technical losses • Commercial discipline • Put sector on a sound financial basis • Cost-covering tariffs • Access to finance for maintenance and rehabilitation • Consumer satisfaction • Reliable service at lower cost

12. Why tariff reform? • Ensure financial sustainability • Attract private know-how and investment • Incentives to conserve energy

13. Reform elements • Tariffs that cover costs • No cross-subsidies • Predictable, transparent adjustment mechanism • With incentives for efficiency improvements • Transparent, on-budget support for poor consumers

14. Implications for the poor • Tariff reform is crucial… • … but we need to know impact on the poor • Provide targeted support… • …rather than delay tariff reform • Efficiency gains can soften the blow • Regional trade • Energy efficiency and conservation

15. Role of EBRD • EBRD assesses affordability in all its infrastructure projects • SEEREM study is the most detailed analysis to date • Collaboration with other organisations • Other IFIs have a comparative advantage on poverty issues

16. Content About the EBRD Power and Energy Utilities Reform and Restructuring Example Projects

17. Power and Energy Portfolio in SEE region Pioneering approach: • Developing IPPs in region: • Maritza East 3 - € 648m first private power sector generation project and largest foreign direct investment to date in Bulgaria • Maritza East 1 - Bulgaria • Equity Investment alongside western sponsor (Moldova, Romania) • Assisted privatisation of distribution companies (Moldova, Bulgaria, Romania, FYR Macedonia) • Pioneer: First loans to Serbia & Montenegro electricity sector • First cross-border transmission line: Bulgaria-Macedonia

18. Moldova: Distribution Privatisation • Government of Moldova (GoM) privatised three power distribution companies (REDs) to Union Fenosa (UF), in 2000 • EBRD provided € 5m equity, valued at same price per share paid by UF, for 19.9% stake in REDs; with a Put right attached • EBRD also provided € 25m, limited recourse debt financing, with 10 years maturity • UF agreed on a Contingent Performance Support until REDs achieve performance targets on losses and collections for a full year; and completed the minimum portion of the investment plan agreed with GoM

19. Romania: Investing in Gas Distribution Distrigaz Sud • EUR 31 million equity investment representing 5.1% beneficial ownership in Distrigaz Sud • Company privatised in 2004 to Gaz de France

20. Bulgaria: Maritza East III • FGD and rehabilitation at Maritza East III Power Plant • 840MW, mine-mouth lignite-fired, providing 7% of Bulgaria's installed capacity • JVC ownership at financial close: 27% NEK, 44% Enel Produzione S.p.A, 29% Entergy Power Maritza Holding BV • PPA covering construction and further 15 years • Long-term take-or-pay Lignite Supply Agreement • Government Support Undertaking

21. Bulgaria: Maritza East III

22. Bulgaria: Argos Wind Energy Park • Project Cost – EUR 770,000; • Loan Amount – EUR 600,000; • KIDSF Incentive – EUR 120,000; • Payback Period – 5.07 years; • Installed Capacity – 1.20 MWe; • Electricity Production – 3.9 GWh/year; • Electricity Price – 61.36 EUR/MWh • CO2 Emissions Reduction - 3,084 t/year.

23. EBRD contact Marko Kecman Principal Banker Power & Energy Utilities Telephone: + 40 21 202 7138 Fax: + 40 21 202 7110 e-mail: kecmanm@buh.ebrd.com Louis Borgo Senior Banker Power & Energy Utilities Telephone: + 44 207 338 6547 Fax: + 44 207 338 7280 e-mail: borgol@ebrd.com

24. EBRD Annual Meeting & Business Forum 2006 Business development opportunities from Central Europe to Central Asia Sunday 21 – Monday 22 May London A unique opportunity to meet leading investors, bankers, entrepreneurs and senior government officials