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  • The Bank works in all industry sectors. This slide illustrates a sectoral breakdown of our portfolio. Of the total € 3.1 on our books (~20% of our total portfolio), the biggest sectors are: - General Industry - 17% (sectors) - Financial institutions - 18% (some of which were bad loans which have been restructured) - Transport 17% - Natural Resources - 12% - Infrastructure - 11% - Agribusiness - 8% - Other (power, telecoms, tourism, and small business) accounts for 17%.
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  • 2005_EBRD_in_Russia.ppt

    1. 1. European Bank for Reconstruction and Development Project Financing in Russia 2005 Eric Rasmussen Deputy Moscow Office
    2. 2. Table Of Contents <ul><li>EBRD in Russia </li></ul><ul><li>Project Finance Guidelines </li></ul><ul><li>Basic Project Structures </li></ul><ul><li>Recent Examples </li></ul><ul><li>Contacts </li></ul>
    3. 3. Growing Presence in Russia <ul><li>Since 1991 the EBRD’s a Cumulative Business Volume is €5.9 billion (this is 23% of all projects financed by EBRD) </li></ul><ul><li>At the end of 2004 the Portfolio Stock was at €3.75 billion and Operating Assets were at €2.29 billion </li></ul><ul><li>76% of the Bank’s portfolio in Russia was the private sector, while 81% was debt, 14% equity and 5% guarantee </li></ul>€ billion Cumulative Business Volume
    4. 4. Russia Portfolio Stock by Sector Portfolio Volume € 3.7 billion
    5. 5. Regional Portfolio & Pipeline <ul><li>Portfolio of 250 projects in 41 regions </li></ul><ul><li>Full pipeline contains 137 projects in 32 regions. </li></ul><ul><li>A “real” presence in 19 regions in which the Bank has 4 or more projects accounting for at least € 10 million in the portfolio. </li></ul>
    6. 6. EBRD R esident O ffices in High Growth Areas St. Petersburg RO Moscow RO Ekaterinburg RO Vladivostok RO Rostov RO (2006) Samara RO (2005) High Market Potential Good Market Potential
    7. 7. EBRD Operational Priorities <ul><li>Promote a sound investment climate and stronger institutions </li></ul><ul><li>Support the creation of sound financial sectors </li></ul><ul><li>Develop small and medium-sized enterprises </li></ul><ul><li>Promote infrastructure development </li></ul><ul><li>Demonstrate restructuring of enterprises </li></ul><ul><li>Take an active approach to equity investment </li></ul>
    8. 8. Financing Instruments <ul><li>Loans </li></ul><ul><li>Equity, including combination of loan and equity </li></ul><ul><li>Guarantees, including credit enhancements (performance bonds etc.) </li></ul><ul><li>SME loans </li></ul><ul><li>Equity funds </li></ul><ul><li>Micro/small business programmes </li></ul><ul><li>Credit lines </li></ul><ul><li>Trade Facilitation Programme </li></ul><ul><li>Co-financings </li></ul>Direct Indirect
    9. 9. <ul><li>Deciding on a JV or a wholly owned green field </li></ul><ul><li>Financial transparency and International Accounting Standards </li></ul><ul><li>Experience in emerging markets </li></ul><ul><li>Strong strategy and business plan </li></ul><ul><li>Bankable transaction - other financial partners and resources </li></ul><ul><li>EBRD presence/political support </li></ul>Assisting Foreign Investors
    10. 10. <ul><li>Disclose shareholder structure and beneficial ownership </li></ul><ul><li>Financial transparency and IAS </li></ul><ul><li>Financial strength and capital adequacy </li></ul><ul><li>Efficient management </li></ul><ul><li>Strong strategy and business plan </li></ul><ul><li>Bankable transaction - other financial partners & resources </li></ul><ul><li>Clear probable exit if an equity investment </li></ul><ul><li>Size of EBRD financing (debt equity max 35% per project) </li></ul>Supporting Russian Companies
    11. 11. Supporting Small Business in Russia <ul><li>Covers over 130 cities </li></ul><ul><li>Disbursed more than US$1.8billion through over 220,000 loans </li></ul><ul><li>Loans portfolio consists of 80% micro loans (under US$10,000) financing through more than 250 fully functioning participating branches of Banks in Russia </li></ul><ul><li>Excellent repayment ratio at 99.4% at end 2004 </li></ul>RSBF Disbursements 1997 – 2004 The Russia Small Business Fund (RSBF) Contact: www.microcredit.ru
