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1 1 Kuusvek

  1. 1. EBRD - Assisting Ukraine Through Difficult Times and Beyond Presentation at Lviv International Economic Forum André Küüsvek EBRD Director, Ukraine 1 October 2009
  2. 2. EBRD in Ukraine  Largest financial investor in the country with 16 years of experience in the local market  Clients - leading local and foreign companies  As of September 2009 the EBRD funded 185 projects in Ukraine for over € 4.5 billion.  Financing of the working capital, trade and purchase of industrial equipment
  3. 3. EBRD Annual Investments in Ukraine EBRD Annual Business Volume in Ukraine (EUR million) 1,000 750 500 789 879 647 667 250 529 300 116 0 2003 2004 2005 2006 2007 2008 8m2009 Net ABV
  4. 4. EBRD Cumulative Business Volume in Ukraine – Allocation by Sector (1 September 2009) Cumulatively 185 projects for the total amount of EUR 4.5 bln. were signed Private sector Loans 73% 90% Equity 10% 14% Industry 18% Agribusiness Public sector 27% 6% Municipal Infrastructure Financial Institutions 4% Natural Resources 29% 7% Power and Energy 3% 4% Property and Tourism 15% Telecommunications Transport
  5. 5. Prospective EBRD Projects for Ukraine 12% 11% 0% Agribusiness MEUR 132 Energy MEUR 157 8% 13% FI MEUR 239 EUR 1.2 General Industries MEUR 255 9% Infrastructure billion MEUR 78 Natural Resources MEUR 111 6% Property MEUR 91 20% Telecoms MEUR 2 Transport MEUR 142 21%
  6. 6. 2009 Municipal Financing Lviv Municipal Transport  EUR 40 million financing in Roads and Public Transport Infrastructures with municipal guarantee  EUR 12 million to Lviv Public Transport Company to finance rolling stock, refurbish tram depots, maintenance training and equipment, new communication and IT systems  EUR 26 million to Lviv Road Agency for the rehabilitation of tram lines 2 and 6 (tracks, overhead lines) and the rehabilitation of the streets and underlying utilities along lines 2 and 6 and traffic management
  7. 7. 2009 Municipal Financing Lviv Municipal Transport (cont’d)  Important Technical Cooperation program (EUR2.6 million) to support the investment program and institutional reforms: – Procurement and Implementation Support – Corporate Development Program – Credit Enhancement Program for the City – Transport Regulatory reform advisory – Traffic Management Design review  In addition to tangible upgrade of infrastructure, the project has an important institutional reform objective and a project management and implementation capacity building for the City as a whole  Project seen as a test case for future cooperation and project development with projects in district heating, road infrastructure, solid waste in the pipeline
  8. 8. 2009 Municipal Financing Ivano-Frankivsk District Heating  EUR 12 million loan to Ivano-Frankivsk TeploKumunEnergo with municipal guarantee  SEK50 million (appr. EUR4.9 million) of grant co- financing provided by SIDA  Carbon Credit Transaction developed (up to EUR 1 million in additional funding)  Important Technical Cooperation Program  Institutional Reforms (tariffs, company corporatisation, IFRS, procurement, …)
  9. 9. 2009 Commercial Financing Galnaftogaz EBRD acquired a stake worth up to $50 million in OJSC Galnaftogaz, which operates Ukraine’s leading petrol stations chain OKKO. The transaction will strengthen the balance sheet and liquidity position of Galnaftogaz. It will also allow OJSC Galnaftogaz to continue its development strategy through selective acquisitions of new stations as well as modernisation of the existing service stations, including via energy efficiency measures.
