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EBRD and Financing of Transport Projects

EBRD and Financing of Transport Projects. Riccardo Puliti, Director Transport Vienna, June 2004. EBRD and the Transport sector. What makes EBRD different to other IFI’s? Overview of Transport business Transport Portfolio Business Opportunities in the Transport sector Transport Pipeline

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EBRD and Financing of Transport Projects

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  1. EBRD and Financing of Transport Projects Riccardo Puliti, Director TransportVienna, June 2004

  2. EBRD and the Transport sector • What makes EBRD different to other IFI’s? • Overview of Transport business • Transport Portfolio • Business Opportunities in the Transport sector • Transport Pipeline • Available financing structures • Information and contacts

  3. 1. What makes EBRD different toother IFIs? • Unique mandate - both political and economic to promote transition to market-based economies by investing mainly in the private sector • Main objective is to mobilise significant foreign direct investment and support privatisation, restructuring and better services to improve people’s lives • To encourage environmentally sound and sustainable development • Focus on developing financing solutions which meet the client’s needs • Invests primarily in private sector projects

  4. IFI with investment banking skills • Specialised knowledge of central and eastern Europe and the CIS and the largest investor in most of its countries of operation • Extensive offer of financial products • Dedicated teams with expertise in a variety of sectors and countries combining investment and commercial banking expertise with local knowledge and contacts • In-house understanding of legal framework for both debt and equity financing

  5. What brings EBRD to its Clients? • Strong, internationally recognised, neutral financial partner with long-term perspective • Supports corporate strategy, long-term prosperity and enhances credibility of companies • Track record of developing financing solutions tailored to needs of companies • Extending boundaries and breaking new grounds with innovative financing structures

  6. Strengths of the EBRD • Excellent working relationship with commercial banks and governments • Honest broker role between public and private partners • Preferred Creditor Status in all countries of operation • Willing to share risks including political risks (customized to each transaction) • Extensive knowledge of local economy, business environment and practices

  7. Tailored to meet project-specific needs including repayment schedules and specific situation of country/region and sector Innovative products/structures Pricing reflects risks with project, borrower and country Wide range of Loans (fixed, floating, choice of currency) Equity, including combination of loan and equity Guarantees, including credit enhancements (performance bonds etc.) SME loans, Equity funds, Micro/small business programmes, Credit lines, Co-financing Financial flexibility

  8. Takes financial risks Takes political risks Takes long maturity Shares equity risk Expertise and sound management Take operational, market and construction risks EBRD risk profile Sponsors EBRD EBDR applies sound banking principles. All projects must be economically and financially viable. Risk sharing to achieve debt capacity maximisation and risk compartmentalisation

  9. 2. Overview of Transport Business Roads Railways • Construction of Highways, • operation and maintenance, • toll roads, road haulage... • Railway infrastructure, • Freight, Passenger rail, • inter-modal transport... Aviation Maritime • Port infrastructure (berth, • breakwater) superstructure, • shipping, stevedoring... • Airport development, • aircraft leasing, air cargo, • air traffic control systems...

  10. 3. Transport Portfolio (I) By sector Ports & Shipping 20 projects 11% Railways - 26 projects 31% Aviation - 23 projects 8% Roads - 31 projects 50% Total cumulative portfolio of EUR 3.4bn with 100 projects

  11. 3. Transport Portfolio (II) By region Central Europe - 39 projects 37% Central Asia – 11 projects 11% Russia - 13 projects 22% SEEC - 37 projects 30% Total operation cost of EUR 10.5 bn with 100 projects

  12. Alfold Koncesszios Autopalya Reszenytarsasag (AKA) M5 Concession Motorway EUR €350 million December 1995 Construction and operation of a private toll motorway M-5 from Budapest to Kiskunfélegyháza (Hungary) Uzbek Railways Republic of Uzbekistan Uzbek Railways Freight Traction Renewal & Management EUR €103 million December 1999 Modernisation of Freight Locomotive Fleet to enhance performance of Freight Business The Russian Federation (Borrower) State Highway Administration Ministry of Transport (Beneficiary) Road Sector Reform USD $229 million September 2002 Construction of new section of St. Petersburg By-pass and new section of road between Chita-Khabarovsk Yugoslav Railways - ZTP Government of the Federal Republic of Yugoslavia Government of the Republic of Serbia ZTP Belgrade Reconstruction Project EUR €134 million October 2001 Refurbishment of electric locomotives and purchase of Track Machinery Roads Directorate Republic of Serbia and Montenegro Road Recovery Project EUR €192 million July 2002 Rehabilitation of 500 km of priority Road Links in pan-European Corridor X Hrvatske Autoceste d.o.o. Republic of Croatia Motorway Rehabilitation Project EUR €96.5 million December 2002 Rehabilitation of European Corridor 10 Motorway andInstitutional Development Selected Transport projects (I)

  13. The Russian Federation Globeground, State Aviation Enterprise Pulkovo, LenStroiGilService) Air Cargo Terminal Pulkovo EUR €12 million October 2000 Construction and operation of Air Cargo Terminal in St. Petersburg - Phase I The Polish Railways - PKP Ministry of Finance of Poland Republic of Poland PKP Second Railway Restructuring&Privatisation USD $130 million March 2002 Provision of financing to continue implementation of PKP Restructuring Programme Croatia Control Limited Ministry of Finance of the Republic of Croatia Area Control Centre Project EUR €54.8 million September 2002 Modernisation of the Area Control Services of Zagreb AS Tallin Airport Estonia Tallinn Airport Loan EUR €7.5 million October 2002 Construction and Corporate loan for the Refinancing of the International Airport of Tallin-Estonia Ministry of Transport and Communications FYR Macedonia Civil Aviation Upgrading Project EUR €15.6 million July 2002 Modernisation of Macedonian Air Navigation Services Port Authority of Poti Delta Petroleum JSC Channel Energy Poti Port EUR €28.8 million March 2002 Construction and operation of Channel oil terminal in the Port of Poti-Georgia Selected Transport projects (II)

