European Hydropower Summit Session IV-Small Hydro in Balkan Region (Albania, Bosnia & Herzegovina, and Republic of Macedonia) Bucharest, February 28, 2012 Dimitar Dimitrovski, Policy/Legal Specialist Balkan Renewable Energy Program (BREP) 1

IFC is a Member of the World Bank Group Tirana 4 IBRD International Bank for Reconstruction and Development IDA International Development Association IFC International Finance Corporation MIGA Multilateral Investment and Guarantee Agency To promote institutional, legal and regulatory reform Governments of poorest countries with per capita income of less than $1,025 - Technical assistance - Interest Free Loans - Policy Advice To promote private sector development Private companies in 179 member countries - Equity/Quasi-Equity - Long-term Loans - Risk Management - Advisory Services To reduce political investment risk Foreign investors in member countries - Political Risk Insurance Est. 1945Est. 1960Est. 1956Est Role: Clients: Products: To promote institutional, legal and regulatory reform Governments of member countries with per capita income between $1,025 and $6, Technical assistance - Loans - Policy Advice What we do?Investment Services Advisory Services Asset Management Shared Mission: To Promote Economic Development and Reduce Poverty 2

IFC Advisory Services Business Lines in Balkan Region Tirana 4 SBA Sustainable Business Advisory PPPs Public Private Partnerships IC Investment Climate A2F Access to Finance Balkan Renewable Energy Program SBA Sustainable Business Advisory Bosnia & Herzegovina Republic of Macedonia AL BIH MK

Balkan Renewable Energy Program (BREP) – Brief Description GOAL To fully enable creation of RE/SHPP market in Albania, Bosnia & Herzegovina, and Republic of Macedonia; To support development and financing of SHPPs in the three countries. OBJECTIVES (COMPONENTS) Improvement of existing RE regulatory framework; Assistance to SHPP sponsors; Assistance to financial institutions (banks). 4

BREP Program Identified Stakeholders FINANCIAL INSTITUTIONS -Local banks, -International FIs (IBRD, IFC, EBRD, EIB, KfW). TECHNICAL SUPPORT -Manufacturing companies, -Engineering and Consulting companies, -IFIs Advisory Services and Technical Assistance. SPONSORS PUBLIC SECTOR -Government, -Agencies, -Power companies, -Municipalities. 5

Support to Public Stakeholders (governments, regulatory bodies): To align national regulation with EU – electricity and RE; To fulfill obligations in accordance to Energy Community Treaty of SEE (creation of regional electricity market); To increase transparency of concessions granting procedure (credibility). Support to RE Sponsors: To increase “bankability” of projects; To decrease collateral requirements; To reduce technical and commercial risks. Support to Local Banks: To make predictable cash flow analysis; To reduce loan’s regulatory risk; To create conditions for project financing. Why do we support different stakeholders? 6

Regulatory Framework Improvement MAIN ACTIVITIES General In-depth research of existing framework; Regional knowledge and best practice exchange; Alignment with EU/Energy Community Treaty requirements. Specific Developing/Improvement of feed-in tariff systems; Improvement of PPA with “take-or-pay” clause integration; Full implementation of “step-in” rights; Improvement of SHPP sponsor selection criteria. 7

Assistance to SHPP Sponsors MAIN ACTIVITIES General B2B matchmaking events in cooperation with chambers of commerce; Regional knowledge and best practice exchange. Specific Cross-check of existing SHPP designs; Workshops on SHPP design and modern technologies; Support to the concessionaire (sponsor) associations; Providing tools and advices on SHPP projects bundling. 8

Assistance to Financial Institutions (FIs) MAIN ACTIVITIES General Country level assistance to financial institutions; Regional knowledge and best practice exchange. Specific Development of SHPP financing manual; Development of template for SHPP cash-flow projections; In-depth support for selected FIs; Case studies to promote SHPP investment by FI sector. 9

Outline of IFC’s IS Investment Products Senior Debt & Equivalents Equity Mezzanine / Quasi Equity Senior Debt (corporate finance, project finance) Fixed/floating rates, US$, Euro and local currencies available Commercial rates, repayment tailored to project/company needs Long maturities: 8-20 years, appropriate grace periods Range of security packages suited to project/country Mobilization of funds from other lenders and investors, through cofinancings, syndications, underwritings and guarantees Subordinated loans Income participating loans Convertibles Other hybrid instruments Corporate and JV Typically 5-15% shareholding (not to exceed 20% of total equity) Long-term investor, typically 6-8 year holding period Not just financial investor, adding to shareholder value Usually no seat on board Infraventures (early equity investments) Financial Products - From Equity to Debt 10

Results to Date? Legislative package in Albania and in Federation of BIH in adoption procedure: RE Law; Concessions Law; Standardized Concession Contract; Standardized PPA and Standardized Grid Connection Agreement. Database of promising SHPP sites in Albania on sell. Ongoing discussion with FIs in Albania, Bosnia & Herzegovina, and Republic of Macedonia for RE dedicated credit lines. IFC Investment Services committed its first investment in equity in SHPPs in Albania. 12

IFC’s Balkan Renewable Energy Program Team Contacts BREP Program Manager Nebojsa Arsenijevic Albania Bajame Sefa, BREP Finance Specialist Republic of Macedonia Dimitar Dimitrovski, BREP Policy/Legal Specialist Bosnia & Herzegovina Dzenan Malovic, BREP Technical Specialist Denis Mesihovic, BREP Client Relationship Specialist 13