Report from the Commission to the Council and to 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 (1996-1997)
COMMISSION OF THE EUROPEAN COMMUNITIES •tt & Brussels, 13. 01. 1998 C()M(1998) 1 final REPORTS FROM THE COMMISSION TO THE COUNCIL AND TO THE EUROPEAN PARLIAMENT • on the implementation of loans granted by the European Investment Bank for projects of mutual interest in countries of Latin America and Asia with which the Community has concluded cooperation agreements. Interim mandate (1996/1997) • 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 (1996/1997) • on the implementation of loans granted by the European Investment Bank in the Republic of South Africa (1995-96) and on the rate of utilization of European Investment Bank loans for projects in the Republic of South Africa (from 1 January 1997 to 30 June 1997) on the rate of utilization 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) (from 1 Julv 1996 to 30 June 1997) REPORT FROM THE COMMISSION TO THE COUNCIL AND TO THE EUROPEAN PARLIAMENT on the implementation of loans granted by the European Investment Bank for projects of mutual interest in countries of Latin America and Asia with which the Community has concluded cooperation agreements. Interim mandate (1996/1997) 1. Introduction CONTENTS 2. 3. 4. 5. Legal framework The European Investment Bank's mandate in Latin America and Asia in relation to its activities outside the Community Results of the interim mandate for Latin America and Asia General comments on operations and assessment of the European Investment Bank's action under its interim mandate Annex 1: Summary table giving details of operations approved and signed under the interim mandate for Latin America and Asia Annex 2: Mutual interest of operations approved under the interim mandate for Latin America and Asia Annex 3: List of countries in Latin America and Asia with which the Bank has concluded framework agreements 1. Introduction _ 4- This report on the activities of the European Investment Bank (EIB) in a number of Latin American and Asian countries has been drawn up in accordance with Council Decision 96/723/EC of 12 December 1996 granting a Community guarantee to the European Investment Bank against losses under loans for projects of mutual interest in Latin American and Asian countries with which the Community has concluded cooperation agreements (Argentina, Bolivia, Brazil, Chile, Colombia, Costa Rica, Ecuador, Guatemala, Honduras, Mexico, Nicaragua, Panama, Paraguay, Peru, El Salvador, Uruguay and Venezuela; Bangladesh, Brunei, China, India, Indonesia, Macao, Malaysia, Pakistan, Philippines, Singapore, Sri Lanka, Thailand and Vietnam). This report covers operations totalling EiCU 275 million which were approved by the EIB Board of Directors between the end of the first mandate (22 February 1996) and the end of the interim mandate (30 June 1997). The last of the three annual reports concerning the first mandate (1993-96) was sent to in September 1996 (COM(96) 429 final of 9September 1996). the Council and Parliament 2. Legal framework The legal framework for the interim mandate in Latin America and Asia is laid down in the following decisions and documents: - Council Decision 96/723/EC of 12 December 1996 the Official Journal of 19 December 1996) granting a Community guarantee to the European Investment Bank against losses under loans for projects of mutual interest in the above-mentioned Latin American and Asian countries. (published in - Decision by the EIB Board of Governors of 11 February 1997 authorising the Bank to make loans of up to ECU 275 million from its own resources for a period to 30 June 1997 in order to finance investment projects in the Latin American and Asian countries which have concluded cooperation agreements with the Community and are listed in the Council Decision of 12 December 1996. - Contract of guarantee signed by the European Community and the EIB on 18 and 26 March 1997. Loans totalling ECU 153 million, approved by the Board of Directors of the Bank under the above-mentioned decisions until publication 19 April 1997 of Council Journal Decision 97/256/EC of 14 April 1997 relating to the new Community guarantee system for the EIB, are fully guaranteed by the Community in accordance with the Official of in Council Decision 96/723/EC of 12 December 1996. - 5- 19 April 1997) - Council Decision 97/256/EC of 14 April 1997 (published in the Official Journal the of a European Investment Bank against losses under loans for projects outside the Community (Central and Eastern Europe countries, Mediterranean countries, Latin American and Asian countries and South Africa). Community guarantee granting to - Contract of guarantee signed by the Community and the EIB on 25 and 29Julyl997. Loans totalling ECU 122 million, approved by the Board of Directors of the Bank between the publication in the Official Journal of 19 April 1997 of Council Decision 97/256/EC and 30 June 1997, are guaranteed by the Community in accordance with Council Decision 97/256/EC of 14 April 1997 and according to the provisions laid down in the above-mentioned contract of guarantee. 