EBRD investment strategy for energy

projects in SE Europe September 2016

Introduction to the EBRD

An international financial institution established in 1991, owned by 65 countries and 2 inter-governmental organisations (EU and EIB)

Invests in 36 countries

Capital base of over €30 billion

Over €107 billion invested through 4470 projects

In 2015, € 9.4 billion in 381 projects

AAA Rating

Promotes transition to market economies by investing mainly in the private sector

Encourages environmentally sound and sustainable development

Where we invest

The EBRD and its objectives

Objectives:

• To promote transition to market economies by investing mainly in the private

sector

• To mobilise significant foreign direct investment and facilitate inward and cross

border investments in the region

• To support market focused reforms, privatizations

• Promotes policy dialogue with regards to investment climate, business and

policy matter

• To encourage environmentally sound and financially sustainable development

3

Benefits of working with the EBRD

4

• Flexible deal structure

• Debt finance to both public and private sector

• Syndication under preferred creditor status

• Catalyst to access additional debt

• LT (up to 10y or more) or ST revolving

• Floating/ Fixed rates

• Choice of currencies (€, US$, RUB, PLN, RON etc.)

• Support of strategic investors

• Perception of quality investment

• Sector expertise through Board of Directors

• Good corporate governance

• Catalyst to access additional equity

• Positioning as neutral party

• Common stock, preferred, mezzanine

• Minority position only (up to 35%)

• Strong, internationally recognized partner with long term perspective

• AAA rated, commercially focused

• Mitigation of political and regulatory risks

• Policy dialogue with government and regulators

• Grant-funded technical assistance

• Finance and operations monitoring

Shareholder ’ s Value

EBRD value - added

Equity Financing

LT Debt Financing

Shareholder

Value

-

EBRD

Value-added

Equity Debt

• The operation is located in EBRD countries of operation

• Investments have a beneficial effect on the local economy and supports

transition

• We are additional, i.e. not “crowding out” private money

• The project makes economic sense - no “soft loans” or grants

• Small size (<€5m for EBRD) is difficult directly from EBRD but special

facilities are available mainly for various regions e.g. Western Balkans,

Cyprus

• Compliance over time with EU environmental standards

EBRD basic project criteria

5

Power and Energy and Natural Resources

financing guidelines

• Maturities between 5 to 15 years

• Flexibility on commitment amounts (but up to 35% for Project Financing)

• IFI public procurement rules for works goods and service and competitive procurement for private partners of PPP arrangements

• Market pricing and security structures

• Local currency, where possible

• Syndication to commercial banks, where possible or other IFIs

• Equity investments, where appropriate, e.g during privatizations along side a strategic investor.

6

7

A key investor in the extractive industries sector

• Long track record:

167 projects for a total of

EUR 7.16 billion net

cumulative investment.

• Natural Resources Team:

30 bankers distributed

across the EBRD region:

o Permanent presence in

Russia, Kazakhstan,

Mongolia, Ukraine,

Egypt, Turkey and

Bulgaria.

o 2 in-house mining and

petroleum engineers

involved in technical

appraisal, due diligence

and monitoring.

o Access to additional

expertise (consultants).

• Key sectors:

o Oil & Gas up-, mid-, and

downstream.

o Mining and services.

-

200

400

600

800

1,000

1,200

1,400

1,600

2011 2012 2013 2014 2015

Mining

O&G

Signed business volume

6%

7%

30%

9%

30%

18% S. E. Mediterranean

Russia

E. Eur. Caucasus

S. E. Europe

Central Asia

Central Europe

Operating assets by instrument

Operating assets by sub-sector Portfolio by region

EU

R m

illio

n

74%

26%

O&G

Mining

9%

91%

Equity

Debt

Introduction to EBRD EBRD Natural Resources Track Record Working Together

Exploration / Start-up Development/early production Mature/expansion

Oil and gas

Mining

Equity /

Mezzanine

Debt

Exploration Development/early production Mature/expansion

Debt

Equity /

Mezzanine

• Flexible financing

solutions:

Reserve based

lending, trade

finance, convertible

debt, early equity are

some examples of

the Bank`s wide

product range.

