The EBRD has played a major role in devising and funding the Joint International Financial Institution (IFI) Action Plan for Growth in Central and South Eastern Europe.
The Plan’s progress so far is a focus of this week’s annual meetings of the World Bank and the International Monetary Fund in Washington DC.
Here is a sample of EBRD projects which are part of the Joint Plan to support financial stability and boost lending to the real economy in Albania, Bosnia Herzegovina, Bulgaria, the Czech Republic, Croatia, Estonia, FYR Macedonia, Hungary, Kosovo, Latvia, Lithuania, Montenegro, Poland, Romania Serbia, Slovakia and Slovenia.
All the EBRD examples below date from the time of the Plan’s launch last November to July this year.
A €3 million loan by the EBRD is supporting the development of Biomashin, a Bulgarian manufacturer of equipment for the food-processing, pharmaceutical and chemical industries. The EBRD funds are used for the purchase of new high-precision equipment which will significantly increase efficiency by reducing production costs and time.
The loan is being provided under the Local Enterprise Facility, a vehicle for investments in small and medium-sized enterprises in south-eastern Europe which offers a wide range of financial instruments tailor-made to address the needs of the real economy in the countries of the region.
Since the start of the programme over 100 investments for a total amount of nearly €250 million have been made in the JIAP countries, 17 of them for an amount of €56 million from November 2012 to July 2013.
A €17 million loan is funding the expansion of Bingo, a local retailer in Bosnia and Herzegovina, which is expected to also boost local suppliers through increased demand for their goods and to benefit local customers. Founded in 1993 in Tuzla, Bingo is today one of the largest and most successful private companies in Bosnia and Herzegovina with 77 stores in both entities of the country. With a staff of almost 2,800 the company is also a major employer and a key investor in the country.
Foreign Direct Investment
A €20 million loan provided by the EBRD is supporting efforts to restart production at the steel factory in Sisak in central Croatia. The location has a long history of steel operations and has been a major employer. The Sisak Ironworks have been acquired the Italian company ABS, a subsidiary of the Danieli group, one of the global leaders in supplying steel plants. The EBRD loan is financing the restructuring and modernisation of the plant to produce highest world market standard steel.
The EBRD supported the asset transfer from Lithuania’s Ukio bank to Siauliu bank with a €20 million subordinated debt facility to strengthen the capital base of Siauliu bank after the regulator had order the discontinuation of Ukio bank’s operations in February. A swift response was imperative to avoid any destabilising impact on Lithuania’s financial sector.
The EBRD is investing up to €27 million in Avallon MBO Fund II, a specialised private equity fund focussed on investing in small and medium-sized management buyouts and management buy-ins predominantly in Poland but also in other countries in central and south eastern Europe. The EBRD is a cornerstone investor in the fund to support to the development of a sustainable private equity asset class in the region and acting as a catalyst to mobilise private institutional quality investors.
Local Capital Markets
A five-year local currency bond by Romania’s UniCredit Tiriac Bank for RON 550 million (€121 million equivalent) became the first issuance under the “Financial Institutions Bond Market Framework for Romania” in 2013. This was followed by second, RON 225 million bond issued by Raiffeisen Bank Romania. The EBRD subscribed 20 and 25 per cent, respectively, of these inaugural issues.
The programme is backing medium- to long-term bonds issued by financial institutions in Romania to allow for a diversification of sources of funding and provide for a better match between assets and liabilities.
Power and Energy
Key investments in the power sector of Montenegro, including a new transmission line from Lastva to Pljevlja, a new substation and the strengthening of the existing high voltage network near the Adriatic Coat, are boosted by a €60 million EBRD loan. The investments are a first step in the development of the power transmission corridor connecting Villanova in Italy with the Jaz peninsula in Montenegro with a 415 km 1 GW high voltage DC cable. The interconnection will be a key element in the energy strategy of Montenegro and its neighbours.
The donor-supported Kosovo Sustainable Energy Projects Framework was designed to improve the generation, use and supply of energy by encouraging small and medium-sized enterprises and private households to invest in energy efficiency technology and the rational use of energy. €8 million have already been committed to three partner banks.
An EBRD loan of €32.5 million to Klaipedos Smelte is supporting the transformation of the Lithuanian port of Klaipeda into a major regional transport hub. The loan is financing the purchase of container cranes, handling equipment and expansion of the existing terminal. Klaipeda is the most northerly deep-water and ice-free port on the eastern coast of the Baltic Sea and Lithuania’s biggest transport hub
Belgrade will benefit from the modernisation of the bus fleet operated by Gradsko saobraćajno preduzeće Beograd (GSP), the Serbian capital’s public transport company, through the acquisition of 400 new buses. The EBRD’s loan of up to €65 million will finance 200 low-floor articulated (18 metre) diesel buses, while the City and GSP will acquire the remaining buses in cooperation with local manufacturers. The new buses will be EURO-5 compliant and CO2 emissions alone are expected to drop by an estimated 35,000 tonnes per year.
The largest syndicated loan in Romania this year worth €225 million - arranged by the EBRD with €75 million for the Bank’s own account and €150 million syndicated - will enable COSMOTE Romania to finance the renewal of its licences and fulfill the payment for the spectrum allowing fourth generation (4G) mobile services. COSMOTE is the third-largest mobile operator in Romania and a subsidiary of the Hellenic Telecommunications Organization (OTE), the market leader in the region.
The EBRD is promoting and facilitating international trade to, from and within its region under its Trade Facilitation Programme by providing guarantees to international commercial banks thereby covering the political and commercial payment risk of transactions undertaken by participating banks.
A typical example was the export of electric lights from Bulgaria to Kosovo in the total amount of about EUR 6,000; the payment was secured by a bank payment guarantee with a tenor of 3 months, issued by an EBRD partner bank in Kosovo and guaranteed by a Confirming Bank under the TFP in Slovenia. An EBRD stand-by letter of credit covered 100% of the payment risk of the Issuing Bank to the Confirming Bank. Between November 2012 and July 2013, in the JIAP countries the programme facilitated 136 transactions with a total amount of €39 million.