Transport: staying on track
By: Sue Barrett, EBRD Transport team Director
This year has been an exceptional one and the EBRD’s Transport team has played a big part in the Bank’s crisis response. Nearly doubling last year’s business volume, we’ve responded flexibly to client refinancing needs and ensured priority investments remain on track. Many smaller transport projects – particularly private sector investments in ports – have struggled to find funding since the start of the crisis and have turned to the EBRD for support.
This year the Bank will finance two Ukrainian port projects, with loan sizes of €10-30 million. These are our first private port projects in Ukraine, where the sector is dominated by state ownership, and therefore particularly important in terms of crisis response.
Some existing clients have found themselves with too much short debt following the crisis and have requested refinancing support from the EBRD. The Russian railways and logistics sectors were badly hit and the EBRD’s willingness to step in has been conditioned upon the strong transition potential of our intervention. This has been demonstrated by the client’s commitment to reforms and the EBRD’s ability to reinforce those reforms by supporting the private sector. We are also working together with Russian Railways to develop a Sustainable Energy Strategy, which will have a significant impact on reducing energy consumption.
Governments in the region have also been keen to develop large infrastructure projects with the EBRD’s help. The R1 Motorway project in the Slovak Republic was a landmark transaction. It was the first Public Private Partnership (PPP) in the country and the first PPP deal since the crisis to be financed without a sovereign guarantee. The EBRD provided a loan of €200 million for this project and was key to its success, playing an important honest broker role between the public and private partners to achieve financial close in August 2009.
Another important project is Corridor X. The EBRD is providing a €150 million sovereign loan to construct a new section of motorway linking Serbia to FYR Macedonia and Greece in the south and Croatia, Hungary and Western Europe in the north. This project combines substantial funding by the EBRD, the European Investment Bank and the World Bank to complete the development of this key Trans-European corridor that supports economic growth and regional integration.
A smaller, but equally important, road project in the Kyrgyz Republic will also have a major impact on regional growth and development in this Central Asian country. This is the first time we have done a transport deal in the Kyrgyz Republic and the project allows us to start a dialogue with the Kyrgyz government on sector reform. The impact of this project is therefore very high.
Demand for the Bank’s support in the transport sector will remain strong across the region. While the commercial banks are coming back to the sector, as witnessed by the successful closing of the R1 PPP in Slovakia, it will take time for private funding to return to pre-crisis levels.
The EBRD will continue to play a key role in financing PPPs in central Europe and Russia and supporting PPP development in other countries in the region. The EBRD will continue to support the private sector to develop key transport links, as well as governments, many of whom will be stepping up sovereign borrowing programmes next year. Cooperation with other international financial Institutions (IFIs) will be key to ensuring our support is targeted and maximises reform potential. Promoting energy efficiency will be central to our efforts, particularly in the railway sector where significant improvements can be achieved by large state-owned railways in countries such as Ukraine and Kazakhstan. The EBRD will also seek to finance projects with state-owned entities on a non-sovereign basis to reduce reliance on scarce government resources and encourage greater commercial discipline.
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December 11th, 2009 @ 18:20
As focal point for PPPs in India, it is great to be able to review the experiences posted on the EBRD blog on developing country experiences. I feel there is lot in common in these experiences and allows us all to learn from sectoral and project experiences. Good work