• Support across

stages of

development.

The EBRD supports

strong sponsors in

pre-development

stage financing,

mine/field

development, project

expansion and

services providers .

8

Financing across the Natural Resources value chain

Introduction to EBRD EBRD Natural Resources Track Record Working Together

EBRD – Power and Energy Utilities

EBRD’s Power team works closely as a trusted partner to

clients and governments in:

• Promoting renewable and sustainable energy through

direct financing an policy dialogue

• Supporting sector reforms and allowing market principles

to develop (e.g. increased competition, market

liberalisation, increased private ownership)

• Strengthening frameworks and infrastructure that lead to

regionalisation (eg. trans-border transmission lines,

regional trading hubs) but also integration of renewable

energy

• Supporting the deployment of new technology e.g. smart

metering

9

Team of ca. 35 bankers, based in London, Almaty, Amman, Belgrade, Budapest,

Bucharest, Cairo, Istanbul, Kiev, Moscow, Tbilisi and Warsaw

• Cumulative EBRD financing in the power

and energy sector since 1992 has

exceeded EUR 11bn, spread across 228

projects. Total value of these projects is

c.EUR 39bn.

• In 2015 EBRD invested over EUR 1.2

billion in 20 projects in the power & energy

sector.

• In each of the last four years, annual

power & energy investments exceeded

EUR 1bn and at least 20% of those funds

went towards renewable energy generation

projects.

• EBRD power investments cover electricity

generation, transmission, distribution,

renewable power, large hydro and natural

gas distribution.

44%

12%

14%

19%

9%

2%

Electric Generation

Electric Transmission

Electric Distribution

Renewable Power

Large Hydro

Natural Gas Distribution

0

2

4

6

8

10

12

0

0.2

0.4

0.6

0.8

1

1.2

1.4 Net c

um

ula

tive

Com

mitm

en

ts

An

nu

al C

om

mitm

en

t

Annual commitment Net Cumulative Commitments

Commitments in € billion

EBRD – Power and Energy Utilities

10

Financing by Sector (1991 – 2015)

28 September, 2016

• Privatisations: Made key investments in

power and gas privatisations in Bulgaria,

Moldova, Poland, Romania and Turkey.

• IPPs are a key focus

• In 2015 the EBRD signed €590mn of

financing for 13 renewables deals with a

total gross project value of €2.2bn.

• Renewable energy technologies financed

since 2011 include primarily onshore wind

(57%), with geothermal (11%), small hydro

(8%), solar (8%) and biomass (7%).

• Award winning transactions include

Kirikkale CCGT (Turkey), Dariali hydro

power plant (Georgia), and Ma’an Solar

(Jordan).

Unaudited as at YE2015

Note: Renewable power excluding new build large hydro

Source: EBRD data

Power and Energy Utilities –

Financings by Region

28 September, 2016 11

25%

18%

17%

19%

8%

7% 6%

Southeastern Europe

Russia

Central Europe & Baltics

Eastern Europe & Caucasus

Central Asia

Turkey

Southern & Eastern

Mediterranean

Financing by Region

(1991 – 2015)

Renewables Financing by Region

(2011–2015)

24%

14%

23%

6%

5%

6%

3%

2%

17% Poland

Romania

Turkey

Regional

Ukraine

Kazakhstan

Serbia

Mongolia

Others

12

Technical

• Feasibility study

• Completion risk

• Production capacity

• Reserves report

• Management

Environ. & Social

• Air / water pollution

• Discharge

• Health & Safety

• Communities

• Management systems

• ESAP / Gap Analysis

Market

• Supply-demand

• Competitors

• Price projections

• FX exposure

Legal & Contracts

• Security

• Charter / Incorporation

• Ownership and title

• Licenses, permits

• Legal agreements

• Insurance

EBRD

Due Diligence

Process

Concept Review

Structure Review

Final Review

Board Approval

Signing

Due Diligence

Energy Audit

Term Sheet

KYC

Final

Documentation

Ou

r a

pp

rova

l p

roce

ss

Approval process and due diligence

• Historical financials

• Projections

• Financial Model

• Credit Ratios

Financial

Introduction to EBRD EBRD Natural Resources Track Record Working Together

Selected

Cases

EBRD transactions: Case Studies

Upstream Oil & Gas and Oil Field Services

14

07900522207

Project

Summary

15

2016 Signed in

EBRD Finance

USD 75 million senior loan and a USD 20 million subordinated

loan to Energean Oil & Gas, the only private upstream oil and

gas producer in Greece.

