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Working with the Private Sector to Working with the Private Sector to Support Investments in PPPsSupport Investments in PPPs

Russian-French Forum

Svetlana Radchenko, Senior BankerSvetlana Radchenko, Senior Banker

European Bank for Reconstruction and DevelopmentEuropean Bank for Reconstruction and DevelopmentJune 2011June 2011

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Section 1Section 1

Overview of EBRD in the Overview of EBRD in the municipal sectormunicipal sector

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Structuring the financing of municipal infrastructure

Promoting commercialisation and corporatisation of services

Supporting the development of regulatory structures and public service contracts

Supporting private sector investment

Improving environmental, social, health and safety

Facilitating donor grant and commercial loan co-financing

EBRD’s role in the municipal sectorEBRD’s role in the municipal sector

EBRD helps municipalities meet their infrastructure needs

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Key sectors coveredKey sectors covered Water & Wastewater – improved

quality of service and environmental compliance

Urban Transport – improved public transport services (buses, LRT, metro, ferries, etc.) and more efficient and safe network design

Solid Waste Management – improved efficiency and frequency of collection; adequate disposal; prevention of groundwater contamination

District Heating – renewal of obsolete heating and distribution systems to promote efficiency gains

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Other CE7%

Ukraine/Caucasus

24%

CA1%

Russia26%

Romania15%

Poland13% Baltics

3% Serbia & Montenegro

6%

Croatia5%

190 projects / EUR 3 billion invested190 projects / EUR 3 billion invested

Sub-Sovereign

52%

Private28%

Sovereign 20%

District Heating

17%

Multisector5%

Urban Transport

24%

Solid Waste and Other

9% Water and Wastewater

45%

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Section 2Section 2

EBRD’s role in PPPsEBRD’s role in PPPs

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Latest EBRD’s track record in PPP Latest EBRD’s track record in PPP structures (Municipal Infrastructure)structures (Municipal Infrastructure)

# Country Year Project Name PPP model Sponsors EBRD

(€ million)

Total project

(€ million)

1. Regional 2007 Veolia Voda Service Contracts Véolia Water (France) 105 275

2. Russian Federation

2007/08 Taganrog DH Direct ownership Centr Invest Bank (Russian Federation)

9 9

3. Regional 2007 E-Energija DH Service contracts / Concessions/Lease

Mr Virginijus Strioga 13 29

4. Bulgaria 2008 Sofia Water PPP Concession United Utilities (Great Britain)

21 214

5. Russian Federation

2008 Rosvodokanal Service contracts /Long Term lease

RVK Group companies 42 58

6. Regional 2009 Aqualia New Europe Concessions/ Service contracts

Aqualia Gestión Integral del Agua, S.A.

80 163

7 Bulgaria 2009 Hebros Bus Service contracts Hebros 1000 Jsc (Bulgaria)

6 8

8 Kazakhstan 2009 Shymkent Vodokanal Direct ownership TOO Vodnyue Resursy Marketing (Kazakhstan)

6 6

9 Russian Federation

2010 Taganrog DH Phase II Direct ownership JSC “TEPTS Teploenergo (Russia)

9 9

10 Turkey 2010 TASK Water Venture Concessions/BOT Akfen (Turkey) Kardan-Tahal (Netherlands)

16 23

11 Russia / Baltics

2010 Dalkia Baltica/Russia Concessions/ Service contracts

Dalkia International (France)

100 100

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Private Sector Participation Private Sector Participation

EBRD’s policy “Financing of Private Parties to Concessions” requires competitive tendering and a specific process:

– http://www.ebrd.com/downloads/procurement/concess.pdf

Which basic conditions foster PPP development:

– An adequate legal structure

– Political will to champion PPP processes

– Robust tariff methodologies and competent regulator

– Sponsors’ interest, dependent on market and PPP structure

– Sufficient capital market development (local and

international) for LT financing notably in Rubles These conditions are partially achieved in Russia

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EBRD support to biddersEBRD support to bidders

EBRD can issue a general letter of interest to be included in the tender

The Bank can have a pre-bidding dialogue with players

– Instruments offered: joint equity investment and/or capex loan

– Indicative terms: tenor, security

Until tender award, EBRD cannot commit to exclusivity with anyone (‘open support’)

– Identical dialogue possible with all bidders

– Different teams established to guarantee Chinese walls

After tender award, EBRD negotiates detailed terms and conditions with the preferred bidder subject to detailed due diligence

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EBRD RequirementsEBRD Requirements

Open International Tender with pre-qualification (including no discrimination on national grounds)

Balanced Contract between City and Operator in line with best international practice

Good Corporate Governance and high integrity and transparence standards of operators

Commitment to high environment, social, health and safety standards

Objective of operational improvements (e.g. ticketing system, etc.)

