84025 PPI data update note 81 September 2012 Private activity in infrastructure in Europe and Central Asia picks up Overview In 2011, 53 new infrastructure projects reached financial or contractual closure in low and middle income countries in the Europe and Central Asia (ECA) region: Albania (3), Bulgaria (4), Georgia (2), Kosovo (1), Romania (4), Russia Federation (2), Turkey (34), and Ukraine (4).1 Total investment commitments (hereafter, investment) in all infrastructure projects reached US$40.1 billion, of which US$16.3 billion were investments in new projects and US$23.7 billion were additional investments in existing projects. As compared to 2010 investment levels total investment increased by US$10.3 billion, from US$29.9 billion (+34%). Sector focus Infrastructure projects with private Investment commitments in participation in ECA by sector, 1990-2011 infrastructure projects in ECA, by 180 50 sector, 1990-2011 Projects * Adjusted by 45 2011 US$ 160 US CPI. 40 billions 140 35 120 30 100 25 80 20 60 15 40 10 20 5 0 0 1990 1995 2000 2005 2010 2011 1990 1995 2000 2005 2010 2011 Energy Telecom Transport Water and sewerage Energy Telecom Transport Water and sewerage Source: World Bank and PPIAF, PPI Project Database. Source: World Bank and PPIAF, PPI Project Database. In ECA, 47 energy projects reached financial closure during 2011, a 60% increase compared to 2010 activity levels. Investment in energy projects followed a similar increase (57.4%), totaling US$19 billion. Of all energy projects, 74% percent (35 projects) were Greenfield projects with a total capacity of 5175 MW, followed by seven management contracts, four concessions and one divestiture. Of the 47 energy projects, 39 were renewable energy projects involving a total capacity of 2273 MW and a majority of these (25 involving a total capacity of 1456 MW) closed in Turkey. This note was written by Andreea Militaru, Consultant, Finance Economics and Urban Development Department, Sustainable Development Network, World Bank 1 Data on infrastructure projects with private participation include primarily medium-size and large projects in low and middle income countries as reported by the media and other public sources. Small-scale projects are generally not included because of lack of public information. More information is available at http://ppi.worldbank.org/. 1 In the telecom sector, the Ukrtelecom divestiture closed in 2011 in Ukraine. The project involved investments of US$1.3 billion. Total investment in telecom projects amounted to US$14.9 billion, a 16.3% increase from 2010 levels. The majority of investments were done in existing assets, valued at US$13.6 billion. Almost two-thirds of the capital was invested in mobile access projects. Russia attracted the biggest share of investments in the telecom sector, totalling US$7.4billion. Turkey witnessed US$3 billion in investments, traditionally the second market in this region. Companies invested almost one billion dollars in Kazakhstan. Five transport projects closed in ECA in 2011, the same as in 2010. Two airport projects closed, one in Turkey and one in Kosovo, two rail projects closed, one in Romania and one in the Russian Federation and one port project closed in Turkey. Total investment in transport projects amounted to US$6.1billion, a 25% increase from 2010 levels. This can be explained by the large investment amount committed to the Freight One divestiture in Russia, US$4.2 billion. No water projects closed in ECA in 2011; there hasn’t been any activity in the water sector in ECA since 2008. Infrastructure projects with private Investment commitments in participation in ECA by PPI type, 1990- 60 infrastructure projects in ECA, by PPI 200 2011 type, 1990-2011 Projects 2011 US$ * Adjusted by billions US