3. The Bank's mandate in Latin America and Asia in relation to its activities outside the Community The mandate given to the Bank in Latin America and Asia confers on it special responsibility for supporting the Community's cooperation policy. Most of the Latin American and Asian countries concerned by the Bank's mandate have historical, cultural and economic ties with the countries of the European Union. These long-standing ties are reflected in a cooperation policy which was established by the Community in 1976 with a number of these countries and broadened over the years up to the Council Decision of 15 February 1993 concerning Bank operations under the first mandate (Council Decision 93/115/EEC, published in the Official Journal of 23 February 1993). In view of the encouraging results of this first mandate which expired in February 1996, it was appropriate to renew it. However, the Council did not reach agreement on the ceiling of the 1996 interim mandate until 12 December 1996 (Council Decision 96/723/EC mentioned in point 2). In view of the date of the Decision, the Bank was unable to attain the ceiling of ECU 275 million by 31 December 1996. Consequently, and in accordance with Article 1 of the Decision, the period during which it was to remain applicable was automatically extended until 30 June 1997. The interim mandate enabled the Bank to consolidate its position as a lender in Latin American and Asian countries. Under the Council Decision of 14 April 1997, the Bank's operations in those countries will continue to be implemented until the year 2000 (see point 2 above). 4. Result of the interim mandate The Bank's Board of Directors approved six operations totalling ECU 275 million under the interim mandate. A summary table giving details about project commitments and signings (countries, sectors, loan amounts, share of the project 5. 5. 1 5. 2 5. 3 5. 4 5. 5 financed by the EIB, co-lenders, etc. ) is set out in Annex 1. General comments on operations and assessment of the Bank's action under the interim mandate As in the case of the first mandate, demand substantially exceeded the funds available in 1996/97 owing to the high absorption capacity of the eligible countries. As a result, the ECU 275 million of the interim mandate were fully committed (mostly in 1997). In 1996, however, it was necessary to reject several financing applications from European Union firms because of the lateness of the Decision introducing the interim mandate. In accordance with the Bank's interim mandate and as in the case of the first mandate, all projects financed will benefit both the Latin American and Asian countries concerned and the European Union. In line with this specific concept of mutual interest, operations satisfy one or more of the following criteria: transfer of European technologies and know-how, cooperation between European and local firms, cooperation in the fields of energy and environmental improvement. A summary of mutual interest for each of the six operations approved is set out in Annex 2. The build-up of projects involving European private partners is continuing. The percentage of private projects approved by the Bank had already grown during the first mandate (1993: 20%; 1994: 42%; 1995/1996: 46%); it has increased to 78% under the interim mandate (see Annex 1). The percentage could eventually be higher because it is envisaged that the final recipients of the Corporacion Andina de Fomento (CAF) global loan will include private-sector promoters. The CAF is a multilateral regional financial institution with its registered office in Caracas, whose principal shareholders are the member countries of the Andean Pact (Bolivia, Colombia, Ecuador, Peru and Venezuela) (see Annex 1). This confirms that EIB financing is particularly well suited to the needs of European enterprises in their investment in the emerging countries, which make up the majority of the Latin American and Asian countries. The average size of operations is ECU 47 million, disregarding future, distinctly smaller loans under the CAF global loan. The sectoral breakdown (see Annex 1) shows activity to be concentrated in the industry and energy sectors. The aim is better industrial cooperation between the Latin American and Asian countries and the European Union and the breakdown is consistent with the objectives of the cooperation agreements signed between those countries and the European Union, which frequently stress the specific importance of cooperation in the energy field. The concentration of activity in industry can also be explained by the fact that European industrial enterprises which, in the past, borrowed from the Bank for their investment within the Union, are now also 5. 6 5. 7 - 7- requesting Bank finance for their projects in the Latin American and Asian countries (often for joint ventures, e. g. the "Vidrio Saint-Gobain" project in Mexico). As far as the geographical breakdown is concerned, the Bank endeavours to maintain, wherever possible, a fair balance between the two regions concerned. However, the operations approved in Latin America account for two thirds of the ECU 275 million and those in Asia for only one third (see Annex 1). This is mainly due to the very short period available to the Bank for committing the envelope. Cooperation with multilateral and bilateral financial institutions in the Latin American and Asian countries continues to be good. Three of the six operations undertaken are being financed jointly with multilateral institutions (World Bank, Asian Development Bank) and/or with bilateral financial institutions (Kreditanstalt fiir Wiederaufbau, Commonwealth Development Corporation). A fourth loan has been made directly to the CAF, the multilateral institution already mentioned. The activities of the Bank and the other multilateral and bilateral institutions complement each other at project level and coordination between the institutions is good. Complementarity offers sufficient opportunities for action in the Latin American and Asian countries to all the parties engaged in multilateral financial aid, favours the maintenance of good cooperative relations and limits the risks of incompatibility. The Bank is increasingly centring its operations on private projects involving European companies, as partners in joint ventures or shareholders, while other multilateral financial institutions are better placed to head the co-financing of large-scale projects (often public) in the infrastructure field. 