Project

USD 186 million for development of two projects, the Prinos

and Epsilon oil fields off northern Greece, and funding of

energy efficiency investment programme.

Environmental Impact

Both projects will help the company set higher standards for

environmental, health and safety management and support

the Greek government to improve the regulatory framework for

offshore operations.

Transition Impact

(1) Largest investment in the Greek upstream sector,

strengthening local business during the recovery period (2)

Introduction of new technologies for operational efficiencies.

(3) Technical support to the Greek government to achieve

international best practice in the oil and gas sector.

Link to Project Summary Document 1 / Link to PSD 2

Energean Oil & Gas, Greece – Upstream oil and gas field development

Project

Summary

16

2015 Signed in

EBRD Finance

USD 40 million loan to Merlon Petroleum El Fayum, an

independent upstream oil & Gas company operating in Egypt.

Project

USD 80 million investment programme, including investments

to reduce associated petroleum gas (APG) flaring, and capital

expenditures for field development.

Environmental Impact

Comprehensive Environmental & Social Action Plan (ESAP)

agreed with the client. Reduction in the flaring of APG and

carbon emissions through the implementation of an APG

utilisation programme. Improvement of the company’s

chemical and waste storage facilities.

Transition Impact

(1) Support of private sector development and increased

competition in the oil and gas sector. (2) Demonstration of

new technologies to capture APG. (3) High standards of

transparency and disclosure of payments to the Egyptian

authorities. (4) Continued Policy Dialogue efforts in relation to

APG utilisation and abatement in Egypt.

Link to Project Summary Document

Merlon, Egypt – Upstream offshore oil and gas field development

Project

Summary

17

2013 Signed in

EBRD finance

USD 40 million long term loan and USD 20 million convertible

note to Serinus Energy Inc, a Canadian mid-sized oil and gas

company resulting from the merger between Kulczyk Oil

Ventures (KOV) and Winstar Resources.

Project

USD 166 million investment plan for the development of the

Company’s Tunisian oil and gas operations.

Environmental Impact

Introduction of Environmental & Social Action Plan envisaging:

improvements in staff trainings, cycling of drilling mud, water

efficiency, emergency planning, stakeholder engagement, air

and water pollution monitoring, treatment waste. KOV’s HR

policies have been aligned with Winstar’s own policies.

Transition Impact

(1) Support to a private independent hydrocarbons producer

in Tunisia, where state-owned enterprise is still dominant. (2)

Demonstration of operational efficiency and productivity

gains. (3) Transfer of geological and operational know-how

from the new owner. (4) Increased revenue transparency.

Link to Project Summary Document

Serinus Energy, Tunisia – Post-merger integration and expansion

Project

Summary

18

2013 Signed in

Romgaz S.A., Romania – Privatization of a state-owned operator

EBRD Finance

RON equivalent investment of EUR 50 million-worth of

ordinary shares in the IPO of Societatea Națională de Gaze

Naturale Romgaz S.A. (Romgaz) in exchange of a 1.9% stake.

Romgaz shares are dual listed on the Bucharest Stock

Exchange (BSE) and the London Stock Exchange (via GDRs)

Project

Romgaz, a state controlled joint stock company, is Romania’s

largest gas producer. The purpose of the project is to assist

Romgaz to improve its corporate governance, internal control

systems and environmental management practices.

Transition Impact

(1) Through the IPO the Ministry of Economy reduced its

holding from 85% to 70%, which increased the private sector

participation in Romania’s energy sector and contributed to

the development of Romania’s capital markets. (2) Improved

corporate governance standards through the implementation

of a Corporate Governance Action Plan, prepared jointly by the

Bank and the Company, and included in the IPO prospectus

Link to Project Summary Document

Link to Press Release

Project

Summary

19

2009 Signed in

Bankers Petroleum, Albania – Environmental remediation

EBRD Finance

USD 55 million borrowing-base loan (BBL) co-financed with IFC,

USD 5 million remediation loan plus CAD 12 million equity to

Bankers Petroleum, a Canadian oil and gas company. In 2013,

the BBL was increased to USD 100 million.

