REPORT FROM THE COMMISSION TO THE COUNCIL AND THE EUROPEAN PARLIAMENT on the implementation of European Investment Bank loans for projects in central and eastern European countries (Poland, Hungary, the Czech Republic, the Slovak Republic, Romania, Bulgaria, Latvia, Estonia Lithuania and Albania) - (1.1.1995 - 31.12.1995)
COMMISSION OF THE EUROPEAN COMMUNITIES Brussels, 18. 10. 1996 COM(96) 501 final REPORT FROM THE COMMISSION TO THE COUNCIL AND THE EUROPEAN PARLIAMENT on the implementation of European Investment Bank loans for projects in central and eastern European countries (Poland, Hungary, the Czech Republic, the Slovak Republic, Romania, Bulgaria, Latvia, Estonia, Lithuania and Albania) (1. 1. 1995-31. 12. 1995) LIST OF CONTENTS 1. 2. 3. 4. 5. Introduction Legal framework Activities of the European Investment Bank in central and eastern Europe in 1995 The Bank's objectives and priorities Cooperation with other institutions JL 1. Introduction The present annual report on the activities of the European Investment Bank (EIB) in central and eastern Europe has been drawn up in accordance with Council Decision 93/696/EC of 13 December 1993 (OJ L 321 of 23 December 1993). It relates to the second year of implementation of the Council Decision and covers the period from 1 January to 31 December 1995. 2. Legal framework The legal and institutional framework of the mandate given to the EIB in central and eastern Europe is laid down in the following decisions and documents: - Council Decision 93/696/EC of 13 December 1993 (OJL321 of 23 December 1993) granting a Community guarantee to the Bank against losses under loans for projects in central and eastern European countries. The guarantee is restricted to an overall loan ceiling of ECU 3 000 million over a period of three years, beginning on 23 December 1993. The guaran tee covers in full any payments not received by the Bank but due under loans granted, in accordance with the usual criteria, in respect of investment projects carried out in the countries specified in the Decision. (The loan guarantee ceiling includes the provisions laid down in respect of investments in Council Decision 93/166/EEC of 15 March 1993). in Estonia, Latvia and Lithuania - Decision by the EIB Board of Governors of 2 May 1994 authorizing the Bank to lend on the basis of the Council Decision of 13 December 1993. - Contract of guarantee signed by the Community and the EIB on 22 July and 12 August 1994. This contract supersedes the guarantee contract relating to the Council Decision of 15 March 1993 mentioned above. 3. Activities of the EIB in central and eastern Europe in 1995 In 1995 the EIB signed 19 loan contracts in central and eastern Europe for an aggregate amount of ECU 973 million, compared with ECU 921 million in the previous year. 3. 1 Geographical spread Project activity is closely correlated to the pace of economic reform. Countries where reforms were undertaken earlier and are now at a more advanced stage continue to show a higher absorption of loans. Table 1 shows that loans signed in the Czech Republic, Hungary, Romania and Poland accounted for nearly 80% of total lending in 1995. The remaining lending was accounted for by Bulgaria, Albania (first-time lending), Lithuania and Estonia. Table 1 Geographical distribution of EIB lending in 1995 Country Number of loans Czech Republic Hungary Romania Poland Slovak Republic Bulgaria Albania Lithuania Estonia 3 2 3 2 2 1 3 2 1 Total loan contracts signed (ECU m) 260 200 175 140 80 60 34 19 5 (26. 7%) (20. 6%) (18. 0%) (14. 4%) (8. 2%) (6. 2%) (3. 5%) (2:0%) (. 5%) Aggregate IS) 973 (100%) 3. 2 Sectoral spread The Bank's operations in central and eastern Europe have taken place in all economic sectors the EIB implementation of various projects in infrastructure, which plays a key role in the implementation of the reforms, as well as to the support for industrial projects in particular SMEs. loans have contributed to (Table 2). Energy is the leading sector as regards infrastructures with four projects in three countries totalling ECU 290 million and representing almost 30% of total EIB lending in the area during 1995. Projects in this sector relate to the improvement of thermal power stations and the modernization of power production and transmission. Projects in the transport sector followed closely in importance with over 24% of total lending. Loans were signed in six countries for a total of ECU 238 million in support of seven projects for the upgrading of transport systems to European standards. Road and rail transport projects supported by the Bank form part of larger corridors of the Trans-European Networks or of transit routes of vital interest to the Community and its transport policies. Projects in the telecommunications sector represented 13. 