Financing by investment banks


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  • Reflects the strong position of Nordic companies in energy, infrastructure and communications
  • Financing by investment banks

    1. 1. EU & Development Bank Financing for Northern Dimension Transport Projects Tero Lausala, 26.11.2002
    2. 2. Contents <ul><li>Finpro & Project Advisory Services </li></ul><ul><li>EU financing: ISPA, Phare, Tacis </li></ul><ul><li>European Investment Bank (EIB) </li></ul><ul><li>European Bank for Reconstruction and Development (EBRD) </li></ul><ul><li>Nordic Investment Bank (NIB) </li></ul><ul><li>World Bank (IBRD & IFC) </li></ul>
    3. 3. Finpro and Finpro Marketing Ltd Finland Trade Centers 5 1 in 3 9 countries = Finpro Marketing Ltd International Marketing Services Innovation Programs Networking projects with stakeholders Consulting Internationalization plans & operations Market Information Center Call Center, Advisory and Market Intelligence Services Chairman of the Board Support Services HR, Finance, IT, Marketing President - Finpro
    4. 4. The Finpro Network Covers Main Target Market Areas <ul><li>5 1 Finland Trade Centers </li></ul><ul><li>in 3 9 countries </li></ul><ul><li>Our personnel </li></ul><ul><li>210 in Finland Trade Centers </li></ul><ul><li>130 in Helsinki </li></ul>
    5. 5. Finpro Project Advisory Services - Mission <ul><li>To assist Finnish firms in their international operations through EU, IFI and UN financed projects in developing and transition economy countries by helping them to find: </li></ul><ul><ul><li>business opportunities in procurement for projects financed by these institutions </li></ul></ul><ul><ul><li>financing for projects identified / sponsored by themselves </li></ul></ul>
    6. 6. Financiers Monitored By Project Advisory Services <ul><li>European Union external aid programs: Tacis, Phare, ISPA, Sapard, EDF, ALA, MEDA, CARDS </li></ul><ul><li>World Bank Group: IFC, IBRD, IDA, MIGA </li></ul><ul><li>European Bank for Reconstruction and Development (EBRD) </li></ul><ul><li>European Investment Bank (EIB) </li></ul><ul><li>Asian Development Bank (ADB) </li></ul><ul><li>Inter-American Development Bank (IDB) </li></ul><ul><li>African Development Bank (AfDB) </li></ul><ul><li>Nordic finance: NIB, NEFCO, Nopef, NDF </li></ul><ul><li>UN system </li></ul>
    7. 7. International Project Finance Flows Monitored By Finpro/ PAS
    8. 8. Project Advisory Services Network <ul><li>BRUSSELS </li></ul><ul><li>EU programmes </li></ul><ul><li>EIB </li></ul><ul><li>EBRD </li></ul><ul><li>WASHINGTON </li></ul><ul><li>WB Group </li></ul><ul><li>IDB </li></ul>HELSINKI Basic information and database on all financiers <ul><li>MANILA </li></ul><ul><li>ADB </li></ul>ST PETERSBURG leasing office
    9. 9. Project Advisory Services Staff <ul><li>Head of Project Advisory Services Pentti Kotiranta (PAS Brussels) </li></ul><ul><li>Head of PAS Washington Kari Janhunen </li></ul><ul><li>Head of PAS Manila Cristina Marquinez </li></ul><ul><li>Head of PAS Helsinki Tero Lausala </li></ul><ul><li>Head of PAS St. Petersburg Timo Koponen </li></ul>
    10. 10. Pas Services & Products <ul><li>P roject consulting and partner search </li></ul><ul><li>P roject financial consulting </li></ul><ul><li>S eminars & training on IFIS and EU: e.g. World Bank procurement, making Tacis applications, ISPA, ADB </li></ul><ul><li>E mergency aid surveys: e.g. Balkans, India, Afghanistan </li></ul><ul><li>P roject database: </li></ul><ul><li>EU Public Procurement Alert Service: www. finpro . fi / tedalert </li></ul>
    11. 11. EU Finance Instruments <ul><ul><li>PHARE: Assistance for the reconstruction of economies in Central and Eastern Europe </li></ul></ul><ul><ul><li>ISPA: Instrument for Structural Policies for Pre-Accession </li></ul></ul><ul><ul><li>TACIS: Technical Assistance to the Commonwealth of Independent States </li></ul></ul>