CPI. 150 40 100 20 50 0 0 1990 1995 2000 2005 2010 2011 1990 1995 2000 2005 2010 2011 Management and lease contract Management and lease contract Greenfield project Greenfield project Divestiture Divestiture Source: World Bank and PPIAF, PPI Project Database. Source: World Bank and PPIAF, PPI Project Database. Sponsor focus Sponsors in energy: US$19 billion were invested in ECA in 2011 across 111 projects. US$10.1 billion represented investments in new projects, while the remaining US$8.9 billion represented additional investment Top 5 sponsor countries by number of Top 5 sponsor countries by investments energy projects, in ECA in 2011 in energy projects, in ECA in 2011 Italy Italy Czech Austria Republic Austria Germany Russian Russian Federation Federation 2011 US$ billions Turkey Turkey Projects 0 10 20 30 40 0 2 4 6 8 10 Source: World Bank and PPIAF, PPI Project Database. Source: World Bank and PPIAF, PPI Project Database. 2 committed to projects closed prior to 2011. Turkish sponsors are dominant with investments over US$8 billion across 30 projects. Turkish sponsors in the energy sector included: Agaoglu Group, Akfen Holding, Akkok Group, Aksa, Aydiner Insaat, Anadolu Endustri Holdings, Bilgin Enerji, Boydak Holding, Ciner Group, Demirer Holding, Dogan Group, Dogus Holding, Dost Enerji, EEN TK Holdings, Eksim Investment Holding, Er Bu Insaat, Fernas Construction Company, Fidas Reklam Enerji Hizmet Lojistik Turizm San Tic, Ka-Fnih Enerji Uretim, Kayseri ve Civari Elektrik, Kent Solar Elektrik Uretim, Kolin Group, Limak Holding, Nas Enerji, Sabanci Holding, Sanko Holding, Turcas Elektrik Uretim A.S., Yildizlar Holding, Yircali Group,. Turkish sponsors are closely followed by Russian sponsors with investments of over US$7.4 billion across 26 projects. Russian sponsors in the energy sector included: Federal Atomic Energy Agency (FAEA), Gazprom, Integrated Energy Systems Holding (IES), Lukoil, Norilsk Nickel, ONEXIM Group, Prosperity Capital Management, Siberian Coal Energy Company, and Syntez Group, and United Energy System of Russia. Top 5 sponsor countries by number of Top 5 sponsor countries by transport projects, in ECA in 2011 investments in transport projects, in ECA in 2011 Romania Russia Netherlands India India, Malaysia Malaysia Russia Turkey Projects 2011 US$ billions Netherland Turkey s 0 2 4 6 0 2 4 6 Source: World Bank and PPIAF, PPI Project Database. Source: World Bank and PPIAF, PPI Project Database. Sponsors in transport: US$ 6.1 billion were invested in transport in ECA in 2011 across nine projects. US$4.9billionrepresented investments in new projects, while the remaining US$1.2 billion represented additional investments committed to projects closed prior to 2011. Turkish sponsors dominate in terms of number of transport projects (5) while a Dutch sponsor dominates in terms of investment in transport, US$4.2 billion, all committed to the Freight One project in Russia. Turkish sponsors in transport include: IC Holding, Limak Holding, and TAV Airports Holding. Dutch sponsors in the sector concern: UCL Rail. Notably, Malaysia Airports Holding (Malaysia) and GMR Group (India) and domestic firm Limak Holding where part of a consortium operating in Turkey on the expansion of Istanbul Sabinha Gokcen International Airport with two new runways and terminals. 