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September 2013 EBRD funding criteria To be eligible for EBRD funding, the proje

September 2013 EBRD funding criteria To be eligible for EBRD funding, the project must: ► ►be located in an EBRD country of operations ► ►have strong commercial prospects ► ►involve significant equity contributions in-cash or in-kind from the project sponsor ► ►benefit the local economy and help develop the private sector ► ►satisfy banking and environmental standards. Project structure The EBRD tailors each project to the needs of the client and to the specific situation of the country, region and sector. The EBRD typically funds up to 35 per cent of the total project cost for a greenfield project or 35 per cent of the long-term capitalisation of the project company. The Bank requires significant equity contributions from the sponsors, which must equal or be greater than the EBRD’s investment. There must be additional funding from the sponsors, other co-financiers or generated through the EBRD’s syndications programme. Requirements for EBRD financing Guide to EBRD financing The EBRD is the largest single investor in the region and also mobilises significant foreign direct investment into its countries of operations. Regional expertise The EBRD has a strong presence in all of its countries of operations through a network of more than 30 local offices. Innovative financing solutions For each project it finances, the Bank assigns a dedicated team of specialists with specific sectoral, regional, legal and environmental skills. Strong appetite for risk The Bank draws on its government contacts, special creditor status and sizeable portfolio to assess and bear risk and to open the options for financing. Adding value The EBRD complements – rather than displaces – private sources of finance. The Bank invests only where it can provide added value, by investing in projects that could not otherwise attract financing on similar terms. Why the EBRD? At a glance Number of projects 3,833 Net business volume €82.2 billion Total project value €252 billion EBRD countries of operations Albania Armenia Azerbaijan Belarus Bosnia and Herzegovina Bulgaria Croatia Estonia FYR Macedonia Georgia Hungary Kazakhstan Kyrgyz Republic Kosovo Latvia Lithuania Moldova Mongolia Montenegro Poland Romania Russia Serbia Slovak Republic Slovenia Tajikistan Turkey Turkmenistan Ukraine Potential recipient countries Egypt, Jordan, Morocco, Tunisia Sectors supported by the EBRD Agribusiness Energy efficiency Financial institutions Manufacturing Municipal and environmental infrastructure Natural resources Power and energy Property and tourism Small and medium-sized enterprises Telecommunications, information technology and media Transport The EBRD does not finance Defence-related activities Tobacco industry Selected alcoholic products Substances banned by international law Stand-alone gambling facilities The EBRD is investing in changing people’s lives and environments from central Europe to central Asia and the southern and eastern Mediterranean. Working together with the private sector, we invest in projects, engage in policy dialogue and provide technical advice that fosters innovation and builds sustainable and open-market economies. EBRD financing for private sector projects generally ranges from €5 million to €250 million, in the form of loans or equity. The average EBRD investment is €25 million. Smaller projects may be financed through financial intermediaries or through special programmes for smaller direct investments in the less advanced countries. Loans The EBRD’s loans are structured with a high degree of flexibility to match client and project needs. The Bank suggests a suitable loan currency and interest rate. The basis for a loan is the expected cash flow of the project and the ability of the client to repay the loan over the agreed period. The credit risk can be taken entirely by the Bank or may be partly syndicated to the market. A loan may be secured by a borrower’s assets and/ or it may be converted into shares or be equity linked. Full details are negotiated with the client on a case-by-case basis. Loan features EBRD loans consist of the following features: ► ►a minimum amount of €5 million, although this can be smaller in some countries ► ►a fixed or floating rate ► ►senior, subordinated, mezzanine or convertible debt ► ►denominated in major foreign or some local currencies ► ►short to long-term maturities, from 1 to 15 years ► ►project-specific grace periods where necessary. Interest rates EBRD loans are priced competitively, based on current market rates, such as EURIBOR. The EBRD offers both fixed and floating interest rates (with a cap or collar). The EBRD does not subsidise projects, does not offer soft loans and the Bank does not compete with private banks. Fees and charges A margin above the base rate is added to reflect country risk and project-specific risk. This information is confidential to the client and the EBRD. In addition to the