    12. 12. Total EUR 9,6 billion EU’s External Actions in 2000
    13. 13. EU E xternal A id P rogrammes <ul><li>Projects are identified by the EU together with the beneficiary countries. </li></ul><ul><li>EC external aid is given by means of contracts to provide services, supplies or works to beneficiary countries. </li></ul><ul><li>Service, supplies and works contracts are awarded after a tendering process. </li></ul><ul><li>Contracts are open on equal terms to all natural and legal persons of the EU Member States and the countries and territories of the regions covered. </li></ul>
    14. 14. EU C ompetition R ules SERVICES > 200.000 EUR Restricted international tender, 4-8 service providers invited < 200.000 EUR Framework contract, or Simplified procedure after consultation with at least 3 service providers < 5.000 EUR One single quote SUPPLIES > 150.000 EUR Open international tender 30.000 < …<150.000 EUR Open local tender < 30.000 EUR Simplified procedure after consultation with at least 3 suppliers < 5.000 EUR One single quote WORKS > 5.000.000 EUR Open international tender; Restricted international tender (special case) 300.000 < …<5.000.000 EUR Open local tender < 300.000 EUR Simplified procedure after consultation with at least 3 contractors
    15. 15. Tacis in 2000-2006 <ul><li>The new Tacis regulation in force from January 2000 </li></ul><ul><li>EUR 3 138 million for the period 2000 to 2006 </li></ul><ul><li>Move from “demand-driven” to “dialogue- driven” programming </li></ul><ul><li>Increased promotion of investment </li></ul><ul><li>Greater emphasis on regional and cross-border co-operation </li></ul><ul><li>Increase in the number of assistance instruments </li></ul><ul><li>Improving the quality of assistance </li></ul><ul><li>Incentive Scheme </li></ul>
    16. 16. Tacis - Areas of Cooperation <ul><li>Democracy and the rule of law </li></ul><ul><li>Private sector and economic development </li></ul><ul><li>Social consequences of transition </li></ul><ul><li>Infrastructure networks </li></ul><ul><li>Environmental protection </li></ul><ul><li>Rural economy </li></ul><ul><li>Regional and cross border cooperation </li></ul><ul><li>Nuclear safety </li></ul>
    17. 17. (LSIF - Large Scale Infrastructure Facility)
    18. 18. Phare <ul><li>The Phare programme aims to help the countries of Central and Eastern Europe to meet economic and institutional obligations for their eventual membership in the EU. </li></ul><ul><li>Phare provides know-how for a wide range of non-commercial, public and private organisations. </li></ul><ul><li>A specific programme of support, CARDS, covers Albania, Bosnia and Herzegovina, Croatia, the Federal Republic of Yugoslavia and the FYROM. </li></ul>
    19. 19. Phare <ul><li>Implementation decentralized to applicant countries </li></ul><ul><li>Priorities: </li></ul><ul><li>1. Institution-building 30% of the budget is channelled to the reform of institutions and the encouragement of twinning, legislation harmonisation with the EU, and public administration. </li></ul><ul><li>2. Mobilisation of investments 70% is allocated to investment projects in industry and infrastructure to meet EU standards and legislation. </li></ul><ul><li>Bridge to the Structural Funds after accession </li></ul>
    20. 20. ISPA: Sectors Receiving Assistance <ul><li>The environment - bringing the applicants up to EU standards </li></ul><ul><li>Transport - expanding the trans-European transport networks </li></ul><ul><li>Technical assistance - directly related to the projects being funded </li></ul>Eligible countries : Bulgaria, Estonia, Hungary, Latvia, Lithuania, Poland, Czech Republic, Romania, Slovenia and Slovakia.
