ebrd financing for rural communication infrastructure tokyo august 2004
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EBRD Financing for Rural EBRD Financing for Rural Communication InfrastructureCommunication Infrastructure
TokyoTokyo
August 2004August 2004
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What is the EBRDWhat is the EBRD
The European Bank for Reconstruction and Development (EBRD) :
AAA-rated multilateral institution founded in 1991
Playing a leading role in Central & Eastern Europe (CEE) and the former Soviet Union (CIS)
The largest lender and private equity investor in this Region
Business oriented - working closely with private sector clients on commercial transactions
The EBRDThe EBRD
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1. A Major, Deal-Oriented Institution1. A Major, Deal-Oriented Institution
EBRD had approximately € 16 billion of outstanding assets in the CEE and CIS Region as at 31 Dec 2003
In 2003, the EBRD
– arranged 119 debt and equity transactions, committing
€ 3.7 billion for its own account;
– 75% debt transactions, 25% equity transactions
making it the most active financial institution in this Region
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2. Regional Focus : a network of offices 2. Regional Focus : a network of offices
in 27 countriesin 27 countries
The EBRD The EBRD
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3. Taking risk and a long-term view3. Taking risk and a long-term view
Appetite for political and commercial risks in CEE/ CIS countries
Long-term perspective on investment :
– debt : non recourse/ limited recourse with maturities of 7 - 10 years in the telecoms sector
– equity : no specific time constraint for exit, 3-7 years preferred anchor investor reducing market volatility
A catalyst for third party investment : EBRD’s commitments of € 22.7 billion through to December 2003 helped raise € 68.5 billion in total investment
The EBRDThe EBRD
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4. Large Regionally-Focused Portfolio4. Large Regionally-Focused Portfolio
Investments exclusively in Central/Eastern Europe and the CIS
100+ transactions per annum
New investments: €3.5 billion per annum
Assets growth: € 2 - € 2.5 billion per annum
0
4
8
12
16
96 97 98 99 00 01 02 03
Assets in the portfolio€ 15.6 billion
The EBRDThe EBRD
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Telecoms, Informatics and Media TeamTelecoms, Informatics and Media Team
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Where are we at the EBRD?Where are we at the EBRD?
EBRDEBRD
BankingBanking Finance and Finance and TreasuryTreasury
Legal, Economics, Support Legal, Economics, Support UnitsUnits
Sector Business GroupsSector Business Groups Country Business GroupsCountry Business Groups
InfrastructureInfrastructure
Financial Financial InstitutionsInstitutions
Energy and Energy and TelecommunicationsTelecommunications
Central EuropeCentral Europe
Russia and Russia and Central AsiaCentral Asia
SE Europe and SE Europe and CaucasusCaucasus
Telecoms, InformaticsTelecoms, Informatics& Media& Media
Telecoms, Informatics Telecoms, Informatics & Media& Media
• Key sector for the EBRD (8% of all assets – low impairment)
• Dedicated team of 18 professionals
• Works closely with Country Teams
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Team PortfolioTeam Portfolio
Cumulative portfolio: €1.9 billion
Covers 22 CEE/CIS countries
Deal size: € 1 - 100 million
Maximum EBRD transaction size: €250 million
Asset growth: € 200 million per annum
Fixed line/Integrated 45%
Mobile30%
Media/Other25%
Telecoms TeamTelecoms Team
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ExecutionExecution
Execution driven by client objectives and market timetable
Transactions have been negotiated, structured, documented and signed in 2 - 3 months
Extensive in-house legal expertise in telecoms regulation and structuring in CEE/ CIS countries
Telecoms TeamTelecoms Team
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Debt Products (1)Debt Products (1)
Debt instruments
– maturities up to 7 - 10 years
– stand-alone loans / syndicated loans / guarantees
– limited recourse / non-recourse structured debt
– capital expenditure financing / acquisition debt / balance sheet financing
– senior / subordinated
– fixed / floating rate
– denominated in major currencies or certain local currencies
Telecoms TeamTelecoms Team
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Debt Products (2)Debt Products (2)
EBRD’s Preferred Creditor Status