margin, the Bank charges the following fees and commissions: ► ►appraisal fee ► ►front-end commission and structuring fee, paid up-front ► ►syndication fee, where applicable ► ►commitment fee, payable on the committed but undisbursed loan amount ► ►loan conversion fee, paid at the time of interest rate, or currency conversion on the amount that is to be converted ► ►prepayment, cancellation and late payment fees where applicable. In line with commercial practice, sponsors are obliged to reimburse the EBRD for out-of-pocket expenses, such as fees for technical consultants, outside legal counsel and travel expenses. Other lending terms Full lending terms are negotiated with the client for each project. Recourse Recourse to a sponsor is not always required. However, the EBRD may seek specific performance and completion guarantees plus other forms of support from sponsors of the kind that are normal practice in limited-recourse financing. Insurance The EBRD requires project companies to obtain insurance against normally insurable risks. Examples include theft of assets, outbreak of fire, specific construction risks. The Bank does not require insurance against political risk or non-convertibility of the local currency. Security The EBRD usually requires the companies it finances to secure the loan with project assets. These can include: ► ►mortgage on fixed assets, such as land, plant and other buildings ► ►mortgage on movable assets, such as equipment and other business assets ► ►assignment of the company’s hard currency and domestic currency earnings ► ►pledge of the sponsor’s shares in the company ► ►assignment of the company’s insurance policy and other contractual benefits. Covenants Typical project finance covenants are required as part of the loan package. Such covenants, limiting indebtedness and specifying certain financial ratios and various other issues, will be negotiated. Loan repayment Repayment is normally in equal, semi- annual instalments. Longer maturities and uneven repayment schedules may be considered on an exceptional basis – for example, up to 15 years under mortgage-style authorisation for large infrastructure operations. Hedging possibilities The EBRD can help manage financial risks associated with a project’s assets and liabilities. This covers foreign exchange risk, interest rate risk and commodity price risk. Risk-hedging instruments include currency swaps, interest rate swaps, caps, collars and options and commodity swaps. Types of funding available Typical capitalisation structure EBRD 35% Foreign sponsor equity 25% Local sponsor equity 15% Other lenders 10% Syndicated loan 15% EBRD project cycle The EBRD project cycle consists of the following stages: Concept Review – The EBRD’s Operations Committee (OpsCom) approves the project concept and overall structure, including proposed financing structure and supporting obligations. At this stage, the EBRD and the client sign a mandate letter, which outlines the project plan, development expenses and responsibilities. Final Review – Once the basic business deal (including a signed term sheet) has been negotiated and all investigations have been substantially completed, the project receives a Final Review by OpsCom. Board Review – The EBRD President and operations team present the project to the Board of Directors for approval. Signing – The EBRD and the client sign the deal and it becomes legally binding. Disbursements – Once repayment conditions are agreed and the Bank’s conditions met, the funds are transferred from the Bank’s account to the client’s account. Repayments – The client repays the loan amount to the EBRD under an agreed schedule. Sale of equity – The Bank sells its equity investments on a non‑recourse basis. Final maturity – The final loan amount is due for repayment to the Bank. Completion – The loan has been fully repaid and/or the EBRD’s equity investment divested. Co-financing The EBRD tries to mobilise domestic and foreign capital because co‑financing increases the resources available for funding other projects and introduces borrowers to the international debt markets. Sources of co-financing include commercial banks, official co‑financiers (such as government agencies and bilateral financial institutions providing grants, parallel loans and equity), export credit agencies and other international financial institutions, such as the International Finance Corporation and the World Bank. The EBRD aims to broaden and deepen the co-financing base by increasing the number of commercial lenders, and by introducing new co-financing structures and new countries into the market. By being flexible and responding to the market, the Bank seeks to maximise the sources of finance available to clients and to structure the most appropriate forms of finance. The types of co-financing available include A/B loans (where the EBRD finances a portion of the loan and syndicates the remainder to commercial lenders), parallel loans, export credit agency uploads/Finance/ guide-to-financing.pdf