4% of total EIB lending in 1995. Two loans for a total of ECU 130 million were signed for the expansion and modernization of the telecommunications network. Support for the industrial sector (over 32%), where the main beneficiaries are small and medium-sized operations, accounts for the largest single share of the Bank's activities in central and eastern Europe during 1995. It should be borne in mind that EIB support for SMEs is channelled through appropriate financial intermediaries who have access to EIB funds either in the form of a global loan - line of credit contracted between the Bank and a specific financial institution - or in the form of an APEXXom - line of credit open to a number of qualified institutions within a particular country and usually channelled via the central bank. In all, loans signed in the industrial sector amounted to ECU 315 million, of which just over 82% are global loans. Table 2. Breakdown by country and sector of EIB loans signed in 1995 Country Czech Rep. Hungary Romania Poland Slovak Rep. Bulgaria Albania Lithuania Estonia Aggregate Total loan contracts signed (ECU m) 260 200 175 140 80 60 34 19 5 Energy 0 Transport 'which Telecoms 50 80 200 60 30 60 35 40 60 29 14 Industry, other, mixed 150 100 50 5 5 5 973 (100%) 290 (29. 8o/o) 238 (24. 5%) 130 (13. 4%) 315 (32. 4%) Table 3 below gives details of the loan contracts signed during 1995. The list of all loans signed at 31 December 1995 under the current mandate is given in the Annex. 3. 3 Monitoring The Bank monitors investment throughout the implementation of the project and up to the end of the loan period. Disbursements are spread over rather long periods, a situation which is usual for infrastructure loans with long maturity periods (12 to 20 years) and is typical in the case of credit lines, where the disbursement takes place only after the decision to support the implementation of an individual investment has been taken. As to the servicing of the loans, repayments have been punctual. Table 3. EIB loans signed between 1 January and 31 December 1995 pursuant to the Council Decision of 13 December 1993 (93/696/EC) COUNTRY PROJECT DESCRIPTION Albania AMOUNT OF LOAN (ECUm) TOTAL COUNTRY (ECUm) 34 East-West road corridor Ferry terminal at the Port of Durres APEX global loan Bulgaria Transit roads II Czech Republic Estonia Hungary CEZ I (Power Plant Improve ments) - Tranche A CEZ I (Power Plant Improve ments) - Tranche B Roads Estonian Global loan - Tranche B Financial sector global loan Investment Bank Telecommunications II - Tranche B Rehabilitation and improvement of some 94 km of roads along the main East-West road corridor Expansion of the existing ferry terminal at the Port of Durres and priority repairs of quays and storage areas Financing of small and medium-sized industrial, agro- industrial, tourism and related services as well as projects promoting environmental protection and energy conservation Rehabilitation and reconstruction of some 900 km of main transit roads Installation of desulphurization equipment at six power stations Installation of desulphurization equipment at six power stations Improvements to the road network Financing of small and medium-sized enterprises in industry, tourism and related services Financing of industrial, infrastructure and tourism projects Expansion telecommunications network modernization and the of 24 5 5 60 100 100 60 5 150 50 60 260 5 200 COUNTRY PROJECT DESCRIPTION Lithuania ] • of Klaipeda Poland * *. "vj^nian Development Bank ,. -'•"031 loan Financial sector Global Loan Railways III Romania Telecommunications i | | Heat and power rehabilitation j i | Constanta Port rehabilitation 1 State Bank and global loan II { SPP gaz transmission Slovak Republic TOTAL Construction of a small container improvements to the roll-on/roll-off terminal Financing of small and medium-sized enterprises in industry, tourism and related services terminal and Financing of small and medium-scale investments in industry, infrastructure and tourism Rehabilitation and upgrading of the first section of the Warsaw-Terespol TEN railway line of the and modernization Expansion telecommunications network Rehabilitation and modernization of heat and power production and electricity transmission and distribution facilities Repair of storm and accident damage to, and comple tion of, breakwaters Financing of term credit operations in industry, tourism and related services, environmental protection and energy conservation Modernization international gas transit and domestic networks the Slovak extension and of AMOUNT OF LOAN (ECU m) TOTAL COUNTRY (ECUm) 19 14 5 100 40 80 60 35 50 30 140 175 80 973 973 4. The Bank's objectives and priorities The Bank assists those central and eastern European countries whose long-term goal is to prepare themselves for EU membership, by helping them create the economic framework necessary to qualify for membership. The examples of Greece, Portugal and Spain provide a historic parallel. The EEB started its lending activity many years before those countries finally joined the Community and helped them to meet the conditions for membership. The EIB's role is, above