5. 8 The Bank's cooperation with the European banking sector, in particular in respect of guarantees, remains good. The EIB and the European commercial banks complement each other in that the latter rarely provide the same type of resource as the EIB, particularly as regards duration and period of grace. The combination of complementary financial instruments constitutes an added beneflt. 5. 9 It should be noted that the interim mandate falls under two different budget guarantee systems: • ECU 153 million of the operations approved will be covered by the old 100% budget guarantee system (same system as for the first mandate); the following this guarantee: Vidrio Saint-Gobain/Mexico loans will be covered by (ECU 50 million), Ghazy-Barotha/Pakistan Batangas I/Philippines (ECU 60 million) and Pirelli Optical Fibre/Brazil (ECU 22 million); (ECU 21 million), • ECU 122 million of the operations approved by the EIB Board of Directors after the publication in the Official Journal of Council Decision 97/256/EC of 14 April 1997 (see 2 above) will be covered by the new 70% global budget guarantee system introducing a risk-sharing element between the EIB and the Community in respect of a significant proportion of the Bank's lending which the Council has set at 25%. For loans where risks are shared, the Community covers the political risks arising from currency non-transfer, expropriation, war and civil disturbance within the limits laid down in the contract of guarantee signed on 25 and 29 July 1997. Out of the envelope of ECU 122 million, risks are shared in two projects out of the three which have been signed: the aggregate amount involved is ECU 82 million, which represents 67% of the proportion of the interim mandate falling under the new budget guarantee system. The projects are the following (the last two involve risk sharing): CAF global loan, Andean Pact (ECU 40 million with no risk sharing between the Bank and the Community budget), Batangas II/Philippines (ECU 12 million with the Bank and the Community budget sharing the risk) and Mercedes Benz A-Class Mercosul (ECU 70 million with the risk being shared). 5. 10 The list of framework agreements establishing the general legal bases for carrying out projects in both public and the private sector which were concluded between the EIB and the country concerned is given in Annex 3. PROJECT COUNTRY SECTOR ALA INTERIM MANDATE 1996 - JUNE 1997 Annex 1 EIB LOAN BORR WER ZO NE n. s. = not yet signed EIB LOAN AS % OF DATE OF APPROVAL FINANCE Bl- AND MULTI (M ECU) PUBLIC PRIVATE ASIA LATIN AMERIC A TOTAL PROJECT COST OF BOARD OF DIRECTORS CONTRACT SIGNATURE 3 Vidrio St-Gobain Mexico Industry Ghazy Barotha - second portion Pakistan Energy (hydro power) Batangas Power Plant Philippines Energy (combined cycle) Pirelli Optical Fibre Brazil Industry CAF Global loan 2 Andean Pact Global Loan Mercedes-Benz A- Class Mercosul Brazil Automotive industry 50 21 60 12 22 40 70 X X X X X X X X X X X X X X 4 1% 1% 12% 50% 20% 12/11/96 12/05/97 10/12/96 23/07/97 29/01/97 9/06/97 25/02/97 29/04/97 20. 10. 97 20. 10. 97 n. s. 16. 10. 97 10% 9/06/97 n. s. KfW T O T AL I N% 275 61 214 93 182 8% 100% 22% 78% 34% 66% 1 Loan falling under the risk-sharing agreement. 2 Corporacion Andina de Fomento (CAF) is a multilateral institution governed by public international law whose principal shareholders are the member countries of the Andean Pact, the republics of Colombia, Bolivia, Ecuador, Peru and Venezuela (collectively over 97% of ownership). 3 Situation at 4 November 1997. LATERAL CO-LENDERS Asian Development Bank, World Bank, Kreditanstalt fur Wiederaufbau (KfW), Islamic Development Bank KfW, Commonwealth Development Corporation -10 Annex 2 Project Country Vidrio St-Gobain Mexico Ghazy Barotha Hydropower-Sec ond Portion Pakistan Mutual interest of operations under the interim ALA mandate Mutual interest the project is a joint venture in which a European enterprise has a large stake; it helps to strengthen Mexico as a bi. Jgehead for European companies wishing to become established on the American market; the guarantee will be provided by the European group which is the majority shareholder; the project comprises a substantial element of technology transfer. • • • • The project comprises a substantial element of transfer of European technology and know-how. The concept and development of the project were carried out by a joint venture consisting mainly of Pakistani and European consultants who will also be responsible for supervising the performance of the contract. All the civil engineering contracts, representing some USD 700 million in value, have been won by European entrepreneurs. The project also represents a major increase in the country's capacity for producing renewable energy from national resources. In a wider context, the project will contribute to the attainment of some of the objectives of the cooperation agreement concluded between the EC and Pakistan, which relates in particular to cooperation in the energy field. Bathangas Power Philippines The borrower, First Philippine Gas Corporation, is a wholly-owned subsidiary of First Gas Holdings Corporation, itself a joint venture established by British and Philippine companies. The Malampaya gas deposit, which will probably supply the power plant Plant with fuel, is exploited jointly by Shell and the Occidental Petroleum Company, while the turn-key construction contract for the power plant has been awarded to a large European group. In a wider context, having regard in particular to the important role it