Transcript EIB Lending in the Water Sector (WSS & IWRM)

EUROPEAN INVESTMENT BANK
Water Sector Strategy and Activities in the New Member States,
Candidate Countries, Western Balkans and Eastern Neighbours
José Frade, Associate Director
Convergence and Environment Department
World Bank ECA Region Urban Regeneration and Water Study Tour, Joint
Workshop with the European Union and Development Partners
29 May 2009
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EIB annual lending and the financial crisis
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Mandates within and outside the EU
Direct loans of EUR 15.7bn in 2008 for environmental sustainability,
including climate change mitigation and adaptation
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EIB Lending in the Water Sector (WSS & IWRM)
3.5
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TOT loans EUR Billion
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2.5
2.3
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2.1
1.5
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0.5
0
2004
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EIB annual average lending: EUR 2.5bn
2005
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2008
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Range of Instruments
Loans for sovereign, sub-sovereign, corporate clients;
Long tenors and adequate grace periods
Investment, programme, framework and global loans
Funding of 50 (-75)% of total project cost
Co-funding with Commission, IFIs, commercial banks
Facilitation of PPP models, where appropriate
Support to client throughout the project cycle
Due diligence based on technical, financial,
environmental, and social criteria (EC Directives,
international standards). Special focus on cost recovery
and sustainability
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Key challenges facing the water sector
The Past : Investment backlog, poor services, inefficiency
High inefficiency/wastage of resources
Deteriorating infrastructure due to lack of funds
The Present & Future: Increasing CAPEX, competition, risks
More demanding environmental/service quality objectives
Economic growth & urbanisation (water for food, energy…)
Adaptation to climate change
The “3 G’s”: Gaps of financing, project quality and capacity
Grants limited by budget, tariffs by politics, loans by risk
Poorly prepared projects cannot attract enough funding
Weak regulatory, absorption and implementation capacity
Is the water sector financially and operationally unsustainable?
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EIB’s 2008 Water Lending Policy
Seven key areas of intervention:
 IWRM
 Consolidation of
Institutional Framework
 Adaptation to Climate
Change
 Water efficiency
 Development of new water
supply
 Wastewater and sanitation
services
 Research & Innovation
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Implementing the Policy: Key actions (1)
IWRM :
Promote IWRM + water services provision in a project
Support transboundary cooperation
Consolidation of institutional framework:
Support appropriate level of integration of utilities to improve
efficiency and enhance borrowing capacity
Enhance financial sustainability (sustainable cost recovery)
Adaptation to climate change (CC):
Adaptation part of new lending priority in EIB CC Strategy
Promoters should consider adaptation in project design
EIB supports TA with grants
Preparation, implementation of flood risk management projects
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Implementing the Policy: Key actions (2)
Water efficiency:
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Support efficiency in: i) use by consumers; ii) allocation of
resources; iii) systems (losses); iv) management of utilities
Promote principle of cost recovery in line with WFD
Support industries aiming at improving “water footprint”
Development of new water supply:
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Demand side management and efficiency as 1st priority
Finance: i) desalination with pre-requisites; ii) dams, basin
transfers and fossil water under strict conditions
Wastewater and sanitation services:
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Always consider them when undertaking DWS projects
Sustainable Cost Recovery (role of subsidies)
Sustainable financing (blend loans, grants)
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“ECA” Regional priorities : Main drivers
EU Member States: Compliance with EC Directives, efficiency
gains, CC adaptation (flood management and protection)
EU Candidate Countries (Turkey, Croatia, FYROM) and other
Western Balkans (Albania, Bosnia and Herzegovina, Montenegro,
Serbia and Kosovo): Future compliance, institutional
consolidation, pollution reduction, upgrading & maintenance,
and extension of services after careful analysis
Russia and the Eastern neighbours, i.e. Eastern Europe (Ukraine,
Moldova and - subject to future Council Agreement - Belarus) and
Southern Caucasus (Armenia, Azerbaijan and Georgia): As above,
minus compliance
Central Asia (Kazakhstan, Turkmenistan, Uzbekistan, Tajikistan,
Kyrgyzstan) : New mandate. To be identified.
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New Member States : Instruments and Activities
Process driven by compliance with EC Directives & grant
availability. The EC is the main financier and sets the rules.