Project

USD 130 million initial costs (extension: USD 439 million) to

expand and modernise the Patos Marinza oil field in southern

Albania, one of the largest onshore oil deposits in Europe.

Environmental Impact

Remediation of environmental damage and long-standing

issues (leakages and spills) around the heavily contaminated

Patos Marinza field. Improved life conditions of nearby

residents resulting from reduced pollution.

Transition Impact

(1) Support private investment in the Albanian oil sector. (2)

Demonstration of higher standards for environmental

management. (3) Increased tax revenue transparency. (4)

Technical Cooperation project (EUR 50,000) to improve

social/retrenchment practices by the Albanian authorities.

Link to Project Summary Document

EBRD transactions: Case Studies

Midstream Oil & Gas: Gas Trade, Transmission, Storage and LNG Transportation

20

Project

Summary

21

2016 Signed in

EBRD Finance

USD 94 million EBRD financing, consisting of a USD 71.9

million senior loan and a USD 21.8 million mezzanine facility

to Sonker Bunkering Company SAE (Sonker), a private

hydrocarbon storage and trans-shipment company owned by

the Amiral Holding and the Egyptian Government. The EBRD

financing is part of a larger package with IFC and CIB.

Project

USD 504 million for the construction and operation of a bulk

liquids terminal at the port of Sokhna, on the Red Sea. This

infrastructure project is critical to Egypt’s energy security to

meet its requirement for gasoil, LPG and LNG imports.

Environmental Impact

Comprehensive Environmental & Social Action Plan (ESAP) has

been agreed with the client.

Transition Impact

(1) Promote private ownership in Egypt as Sonker is one of the

few independent private players in the sector. (2) Demonstrate

the benefits of efficient operation of the hydrocarbons import

handling sector. (3) Standards of corporate governance.

Link to Project Summary Document

Sonker, Egypt – Development of a bulk liquids terminal

Project

Summary

22

2010 Signed in

BH-Gas, Bosnia-Herzegovina –Gas pipeline development

EBRD Finance

EUR 19 million senior loan to BH-Gas d.o.o. Sarajevo, a state-

owned company active in transport and wholesale of natural

gas in the Federation of Bosnia and Herzegovina.

Project

USD 23.5 million project for the construction of new 40km

high-pressured natural gas transport pipeline to enable

natural gas supply to four municipalities in Central Bosnia

Canton providing clean and efficient alternative fuel supply

Environmental Impact

A comprehensive Environmental & Social Action Plan has

been agreed with the Bank. The pipeline will provide an

alternative clean energy source and impact CO2 emissions.

Transition Impact

(1) Support reform of the natural gas sector in Bosnia and

Herzegovina. (2) Support through Technical Cooperation the

competitive environment in the gas infrastructure sector by

enabling private companies to participate in public tenders on

an equal basis. (3) Setting standards for environmental,

health and safety management and procurement.

Link to Project Summary Document / Press Release

Project

Summary

23

2010 Signed in

Srbijagas, Serbia – Gas network rehabilitation / Storage development

EBRD Finance

EUR 150 million senior sovereign-guaranteed loan to

Srbijagas, which is engaged in natural gas transmission,

distribution, storage and trade and is 100% owned by the

Republic of Serbia.

Project

EUR 150 million project to rehabilitate 40% of Serbia’s gas

transmission network and develop a new gas storage facility.

Through the financing, EBRD also supports the reorganization

and financial restructuring of Srbijagas and support the gas

sector reform in the country.

Transition Impact

(1) Support to the ongoing unbundling process by gradually

separating and auditing accounts, creating separate

management teams and legally separating transport and

trade activities. (2) Demonstration of successful financial and

operational restructuring. (3) Government's commitment to

pass amendments to the energy law and increase the

independence of the regulator and secure third party access

to the country’s transmission and storage infrastructure.