    21. 21. ISPA - Instrument for Structural Policies for Pre-Accession <ul><ul><li>Pre-accession aid from the year 2000 (until max 2006) </li></ul></ul><ul><ul><li>Coverage: initially the 10 central and eastern European candidates; changing according to accession </li></ul></ul><ul><ul><li>Aims: prepare Central and Eastern European Countries for full EU membership </li></ul></ul><ul><ul><li>Environmental measures: waste water, drinking water, solid waste (landfills), air pollution </li></ul></ul><ul><ul><li>Transport infrastructure measures: highways, roads, railways, aviation </li></ul></ul><ul><ul><li>Budget: EUR 1 billion per year </li></ul></ul>
    22. 22. ISPA - Instrument for Structural Policies for Pre-Accession <ul><li>Criteria: population, per capita GDP and land surface area </li></ul><ul><li>ISPA-financing 50-80%, needs national contribution </li></ul><ul><li>Consulting, supplies and works </li></ul><ul><li>Projects are identified by the candidate countries in co-operation with the Commission </li></ul><ul><li>Minimum size usually 5 MEURO </li></ul><ul><li>Contracts for technical assistance, supplies and works are tendered either locally or internationally </li></ul>
    23. 23. ISPA – Financial Provisions by Country Bulgaria 8.0% - 12.0% Czech Republic 5.5% - 8.0% Estonia 2.0% - 3.5% Hungary 7.0% - 10.0% Lithuania 4.0% - 6.0% Latvia 3.5% - 5.5% Poland 30.0% - 37.0% Romania 20.0% - 26.0% Slovenia 1.0% - 2.0% Slovakia 3.5% - 5.5%
    24. 24. ISPA Procedure
    25. 25. How to S ucceed in EU P rojects ? <ul><li>Follow up on project pipeline </li></ul><ul><li>Information gathering: web sites (EuropeAid), Official Journal, local press </li></ul><ul><li>Personal contacts with key players - >Act locally ! </li></ul><ul><li>Networking, alliances, consortium </li></ul><ul><li>Tender preparation: carefully correspond to requirements; pay attention to the quality of the bid </li></ul><ul><li>National network s (beneficiary countries & EU headquarters & home bases ) </li></ul>
    26. 26. Cohesion / Structural Funds <ul><li>Structural Funds are already committed for 2004-2006: EUR 23 billion </li></ul><ul><li>Funds will be 3-4.5 x larger than ISPA (Cohesion Funds) </li></ul><ul><li>Funding available in new sectors (health, urban renewal, urban transport etc) </li></ul><ul><li>prepare large projects to be ready for Structure Fund / Cohesion Fund co-financing after accession </li></ul><ul><li>prepare and finance pilot projects for implementation after accession </li></ul><ul><li>work with regions to develop programmes suitable for regional development funds </li></ul>Partners can help: Structural Funds 2004-2006
    27. 28. CURRENT EXTERNAL EU LENDING MANDATES A global economic development partner 31 <ul><li> EUR million </li></ul><ul><li>Central and Eastern European countries 9 280 (2000-2007) (350m for Yugoslavia) </li></ul><ul><li>Pre-accession facility (EIB risk) 8 500 (2000-2003) </li></ul><ul><li>Mediterranean countries 6 425 (2001-2007) </li></ul><ul><li>Euro-Med mechanism (EIB risk) 1 000 (2001-2007) </li></ul><ul><li>ACP Countries 3 965 (2001-2007) </li></ul><ul><li>South Africa 825 (2000-2006) </li></ul><ul><li>Latin America Asia 2 480 (2000-2006) </li></ul><ul><li>Russia (2000-2005 ) 100 </li></ul>
    28. 29. LOAN SIGNATURES OUTSIDE THE EU EUR 23bn (1997-2001) Executing the EU’s external policies 32 <ul><li>In EURm: </li></ul><ul><li>Accession Countries </li></ul><ul><li>Western Balkan countries </li></ul><ul><li>Euro-Mediterranean Partnership countries </li></ul><ul><li>Africa, Caribbean, Pacific, OCT South Africa </li></ul><ul><li>Asia, Latin America </li></ul>5 366 11 898 625 251 16 776 1 517 35 728 1 396
    29. 30. EIB PROJECT ELIGIBILITY Projects promoting Union objectives 47 Regional development European communications infrastructure Natural and urban environment Energy International competitiveness of European industry and support for SMEs i2i, R&D, Dissemination of innovation, technology networks, education, health
    30. 31. FINANCING OPTIONS Tailor-made finance to fit project and promoter 49 Large-scale projects ( project size over EUR 25 million) <ul><ul><li>direct financing </li></ul></ul><ul><ul><li>indirect financing </li></ul></ul>Small and medium-scale projects ( EUR 40 000 - EUR 25 million) <ul><ul><li>Global loans with partner banks </li></ul></ul><ul><ul><li>High-growth innovative SMEs: investment funds, venture capital or development capital companies </li></ul></ul>EIB participation is limited to 50% of a project’s cost.