all, that of a catalyst in the difficult task of mobilizing financing packages for major infrastructure projects. This is very much in keeping with its specific character as a provider of complementary finance, i. e. as a Bank which steps in when funds from the commercial sector are unavailable or insufficient. The EIB is particularly involved in the extension to the countries of central and eastern Europe of the Trans-European Networks in roads and railways, on the basis of the road and rail corridors defined by the Pan-European Conference of Transport Ministers as development priorities for the medium term. 5. Cooperation with other institutions The Bank's activities in the countries of central and eastern Europe are conducted within the framework of the EU programme to help those countries to prepare for accession to the Union, in particular by financing investment aimed at integrating the infrastructure (transport, telecommunications, energy, environment) of the countries concerned with that of the EU and by assisting SMEs. Whenever possible, co-financing is established with other institutions, in particular to meet the above objectives. The Bank's activities thus form part of a concerted approach that is being pursued in close cooperation with the Commission and, as appropriate, with the international financial institutions working in the area. The Bank cooperates closely with the Commission, in particular with PHARE. In addition to frequent PHARE assistance during the pre-investment phase (studies and technical assistance support), the Bank and PHARE have co-financed during the reference period a rail project in Poland, a roads project in the Czech Republic, road and port development projects in Albania, an energy project in Romania and a port development in Lithuania. Of the international financial institutions, the EIB works closely with the EBRD and the World Bank. Together, they finance some of the projects that have been undertaken in the area, with a view to maximizing the impact of their activities to the benefit of the countries concerned. During the reference period, 9 the EIB co-financed with the EBRD and the World Bank a project in the energy sector in Romania. The share of the different financing sources in projects financed by the EIB is shown below. Table 4. Share of PHARE and international financial institutions in projects financed by the EIB during 1995 _ (ECUm) Country EIB EBRD IBRD Other ' PHARE TOTAL Albania Bulgaria Czech Rep. Estonia Hungary Lithuania Poland Romania Slovak Rep. 34 60 260 5 200 19 140 175 80 2 183 160 2 61 280 5 840 36 23 176 73 31 12 10 5 20 15 69 133 550 10 1040 60 183 709 153 TOTAL 973 ( 33%) 185 (7%) 160 (6%) 1496 (51%) 93 (3%) 2907 (100%) 1 States, public bodies or other domestic financial sources, including own funds of borrower/promoter. /W CENTRAL AND EASTERN EUROPE Annex 1 EIB loans signed during the period 15. 3. 1993-31. 12. 1995 on the basis of the Council Decisions of 15 March 1993 (93/166/EC) and 13 December 1993 (93/696/EC) Date of signature PROJECT Amount of loan (ECU m) COUNTRY TOTAL (ECU m) COUNTRY Albania Bulgaria Czech Republic Hungary Latvia Lithuania Estonia 1993 (*) 1995 1995 1995 1994 1995 1994 1994 1994 1995 1995 1995 1994 1994 1994 1995 1994 1994 1995 1995 East-West road corridor Ferry terminal at the Port of Durres APEX global loan Air traffic services - B Transit roads II Berlin-Vienna rail corridor Mero-IKL (D-CZ) pipeline Telecommunications 1 - B CEZ I (power plant improvements) - A CEZ I (power plant improvements) - B Roads Estonian Investment Bank global loan - Tranche A Upgrading air traffic services Port of Muuga bulk terminal District heating rehabilitation Estonian Investment Bank global loan - Tranche B Telecommunications II Municipal infrastructure global loan Financial sector global loan Telecommunications II - Tranche B 1993 (*) Investment Bank of Latvia - Global loan 1994 1995 1995 Vilnius Airport Port of Klaipeda Lithuanian Development Bank - Global loan 11 34 90 515 52 i i 340 5 29 24 5 5 30 60 125 100 30 100 100 60 5 20 15 7 5 100 40 150 50 5 10 14 5 COUNTRY Date of signature PROJECT Amount of loan (ECU m) COUNTRY TOTAL (ECU m) Poland Romania Slovak Republic TOTAL 1994 1994 1994 1994 1995 1995 1994 1994 1995 1995 1995 1994 1994 1995 1995 Telecommunications II Highways Warsaw sewerage treatment plant Export Development Bank global loan Financial sector global loan Railways IÎI Romgaz rehabilitation and modernization Air traffic services - B Telecommunications Heat and power rehabilitation Constanta port rehabilitation Telecommunications 1 -B Air traffic services State Bank and global loan II SPP gaz transmission 150 125 45 13 100 40 50 16 80 60 35 20 15 50 30 473 241 115 1894 1894 (*) Signed on the basis of Council Decision 93/166/EEC. 01 KSN 0254-1475 COM(96) 501 final DOCUMENTS EN 11 Catalogue number : CB-CO-96-504-EN-C ISBN 92-78-09948-1 Office for Official Publications of the European Communities L-2985 Luxembourg 43