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EBRD 25 th September 2009 Sarajevo

EBRD 25 th September 2009 Sarajevo. Public-Private Partnership in developing municipal infrastructure. Agenda. Introduction to the EBRD PPP – definition and rationale EBRD EBRD Experience in PPPs. Introduction to EBRD.

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EBRD 25 th September 2009 Sarajevo

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  1. EBRD25th September 2009Sarajevo Public-Private Partnership in developing municipal infrastructure

  2. Agenda • Introduction to the EBRD • PPP – definition and rationale EBRD • EBRD Experience in PPPs

  3. Introduction to EBRD • International financial institution, promotes transition to market economies in 27 countries from central Europe to central Asia • Owned by 62 countries and two inter-governmental institutions including countries of operation • Capital base of €20 billion

  4. Introduction to EBRD • Mandated to finance projects in Central and Eastern Europe and former Soviet Union • AAA rated by Moodys and Standard & Poor’s • Provides debt and equity financing to state and private projects • >London headquarters • >30 Resident Offices in 27 countries

  5. EBRD Differs from Commercial Banks • Mandate to foster transition from planned to market economies • The EBRD promotes environmentally sound and sustainable development in all its activities • Can finance projects without bank guarantees or sovereign guarantees • Willingness to try new products/structures • Broad market knowledge

  6. Municipal and Environmental Infrastructure MEI Investment Portfolio MEI covers all forms of PPP related to municipal infrastructure: Water/Wastewater Solid Waste Urban Transport District Heating

  7. Selected Water and Wastewater Projects Zagreb Waste Water Treatment Plant Croatia €55.2 million syndicated loan December 2001 Construction and operation of wastewater treatment plant Tallinn Water Limited Privatisation Estonia €31 million syndicated loan October 2001 Partial privatisation of AS Tallinna Vesi 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 Maribor Waste Water Concession Slovenia €14.8 million loan April 1999 Construction and operation of wastewater treatment plant Budapest Wastewater Services Privatisation Hungary €13.1 million equity investment December 1998 Partial privatisation of waste- water services companies Apa Nova Water Treatment Plant Romania €188.4 million loan December 2002 Modernisation of the Crivina Treatment Plant St Petersburg South-West Wastewater Treatment Plant Russian Federation €105 million loan November 2002 Construction and operation of wastewater treatment plant

  8. How do we Define a PPP? • A PPP is a contractual agreement between a public agency (i.e. municipality) and a private entity • Through this agreement, the skills and assets of each sector (public and private) are shared in delivering a service or facility for the use of the general public • Each party also shares in the risks and rewards potential in the delivery of the service and/or facility • Agreements between the public and private entities differ in their allocation of risks and responsibilities, in the ownership of the assets and their duration

  9. Main Options for PPP and Degree of Risk Transfer Privatisation Build-Operate-Transfer Concession Degree of Private Sector Risk Lease Management Contract Design-Build Government Degree of Private Sector Involvement

  10. PPPs in Transition Economies • PPPs meet the transition test • Utilisation of the private sector • Transparency and competition • Priority infrastructure investments • Efficiency and lower costs (public sector comparator)

  11. Typical Concession Structure Government Concession Contract Loan Agreement Shareholders Concessionaire Equity Construction Contract Operation Contract Operator Contractor

  12. Pros and Cons of Different PPP Structures

  13. Time (Years) How are PPPs in EU Markets Evolving? 9 Widespread Use of PPPs Spain 7 Hungary Czech Rep Greece Slovakia Poland Some Projects Implemented Slovenia Bulgaria Romania 5 Italy Croatia Estonia Pathfinder or Single Projects Latvia Lithuania Russia Ukraine Kazakhstan 4 Kyrgyz Rep Interest Albania Bosnia/Herz FYR Macedonia Serbia/Montenegro Belgium 2 Moldova Belarus Armenia More difficult Azerbaijan Georgia Tajikistan 0 Turkmenistan 0 Uzbekistan

  14. Water supply and wastewater treatment Investment challenges • Meeting EU water and wastewater standards • Need to increase investments in maintenance and asset renewal • Improve water supply standards • Improve collection and treatment of sewage • Improve operational and financial performance of municipal water and sewerage companies EBRD water and sewerage Projects

  15. EBRD in waste management projects Investment challenges • Meeting EU waste standards • Efficiency and frequency of collection of waste • Improve adequacy of waste disposal • Prevent groundwater contamination due to inadequate treatment of leachate • Need to organise waste management systems EBRD is experienced in structuring waste management projects

  16. EBRD in urban transport projects Investment challenges • Key factor in promoting economic growth • Rehabilitation of public transport in urban areas and need to replace ageing and operating equipment • Improve financial performance of transport operators to allow access financing • Need to introduce public service contracts between transport authority and operator • Investment in public transport needed to counter the negative effects of rapid motorisation

  17. EBRD offers Several Financing Structures EBRD will structure each product according to project needs Limited or non-recourse project financing to public or privately-owned project companies; senior or subordinated debt Loans Equity From pure to portage equity in project company Various forms of leveraged leasing structures for creditworthy entities Leasing Partial guarantees Partial risk, credit and specified event guarantees

  18. EBRD investment selection criteria • Financial, economic, legal and technical viability • Creditworthiness of borrower, sponsors and guarantors • Project would need to contribute to structure and extent of markets, institution building, and/or market-based skills and innovation • Legal framework would need to allow PPP arrangement and enforceability of contracts • Technology would need to be appropriate for site and service/performance required

  19. Some LessonsWhat our experience has taught us…

  20. Davor Inđić Giulio Moreno Contact details Principal Banker Zagreb Resident Office Miramarska 23/111, 10000 Zagreb Tel: +385 1 6000 310 Fax: +385 1 6197 218 e-mail: indicd@ebrd.com Head of Sarajevo Resident Office Unitic Towers, 15th floor, Tower B Fra Andela Zvizdovica 1, 71000 Sarajevo Tel: +387 33 667 945Fax: +387 33 667 950 E-mail: morenog@ebrd.com

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