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EBRD PPP pipeline in Russia (Municipal Infrastructure):

St. Petersburg Neva Water PPP

DBFOT PPP Agreement for Northern Water Treatment Plant in St. Petersburg; The Project is aimed at enhancing the quality of potablewater by choosing the most up-to-date water treatment technology;

Roundtable for interested investors 9/10 December 2010 in the EBRD office in London; Pre-qualification submitted 30 May 2011; prefered bidder

Pre-qualification results will be announced 20 June 2011, Bids submission 16 Jan 2012; 1 Oct 2012 – financial closing;

St. Petersburg Waste PPP - Yanino

DBFOT PPP Agreement for Waste Utilisation Plant with total capacity to handle 350,000 tonnes of waste per year.

Preferred bidder was selected and PPPA is signed on 16 May;

Financial closing is expected in November 2012.

Perm Road PPP – EBRD financing Drafting of Regional PPP Law

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Section 3Section 3

Case StudiesCase Studies

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Case study 1: Rosvodokanal Case study 1: Rosvodokanal Borrower: Group of companies Rosvodokanal,

provides water and waste water services to 5.5 mln. people

EBRD loan: 1.5 bln RUB Maturity: 13 years Use of funds: modernisation of water and waste

water infrastructure in Krasnodar, kaluga, Tyumen, Orenburg, etc.

Tenders for construction contracts: private procurement;

Transition impact: development of the new agreements between Rosvodokanal and municipalities in accordance with best international practice

Signed 2008

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Case study 2: Dalkia PolskaCase study 2: Dalkia Polska

EUR 70 million invested alongside the Dalkia Group for a series of investments in Poland over the 1998-2004 timeframe.

EBRD holds a 35% stake in Dalkia Polska. Dalkia International remains the controlling partner with a 65% stake.

EBRD’s funds allowed Dalkia Polska to invest throughout the region in ESCO type projects as well as district heating opportunities (privatisations, concessions, lease contracts).

EBRD exit in mid 2010 by selling shares back to Dalkia

EBRD’s involvement has enabled increased private sector participation, as well as improved energy efficiency and cost effectiveness at operating companies.

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Case Study 3: United Utilities - Sofia Case Study 3: United Utilities - Sofia and Tallinn concessionsand Tallinn concessions

Equity investments in two water companies in Bulgaria and Estonia with put option to UU at fair market value in year 7

Sofia

– 2000 – EBRD grants a loan to Sofia W to finance capex

– 2003 – EBRD indirectly becomes 19% shareholder of Sofia W

– 2008 – Revised Concession Agreement signed

– 2010 – EBRD sells to Veolia alongside UU

Tallinn

– 2002 – EBRD loan to newly privatised Tallinn W

– 2003 – EBRD becomes shareholder (12.6%) in Tallinn W

– 2005 – EBRD helps initiate IPO of Company for float on Tallinn

– 2010 – EBRD sells shares back to UU

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Case Study 4: Veolia Voda EquityCase Study 4: Veolia Voda Equity

EUR 160 million invested In Veolia Voda to finance a series of investments in water and waste water concession in CEE, including Russia, signed in 2007.

EBRD holds a 10% stake in Veolia Voda. Veolia Water remains the controlling partner.

EBRD’s funds allowed Veolia Voda to acquire several concession and lease contracts, including long-term lease contract in Tomsk.

EBRD exit is envisaged in year 7 by selling shares back to Veolia

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Case study 5: ‘Aqualia new Europe’Case study 5: ‘Aqualia new Europe’

Creation of a regional investment platform in common between Aqualia (51%) and EBRD (49%) to allow for external growth, acquisitions of concessions and management operation contracts.

EUR 80m EBRD equity commitment to Aqualia New Europe

With the backing of the EBRD, Aqualia intends to expand across eastern Europe, where an improvement in the water management and infrastructures is in high demand.

Aqualia, a subsidiary of Spanish group FCC, currently provides water and wastewater services to over 26,000,000 people in more than 1,100 municipalities worldwide.

Signed in May 2009

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Contact detailsContact details

Svetlana RadchenkoSenior Banker, Municipal and Environmental Infrastructure

Tel: +7 499 270 31 17Fax: +7 495 787 11 11radchens@ebrd.com