3 Sponsors in telecom: US$14.9 billion were invested in telecom in ECA in 2011 across 85 projects. The bulk of this amount, US$13.6 billion, represented additional investments committed to projects closed prior to 2011. The majority of these projects are Greenfield mobile operations which have been constantly expanding since Top 5 sponsor countries by number of Top 5 sponsor countries by investments telecom projects, in ECA in 2011 in telecom projects, in ECA in 2011 Austria Turkey Ukraine Austria United Kingdom Norway Sweden Sweden 2011 US$ billions Russian Russian Federation Projects Federation 0 10 20 30 0 5 10 Source: World Bank and PPIAF, PPI Project Database. Source: World Bank and PPIAF, PPI Project Database. the mid-90s, when the first mobile licenses were secured. Sweden and Russia dominate both by number of projects and by investment. Investments from Swedish sponsors mostly originated from the telecom operator, TeliaSonera, while investments from Russian sponsors were made through a variety of local operators which are in a process of consolidating operations. The Swedish sponsors in the telecom sector also included Tele2AB. The Russian sponsors included: AF Telecom Holding, Alfa Group, Bashinformsvyaz, Financial Corporation Sistema, Megafon, Mobile TeleSystems (MTS), Perm Financial and Industrial, International Telecom Company (ITC), Rostelecom, Svyazinvest, and Vimpel Communications. 4 Featured project Polat Soma II Wind Farm (Turkey) | Electricity generation: Wind, Onshore | Greenfield BOO | PPP Soma Enerji developed the 61.6MW Soma II wind farm in Manisa province, in Turkey. Phase two of the project comprised of 77 turbines of 0.8MW each, and was commissioned in January 2012. Soma II was an addition to the 79.2MW Soma I wind farm, a farm commissioned in November 2010 which comprised of 99 turbines. Soma Enerji was a wholly-owned subsidiary of Polat Enerji. Polat Enerji was 50-50% owned by French EDF Energies Nouvelles and entrepreneur Adnan Polat. The initial feasibility study was done by Electric Power Engineers (EPE) consulting, from the United States, who outsourced part of the energy assessment to GL Garrad Hassan. Equipment was supplied by German Enercon, which for the second phase included 30 turbines of the E-70 type and one turbine of the E-44 type. Financial close was reached in February 2011 and construction started in February 2011. Financial Information The project was financed by EUR62.45 million ($83 million) debt and EUR10.45 million (US$13.9 million) equity. The debt included a EUR58.45 million (US$77.7 million) 14-year term loan and a EUR4 million (US$5.3 million) 1 year revolving credit, arranged by Garanti bank. There was a two-year grace period. The debt/equity ratio was 86/14.Total project costs were EUR72.90 million (US$97 million). Government support The project secured a 10-year power purchase agreement (PPA) with state-owned utilities. Additional revenue support is provided by the Renewable Energy Law adopted in Turkey in 2010. For wind energy, the law comprises a feed-in tariff (FiT) of US$7.3 cents per kWh, for 10 years. In addition, purchasers of locally sourced equipment receive bonus FiT payments for: blades US$0.8 cents/kWh; generator and power electronics US$1 cent/kWh; turbine tower US$0.6 cents/kWh, and; US$1.3 cents/kWh for all mechanical parts. Producers of renewable energy also benefit from an 85% reduction in transmission costs for 10 years . 5 Table 1 Projects with private participation reaching financial or contractual closure in ECA in 2011 Energy Total Subtype of Investment Country Project Name Type of PPI Segment Sponsors PPI (US$ millions) Cerruje 1 & 2 Mini Greenfield Build, operate, Electricity Albania Hydropower Plants project and transfer generation 4.16 Energy Partners (100% / Albania) SDN Company (50% / Korea, Rep.), Veliko Tarnovo Solar PV Greenfield Build, own, and Electricity Korea Electric Power Company Bulgaria Project project operate generation 203.49 (KEPCO) (50% / Korea, Rep.) Middle Iskar Cascade Greenfield Build, lease, Electricity Bulgaria project (Phase II) project and transfer generation 34.6 Petrolvilla Group (90% / Italy) JV CO Bourgas Solar Greenfield Build, own, and Electricity ERG Renew (Italy), Lukoil ( Russian Bulgaria Plant project operate generation 4 Federation) Greenfield Build, own, and Electricity Bulgaria Kosharevo Solar PV project operate generation 10 GSG Studena ood (..