Project Summary Document / Press Rel. 1 / Press Rel. 2

Project

Summary

24

2009 Signed in

Plinacro, Croatia – Acquisition of strategic gas storage assets

EBRD Finance

EUR 70 million senior corporate loan secured with a sovereign

guarantee to Plinacro d.o.o., a state-owned company and the

Croatian natural gas transmission system operator.

Project

Financing of the acquisition of Podzemno Skladiste Plina

d.o.o., a company that owns a strategic underground gas

storage facility at Okoli. The acquisition of Okoli will enable

Plinacro to implement non-discriminative third party access to

storage gas supply.

Environmental Impact

A comprehensive Environmental & Social Action Plan (ESAP)

was agreed with the client. In addition, a Stakeholders

Engagement Plan (SEP) was prepared.

Transition Impact

(1) Promote improvements in the efficiency of the gas storage

and supply services, including commitment to rehabilitation

and expansion of the storage facility. (2) Improvements in the

regulatory framework for gas storage and gas market activities

in Croatia.

Link to Project Summary Document / Press Release

EBRD transactions: Case Studies

Downstream: Petroleum Refining

25

Project

Summary

26

2016 Signed in

EBRD Finance

USD 150 million loan to Tüpraş, Turkey’s largest industrial

company and the owner of the country’s four active refineries.

Project

USD 232 million resources efficiency programme, including a

new on-site thermal power plant, waste heat recovery system,

stack gas treatment, water treatment plant, new fluid catalytic

cracker and hydrocracker unit at Kirikkale and Izmir plants.

Environmental Impact

Reduction in NOx and CO2 emissions (270,000 tonnes/year)

and water consumption (2.6 mcm/year) as a direct result of

the project. Comprehensive Environmental & Social Action

Plan (ESAP) to bring the plants in line with EU standards.

Transition Impact

(1) Largest resource-efficiency programme in the Turkish

industrial sector to date, fully in line with the Bank’s Green

Economy Transition approach. (2) Demonstration of increased

competitiveness stemming from efficiency upgrades. (3)

Demonstration of OHS standards in line with EU Seveso III

directive and beyond national requirements.

Link to Project Summary Document

Tüpraş, Turkey – Resource efficiency investment programme

Project

Summary

27

2010 Signed in

INA, Croatia –Energy efficiency and modernization programme

EBRD Finance

EUR 210 million loans from EBRD (EUR 150 million), Cordiant

Emerging Fund of Canada (EUR 10 million) and ICF Debt Pool

(EUR 50 million) to INA, a Croatian integrated oil company.

Project

First stage of INA’s refinery modernization programme,

including: (i) introduction of modern technologies and

improved business practices, (ii) implementation of energy

efficiency sub-projects identified through the EBRD-led energy

audit, and (iii) implementation of an environmental

remediation programme and prevention at INA’s refineries.

Environmental Impact

Upgrade of environmental practices to comply with EBRD

requirements, including: air monitoring, wastewater treatment

systems, storage and handling of waste and completion of soil

and groundwater quality assessments.

Transition Impact

(1) Increased competition in the sector and introduction of

modern technology and improved practices leading to higher

efficiencies. (2) Technical and marketing know-how transfers.

Link to Project Summary Document

Project

Summary

28

2000 Signed in

Hellenic Petroleum, Regional – Feedstock supply pipeline

EBRD Finance

USD 50 million A/B loan (of which USD 25 million syndicated)

to Okata Refinery, an Hellenic Petroleum’s subsidiary

operating in FYR Macedonia.

Project

Construction of a 2.5 Mtpa crude oil pipeline from Hellenic

Petroleum’s facilities at Thessaloniki to the Okta refinery at

Skopje.

Environmental Impact

Development of the project in line with the Bank’s

Environmental standards. Mitigation of the risk of a major

hazard accident by replacing rail transportation. The pipeline

has been re-routed to pass through avoid land of ecological

importance.

Transition Impact

(1) Reduction in transport costs by 40% and enhanced

security of supply to the region. (2) Strengthened links

between the oil sector and the rest of the economy through

market expansion and regional integration of Hellenic

Petroleum’s operations.

