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EBRD steps up pace of investment in 2006
Transition process boosted as number of equity deals rises
The EBRD signed a record number of projects across its countries of operations
in 2006, making an unprecedented level of investment and promoting further the
process of economic and financial transformation by boosting its equity
participations.
Investments grew particularly strongly in Russia. Throughout the region, the
Bank increased its emphasis on projects that support energy efficiency and the
development of sustainable energy sources. The EBRD also stepped up its
programme of local currency funding and lending.
The EBRD’s total investments in 2006 rose to €4.9 billion from €4.3 billion a
year earlier and there were a record 301 projects, compared with 276 in 2005.
In 2006, 167 stand-alone projects were signed and 134 were made under
framework agreements. The methodology for calculating the number of projects
has been changed to include individual projects signed under framework
(multi-project) agreements, as well as independent projects. The old system
used a weighted measure that assigned proportional values rather than counting
each sub-project of a framework separately. Under this new methodology, there
were 156 standalone projects in 2005, compared with the 151 previously
reported.
The number of equity investment projects rose to 64, from 61 in 2005, while in
volume terms equity investments rose by 76 per cent to €1.0 billion, up from
€572 million in 2005.
The Bank, set up in 1991 to help the transition to the market economy of
countries in central Europe and the former Soviet Union, has now invested a
total €33.3 billion since its inception. The total amount of investment
mobilised in the region, including funds raised via commercial co-financing,
has now exceeded €100 billion, reaching €102.9 billion, compared with €94.4
billion at the end of 2005.
The EBRD’s 2006 earnings rose to €2.4 billion from a previous €1.5 billion,
mainly as a result of the realisation of previous equity investments. This
allowed for a significant addition to reserves to support future business
activities. Earnings also included nearly €800 million in unrealised gains on
share holdings, leaving around €1.6 billion in realised profit.
Reserves rose to €7.0 billion at the end of 2006 from €4.7 billion a year
earlier. Future earnings remain vulnerable to changes in the economic
environment and in financial markets.
In the course of 2006, the EBRD expanded its geographic reach, with Mongolia
joining the Bank as a country of operation last October. Following its
independence, Montenegro also became a separate country of operation, bringing
to 29 the number of countries where the EBRD is active.
Last year the Bank unveiled its strategy for the next five years, which
foresees a shift in its investments further to the east and south of its areas
of operations. This will result in a focus of activities on Russia, Ukraine,
Central Asia, the Caucasus, the Western Balkans and South East Europe along
with a decline in activity in Central Europe.
This trend was reflected in Russia, where investments rose to €1.9 billion
from €1.1 billion and spanned right across the country. Three quarters of the
Bank’s investments were outside the cities of Moscow and St Petersburg.
Russian commitments represented 38 per cent of total EBRD business volume in
2006, compared with 26 per cent the previous year. In support of the regional
and sector diversification of the economy, the Bank doubled its direct
investments in the industrial sector and contributed to strengthening and
consolidating the Russian financial sector. 75 per cent of investments in
Russia last year were with Russian-owned companies.
The Bank trebled its equity investments in Russia. These included a stake in
JSC Concern Sitronics, Russia’s largest high-tech industrial conglomerate, a
transaction underlining the Bank’s commitment to investments promoting the
commercialisation of Russian technology. It also took a 20 per cent stake in
the country’s first budget airline, Sky Express.
The rise in EBRD investments in Russia coincided with a doubling of Bank staff
in Moscow and plans to open three new regional offices in Russia in 2007 in
the South, in the Volga region and in Siberia.
Investments in Central Asia, south-eastern Europe and Western CIS and the
Caucasus took a 48 per cent share of overall business volume. Total
investments of €2.4 billion in this region were close to the record level
achieved in 2005.
The share of investments in central Europe and the Baltics dipped to 14 per
cent from 16 per cent, totalling €701 million.
The EBRD unveiled a major Sustainable Energy Initiative last year under which
the Bank will aim to invest at least €500 million per year between 2006 and
2008 in sustainable energy projects, with the bulk going to improving energy
efficiency. In 2006, the Bank invested close to €750 million in projects that
are helping energy utilities, companies and households to become more energy
efficient, a key goal in a region where in many countries energy costs are
rising and the wastage of energy remains endemic.
In support of its work to promote energy efficiency in its countries of
operations, the EBRD has to date provided €155 million to local banks in
Bulgaria to help entrepreneurs and households improve energy efficiency and
renewable energy. To date nearly 70 corporate projects and over 6,000
residential projects have been approved, and following this success a similar
initiative is now being rolled out in Ukraine. The Bank aims to do the same in
Croatia, Georgia, Romania, Russia and Slovakia.
This initiative also included the creation of the €165 million Multilateral
Carbon Credit Fund, set up in December 2006 in partnership with the EIB to cut
carbon emissions in the countries in which the Bank operates by financing
carbon emission reduction projects and generating carbon credits for MCCF
members, including governments and private businesses.
On March 13/14 the EBRD will host a conference bringing together the heads of
Multilateral Development Banks, high-ranking government officials and senior
corporate executives who will discuss concrete initiatives to combat climate
change in a partnership between the public and private sectors.
The Bank continued its drive to support the development of local capital
markets. In this context, the EBRD issued its second and third domestic rouble
bonds last year and followed this up at the start of 2007 with its first ever
rouble issue on the Eurobond markets. The Bank has now issued 19.5 billion
roubles worth of bonds and has been instrumental in establishing the Mosprime
money market index for use in the Rouble inter-bank, loan, mortgage and
derivative markets.
The rouble borrowing enabled the Bank to step up its critically important
domestic currency lending, with two landmark syndicated loans to power
utilities Mosenergo and Hydro OGK, both of which had maturities unseen
previously in the Russian domestic market.
Throughout its areas of activity, the EBRD is steadily increasing its
operations outside of the national capitals and main cities, a trend reflected
in the Bank’s decision to hold its Annual Meeting in May 2007 in Kazan, the
capital of the Russian Republic of Tatarstan.
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