plays in the introduction of natural gas to the Philippines, the project will favour the attainment of certain objectives included in the EU-ASEAN cooperation agreement, which mentions in particular cooperation in the fields of energy and environmental improvement. Pirelli Optical Fibre Brazil • • • • • the promoter is the subsidiary of a European enterprise; the project will help to improve the promoter's position on a promising market; the project comprises a substantial element of technology transfer; the guarantee will be provided by a European bank; the project will contribute to the modernisation of the fibre optic cable sector in Brazil and will assist in the modernisation of the country's telecommunications networks (national and international). Project Country 11 Mutual interest Corporacion Andina Fomento global loan de (CAF) Five member countries of the Andean Pact The proposed projects are of mutual interest and are likely to strengthen cooperation between the EU and the Andean group, through private investment in the eligible sectors. The global loan will enable CAF to grant loans of up to 15 years, a new feature in the region which should favour its European customers. It should also partly fill the gap between the EC International Investment Partners instrument (ECIP) managed by the Commission, the credits for which are limited to ECU 1 million, and the It will permit the financing of beneficial medium-size European Union/Latin America minimum amount of EIB direct loans. initiatives, which have so far been ineligible for a direct Bank loan because of their size. Benz Brazil Mercedes A-Class Mercosul • • • the project is essential in order to strengthen the position of the promoter, which is the subsidiary of a large European enterprise, on one of the leading emergent markets; it comprises a substantial element of technology transfer (equipment during the construction phase and imports of components during the production phase); it will help to modernise the Brazilian automobile industry. - 12- Annex 3 List of countries which have concluded a framework agreement with the EIB (situation at 15 September 1997) 1) Agreements signed and presently valid for all the mandates ASIA LATIN AMERTCA China Indonesia 06. 12. 95 20. 06. 95 First signature Extension 16. 03. 97 Argentina Brazil Bolivia Colombia El Salvador Honduras Mexico Panama Paraguay Peru Uruguay 03. 10. 94 19. 12. 94 12. 10. 95 13. 03. 95 27. 02. 97 27. 02. 97 09. 03. 95 10. 04. 96 19. 09. 94 02. 10. 94 21. 04. 95 2) Agreements signed for the ECU 750 million mandate (ongoing negotiations for extension to new mandate) ASIA LATIN AMERICA India Pakistan Philippines Thailand 17/25. 11. 93 25/28. 02. 94 15. 09. 94 10/17. 01. 94 Chile Costa Rica 07. 10. 94 30. 11. 93 3) New framework agreements under negotiation Bangladesh, Vietnam, Venezuela, Ecuador, Guatemala, Nicaragua. : Sri Lanka, Mongolia, 13 REPORT FROM THE COMMISSION TO THE COUNCIL AND TO 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 (1996/1997) - 14 LIST OF CONTENTS 1. Introduction 2. Legal framework 3. Activities of the European Investment Bank in central and eastern Europe in 1996 4. The Bank's objectives and priorities 5. Cooperation with other institutions Annex 1: Annex 2: Summary table of the financing provided on the basis of the Council Decisions of 15 March 1993 (93/166/EEC) and 13 December 1993 (93/696/EC). Breakdown by country and sector Summary table of the financing provided on the basis of the Council Decisions of 15 March 1993 (93/166/EEC) and 13 December 1993 (93/696/EC). List of projects by country - 15 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 third and final year of implementation of the Council Decision and covers the period from 1 January 1996 until June 1997, end of the mandate. The previous annual report dealing with the Bank's mandate in central and eastern Europe was transmitted to Council and Parliament in October 1996 (COM(96)501). 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 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 the date the Council Decision took effect (23 December 1993) subject to an automatic extension of six months if, at the end of the three years, the loans granted by the Bank did not attain the overall amount referred to above. (OJL321 The guarantee 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 Estonia, Latvia and Lithuania in Council Decision 93/166/EEC of 15Marchl993). - Decision by the EIB Board of Governors of 2 May 1994 authorising 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. - 1 6- 3. Activities of the EIB in central and eastern Europe in 1996 3. 1 In 1996 the EIB signed 21 loan contracts in central and eastern Europe for an aggregate amount of ECU 1 086 million, compared with ECU 973 million in 1995 andECU921 million in 1994. to ECU 2 980 million, At 31 December 1996, the end of the three-year period of the Council mandate, total loan contracts signed by the bank on the basis of the 1993-1996 mandate the guarantee ceiling of amounted In March 1997, in ECU 3 000 million granted by Council Decision 93/696/EC. accordance with Article 1 of the Decision which automatically extends the guarantee period by six months, the Bank signed a final loan for ECU 20 million, thus attaining the ceiling granted. just below Details of the breakdown per country and sector of the 1993-1996 financial package as well as the list of projects are given in Annexes 1 and 2 respectively. 3. 