1. BSTDB Financing Networks Transport Batumi, October 2011

2. Road Transport Finance Historically budgetary resources from the governments have been the major source of financing for infrastructure such as road projects. However, growth in the traffic requires continuous investment and improvement in the road network.

3. Difficulties of Road Transport Finance It requires large and long-term investment of capital, (i.e. construction, maintenance, overhead expenses) Financing through state budget is not only costly but also cumbersome Long procurement procedures create delays and cost overruns Private sector’s interest is low due to the complexity of the sector and long payback period

4. Why PPP’s Governments prefer PPPs: To avoid financing large capital costs directly To deliver such projects without cost overruns encountered in public procurement Private sector brings sharp business focus and expertise in the project

5. Why PPP’s PPPs also: Facilitate the project to be implemented on time and within budget. “No service / no pay” principle ensures that the private partner is incentivized for timely delivery and operation of project assets. Better overall governance by private sector entities.

6. Why PPP’s Under PPP contracts, commercial and technical risks such as the risks construction, operation, maintenance, traffic revenue, land acquisition, permit / approval, force majeure, political risks, and toll collection are shared between the concessionaire and the granting authority. Governments need to provide inducements, guarantees, and subsidies to privatize and support development of railway systems

7. How does PPP work: The specifications of the project are decided by the public entity The SPV has the right to build and operate the assets for a specified time period SPV is a private entity, which borrows the funds needed, constructs and purchases the assets, and is then paid by the public sector client to operate the assets as agreed under a contract. The public entity starts paying once the assets are fully operational, can withhold or reduce payments of the SPV fails to meet the agreed specifications. Payments from clients are used to remunerate the SPV’s borrowings, pay the operator, and residual profit goes to the shareholders of the SPV.

8. How does PPP work: Normally 20 to 30 years. During the contract period assets are owned by the SPV. At the end of the PPP the assets are transferred to the public entity. Financiers lend directly to the SPV. SPV shareholders may provide some guarantees to the lenders through their mother companies. The government body provides certain comforts to the lenders like minimum tarrifs, minimum traffic levels etc. Step-in rights given to lenders are important components of PPP agreements

9. PPP’s require: Since public interest is involved: Creation of necessary policy and legislative basis, so that it permits PPP initiatives at national and municipal level (especially regarding step-in rights) The deliverables should be clearly defined, the realistic cash-flow projections should be made The projects should be assessed within the framework of the overall rail infrastructure of the country Public subsidy and public funding should be determined; as it will be necessary to cover the costs As safety and technical aspects are crucial, all parties involved should have necessary expertise and competence to discharge their responsibilities PPP contract should be clear, fair, unambiguous and comprehensive.

10. Black Sea Trade and Development Bank Started operations in 1999 A regional development bank Financial pillar of BSEC (Black Sea Economic Cooperation organisation) Authorized share capital: SDR 3.0 billion Provides financing for public and private investments in the shareholding countries Headquarters in Greece (Thessaloniki)

11. Opportunities in the Region Significant investment needs in the region Growing regional cooperation and cross-country investments High potential for further growth Close ties with other IFIs and development banks Observer Status: KfW, EIB, DEG, NIB…

12. Black Sea Trade and Development Bank Shareholders BSTDB Shareholders of the Black Sea Trade and Development Bank (BSTDB): Albania Armenia Azerbaijan Bulgaria Georgia Greece Moldova Romania Russia Turkey Ukraine

13. BSTDB – Capital structure Greece 16.5% Moldova 1% Georgia 0.5% Bulgaria 13.5% Azerbaijan 5% Armenia 1% Albania 2%Ukraine 13.5% Turkey 16.5% Russia 16.5% Bulgaria 13.5%

14. BSTDB – Mission To foster the economic and social development of its shareholding countries To promote the co-operation among its member countries To mobilize resources to the Black Sea Region

15. BSTDB – Role Development impact: Public infrastructure development Environment protection Export development Jobs creation Productivity improvement Import substitution etc. Regional cooperation: trade, investments Resource mobilization: co-finances with commercial banks and IFIs (EBRD, IFC, etc.)

16. Priority sectors Transport Municipal infrastructure Telecommunications Energy General Industries

17. BSTDB Financing Transport Infrastructure No concessional lending Financing through: Direct senior loan Co-financing Syndication A/B Lending Technical Assistance Fund

18. Who can receive financing? Public Private PPP’s Entities, for activities / investments in any of the 11 shareholding countries of the BSTDB

19. Medium and Long Term Loans Amount For sovereign and sub-sovereign loans: no ceiling For private entities: maximum EUR 39 million, minimum EUR 5 million Maturity Maximum 15 years Decided on a case-by-case basis Grace period: normally up to 4 years Flexible pricing policy

20. Project and corporate finance – What can BSTDB finance? Public sector: Investments with hith development impact – e.g. transport infrastructure, municipal infrastructure etc. Private sector: Green-field investments Investments for modernisation and technology improvements Investments for expansion of production capacity Post-privatisation investments Working capital needs

