Financing the development of airports and related infrastructure by EBRD

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Financing the development of airports and
related infrastructure by EBRD
Robin Earle, Senior BankerTransport Team,
Infrastructure Business Group,Bratislava 23
November 2005
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What EBRD brings to its Clients?

• Strong, internationally recognised, neutral
  financial partner with long-term perspective and
  honest broker role between public and private
  partners
• Track record of developing financing solutions
  tailored to needs of companies
  
• Extending boundaries and breaking new grounds
  with innovative financing structures willing to
  share risks including political risks (customized
  to each transaction)
• Preferred Creditor Status in all countries of
  operation and excellent working relationship with
  commercial banks and governments

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What makes EBRD different toother IFIs?

• Unique mandate - both political and economic to
  promote transition to market-based economies by
  investing mainly in the private sector
  
• IFI with investment banking skills, invests
  primarily in private sector projects with
  extensive offer of financial products
  
• Specialised knowledge of central and eastern
  Europe and CIS. Dedicated teams with expertise in
  a variety of sectors and countries combining
  investment and commercial banking expertise with
  local knowledge and contacts
• EBRD is the largest investor in most of its
  countries of operation
  

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EBRD risk profile
Sponsors
EBRD

• Expertise and sound management
• Take operational, market and construction risks

• Takes financial risks
• Takes political risks
• Takes long maturity
• Shares equity risk

EBDR applies sound banking principles. All
projects must be economically and financially
viable. Risk sharing to achieve debt capacity
maximisation and risk compartmentalisation
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EBRD Transport Team

• Includes roads, railways, aviation, maritime,
  aerospace
  
• Product range covers entire spectrum from
  sovereign leading to private equity
  
• Sovereign/sovereign guaranteed loans
• Corporate lending
• Concession financing
• Receivable lending
• Assetbacked
• Equity
• Private sector financing structures increasingly
  adopted by public sector clients
  

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Transport Team Portfolio
By sector
By region
Aviation 19 projects (22)
Ports Shipping 12 projects (13)
Central Europe 26 projects (30)
Central Asia 12 projects (13)
Other 3 projects (3)
Roads 32 projects (36)
Railways 23 projects (26)
Russia 11 projects (12)
SEEC 40 projects (45)
Total portfolio of EUR 2.5 bn with 89 projects
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EBRD experience in Airport Sector

• Total of EUR 297m with 12 projects (EBRD EUR
  181.2m)
  
• Tallinn Airport Rehabilitation Project (ESTONIA)
• CSA (CZECH Rep.)
• Air Navigation System (CROATIA)
• Riga International Airport Rehabilitation Project
  (LATVIA)
  
• Skopje Airport Rehabilitation Project (FYR
  MACEDONIA)
  
• Tbilisi Airport Refurbishment (GEORGIA)
• Tallinn Airport Passenger Terminal Reconstruction
  (ESTONIA)
  
• Ukraine International Airlines (UKRAINE)
• Tirana International Airport (ALBANIA)
• Montenegro Airports Urgent Rehabilitation Plan
  (SERBIA MONTENEGRO)
  
• TSA Air Fleet Upgrade Project (TAJIKISTAN)
• Future Air Traffic Management Modernisation
  (SERBIA MONTENEGRO)
  

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EBRDs impact in PPPs

• EBRDs involvement in PPPs has achieved the
  Banks transition and additionality objectives
  and more recently has given rise to high quality
  portfolio assets
• Even the instances where EBRD rejects PPP
  projects, such as the Bucharest-Brasov road in
  Romania, send clear messages to the countries of
  operation and the market that these large and
  complex projects will not find finance if
  ill-prepared

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Example of EBRD experience in PPPs

• M1-M15 tolled motorway (Hungary) true
  demonstration of risk taking by private sector
  where equity was lost the concessionaire was
  replaced with a state owned concession company
  and the lenders took a 10 haircut
• M5 Motorway (Hungary) Low traffic volumes -
  Banks timely refinancing puts concessionaire on
  sound financial footing. Government wants rapid
  abolition of tolls to bring motorway into
  vignette system so EBRD provides interim finance
  to avoid nationalisation and allow negotiation
  of availability payments based concession
  agreement. Bank participates in renegotiation of
  concession to ensure bankable document