2 In 1996, loans in Poland, the Czech Republic and Hungary accounted for almost 71% of the EIB lending in the region during 1996. The Bank also signed loans in support of projects in all the other central and eastern European countries, except Bulgaria (see table 1). Table 1. Geographical distribution of EIB lending in 1996/1997 Council Decision 93/696/EC Country Number of loans Contracts signed (ECU m) Poland Czech Republic Hungary Romania1 Slovak Republic Lithuania Latvia Estonia Albania 3 2 2 3 2 5 3 1 1 380 255 135 110 100 72 26 16 12 (34. 4%) (23. 1%) (12. 2%) (9. 9%) (9. 0%) (6. 5%) (2. 4%) (1. 4%) (1. 1%) TOTAL 22 1 106 (100%) The Bank's activity continues to support the development of the economies of central and eastern European countries as they prepare for their accession to the Community. Includes loan of ECU 20m signed in March 1997. - 1 7- As in previous years, financing in 1996 centred on funding strategic infrastructure and strengthening the physical links with the European Union: • • • Half the total financing, ECU 563 million (ECU 238 million in 1995), went to finance transport infrastructure projects, most of which form part of the priority transport corridors identified by the Pan-European Conference in In the field of road transport, these included the A4 Crete in 1994. Wroclaw-Gliwice motorway the M3 Budapest-Gyongyos in Poland, motorway in Hungary and the Via Baltica in Lithuania; in the field of rail transport, they included the modernisation of the Warsaw-Ostrava-Vienna line in the Czech republic and the rehabilitation of several sections of the Tallinn-Narva railway in Estonia. Loans for projects in the energy sector totalled ECU 363 million and accounted for one third of total financing in the region during 1996 (ECU 290 million in 1995). Loans were signed in five countries in support of six projects relating to the construction, rehabilitation, modernisation, and expansion of power plants and gas transmission. Loans signed in the telecommunications sector totalled ECU 115 million (ECU 130 million in 1995) and accounted for about 10% of the total financing during the year. Financing provided in the sector consisted of two loans for the extension and modernisation of the network (Poland) and the construction of a mobile telecommunications network (Lithuania). Table 2. Breakdown by country and sector of EIB loans signed in 1996/1997 Council Decision 93/696/EC Country Poland Czech Rep. Hungary Romaniaz Slovak Rep. Lithuania Latvia Estonia Albania TOTAL Total loan contracts signed (ECU m) 380 255 135 110 100 72 26 16 12 Transport of Energy ch i Telecoms 100 15 100 200 95 110 42 16 180 55 100 10 6 12 Industry, other, mixed 40 5 20 1106 (100%) 563 (50. 9%) 363 (32. 8%) 115 (10. 4%) 65 (5. 9%) Includes loan of ECU 20m signed in March 1997. - 1 8- In addition to projects in infrastructure, support for the industrial sector during 1996 amounted to ECU 65 million, of which ECU 50 million was provided by means of global loans for small and medium-sized enterprises. 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 APEXXoan - line of credit open to a number of qualified institutions within a particular country and usually channelled via the central bank. Table 3 below gives details of the loan contracts signed during the year. 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. 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. The examples of Greece, Portugal and In their case too, the EIB started its lending Spain provide a historic parallel. activity many yp^rs before those countries finally joined the Community and helped them to meet the conditions for adhesion. The EIB gives absolute priority to upgrading, modernising and developing the transport, telecommunications and energy sectors, with particular emphasis on the Trans-European Networks 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. Environmental issues related to EIB projects are given priority in the framework of the gradual adaptation of the legislation of the countries concerned to that of the European Union. The Bank also supports SMEs and other industrial initiatives, in particular where they involve European Union partners either directly or through the Bank's global loan instrument. Table 3. EIB loans signed in 1996/1997 pursuant to the Council Decision of 13 December 1993 (93/696/EC) - 1 9- COUNTRY PROJECT DESCRIPTION Albania Czech Republic Estonia Hungary Latvia Power transmission Rehabilitation and upgrading of electricity grid CESKE DRAHY Rail corridor II SKO ENERGO FIN/VW-SKODA combined heat and power plant Modernisation of Warsaw-Ostrava-Vienna railway line Replacement of VW/Skoda's lignite-fired combined heat and power plant in Mlada Boleslav by coal-fired plant of same type Railways M3 Toll motorway sector- Global Financial loan (Extension to the original loan of ECU 150m) Investment Bank of Latvia Global loan B Riga water and environment Daugava Hydropower Lithuania Gas distribution Lithuanian Development Bank Global loan B Via Baltica Telecommunications (GSM) Railways Rehabilitation of several Tallinn-Narva main railway line sections of Upgrading of M3 toll motorway linking Budapest to Gyongyos Financing for small and medium-scale ventures Financing of small and medium-scale ventures Upgrading and rehabilitation of water supply and sewerage systems in and around Riga Rehabilitation works and dam improvements at hydroelectric plants safety Construction of natural gas transmission and distribution pipelines Financing for small and medium-scale ventures Upgrading and rehabilitation of selected sections of Via Baltica road corridor Construction and operation of first phase of mobile telecommunications network Modernisation of railway infrastructure AMOUNT OF LOAN (ECU m) TOTAL COUNTRY (ECU m) 12 255 16 135 26 72 12 200 55 16 95 40 5 15 6 10 5 20 15 22 -20 COUNTRY PROJECT DESCRIPTION AMOUNT OF LOAN (ECU m) TOTAL COUNTRY (ECU) of and modernisation Extension telecommunications network Upgrading to motorway