21. 6) Disbursement 5) Signing 4) Board Approval 3) Final Review 2) Concept Clearance 1) Eligibility Review Approval process

22. 6) Disbursement 5) Signing 4) Board Approval 3) Final Review 2) Concept Clearance 1) Eligibility Review How long does it take from “first call” to signing? Avrg. 3 months, depending on availability of info

23. Criteria Borrower: Solid financial situation (debts, revenues, liquidity etc.) Ability to service current and foreseen debt Commitment to the Project (own financial and human resources allocated for the Project etc.) Project management ability (solid track record, adequate organisational arrangements in place etc.) Project: Project “maturity” (feasibility studey, environmental assessment, market analysis etc.) Technical feasibility, financial soundness Development impact Environmental impact

24. Security Requirement Standard pledge of shares, assets, etc., depending on the project Guarantee from acceptable corporates In a cross-border investment, the security can be based in the country of investment While possible, sovereign guarantee is not required

25. Why BSTDB? Stringent, but quick approval process No political or macroeconomic conditionality attached to BSTDB financing Team blending international and local expertise

26. What has BSTDB achieved so far? (signed operations) TOTAL EUR 1.700 million Project and corporate financeEUR 1.035 million SME financeEUR 495 million Trade financeEUR 119 million EquityEUR 51 million As of end July 2011

27. Financing Provided by sectors Energy 35% Financial institutions 17% General Industries Mining 2% Construction 2% Telecommunications 6% Mining 1% Financial Institutions 42% Energy 14% General Industries 23% Public Utilities and Transport 12%

28. Financing Provided – Examples: Adana Light Rail Transportation System Scope of the operation: Construction of 13.6 km bi-directoral light rail system for inner-city transportation under a turn-key contract. Total Project cost: USD 667 million BSTDB participation: USD 45 million Maturity: 10 years

29. Financing Provided – Examples: Adana Light Rail Transportation System Borrower: Adana Metropolitan Municipality Guarantor: 95% sovereign guarantee Co-Financiers: Several ECAs and international commercial banks like: SEB, ING, UBS, Nordic Investment Bank, Societe Generale, West LB and Vakifbank Contracters: ABB, Bombardier and Alarko

30. Financing Provided – Examples: Istanbul Metro Otogar – Olympic Village Line Scope of the operation: Extension of the existing metro system between Otogar – Bagcilar and Olympic Village with 17.6 km long double-track system Total Project cost: USD 532 million BSTDB participation: USD 21 million Borrower: Istanbul Electric Tramway and Tunnels Administration Guarantor: Istanbul Metropolitan Municipality Co-Financiers: Several international banks and ECAs Contracters: Gulermak – Dogus Consortium Maturity: 8 years

31. Financing Provided – Examples: Istanbul Metro Kadikoy - Kartal Line Scope of the operation: Construction of a double track system metro line of 21,020 m. to serve seventeen stations along the D-100 highway between Kadikoy and Kartal Total Project cost: EUR 751 million BSTDB participation: EUR 50 million Borrower: Istanbul Metropolitan Municipality Co-Financiers: Other Club banks: Fortis, Dexia, Calyonbank, Societe Generale, Unicredito, West LB, Vakifbank Contracters: Astaldi – Makyol – Gulermak Joint Venture Maturity: 10 years

32. Financing Provided – Examples: Ukrainian Railways Scope of the operation: Syndicated medium term loan facility for general corporate purposes, including renovation of rolling stock, modernization of track, upgrade and renovation of railway stations, depots and bridges Total Project cost: USD 300 million BSTDB participation: USD 36 million Borrower: Several Ukrainian State Railway Enterprises Guarantor: State Administration of Rail Transport of Ukraine

33. Financing Provided – Examples: Port of Poti – Oil Terminal Scope of the operation: Building a new terminal in Port of Poti, which is the least-cost export route for oil products from Caspian Sea to the black Sea, for trade of oil products between Caspian and Mediterranean countries Total Project cost: USD 33 million BSTDB participation: USD 10 million Borrower: Channel Energy Ltd (Georgia) Sponsors: Tower Holdings (Luxemburg), Delta Petrol Group (Turkey) Other Financiers: EBRD with USd 13 million Contracters: Ustay Construction Ltd (Turkey)

34. Financing Provided – Examples: Port of Ilyichevsk Scope of the operation: Establishing and financing of a grain terminal in the Port of Ilyichevsk, to serve as a leading grain handling facility in Ukraine Total Project cost: USD 27.2 million BSTDB participation: USD 9 million Borrower: East Agro Investment BVI Guarantor: Estron Corporation, Nicosia Maturity: 7 years

35. Whom to contact Orhan Aytemiz – Director Tel: (+30 2310) 290 439 Fax: (+30 2310) 290 469 E-mail: oaytemiz@bstdb.orgoaytemiz@bstdb.org info@bstdb.org Web site: www.bstdb.org