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Example of EBRD experience in PPPs

• M6 Motorway (Hungary) First PPP tendered as an
  availability payments concession in Banks
  countries of operation. Because of competitive
  tender, sponsors brought in EBRD after award of
  the concession. Sponsors recognise value added of
  Banks presence at an intermediate level before
  general syndication
• Grandi Stazioni Banks first equity investment
  in a transport PPP. Bank relies on dividend
  income not equity exit. Project involves
  rehabilitation commercial exploitation of
  Prague Main, Marianske Lazne Karlovy Vary
  stations. Czech national railways tendered
  30-year concession in line with the Banks
  requirements. Local commercial banks provide the
  long-term debt financing

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EBRD experience in PPP financing in the airport
sector Case study Concession of Mother
Teresa Tirana International Airport
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Successful Tendering Process

• In February 2003, the Albanian Government (GoA)
  launched a tender for the concession to design,
  build, finance and operate the Mother Teresa
  International Airport for a 20 year period
• The Bank provided support during the tendering
  process hosting meetings with potential bidders
  to promote market awareness and raise interest in
  the tender
• In addition, the GoA engaged adequate financial,
  legal and technical advisors to assist them
  during the tendering and negotiation process

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Successful Tendering Process (cont)

• Four consortia comprised of highly-regarded
  companies in the airport sector were shortlisted
  of which the group led by Hochtief AirPort GmbH
  was selected as preferred bidder in January 2004
• The Bank reviewed the tender process and the
  outcome of the Concession which was concluded to
  be satisfactory and in compliance with the Banks
  Procurement Policies and Rules
• It sets out an excellent example for Albania and
  the whole region of how a PPP project has been
  successfully handled and negotiated (financial
  close 23 March 2005)

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The Participants

• Shareholders
• Hochtief Airport GmbH (Germany), the Strategic
  Partner responsible for the overall management of
  the project
  
• DEG (Germany) a wholly owned subsidiary of KfW
• Albanian American Enterprise Fund (USA)
• Lenders
• EBRD as Principal Lender and parallel loans
  of DEG (Germany), American Bank of Albania
  (Albania), Alpha Bank (Greece Tirana Branch)
  

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The Project Structure
AAEF Financial Partner
DEG Financial Partner
HTA Strategic Majority Partner
21,3
31,7
47
Shareholders Agreement
Senior Debt
TAP Sh. P.K. New Airport Concessionaire
EBRD
Concession Agreement
DEG
Loan Agreements
Alpha
Albanian Government
Management
Am. Bank
Mother Teresa International Airport
Sovereign Loan
EBRD
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The Financing Plan

• Senior debt facility of EUR 33.9 million to TAP
  comprising
  
• Loan 1 EUR 24.9 million 12 year tenor on a
  project finance basis
  
• Loan 2 EUR 9 million 15 year tenor sovereign
  gtee (EBRD only)

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Business case Traffic Projections
Historic Traffic 561,000 pax in 2003 and 10,638
ATM Forecast traffic over 1.5 m pax by 2017 a
nd 21,030 ATM
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Revenue Mix Projections
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Conclusions

• EBRD has a wide experience in financing airports
  and related infrastructure and adds value to the
  transaction with its long standing presence and
  reputation in The region, in particular,
  extensive knowledge at municipal and regional
  level
• Ultimately, airport performance depends mainly on
  the ability to maximise infrastructure
  utilization and service levels
  
• EBRD can assist in the development of airports
  and the challenge to upgrade mainly regional
  infrastructure to meet perspective of high
  traffic growth expected at regional airports
  which are attracting international interest
  potentially from LCC

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Information and contacts at the EBRD

Riccardo Puliti Director, Transport Tel
44 207 338 7379
e-mail pulitir_at_ebrd.com
Robin Earle Senior Banker, Transport Tel
44 207 338 7209
e-mail earler_at_ebrd.com
www.ebrd.com