standard of A4 between and Nogawczyce (Gliwice) via Prady (Opole) Conversion of depleted Wierzchowice gas field, in west of country, into underground storage facility (Wroclaw) Bielany Rehabilitation of sections of E81 and E60 European road corridors Renewal of rolling stock and completion of network infrastructure on Bucharest metro Ditto. and Modernisation international gas transit network Rehabilitation of Vojany power station expansion of I coal-fired 380 110 100 100 100 180 70 20 20 30 70 1 106 1 106 Poland Polish Telecommunications II - Tranche B Poland Highways - Tranche B PGNG II- Second gas Romania Roads rehabilitation II Bucharest Metro modernisation Bucharest Metro modernisation - Tranche B SPP Gas transmission - B SE Thermal Power rehabilitation Slovak Republic TOTAL Signed in March 1997. - 2 1- Following the signature of a final loan early in 1997, the Bank has now fully discharged its responsibilities under the lending authorisation based on Council Decision 93/696/EC. The Bank intends to continue to pursue its objectives in Central and Eastern Europe on the basis of its new lending authorisation decided by Council on 14 April 1997 (Council Decision 97/256/EC) and is already appraising potential investment projects in the countries concerned. 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 the PHARE programme. In addition to frequent PHARE assistance during the pre-investment phase to ensure that the necessary studies and technical assistance are implemented in support of EIB projects, the Bank also cooperates with PHARE in co-financing infrastructure projects, to which up to 25% of PHARE resources may be allocated. During the reference period, the Bank and PHARE have co-fmanced a rail project in Estonia, a road project in Romania and rail and road projects in Lithuania. Of the international financial institutions, the EIB works closely with the EBRD, of which the EIB is a shareholder, and the World Bank. Together, they finance some of the projects that have been undertaken in the area, with a view to the impact of their activities to the benefit of the countries maximizing concerned. During the reference period, the Bank, together with the EBRD, has co-fmanced the infrastructure projects in Albania, the Czech Republic, Latvia, Lithuania and Romania listed in Table 3. The World Bank has also co-financed the project in Albania and is appraising projects for co-financing in Romania. The share of the different financing sources in projects financed by the EIB is shown below. - 22 - Table 4. Share of PHARE and international financial institutions in projects financed by the EIB during 1996/1997 (Council Decision 93/696/EC) Country EIB EBRD IBRD Other4 PHARE TOTAL (ECU m) Albania Bulgaria Czech Rep. Estonia Hungary Latvia Lithuania Poland Romania5 Slovak Rep. 12 0 255 16 135 26 72 380 110 100 10 — 40 0 0 47 38 0 54 0 14 — 0 0 0 0 0 0 120 6 0 104 — 368 11 55 19 90 3 732 81 320 0 — 0 5 0 0 5 0 5 0 140 ~ 663 32 190 92 205 4 112 370 420 TOTAL 1 106 (17. 8%) 189 (3%) 134 (2. 2%) 4 780 (76. 8%) 15 (0. 2%) 6 224 (100%) States, public bodies or other domestic financial sources, including own funds of borrower/promoter. 5 Includes loan of ECU 20m signed in March 1997. 6 Under appraisal. 23 Annex 1 Financing provided on the basis of the Council Decisions of 15 March 1993 (93/166/EEC) and 13 December 1993 (93/696/EC) Breakdown by country and sector SECTOR COUNTRY TOTAL Transport Telecoms Energy Industry, other, mixed Poland Czech Rep. Hungary Romania Slovak Rep. Bulgaria Lithuania Estonia Albania Latvia 853 770 475 351 215 90 101 68 46 31 265 385 95 161 15 90 66 51 29 - TOTAL 3 000 1 157 250 30 150 80 20 - 15 - — - 545 180 355 - 110 130 - 10 7 12 6 810 158 - 230 — 50 — 10 10 5 25 488 (100%) (38. 6%) (18. 2%) (27%) (16. 3%) 24 EIB loans signed on the basis of the Council Decisions of 15 March 1993 (93/166/EEC) and 13 December 1993 (93/696/EC) Annex 2 Year of signature COUNTRY Albania PROJECT Amount of loan (ECU m) COUNTRY TOTAL (ECU m) Bulgaria Czech Republic Estonia Hungary 1995 1995 1995 1996 1994 1995 1994 1994 1994 1995 1995 1995 1996 1996 1993 ' 1994 1994 1994 1995 1996 1994 1994 1995 1995 1996 1996 East-West road corridor Ferry terminal at the Port of Durres APEX global loan Power transmission Air traffic services - B Transit roads II Berlin-Vienna rail corridor Mero-IKL (D-CZ) pipeline Telecommunications 1 - B C'EZ I (power plant improvements)-A C'EZ I (power plant improvements)- B Roads C'Eske Drahy Rail Corridor II Sko Energo FIN/VW-Skoda combined heat and power plant 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 Railways (Rehabilitation Tallinn-Narva line) Telecommunications II Municipal infrastructure global loan Financial sector global loan Telecommunications II - Tranche B M3 Toll motorway Financial sector global loan (Extension to 1995 ECU 150 million loan) 24 5 5 12 30 60 125 100 30 100 100 60 200 55 5 20 15 7 5 16 100 40 150 50 95 40 46 90 770 68 475 - T PROJECT Investment Bank of Latvia - Global loan Investment Bank of Latvia - Global Loan B Riga Water and Environment Daugava Hydropower Vilnius Airport Port of Klaipeda Lithuanian Development Bank - Global loan Gas distribution Lithuanian Development Bank - Global loan B Via Baltica Telecommunications (GSM) Railways (Modernisation) Telecommunications II Highways Warsaw sewerage treatment plant Export Development Bank glob^1 loan Financial sector global loan Railways III Polish Telecommunications Tranche (Extension B modernisation) Poland Highways - Tranche B PGNG II - Second Gas II and and rehabilitation Romgaz modernisation Air traffic services - B Telecommunications Heat and power rehabilitation Constanta port rehabilitation Roads Rehabilitation II Bucharest Metro