    12. 12. Direct Equity Funds <ul><li>Largest single investor in the sector with a strategic goal to reach out to small and medium-sized Russian companies fostering a new generation of entrepreneurs </li></ul><ul><li>More than $500 million raised by funds with Bank’s participation </li></ul><ul><li>11 RVFs consolidated around 4 fund managers with $60-$100 million each - Eagle: Black Earth, Smolensk, Urals - Norum: North West and West Russia - Russia Partners: Lower Volga - Quadriga - St. Petersburg, West Siberia </li></ul><ul><li>Investor in the new Baring Vostok Fund ($205 million total capitalisation) </li></ul><ul><li>Founder of the Russian Venture Capital Association (RVCA) </li></ul><ul><li>Ready to work with other fund manager with proven successful track-record to further improve private equity infrastructure </li></ul>
    13. 13. EBRD’s Trade Facilitation Programme <ul><li>Case Study: Export of Equipment to Russia </li></ul><ul><li>A Russian Issuing Bank under the TFP opens a Letter of Credit to a foreign Confirming Bank, payable in several instalments after delivery </li></ul><ul><li>EBRD guarantees payment to the Confirming Bank </li></ul><ul><li>The Confirming Bank discounts the Letter of Credit to the exporter </li></ul>Exporters and Importers check under www.ebrd.com/tfp , for which Issuing Banks and which tenors EBRD may guarantee the payment
    14. 14. Minimum Project Euro 20m Minimum EBRD financing Euro 7m Basic Financing Guidelines <ul><li>Significant equity contribution from the Sponsor ensures a prudent capital structure </li></ul><ul><li>Appropriate return on investments - a fair balance of risk / reward </li></ul><ul><li>EBRD money usually not to exceed 35% of capitalisation of company (or 50% in case of syndication) </li></ul>35%
    15. 15. Typical Project Balance Sheet 60 Total debt 100 Total sources 100 Total uses 30 Commercial bank loan 15 Working capital 30 EBRD loan 15 Existing liabilities 40 Total equity 70 Capital investment 5 EBRD 5 Financial investors/in-kind 10 Contingency 30 Western sponsor cash 60 Capital investment % Sources of capital % Project costs
    16. 16. How to obtain finance from EBRD <ul><li>Commitment to work together </li></ul><ul><ul><li>clarify role of EBRD </li></ul></ul><ul><ul><li>mandate to initiate transaction </li></ul></ul><ul><ul><li>mutual understanding of corporate integrity issues </li></ul></ul><ul><li>Project / business plan and strategy </li></ul><ul><li>Feasibility or market studies (if available) </li></ul>
    17. 17. Basic Structures : Risk Equity <ul><li>International Sponsor(s) </li></ul><ul><li>management control </li></ul><ul><li>ownership </li></ul>EBRD Project Company <ul><li>Local Sponsor(s) </li></ul><ul><li>ownership </li></ul><ul><li>EBRD exits through a put to the Sponsors with pricing depending on performance of the Company. </li></ul><ul><li>An alternative is full risk equity after “Project Completion” targets are met </li></ul><ul><li>EBRD’s risk can be limited to specified (such as political risk) events with recourse to the Sponsors in all other cases. </li></ul>Risk Pure Note: details are simplified for case study Equity Equity
    18. 18. Basic Structures : Syndicated Debt EBRD Co-financing Banks A/B loan structure Company Debt Participation <ul><li>EBRD can finance up to 35% of company’s balance sheet from own funds </li></ul><ul><li>EBRD syndicates additional debt from commercial banks </li></ul>Debt
    19. 19. Basic Structures : Mixed Equity and Debt <ul><li>EBRD </li></ul><ul><li>Sponsor </li></ul><ul><li>significant ownership </li></ul><ul><li>management </li></ul><ul><li>expertise </li></ul>Co-financing Banks A/B Loan structure Project Company EBRD <ul><li>EBRD equity up to 20% </li></ul><ul><li>Syndicated long-term debt </li></ul>Equity Debt Local Partner
    20. 20. Example: Uralkali Uralkali Signed on 12 December 2003 <ul><li>EBRD Loan: US$ 75 million (67% syndicated) </li></ul><ul><li>Purchase and installation of gas engines sites </li></ul><ul><li>Modernisation of equipment and machinery for extraction and transportation sites </li></ul>
    21. 21. Example: Severstal - Arcelor JV <ul><li>EBRD Loan: $90 million (33% syndicated). </li></ul><ul><li>Creating a $170 million JV between Arcelor, the biggest global steel producer and Severstal a major Russian steel producer for a greenfield construction of a galvanized steel plant. </li></ul>Signed on 11 February 2003 Severstal - Arcelor JV
    22. 22. <ul><li>Equity €13.6 million </li></ul><ul><li>Purchase of a 10% equity stake in &quot;Stinol&quot;, the largest refrigerators production plant in Russia, recently acquired by Merloni. Investment will be used to upgrade existing facilities for local production of a Western quality product. </li></ul>Example: Merloni Signed on 27 February 2002 Merloni - Stinol
    23. 23. Example: General Motors - Avtovaz <ul><li>Equity US$ 40 million and Loan €108 million of which €25 million syndicated </li></ul><ul><li>Green-field construction and operation of a factory to manufacture 75,000 vehicles in Togliatti, Russia. Avto VAZ and GM hold an equal share in the venture. </li></ul>Signed on 27 June 2001 General Motors - VAZ JV