  10. 10. Benefits of working with the EBRD  Extensive knowledge of local economy, business environment and practices  Door opener for FDI  Experience gained in problem resolution in CEE & CIS  Excellent working relationships with the Government at the highest levels  Full range of financial products and tenor tailored to client needs  Willing to share risks, including political risks (customised to each transaction)  Preferred Creditor Status in CEE & CIS  Strong, internationally recognised, financial partner with long-term perspective and mission  Sectoral expertise
  11. 11. EBRD: general project features Minimum EBRD financing:  Project makes economic €5 million sense - no “soft loans”  Substantial equity contributions by the project Minimal project cost sponsor, incl. cash (or cumulative portfolio costs) :  Usual need for a B lender €15 million  Limited refinancing  Project is tailored to the needs of the market
  12. 12. EBRD Investment Products Equity / Mezzanine Debt Investment Funds • Common stock  Senior, subordinated  To date EBRD has debt, convertible committed EUR 443 • Preferred shares million to 11 real estate  Mezzanine loans  Syndication funds focusing on  Minority positions Eastern Europe  Maturities (Ukraine) only  Flexible exit  Denominated in major strategies currencies  Flexible, tailor-made security package
  13. 13. EBRD Project Approval Procedure: • EBRD receives initial information (business plan/financing request) and considers project concept (Approx. 1 month) • Formal approval of Project Concept by EBRD Credit Committee • Due diligence and Project preparation • EBRD prepares and submits Term Sheet to client • Final Approval of Project by Credit Committee • Approval by EBRD Board of Directors (1 month) • Loan/investment negotiations and signing Project preparation time: approx. 6 months (depending on preparedness)
  14. 14. Ukraine & Financial Crisis. What’s next?
  15. 15. Ukraine: Crisis Impact so far Ukraine's GDP has dropped by 18 percent in the second quarter of 2009 against the same period last year. The worst production reduction was reported in the: • construction • processing industries • production and distribution of electric energy • gas and mining industry It is expected that GDP will record a 3% growth in 2010 The CPI inflation rate will exceed 15% in 2009 and is expected to be around 12.4% in 2010 The volume of industrial output in January- July, 2009 dropped by 30.4 percent against the same period in 2008
  16. 16. Ukraine: Crisis Impact so far (cont’d) The budget deficit exceeded 2. 2 billion U.S. dollars In January-August 2009 the NBU monetary gold reserves shrank by 8.5% or USD 2.672 billion, from USD 31.543 billion to USD 28.871 billion. While Ukraine’s current-account deficit has narrowed in 2008, to $1.2 billion recently, it remains in negative territory. Part of this deficit is attributable to payments for natural gas pumped underground in summer and stored for winter. In January-July 2009, imports of goods exceeded exports by USD 3,131.6 million The prospects for recovery in the near term remain constrained by world economic developments.
  17. 17. Ukraine: Key immediate steps to be taken In the financial sector: • Recapitalisation of the banking sector • Restore trust in banks so that normal business practices can resume • Improve corporate governance and transparency • Develop local currency long-term funding Energy / Energy Efficiency: • Improve energy efficiency - increase energy security • Restoring trust in Ukraine as a reliable partner is key • Predictability and transparency are key conditions for that
  18. 18. Ukraine: EBRD crisis response measures EBRD stands ready to support Ukraine and is acting: The EBRD targets to invest over EUR 1 billion in Ukraine in 2009. Close cooperation with the Government, involve into policy dialogue, assisting the authorities in putting together a coordinated crisis response. A strategic EBRD-Government portfolio review meeting took place in early 2009. EBRD and Ukraine discussed and agreed the list of priority projects to be financed by the Bank in the public sector The Bank is actively involved in the talks about the banking sector and in contact with all relevant parties: banks, authorities, IFIs. In early 2009 a coordination meeting with participation of 15 foreign banks, the Government and the National Bank to agree key principles for continued support of foreign banking groups to their Ukrainian subsidiaries, and to restore lending to real economy.
  19. 19. Ukraine: what’s next? Ukraine is an important country for Europe and for the Bank and this country is badly affected by the financial crisis. Failure of Ukraine will have severe economic and political repercussions and can potentially destabilise the whole region. Because of its mandate, country knowledge and reputation, the EBRD is in the unique position to bring together all relevant parties (external and internal) to jointly work on crisis mitigation issues. But political will, quick strategic thinking as well as political consensus are urgently required from the authorities of this country. Only jointly we can succeed in our efforts. The authorities should act in full and immediate collective consensus on the urgency to jointly restore stability and compliance with IMF Programme, which will stipulate involvement of other IFIs in Ukraine.
  20. 20. How to contact us Tel: +380 44 270 6132 Fax: +380 44 270 6813 Email: Kiev Resident Office 27/23 Sofiyvska Street Kiev 01001 Ukraine