modernisation Bucharest Metro Tranche B modernisation- Amount of loan (ECU m) COUNTRY TOTAL (ECU m) 31 101 853 351 5 5 15 6 10 14 5 10 5 20 15 22 150 125 45 13 100 40 100 100 180 50 16 80 60 35 70 20 20 COUNTRY Latvia Year of signature 1993 ' Lithuania Poland Romania 1996 1996 1996 1994 1995 1995 1996 1996 1996 1996 1996 1994 1994 1994 1994 1995 1995 1996 1996 1996 1994 1994 1995 1995 1995 1996 1996 1997 2 - 26 - COUNTRY PROJECT Year of signature Slovak Republic Amount of loan (ECU m) COUNTRY TOTAL (ECU m) 215 1994 1994 1995 1995 1996 1996 Telecommunications 1 -B Air traffic services State Bank and global loan II SPP Gas transmission SPP Gas transmission - B SE Thermal Power - rehabilitation 20 15 50 30 30 70 TOTAL 3000 3000 Signed on the basis of Council Decision 93/166/EEC. Signed on 27 March 1997. - 2 7- REPORT FROM THE COMMISSION TO THE COUNCIL AND TO THE EUROPEAN PARLIAMENT on the implementation of loans granted by the European Investment Bank in the Republic of South Africa (1995-96) 28 CONTENTS 1. Introduction 2. 3. 4. Results of the mandate for South Africa Assessment of the system's operation Coordination between the financial institutions operating in the country 1. Introduction - 2 9- This report on the activities of the European Investment Bank (EIB) in South Africa has been drawn up in accordance with Council Decision 95/207/EC of 1 June 1995 (OJ No L 131 of 15 June 1995) granting a full Community guarantee to the EIB against losses under loans for projects in South Africa. This guarantee is restricted to an overall loan ceiling of ECU 300 million over a period of two years beginning on the date on which the Decision takes effect. Since this report is the first of its kind, it exceptionally covers the period to 31 December 1996. 2. Results of the mandate for South Africa During the reference period, the EIB made from its own resources three loans totalling ECU 101 million in South Africa. A summary table giving details about signings (sector, loan amounts, etc. ) is set out below. 3. Assessment of the system's operation All the operations mentioned above have been carried out under a specially adapted financing In accordance with the Council Directives, they are to assist the transition to system. democratic rule initiated by South Africa and contribute to the successful completion of the country's reconstruction and development programme. For example, the loan to the Industrial Development Corporation (IDC) has been used to finance a total of 30 operations in the industry, agro-industry and tourism sectors, helping to create more than 1 500 jobs. The loan to the Development Bank of Southern Africa (DBSA) has been allocated to 27 projects, most of which relate to water and wastewater treatment schemes. They thus were responding to the evident urgent needs in many of the country's regions. -30 Table 1. EIB loans signed on the basis of the Council Decision of 1 June 1995 (95/207/EC) Date of signature 21. 12. 1995 28. 12. 1995 22. 05. 1996 Project Industrial Development Corporation Development Bank of Southern Africa ESKOM Amount of loan (ECU million) 15 30 56 Description Comments to loans Global loan to finance small and medium-sized projects in manufacturing, the agri-foodstuffs, tourism, transport and mining sectors Global finance infrastructure projects in the wastewater water treatment sectors Partial the financing upgrading and extension of the power grid three in regions of the country and of The loan has been fully allocated and disbursed Two thirds of the loan have been disbursed; satisfactory progress is being made in carrying various out aspects the of project TOTAL 101 4. Coordination between the financial institutions operating in the country The Bank cooperates closely with the Commission and their financing activities complement each other. For example, the Commission provides assistance for water supply programmes whereas the EIB grants loans for water and wastewater treatment and purification; the Commission assists in guarantee programmes for small and medium-sized enterprises, -31 - financed through the commercial banking sector, whereas the EIB finances loans through the commercial banks and SMEs through the Industrial Development Corporation. The EIB maintains close contact with the World Bank office, and discussions on specific projects have been initiated with national organisations, for example the Societe de Promotion et de la Participation pour la Cooperation Economique (PROPARCO) in France and the Commonwealth Development Corporation in the United Kingdom, both of which have a local office. -32 REPORT FROM THE COMMISSION TO THE COUNCIL AND TO THE EUROPEAN PARLIAMENT on the rate of utilization of European Investment Bank loans for projects in the Republic of South Africa (from 1 January 1997 to 30 June 1997) 1. Introduction Council Decision 95/207/EC of 1 June 1995 (OJ No L 131 of 15 June 1995) grants in full the Community guarantee to the European Investment Bank (EIB) against losses under loans for investment projects in the Republic of South Africa for a maximum loan ceiling of ECU 300 million over an indicative two-year period. It requires the Commission to draw up a six-monthly report on the rate of utilization of EIB loans signed under the guarantee. The present report covers the period from 1 January to 30 June 1997. The previous report covered the period 1 January to 30 June 1996 and was transmitted to Council on 6 December 1996 (COM(96)688). No loans were signed in the second half of 1996. 2. Lending during the reference period 2. 1 During the first half of 1997 the EIB Board of Directors approved two loans out of own resources for a total of ECU 90 million in the Republic of South Africa. Loans were signed during the reference period except for ECU 15 million corresponding to the second tranche of one of the loans. Details of the operations are given in the table below. 