    24. 24. <ul><li>EBRD Loan: US$ 90 million </li></ul><ul><li>The JV will build a new plant at Severstal's facilities in Cherepovets, 400 km north of Moscow, to produce up to 400,000t of hot dip galvanised steel a year </li></ul>Example: Sevestal - Arcelor JV Signed on 11 February 2003 Severgal
    25. 25. Example: System operator (SCADA) <ul><li>€ 80m syndicated loan with € 60m EBRD participation to a Russian power system operator for upgrade of its technology </li></ul><ul><li>Objective to support restructuring of the Russian power sector and improve it to the standards of European neighbours </li></ul>Signed on 17 December 2004
    26. 26. Example: TogliattiAzot <ul><li>EBRD’s largest-ever loan for energy efficiency of US$ 160m (Bank’s portion US$ 100m) </li></ul><ul><li>Reparation and modernisation of four ammonia production units </li></ul><ul><li>The project will result in significant gas savings and reduction of carbon dioxide emissions, that can be used as carbon credits under Kyoto Protocol </li></ul>Signed on 9 December 2004
    27. 27. Example: Lenta <ul><li>US$30m EBRD loan for the construction of three Lenta retail stores in St Petersburg </li></ul><ul><li>The Bank’s investment will benefit Russian consumers through higher quality goods and increased range of products sold at lower prices </li></ul>Signed on 3 December 2004
    28. 28. Example: Nokian Tyres <ul><li>EUR 50m senior loan to finance construction of Nokian Tyre's Greenfield plant near St Petersburg </li></ul><ul><li>The plant will have an annual capacity of 2m tyres </li></ul><ul><li>The investment will help to develop the production of tyres in Russia and increase competition in this sector </li></ul>Signed on 24 September 2004
    29. 29. Example: Pokrov Glass Plant <ul><li>Provision of a US$11m loan to a Russian subsidiary of the Turkish company Anadolu Cam </li></ul><ul><li>Reconstruction and expansion of the capacity </li></ul><ul><li>Increasing quality and choice of food packaging in the market and introducing greater competition and innovation </li></ul>Signed on 23 September 2004
    30. 30. Example : Middle-Timan Bauxite Mine <ul><li>Expansion of an existing bauxite mine in the Komi Republic (Russia) </li></ul><ul><li>The EBRD finance comprises a loan of US$ 75 million. The Project will be co-financed by the International Finance Corporation with a parallel loan of US$ 75 million </li></ul><ul><li>The investment will help to enhance the competitiveness of the Russian aluminium industry </li></ul>Signed on 4 August 2004
    31. 31. Example: Narzan <ul><li>US$ 12.25m combined EBRD loan and equity investment to finance a Russian mineral water producer, including his CAPEX and working capital </li></ul><ul><li>The investment will help one of Russia’s best-known mineral water companies to expand its bottling capacity, develop new products and provide it with working capital </li></ul>Signed on 11 May 2004
    32. 32. Example: International Moscow Bank <ul><li>Provision of a US$ 200m syndicated loan (EBRD portion US$ 30m) for Russian small and medium-sized enterprises, particularly in less-developed regions </li></ul><ul><li>First of similar deals the Bank is working on to provide Russian banks with long-term funds so they can give Russian businesses much needed access to longer-maturity credit </li></ul>Signed on 06 May 2004
    33. 33. Example: OAO Karelsky Okatysh <ul><li>Provision of US$ 60 million long-term debt finance to develop iron ore mining in the Karelia region, thus ensuring adequate raw material supply for Severstal </li></ul>Signed on 25 March 2004
    34. 34. Example: Rising Star Media <ul><li>US$ 17m loan for the construction of four multiplex theatres in Moscow and St Petersburg </li></ul><ul><li>Development of infrastructure for a modernising and fast growing media sector </li></ul><ul><li>Supporting the entrance of a strategic investor, a leading international cinema operator, into the Russian market and promoting competition </li></ul>Signed on 06 February 2004
    35. 35. Contacts <ul><li>Victor Pastor, Director Russia </li></ul><ul><li>Tel: +7-095-787-1111 / fax: +7-095-787-1122 E-mail: PastorV@mos.ebrd.com </li></ul><ul><li>Eric Rasmussen, Deputy Head of Moscow Office, Russia Team </li></ul><ul><li>Tel: +7-095-787-1111 / fax: +7-095-787-1122 E-mail: [email_address] </li></ul><ul><li>Leonid Vindman, Principal Banker, Russia Team </li></ul><ul><li>Tel: +7-095-787-1111 / fax: +7-095-787-1122 E-mail: [email_address] </li></ul><ul><li>Procurement Opportunities and General Information via web site: www.ebrd.com </li></ul>