% / Bulgaria) Electricity Inter RAO UES (100% / Russian Georgia Khrami I & II Divestiture Divestiture Full generation 104 Federation) Martifer Babadag wind Greenfield Build, own, and Electricity Romania farm project operate generation 80 Martifer Group ( Portugal) EDPR Cernavoda I & II Greenfield Build, own, and Electricity Electricidade de Portugal SA (85% / Romania Wind Farm project operate generation 266 Portugal) Greenfield Build, own, and Electricity Romania Enel Corugea wind farm project operate generation 158 Enel SpA (Italy) Greenfield Build, own, and Electricity Electricidade de Portugal SA (85% / Romania EDPR Pestera wind farm project operate generation 170.24 Portugal) Enel Moldova Noua wind Greenfield Build, own, and Electricity Romania farm project operate generation 97 Enel SpA (100% / Italy) Management Russian OJSC Tomsk Distribution and lease Management Electricity Electricite de France (100% / Federation Company contract contract distribution 0 France) Build, rehabilitate, Toroslar Elektrik Dagitim operate, and Electricity Turkey A.S Concession transfer distribution 2075 Yildizlar Holding (100% / Turkey) Build, rehabilitate, Akdeniz Elektrik Dagitim operate, and Electricity Turkey A.S. Concession transfer distribution 1170 Ciner Group (100% / Turkey) 52 Hydroelectric Plants - Rehabilitate, Electricity Kent Solar Elektrik Uretim (100% / Turkey Group 1 Concession operate, and generation 6.6 Turkey) 6 transfer Management Turuncova Finike River and lease Electricity Fides Reklam Enerji Hizmet Lojistik Turkey Hydro Plant (Group 5) contract Lease contract generation 2.76 Turizm San. Tic. (100% / Turkey) Camardi, Pinarbasi, Sizir Management River Hydro Plant (Group and lease Electricity Kayseri ve Civari Elektrik (100% / Turkey 10) contract Lease contract generation 16.97 Turkey) Degirmendere, Karacay, Management Kuzuculu River Hydro and lease Electricity Ka-Fnih Enerji Uretim (100% / Turkey Plant (Group 11) contract Lease contract generation 7.02 Turkey) Build, rehabilitate, 52 Hydroelectric Plants - operate, and Electricity Kayseri ve Civari Elektrik (100% / Turkey Group 13 Concession transfer generation 13.8 Turkey) Bayburt Cemisgezek Management Girlevik River Hydro and lease Electricity Turkey Plants (Group 14) contract Lease contract generation 7.4 Boydak Holding (100% / Turkey) Cag, Otluca, Ultudere Management River Hydro Plant (Group and lease Electricity Turkey 16) contract Lease contract generation 40.8 Nas Enerji (100% / Turkey) Adilcevaz, Ahlat, malazgirt, Varto-Sonmez Management River Hydro Plant (Group and lease Electricity Turkey 17) contract Lease contract generation 5.06 Er Bu Insaat (100% / Turkey) Greenfield Build, operate, Electricity Anadolu Endustri Holding A.S. Turkey Georgia Urban Enerji Ltd. project and transfer generation 156.5 (AEH) (Turkey) Garzan Dam & HEPP Greenfield Electricity Fernas Construction Company (..% / Turkey Project project Merchant generation 65.5 Turkey) Ansaldo Energia SpA (40% / Italy), Gebze CCGT Power Greenfield Electricity UNIT Investments SA, SPF (60% / Turkey Project project Merchant generation 1000 Netherlands) Goynuk-Bolu Thermal Greenfield Build, own, and Electricity Turkey Power Plant project operate generation 351 Aksa (100% / Turkey) Denizli CCGT Power Greenfield Build, own, and Electricity RWE (70% / Germany), Turcas Turkey Project project operate generation 725 Elektrik Uretim A.S. (30% / Turkey) Egemer CCGT Power Greenfield Electricity Turkey Project project Merchant generation 651 Akkok Group (100% / Turkey) Greenfield Electricity Turkey Sanliurfa NGPP project Merchant generation 