2. 2 At 30 June 1997 the loan contracts signed by the Bank under the mandate amounted to ECU 176 million. Additionally, the loan for ECU 15 million mentioned above is expected to be signed shortly. - 3 3- Operations signed in the period 1 January to 30 June 1997 on the basis of Council Decision of 1 June 1995 (95/207/EC) Project name Date of Signature Amount signed (ECU mio) Description Central Energy Fund 30. 06. 1997 45 Part-funding of the cost of exploiting adjacent the installation of associated compression facilities of Mossgas deposits and gas Commercial Bank Infrastructure- credit line Commercial Bank Infrastructure - credit line - Tranche B 06. 03. 1997 30 loan Global medium-scale infrastructure projects financing of the for (1) 15 Ditto TOTAL 90 (1) Signature expected shortly. -34- REPORT FROM THE COMMISSION TO THE COUNCIL AND TO THE EUROPEAN PARLIAMENT on the rate of utilization 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) (from 1 July 1996 to 30 June 1997) 1. Introduction , of 13 December 1993 Decision 93/696/EC Council of 23 December 1993) grants in full the Community guarantee to the European Investment Bank (EIB) against losses under loans for projects in central and eastern Europe for a maximum loan ceiling of ECU 3 000 million over an indicative three-year period. The loan guarantee ceiling includes the provisions laid down in respect of investments in Estonia, Latvia and Lithuania by Council Decision 93/166/EEC of 15 March 1993. (OJ No L 321 Council Decision 93/696/EC requires the Commission to draw up a six-monthly report on the situation regarding loans signed under the guarantee. The present report covers the period from 1 July 1996 to the end of the 1993-96 mandate. In December 1996, the end of the indicative three-year period referred to in the Decision, Bank lending had not attained the guarantee ceiling granted and therefore, in accordance with Article 1, the guarantee period was automatically extended by six months. 2. Lending during the reference period 2. 1 During the second half of 1996 the Bank signed 18 loans financed out of own resources for a total of ECU 965 million in 8 countries of central and eastern Europe. At 31 December 1996, total loan contracts signed by the Bank amounted to ECU 2980 million. In accordance with Article 1 of the Council Decision, which extends the guarantee period by six months, the Bank in March 1997 signed a final loan for ECU 20 million, thus attaining the guarantee ceiling of ECU 3 000 million. The Bank has now fully discharged its responsibilities under the lending authorisation based on Council Decision 93/696/EC. 2. 2 The list of operations signed during the period and the description of the projects are given in the table below. Operations signed in 1996/1997 on the basis of the Council Decision of 13 December 1993 (93/696/EC) 35 COUNTRY PROJECT NAME ALBANIA Power transmission DATE OF SIGNATURE 15. 11. 1996 AMOUNT SIGNED (ECU m) 12 HUNGARY Financial sector global loan 15. 12. 1996 LATVIA Riga Water and Environment 06. 08. 1996 Daugava Hydropower Investment Bank of Latvia - Global loan B 29. 10. 1996 13. 11. 1996 LITHUANIA Via Baltica 12. 08. 1996 Telecommunications (GSM) 04. 11. 1996 Lithuanian Development Bank Global loan - B 05. 11. 1996 40 15 6 20 15 5 Railways 20. 12. 1996 22 DESCRIPTION the power improvement of and Rehabilitation transmission and distribution networks. For financing SMEs in industry, tourism and related services. Upgrading and rehabilitation of water and wastewater systems in and around the city of Riga. Rehabilitation works and dam safety improvements. For financing SMEs in industry, tourism and related services, and environmental protection and energy- saving projects. the Lithuanian Upgrading of selected sections of component of the Via Baltica North-South corridor. Construction and operation of the first phase of a mobile (GSM) telecommunications system. For financing SMEs in industry, tourism and related services. renewal, modernisation of signalling and of purchase network, and Track telecommunications locomotives. COUNTRY PROJECT NAME DATE OF SIGNATURE POLAND Poland Highways - Tranche B 19. 07. 1996 PGNG II-Second Gas 30. 09. 1996 telecommunications Polish Tranche B II- 16. 12. 1996 SLOVAKIA SE Thermal Power rehabilitation 08. 11. 1996 SPP GAS Transmission - B 21. 11. 1996 - 3 6- AMOUNT SIGNED (ECU m) 100 180 100 70 30 C'Eske Drahy Rail Corridor II 04. 12. 1996 200 CZECH REPUBLIC ROMANIA TOTAL Signed in March 1997 SKO Energo FIN/VW-Skoda Combined heat and power plant Roads Rehabilitation II 05. 12. 1996 25. 10. 1996 Bucharest metro modernisation 20. 12. 1996 Bucharest metro modernisation - Tranche B• 27. 03. 1997 55 70 20 20 985 DESCRIPTION Upgrading to motorway standards of the A4 highway between Bielany and Nogawczyce. Conversion of the Wierzchowice gas field underground storage facility. Expansion telecommunications network. and modernisation into an Polish the of Rehabilitation of the Vojany I coal-fired power station. line the Warsaw-Ostrava-Vienna Modernisation and extension of the Slovak international gas transit and domestic networks. Modernisation of (Corridor 2). Replacement of VW/Skoda's combined heat and power plant in the city of Mlada Boleslav. Rehabilitation of key sections of the European corridors E81 andE60. Renewal of rolling stock and network completion. Ditto infrastructure ISSN 0254-1475 COM(98) 1 final DOCUMENTS EN 09 01 11 Catalogue number : CB-CO-98-001-EN-C ISBN 92-78-30004-7 Office for Official Publications of the European Communities L-2985 Luxembourg %