INTERVIEW - EBRD to lend 3.0 bln euro to SEE region, renewables projects in Bulgaria on hold

SOFIA (Bulgaria), October 25 (SeeNews) – The European Bank for Reconstruction and Development (EBRD) plans to provide 3.0 billion euro ($3.9 billion) in financing for projects in Southeast Europe (SEE) over the next two years, the bank’s first vice president said.

“[..] The actual distribution would not be according to a budget for a particular country or a particular sector. It would be based on demand that we find for projects, for investments, what the sponsors are prepared to do,” Varel Freeman told SeeNews in an exclusive interview during a two-day visit to Sofia earlier this week.

“And, of course, we would seek to have a diversified portfolio within that amount of financing, diversified in terms of sectors and in terms of countries. But we do not have a central planning approach as to how to allocate that money,” he added.

The SEE countries are not identical in their needs and their capabilities, Freeman said, pointing to energy, natural resources, infrastructure, and the financial sector as areas where the bank sees good opportunities for investments.

“The EBRD on average is a very balanced institution. We have about one-third of our activity taking place in the financial sector which should be banks and insurance companies, leasing companies and other financial enterprises, about one-third in manufacturing and services – which could be agribusiness, industrial investments, business services such as tourism, and about one-third in infrastructure, natural resources and energy.”

The EBRD vice president stressed that the bank is always a minority investor or lender, seeking to leverage its capital to mobilise other people’s investments. “So, if we are investing in equity, it would never be more that one-third of the equity and two-thirds of the equity of the company should come from private sources. Likewise, in lending we seek to be a minority lender,” he said, adding that the EBRD is working quite extensively with the European Investment Bank, the International Finance Corporation and with development agencies.

The pace of economic growth in SEE is slower than desired, which means governments need to be very careful to adopt policies which encourage investments, promote risk-taking and build confidence on the part of the private sector, both domestic and international, so that there is in response willingness of the private sector to take risk to invest, to create jobs and to grow, Freeman also said.


Taking a question on Bulgaria in particular, Freeman said that despite "a good mix of optimism and confidence" among investors, the business environment and legal framework give grounds for concern.

“The not so good news is that a great deal of concern has been expressed by a number of potential investors - often the same ones who see opportunity also see some cause for concern - and in general that concern is that the business environment in Bulgaria is not as clear and not as predictable as would be desirable."

He pointed to recent examples of policies being changed or taken without a great deal of or any consultations with the private sector or other stakeholders. "[There is] a great deal of uncertainty as to whether investors can see enough predictability about the conditions under which they would be operating in Bulgaria to feel confident to eventually make a positive decision on investment.”

Highlighting the recent changes to the regulatory framework on renewable energy in Bulgaria as an example for changes that have been made without consultations with the affected parties, Freeman said the move has prompted the EBRD to put on hold its plans for investments in this area.

“That is an example of a law that has been changed with no consultation whatsoever with the affected parties and irrespective of the merits of those changes it is generally difficult to make a good policy without a broader consultation and debate," he said.

“We do not contemplate any investments in renewables in Bulgaria, not this year, not next year, not until the framework is more clear.”

The bank’s investment focus in the country in the mid-term will be on industrial investments, both on the domestic market and exports, on infrastructure, the financial sector and energy efficiency both in the corporate and in the residential sector.

“We will focus primarily on industrial investments, those investments that create capital formation and jobs in Bulgaria [..] We also look at infrastructure. We are working on a number of municipal infrastructure projects that could improve transport or water supply components for example, some support in the financial sector where banks and other financial institutions need capital or additional liquidity, we are prepared to work there."

Another area high on EBRD's priority list in Bulgaria is energy efficiency given that the country has one of the most energy-intensive economies in the world, fuelled in part by low energy prices.

($ = 0.7707 euro)

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