Financing Agribusiness in Serbia and Montenegro

1. Financing Agribusiness in Serbia and Montenegro Levent Aydinoglu, Associate BankerBelgrade, 27 May 2004

2. Structure of the presentation • EBRD and agribusiness • EBRD experience in agribusiness financing in CEE and CIS • Selected agribusiness transactions • Opportunities for financing agribusiness in Serbia and Montenegro • Contact Information

3. What is the EBRD? • International financial institution, promotes transition to market economies in 27 countries from central Europe to central Asia • Owned by 60 countries and two inter-governmental institutions • Capital base of €20 billion Cumulative commitments €22 billion Unaudited September 2003

4. EBRD investments have attracted an additional € 47 billion from domestic and foreign investors The EBRD uses donor funding to assist project preparation and catalyse foreign investment Catalyst for change Cumulative funds mobilised € 47.1 billion

5. Financing structured to meet project-specific needs including repayment schedules Tailored to particular situation of the country/region and sector Pricing reflects risks with project, borrower and country Wide range of loans fixed or floating rate loans choice of currencies short to long-term maturities Financial flexibility - Loans

6. EBRD and Agribusiness • AAA-rated multilateral institution founded in 1991, owned by 60 national and two supranational shareholders • Playing a leading role in Central & Eastern Europe (CEE) and the former Soviet Union (CIS) • Business oriented - working closely with private sector clients on commercial transactions

7. EBRD and Agribusiness EBRD annual investments in Agribusiness (million €) • EUR 3.25 bn invested in 205 projects. • EUR 56.1m invested in 6 projects in Serbia and Montenegro. • Serbia is the 12th largest recipient of the EBRD financing in the agribusiness sector following Russia, Ukraine and Poland.

8. EBRD and agribusiness: Financing of entire food chain Consumer Foodservice Distribution • crushers (sunflower, soya bean) • millers • grain handling • produce market • grains • oilseeds • livestock • poultry • dairy • fish • horticulture • produce • restaurants • supermarkets • institutions • distributors Packaging Production • seeds • fertiliser • farm machinery • agricultural chemicals • bio-tech • distributors Food Processors • glass bottles & jars • PET bottles • cans • carton containers • meat • bakery • snacks • beverages • frozen foods • fish • pet food Primary Processing Production Agricultural Inputs

9. EBRD and agribusiness: Financing local & foreign market leaders

10. Recent Agribusiness Projects in Serbia and Montenegro

11. Selected Investments in 2003 Grand Coffee • Local entrepreneur with successful track record • Serbia and Montenegro's largest coffee company • €7 million debt to finance domestic and regional expansion

12. Selected Investments in 2003 Bonduelle • Bonduelle, world’s top processed-vegetable producer • €15m equity investment • For the construction of a greenfield vegetable canning plant, located in the Kransnodar region, Russia • To produce 60,000 tonnes of fresh packaged vegetables

13. Selected agribusiness transactions • Financing to DOEP (Cereol’s subsidiary) leading producer of refined edible oil in Ukraine • A syndicated loan of US$ 43m, structured and arranged by EBRD, to co-finance purchases of sunflower seeds and related working capital requirements.

14. EBRD experience in agribusiness financing: Key issues faced (1) Working capital: • lack of security and of financial support to farming and primary processing sector (2) Government policies: • changing laws/regulations, complex restructuring of agri-conglomerates, EU accession talks cause further uncertainties (3) Production efficiency/competitiveness: • structural reasons for lower yields (4) Global industry challenges apply as well… • bargaining power of food producers vs retail chains

15. EBRD experience in agribusiness financing: Key issues learnt • Strong processors are the key to a healthy sector • provide a sustainable market for agricultural products • It is better to focus on the best companies • with long term views, and competitive advantages (marketing, distribution) • There are no standard financial solutions • agribusiness companies often need tailor made solutions • We have to understand the whole food chain • to make sure sufficient quality supplies are available • A better legal and institutional framework is a must • For farmers and processors to get the financing they need

16. Debt Senior, subordinated, convertible Working capital Long-term maturities Denominated in major currencies Flexible tailor-made security package Political risk guarantees Equity Common stock Preferred shares Mezzanine financing Large minority positions Political risk guarantees (portage equity) Opportunities for financing agribusiness in Serbia and Montenegro: Traditional finance Co-financing / Syndications • Substantial in-house syndication department • Equity / debt underwriting

17. Opportunities for financing agribusiness in Serbia and Montenegro • Large number of high quality food producers with well known branded product • Increasing penetration of organised retail and the opportunities and challenges this creates • Restructuring of food industry is not complete yet. • Financing needs are enormous.

18. WR WR WR Sale € € € Opportunities for financing agribusiness in Serbia and Montenegro: Structured finance Example: Warehouse Receipt Programme 6 2 1 4 5 Risk participation with local bank OR credit line to the local bank 3

19. € Loan Off-take € € Opportunities for financing agribusiness in Serbia and Montenegro: Structured finance Example: Suppliers financing 2 + Guarantee Know how 3 1 Funded or un-funded participation 4

20. Contacts Levent Aydinoglu Tel: +44 207 338 7021 Email: Aydinogl@ebrd.com Associate Banker, Agribusiness Team