Role of other agencies is to help accelerate grant
absorption, i.e. help countries meet EC requirements and
procedures. Availability of grant is now a precondition for cofinancing with other financial resources.
EIB is the standard co-financier for Cohesion Fund
projects through sovereign loans, including framework loans
EIB has also begun to undertake sub-sovereign lending
(Romania, Poland, the Czech Republic)
The Bank applies its technical knowledge to upstream
project development either directly (e.g. flood management
and protection) or under the joint instrument JASPERS
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NMS: EIB Contribution to Flood Risk Mitigation
Flood management and protection projects form part of
adaptation to CC in new water sector lending policy
Bank’s experts advise on capacity building, give support to
strategies, technical and economical studies, and support
implementation
“Value added” incl. sector know-how, worldwide project
experience, and good contacts with EC and other IFIs
“Guide for preparation of flood risk management schemes”
published in 2007
JASPERS advises new Member States on EC grant
applications for, inter alia, flood risk mitigation projects
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NMS: What is JASPERS
‘Joint Assistance to Support Projects in European
Regions’
Objective: increasing capacity of beneficiary countries to
make the best use of EU Structural Grant funding
TA partnership to prepare major projects between DG
REGIO, EIB and EBRD. KfW a partner in July 2008
Value added: draws on past experience and expertise of
the EIB, EBRD, and KfW
JASPERS is managed within the EIB but is separate
from its lending activities
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Candidate Countries and Western Balkans:
Instruments and Activities
A tailored approach: “distance” from Accession determines focus on
convergence and compliance with EU standards as well as the availability
of EC grants
Infrastructure is a key focus area for EC and its cooperation with EIB
and other IFIs: a Western Balkans Investment Framework is being
developed, while its precursors – the Infrastructure Projects Facility (TA
instrument) and Municipal Window (grants) – are operational
EC, EIB and EBRD are discussing with Member States a Joint Grant
Facility (JGF), and related European Western Balkans Joint Fund to
pool grant resources in support of priority investment projects in the region
(first focus on infrastructure, then extend)
EIB can adopt a programmatic approach to invest in small and medium
towns, coupled with TA and a grant element (Bosnia, Montenegro).
EIB supports the strengthening of the sector, e.g. to reduce excessive
fragmentation when this threatens cost-effectiveness, sustainability and
the ability of countries to implement ambitious plans and absorb EC funds
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Russia, Eastern Neighbours & Central Asia:
Instruments and Activities
EIB activities in Russia and Eastern Neighbours guided by EU policies
and initiatives: (i) European Neighbourhood Policy, (ii) Black Sea Synergy
Initiative, (iii) Eastern Partnership
2007-13 mandate for EUR 3.7bn for projects of significant interest to the
EU in infrastructure
Water: approach will be to focus on rehabilitation and efficiency of water
utilities as well as issues such as climate change adaptation.
Modest volumes, apart from Russia: operations in St. Petersburg with
EBRD. First Finance Contract (EUR 25 M) in 2003 for SW Wastewater
Treatment Plant - with NIB, EBRD, EC, Finnfund, NEFCO, Swedfund.
Ukraine: recent progress in Mykolaiv, where projects for co-financing with
the EC and national/local funds are under appraisal
Central Asia: operations started in 2009
MoU (2006) between EC, EBRD and EIB: (i) Steering Committee meets
regularly, (ii) EIB and EBRD carry out joint missions and coordinate
appraisal work, but each has independent credit and project analysis
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Cooperation with the WB: Some Examples
Moldova: EIB relying on sector work done by the WB
Albania: Coastal Cities project (co-funded with WB/GEF)
progressing after severe delays. Collaboration is excellent.
FYROM, Montenegro: contacts made for possible cofinancing, but at early stages
Romania: WB provides TA to regional water companies - will
feed into grant application process supported by JASPERS
Poland: WB coordinating with JASPERS to accelerate
implementation of ODRA flood protection project
Bulgaria : WB financing Master Plans not fully coordinated
with partners present in the country
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A few questions for the discussion
How can we all contribute to filling the 3 G’s?
How can we help implement IFinRM?
How does the WB see its comparative advantage
and role in different sub-regions?
What about the other partners?
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