  14. 4. Business opportunities in the Transport sector (I) • Road Construction and rehabilitation (upgrading and maintenance of roads in a specified area for fixed period and specified price), • Toll-Motorway Construction and Operation, Road Maintenance Contracting.. • Private sector or PPP revenue generating projects that meet economic and financial criteria

  15. 4. Business opportunities in the Transport sector (II) • Railway Supply industries, (locomotive & wagon repair, track maintenance), • Network operation (upgrade line speed capacity, infrastructure maintenance, rail telecommunications) • Transport operation (Rolling stock rehabilitation/leasing) • Freight andPassenger concessions and franchises

  16. 4. Business opportunities in the Transport sector (III) • Rehabilitate and adapt Port facilities (superstructure and infrastructure) • Private sector investment with use of private services (stevedoring, forwarding, bunkering..) leading to private specialised terminals for containers (grain, oil..) • Waterway transport with environmental benefits

  17. 4. Business opportunities in the Transport sector (IV) • Aviation: Air Navigation Systems and airport infrastructure development • Opportunities for private sector in construction of airport terminals and airport privatisation (runway, taxiway improvements, ground handling equipment, passenger and cargo terminal buildings)

  18. Private sector participation • Privatisation: Opportunities for new investments or for the rehabilitation of existing facilities to be developed by the private sector in the form of: Concession: full concession granted by the State to a fully private or private majority ownership company Commercial Agreement Public Administration managing the State assets, and private entity for rehabilitation and operation of assets Contractual Agreement Private operator under contract (e.g. Management or operating contract) and State finances investment requirements

  19. 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 • 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 • Private Sectordriving force of project through financial, management and technical support.

  20. Leasing opportunities • Leasing is an important financing tool for capital equipmentproviding vendors with a different sales tool in higher risk countries • Vendor finance facilities financing to medium size companies for acquisition of modern equipment • Financing of more broadly based rolling-stock and aircraft leasing companies • Assess and share credit risks of equipment lessors in our countries of operation • EBRD has substantial expertise and fast growing leasing portfolio

  21. 5. Transport Pipeline (I) By sector Ports & Shipping 10 projects 14% Aviation - 6 projects 20% Railways – 5 projects 14% Roads - 9 projects 52% Total pipeline of EUR 1.2 bn with 30 projects

  22. 5. Transport Pipeline (II) By region Central Europe - 5 projects 23% Russia - 8 projects 27% Central Asia - 2 projects 3% SEEC - 15 projects 47% Total operation cost of EUR 2.6 bn with 30 projects

  23. Key challenges • Public affordability and Political acceptability: Financial planning and state budget constraints • Creditworthiness (if relevant) • revenue generation below potential • political and social constraints to economic pricing • budget deficit and vast investment needs • credit rating • Legal and regulatory uncertainty • Extent of private sector participation • Realistic traffic projections • Financing opportunities post 2004 in Accession countries

  24. 6. Available financing structures Private sector Project • Private or majority owned by private parties • Unless the project is guaranteed by the State it should be structured as limited-recourse financing which is ideal for large infrastructure Projects • Debt, equity and guarantees Public sector Project • Sovereign borrower or with sovereign guarantee • Non-sovereign lending only to creditworthy public borrowers with certain undertakings from central government to mitigate political intervention that falls outside of it’s control. Corporatised entities (e.g. Romanian Freight Company)

  25. How to request financing • Robust business plan to assess the main merits of the business proposal with cost estimates of the project and sources of financing • In case of private sector projects it is necessary to work with a strong creditworthy sponsor committed to the project who may provide support through project completion guarantee to mitigate cost overruns and/or throughput agreements to mitigate market risk • In case of public sector projects technical co-operations grant funds may be available for project preparation

  26. Types of Technical co-operation • Project Preparation/Feasibility/Preliminary Engineering • Detailed Designs and Tender Documents • Institutional Development - Railways - Business Planning/Cost Accounting Systems - Wagon Control Systems - Track Access Charging - Public Service Obligation Support • Institutional Development - Roads - Road Sector Financing and Road Maintenance - Road Safety

  27. 7. Information and contacts at the EBRD Riccardo Puliti Director, Transport Tel: +44 207 338 7379 e-mail: pulitir@ebrd.com www.ebrd.com

  28. Project Cycle EBRD Origination Concept Clearance Structure Review Project Preparation Due Diligence Final Review Negotiations Procurement / Contracting Board Approval Signing Monitoring Implementation

  29. Public Project EBRD Consultant Borrower Advisers/ Consultants Works Contractors Goods Suppliers

  30. Public Project Opportunities Borrower EBRD Origination / Identification - - Preparation / Due Diligence Consultancy Consultancy - Procurement Consultancy Implementation / Monitoring/ Institutional Support - Consultancy

  31. Private / PPP Project Public Authority Sponsors Concessionaire EBRD Co-financiers Operator Contractor Lenders’ Technical Adviser Sub-contractors / Suppliers Specialist Advisers

  32. Private / PPP Projects Public Authority Borrower EBRD - - Advisers Origination Preparation Due Diligence - - Advisers - Contracting - Advisers Implementation / Monitoring Advisers - -

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