Link to Project Summary Document

EBRD transactions: Case Studies

Downstream: Distribution of Traditional and Alternative Fuels

29

Project

Summary

30

2015 Signed in

Bulmarket DM, Bulgaria – Expansion of LPG and LNG network

EBRD Finance

Parallel EUR 10 million loans from EBRD and IFC to Bulmarket

DM, a Bulgarian fuels and natural gas distributor.

Project

Expansion of Bulmarket DM’s network of liquefied petroleum

gas (LPG) terminals and development of a new terminal to

store and distribute liquefied natural gas (LNG). Thanks to the

project, Bulmarket DM is expected to become the first

importer and distributor of LNG in Bulgaria.

Environmental Impact

Introduction of cleaner and more efficient fuels. Introduction

of EBRD and IFC environmental and social requirements.

Transition Impact

(1) Diversification of the energy sources available to Bulgaria’s

smaller businesses by introducing alternative and more

competitive fuels. (2) Support the growth of an innovative local

company committed to transparency and best environmental

and safety standards. (3) The project is consistent with the

LNG Masterplan of the European Commission’s Innovation

and Networks Executive Agency.

Link to Press Release

Project

Summary

31

2012 Signed in

Prista Oil, Bulgaria / Turkey – Financial restructuring

EBRD Finance

EUR 36 million financing including a long term secured loan,

an equity investment and a convertible loan to Prista Oil

Holding EAD and Prista Oil Yag San. ve Tic., a producer and

distributor of engine lubricants in Bulgaria and Turkey

Project

USD 60 million financial restructuring of the Prista group,

thereby improving its corporate and shareholders structure

and capital investment financing to turn around the lubricants

business performance in Bulgaria and Turkey.

Environmental Impact

Comprehensive Environmental & Social Action Plan (ESAP)

including improvement in waste and materials storage;

individual employee exposure monitoring; monitoring of

wastewater discharges; and redefinition of Stakeholder

Engagement Plan (SEP).

Transition Impact

(1) Elimination of unprofitable business lines and reduction of

costs. (2) Implementation of an innovative branded services

programme. (3) Corporate governance improvements.

Link to Project Summary Document / Press Release

EBRD transactions: Case Studies

PEU Case Studies

28 September, 2016 32

Efeler Geothermal Plant – Turkey

Gurmat Elektrik

EBRD: US$ 200 million, signed 2015 Other banks: USD$ 520 million

Construction of the largest greenfield geothermal power plant in Turkey (123MW), located in the Aydin province.

Limited recourse project finance structure with project completion support from the Sponsors

Mogan Enerji Yatırım Holding, Guris Holding, Guris Construction

28 September, 2016 33

Borrower

Lenders

Project

Structure

Sponsor

Ma’an Solar Programme – Jordan

Four separate private companies

Four loans totalling US$ 75 million, signed Sep 2014

Construction and operation of four solar power plants

totalling 60 MW, as part of Jordan’s first round of solar

IPPs, diversifying energy sources and reducing

dependence on oil imports.

SunEdison, Scatec

28 September, 2016 34

Borrower

Lenders

Project

Structure

Sponsor

Senior loan to private operator on a secured limited

recourse basis.

Lastva - Pljevlja Transmission Line –

Montenegro

Crnogorski Elektroprenosni Sistem AD (CGES)

EBRD: € 60 million KfW: € 25 million

Construction of a 400kV high voltage transmission line and associated infrastructure connecting a new undersea cable from Italy to Montenegro with Pljevlja in Northern Montenegro

Sovereign loan

May 2013

28 September, 2016 35

Borrower

Lenders

Project

Structure

Date

Khalladi Wind Farm – Morocco

UPC Renewables

EBRD: € 57 million EBRD Special Fund: € 10 million Local bank: € 67 million

Construction of a wind farm of up to 120 MW near Tangiers in northern Morocco. First private project to sell electricity directly to high voltage private offtakers.

Senior secured limited-recourse project finance structure. Loan in local currency (MAD).

ACWA Power, UPC Renewable and ARIF

28 September, 2016 36

Borrower

Lenders

Project

Structure

Sponsor