351 Aksa (100% / Turkey) Greenfield Build, operate, Electricity Dogus Holding (34% / Turkey), Turkey Rainpower Aslancik Hydro project and transfer generation 220 Dogan Group (33% / Turkey) Greenfield Build, own, and Electricity Demirer Holding (50% / Turkey), Turkey Polat Poyraz wind farm project operate generation 34.26 EDF Energies Nouvelles SA (25% / 7 France) Greenfield Build, own, and Electricity EEN TK Holdings AS ( Turkey), EDF Turkey Polat Soma II wind farm project operate generation 99.9 Energies Nouvelles SA ( France) Greenfield Build, own, and Electricity Turkey Iltek Susurluk wind farm project operate generation 90 Eksim Investment holding ( Turkey) Greenfield Build, own, and Electricity Turkey Galata Sah wind farm project operate generation 147 Agaoglu Group (Turkey) Greenfield Build, own, and Electricity Turkey Karesi Akres wind farm project operate generation 66.5 Yircali Group (100% / Turkey) Greenfield Build, own, and Electricity Turkey Dost Yuntdag II wind farm project operate generation 85 Dost Enerji (Turkey) Enerjisa Dagpazari II wind Greenfield Build, own, and Electricity Turkey farm project operate generation 47 Verbund (50% / Austria) Verbund Canakkale- Greenfield Build, operate, Electricity Verbund (50% / Austria), Sabanci Turkey Mahmudiye wind farm project and transfer generation 49.2 Holding (50% / Turkey) Greenfield Build, operate, Electricity Turkey Sanko Yedigoze hpp project and transfer generation 400 Sanko Holding (100% / Turkey) Greenfield Build, operate, Electricity Turkey Akfen Camlica III hpp project and transfer generation 45 Akfen Holding (Turkey) Greenfield Build, operate, Electricity Limak Holding (Turkey), Bilgin Enerji Turkey Darenhes Tatar hpp project and transfer generation 300 (Turkey) Greenfield Build, own, and Electricity Turkey Ayen Korkmaz wind farm project operate generation 66.5 Aydiner Insaat (Turkey) Greenfield Build, operate, Electricity Turkey Enerjisa Yamanli II hpp project and transfer generation 110 Verbund (50% / Austria) Greenfield Build, operate, Electricity Turkey Enerjisa Kavsakbendi hpp project and transfer generation 259 Verbund (50% / Austria) Novoazovskiy wind farm Greenfield Build, own, and Electricity Wind Park Novoazovskiy LLC Ukraine (Phase I &II) project operate generation 118.4 (100% / Ukraine) Active Rodnikovoye solar Greenfield Build, own, and Electricity Ukraine PV project operate generation 25 Activ Solar Holding (100% / Austria) Active Ohotnikovo solar Greenfield Build, own, and Electricity Ukraine PV project operate generation 200 Activ Solar Holding (100% / Austria) Telecom Subtype of Total Investment Country Project Name Type of PPI Segment Sponsors PPI (US$millions) Ukraine Ukrtelecom Divestiture Partial Fixed and mobile access 1320 EPIC Invest (93% / Austria) 8 Transport Total Country Project Name Type of PPI Subtype of PPI Segment Investment Sponsors (US$ millions) Runway Greenfield Build, operate, and and Turkey Zafer Airport project transfer terminal 71.65 IC Holding (100% / Turkey) Pristina Runway International Build, rehabilitate, and Kosovo Airport Concession operate, and transfer terminal 127 Limak Holding (90% / Turkey) Fixed Russian assets and UCL Rail (Universal Carogo Logistincs Federation Freight One Divestiture Partial freight 4271 Holding B.V.) (75% / Netherlands) Iskenderun Port Build, rehabilitate, Turkey Concession Concession operate, and transfer Terminal 425 Limak Holding (100% / Turkey) Management and lease Fixed Transferoviar Group S.A. (100% / Romania CFR lease contract Lease contract assets 0 Romania) Note: .. denotes missing data; N/A means not applicable. Investment commitments include payments to the government and investment in physical assets. *in current US$ millions Source: World Bank and PPIAF, PPI Database. 9