    31. 32. EIB: PROJECT CYCLE A sound project portfolio 50 EIB eligibility Contract signature Monitoring Promoter’s request Banking criteria Staff teams Economic Financial Technical Environmental Management Committee Lawyers Contract negotiation Board of Directors Loan approval Project Borrower Guarantor
    32. 33. RATIONALE FOR EIB PARTICIPATION IN A PROJECT 52 T he EIB can become involved either Up stream , where the EIB financial contribution is critical and the EIB’s technical know-how can influence the project’s concept Down stream , where the the EIB’s contribution supports the overall financial package
    33. 34. PROJECT REQUIREMENTS: 55 A project assessment with many facets Projects should be: Technically sound Financially viable Show an acceptable economic return Comply with environmental protection and procurement regulations Have adequate security Eligible for EIB finance
    34. 35. Introduction to EBRD <ul><li>International financial institution founded in 1991, owned by 62 national and supranational shareholders, including EU and CEE countries </li></ul><ul><li>Promotes market-based economies in 27 countries in Central & Eastern Europe and the former Soviet Union </li></ul><ul><li>Provides finance to public and private sectors </li></ul>Cumulative commitments € 20.2 billion
    35. 36. <ul><li>EU Accession countries </li></ul>EBRD Geographical Focus <ul><li>Western Balkans </li></ul><ul><li>Russian Federation and CIS states </li></ul>
    36. 37. EBRD Features <ul><li>Mandate to foster transition from planned to market economies </li></ul><ul><li>EBRD promotes environmentally sound and sustainable development in all its activities </li></ul><ul><li>Helps facilitate EU grant co-financing and mobilise Technical Cooperation funds to assist municipalities in implementation of projects </li></ul><ul><li>Can finance suitable projects without bank guarantees or sovereign guarantees </li></ul>
    37. 38. EBRD Investment Selection Criteria <ul><li>Financial, economic and technical viability </li></ul><ul><li>Priority projects (environmental, national, local) </li></ul><ul><li>Credit quality borrower </li></ul><ul><ul><li>strong economic base (municipality) </li></ul></ul><ul><ul><li>financial strength/creditworthiness </li></ul></ul><ul><ul><li>institutional capability and potential </li></ul></ul><ul><li>Readiness to implement changes </li></ul><ul><ul><li>cost recovery/tariff increases as appropriate </li></ul></ul><ul><ul><li>financial and operational performance improvement </li></ul></ul><ul><ul><li>creditworthiness enhancement </li></ul></ul>
    38. 39. EBRD / ISPA Co-financing <ul><li>Memorandum of Understanding between EBRD and ISPA signed in April 2000 </li></ul><ul><li>EBRD project appraisal consistent with ISPA evaluation process </li></ul><ul><li>Co-operation in organising technical assistance </li></ul><ul><li>Assistance to municipalities in preparation of applications to ISPA for co-financed projects </li></ul><ul><li>Agreement on procurement requirements </li></ul><ul><li>Approximately €400 million in EBRD-ISPA co-financing </li></ul><ul><li>Total project value of almost €1.3 billion </li></ul><ul><li>Over €650 million of projects in pipeline </li></ul><ul><li>Projects in Czech Republic, Estonia, Lithuania, Poland, Romania, etc. </li></ul>Co-operation with ISPA EBRD-ISPA Track Record
    39. 40. Types of EBRD Co-financing with ISPA <ul><li>Loan to municipality (eg.Wroclaw, Gliwice) </li></ul><ul><li>Loan to utility with municipal support agreement (eg. Krakow, Bydgoszcz, Kaunas) </li></ul><ul><li>Loan to utility with municipal guarantee (eg. Rybnik) </li></ul><ul><li>Loan to private concession company (eg in preparation - Warsaw) </li></ul><ul><li>Regional facility (eg. in preparation - Dolnysląsk </li></ul>