EBRD has Preferred Creditor Status in respect of transfer and convertibility risk (Art. 21 of the Agreement establishing the EBRD)
Tested ! Russia, August 1998 - Payments to EBRD exempted from the transfer and convertibility moratoria
EBRD loans are :EBRD loans are :
• not subject to restrictions not subject to restrictions on on
conversion of local conversion of local currency currency or transfer of foreign or transfer of foreign currencycurrency
• not included in any not included in any general general
rescheduling of the rescheduling of the country’s country’s foreign currency debt foreign currency debt • generally exempt from
generally exempt from country country provisioning requirements provisioning requirements• exempt from withholding
exempt from withholding taxtax on interest on interest
Telecoms TeamTelecoms Team
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Debt Products (3)Debt Products (3)
EBRD A/B Loan Structure
EBRD acts as a lender of record for the entire syndicated facility
EBRD retains at least 35% of the loan for own account
EBRD receives payments and passes them on to syndicate participants
Participants benefit from EBRD Preferred Creditor Status
EBRD
Loan Participants
Loan Agreement
Participation Agreement
BorrowerBorrower
Telecoms TeamTelecoms Team
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Equity and Other ProductsEquity and Other Products
Equity– private equity– IPO underwriting and IPO
investments Quasi Equity
– subordinated debt– convertible instruments
Guarantees – political risk mitigation – credit enhancement
Range of applications
– large greenfield or existing expanding companies
– privatisations and pre-privatisations
– ownership changes/ rationalisation
Telecoms TeamTelecoms Team
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Direct Investment FacilityDirect Investment Facility
– aimed at smaller businesses in early-stage transition countries
– equity (and limited debt)
– local equity participation strongly preferred
– do not need hard-currency earnings
– sponsors expected to make reasonable cash contributions but may also include capital in-kind
– generally USD500,000 to USD2,500,000
– equity in range 25-30% - but up to 49% in short term
– preferred investment span is 3-5 years - but up to 7 years
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Micro and Small Business Loan ProgrammeMicro and Small Business Loan Programme
– aimed at individual entrepreneurs and small enterprises
– strong regional focus - limited to specific countries
– EBRD works through existing local banks and by setting up “greenfield” specialised micro-finance banks
– assistance to develop staff and implement training
– 185,000 loans disbursing USD1.5 billion - so far!
– terms vary from scheme to scheme but typically
– small loans up to USD200,000 - maturity of up to 3 years
– micro-credits from USD50 - USD10,000 - up to 12 months
– delivers quickly!
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Rural Communication InfrastructureRural Communication Infrastructure
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Current Team Portfolio - RegionalCurrent Team Portfolio - Regional
Current Portfolio - €1 billion
Russia: €90 million
Central Asia: €63 million Including:
– mobile telecomsmobile telecoms– fixed line operatorsfixed line operators– ISPsISPs– submarine cablessubmarine cables– terrestrial TVterrestrial TV– cable TVcable TV– software developerssoftware developers– systems integratorssystems integrators
CEE 45%
Russia 32%
Central Asia7%
Telecoms TeamTelecoms Team
SEEC 32%
Regional6%
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EBRD Financing (1)EBRD Financing (1)
Sound Banking Principles
Transition Impact
Additionality
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EBRD Financing (2) EBRD Financing (2)
EBRD funds up to
– 35% of total project costs for a greenfield project
– 35% of long-term capitalisation of an established corporate
Usual minimum EBRD involvement is €5 million– Minimum project size is €15 million
– Lower financing requirements are met by financial intermediaries funded by EBRD
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EBRD Financing (3)EBRD Financing (3)
Mobilisation of financing
– Commercial financing
– Other IFIs
– Grants
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Telecoms Team ContactsTelecoms Team Contacts
David CooperSenior Banker
tel: +44 207 338 6831e-mail : [email protected]
Izzet R. GüneyTeam Director
tel: +44 207 338 6565e-mail : [email protected]
Team fax : +44 207 338 6674Team fax : +44 207 338 6674