    40. 41. EBRD loan terms and costs <ul><li>EBRD loan size normally > EUR 10 m </li></ul><ul><li>EBRD can offer up to 15 years maturity if appropriate for infrastructure financing </li></ul><ul><li>Grace periods based on construction </li></ul><ul><li>Loan margins based on credit risk of municipality / utility and market pricing </li></ul><ul><li>Pricing depends on project risk </li></ul><ul><li>Loan fees reflect Bank costs </li></ul><ul><li>Structure provides low all-in annual costs for municipality / utility customers </li></ul><ul><li>EBRD Procurement Policies and Rules apply </li></ul>Grace Period Maturity Margins and Fees Procurement Loan Size
    41. 42. Nordic Investment Bank <ul><li>Finances projects of common interest within the Nordic region </li></ul><ul><li>Finances international investments projects of mutual interest to the customer country and the Nordic countries </li></ul>
    42. 43. NIB Mission & Strategy <ul><li>Promoting Nordic industrial cooperation by financing new investments, infrastructure projects and structural improvements. </li></ul><ul><li>Participating in the financing of projects in the emerging markets thus promoting the globalisation of Nordic industry </li></ul><ul><li>Contributing with financing to the economic transformation and development in the areas adjacent to the Nordic region </li></ul><ul><li>Playing an important role in the financing of environmental improvement investments particularly in the Baltic Sea and Barents Sea regions </li></ul>NIB:s primary purpose is to promote sustainable economic growth by means of long-term financing. NIB endeavours to reach this goal by:
    43. 44. NIB Financing Activities <ul><ul><li>77 per cent within the 5 Nordic countries </li></ul></ul><ul><ul><li>2 3 per cent in 3 7 countries outside the Nordic region </li></ul></ul><ul><ul><li>Total assets in December 200 1 EUR 1 5 billion </li></ul></ul>
    44. 45. NIB Loan Portfolio EUR million Total outstanding loans 3 0 . 06 .200 2 9.780 of which International Loans in more than 30 countries 2.133
    45. 46. NIB Loans Outstanding
    46. 47. NIB I nt. Loans Outstanding / Geographical Spread as of 30.06.2002
    47. 48. NIB Int. Loans Outstanding by Sector / Dec. 2001
    48. 49. NIB Loan Terms & Conditions <ul><li>Sovereign loans or guarantees </li></ul><ul><li>Maturity: Up to 20 years </li></ul><ul><li>Grace period: Up to 5 years </li></ul><ul><li>NIB financing maximum 50 % of total project cost </li></ul><ul><li>Private sector loans </li></ul><ul><li>- Terms and conditions similar to other lenders and depending on the project risk </li></ul><ul><li>Loans untied in respect of sources of origin of project components </li></ul>
    49. 50. NIB Loans to CEE as of 6/2002 (EUR million) <ul><li> Outstanding Signed, </li></ul><ul><li> not yet disbursed </li></ul><ul><li>Croatia 21,9 7,1 </li></ul><ul><li>Czech Republic 111,9 29,8 </li></ul><ul><li>Estonia 88,6 102,2 </li></ul><ul><li>Hungary 0,0 2 0,1 </li></ul><ul><li>Latvia 59,2 44,6 </li></ul><ul><li>Lithuania 47,0 65,4 </li></ul><ul><li>Poland 197,3 34,0 </li></ul><ul><li>Romania 38,6 35,0 </li></ul><ul><li>Russia 9,5 0,0 </li></ul><ul><li>Slovak Republic 1 ,5 0 , 0 </li></ul><ul><li>TOTAL 575,5 338,2 </li></ul>
    50. 51. The World Bank Group International Bank for Reconstruction and Development IBRD Established: 1945 IDA Established: 1960 IFC Established: 1956 MIGA Established: 1988 International Development Association International Finance Corporation Multilateral Investment Guarantee Agency
    51. 52. South Asia 18% $3.5 billion Middle East and North Africa 3% $0.6 billion Latin America and the Caribbean 22% $4.4 billion Europe and Central Asia 29% $5.5 billion East Asia and Pacific 9% $1.8 billion Africa 19% $3.8 billion IBRD & IDA Lending FY 2002 Share of Total Lending of USD 19.5 billion
    52. 53. IBRD and IDA Lending by Sector FY 2002 Education 7% Agriculture, Fishing & Forestry 6% Water, Sanitation, & Flood Protection 3% Transportation 12% Law & Justice & Public Administration 27% I CT 1% Health & Other Social Services 12% Finance 15% Energy & Mining 10%
    53. 54. Transportation Sector IBRD and IDA Lending by Region, F Y 2002 Latin America and the Caribbean 19% Europe and Central Asia 3% Middle East and North Africa 3% East Asia and Pacific 23% South Asia 31% Africa 21%