GIB2015_Instruments for Increasing Capital Flows_Fischer

This presentation was
held during the 5th GIB
Summit, May 27-28 2015.
The presentation and
more information on the
Global Infrastructure Basel
Foundation are available
on www.gib-foundation.org

The next GIB Summit will take place in Basel,
May 24-25, 2016.

The information and views set out in this presenation are those of the author(s) and do not necessarily reflect the opinion of the Global
Infrastructure Basel Foundation. Neither the Global Infrastructure Basel Foundation nor any person acting on its behalf may be held responsible
for the use of the information contained therein.

Erste Group Bank AG
GIB Sustainable Infrastructure Summit
Our approach on fostering infrastructure finance in the Central and Eastern
European region
May 2015, Basel, Switzerland
Hinrich Fischer
Project Finance / Infrastructure

Index
Main highlights
! Erste Group at a glance
! Outlook for CEE region
! Public – Private Partnerships
! Advantages & Preconditions for successful PPPs
! “Bankability” of PPPs
! Current situation & outlook in Europe
! Power and Renewable Markets in CEE
! Power Market Overview
! Most important Renewables Market in CEE: Poland
! New RE Support Regime in Poland

Erste Group at a glance
Customer banking in the eastern part of the EU
Erste Group overview
! 45,000 employees serve 16.2 million customers with
approx. 2,800 branches in 7 countries in the eastern
part of the EU
! One of the leading financial providers in the eastern
part of the EU
! Among the TOP 3 banks in our core markets in CZ,
AUT, SK, RO, HU and HR
Infrastructure finance & advisory
Sector expertise:
! Transportation (roads, airports, railways)
! Social Infrastructure (education, hospitals)
! Energy and environment (renewable energy, water
& waste treatment)

InflationInflationGDPGDP
Source: ERSTE Research 1/2015
Budget DeficitsBudget DeficitsGDP (real) growthGDP (real) growth
ERSTE Research is
expecting GDP growth for the
CEE region to remain flat
compared to 2014.
Outlook supported by fiscal
consolidation and increasing
demand for exports.
All CEE countries which had
been under the EDP
(excessive deficit procedure)
have reduced their deficits
below 3% of GDP; HR and
RS still have to do their
homework.
Recovery in job markets is
still lagging – more
investments are needed;
uncertainty about global
outlook and high taxes weigh
on job creation.
AQ Research (2013)
Best overall CEE
Research Team
No.1
Real GDP growth (%) 2013 2014f 2015f 2016f
Croatia -0.9 -0.7 -0.5 0.5
Czech Republic -0.7 2.3 2.4 2.0
Hungary 1.5 3.3 2.1 1.9
Poland 1.6 3.3 3.1 3.6
Romania 3.5 1.8 2.2 2.7
Serbia 2.6 -1.8 -0.5 1.0
Slovakia 1.4 2.2 2.5 3.0
Slovenia -1.0 2.2 1.5 1.8
Turkey 4.1 2.8 3.8 4.5
CEE8 average 1.2 2.6 2.5 2.8
CEE8+Turkey 2.4 2.6 3.0 3.5
Page 4
… ready to fund economic growth in the region
The outlook for CEE remains positive

Public-Private Partnerships
„Bankability“ of PPPs
Secure and
Stable Cash-
Flows
(CFADS)
Risk
Allocation
Strong
Government
Support
Due
Dilligence
Technical
Complexity
Remuneration
/Availability
scheme
Project
Rationale
Experience &
Knowhow of
contracting
parties
Sponsors
Early
Termination
Regime
Strong political will/
stable regulatory
and legal framework
Strong support
Know-how
KEY
BANKABILITY
FACTORS

London
Warsaw
Prague
Istanbul
Vienna
Europe
Berlin
Zagreb
Bratislava
Budapest
BucharestBelgrade
Page 6
Current on-going projects or upcoming tenders in CEE
Romania – focus on Transport:
! Highways: Comarnic-Brasov,
Sibiu-Pitesti;
! Bucharest Southern ring road,
Northern suspended highway;
! Galati tunnel, Braila bridge,
Buzau road rehabilitation.
Croatia – focus on Social Service:
! Varaždin Hospital;
! Popova!i Hospital.
Austria – focus on Social Service:
! Schools: Vienna Attemsgasse,
Schule Weiz;
! Vienna Radioonkologie Hospital;
! 10 schools and 3 other hospitals
to be tendered in the future.
Slovakia – various projects:
! D4/R7 Motorway (Bratislava bypass);
! Bratislava Hospital
Czech Republic – focus on Transport:
! R4 Expressway, south of Prague
Core markets of Erste Group
Indirect presence in CEE
Serbia – focus on Energy:
! PPP: Vinca Waste to Energy, Belgrade

Current situation & outlook in Europe
! In 2014, market value of PPP transactions closed: EUR
18.7bn (y-o-y increase of 15%)
! 11 large transactions (> EUR 500mn) accounted for EUR
11bn
! Western Europe (UK, Netherlands, Belgium, Germany)
and Turkey still dominate the PPP market
! Priorities: transport sector, followed by the healthcare
sector
Outlook in CEE: benchmark D4/R7 road PPP project in Slovakia
Source: EPEC market update 2014
! Mainly “greenfield” projects
! Majority of projects availability based (= no market/traffic
risk)
! Tight commercial terms (pricing and covenants)
! Preference of traditional bank financing over bond
financing
Key features: Current situation:
Contracting
Authority
Ministry of Transport, Construction and Regional Development of the
Slovak Republic
Contract DBFOM (design, build, finance, operate, maintain)
Key Facts
Tenor: 35 years
Operation period: 30 years
Capex: approx. EUR 1.5bn
Length: approx. 59.6 km
Remuneration Availability based

Conclusion: Current Trends on the PPP market in Europe
• „Wall of Money“ on the market (more diverse providers of financing) ! strong
competition
• Limited deal pipeline: no transport PPP project closed in CEE in 2014 (boost
expected)
High Liquidity with few
Adequate Projects
• Bank Loans vs. Project Bonds
• „Optimization“ of financing structures by using different facilities & guarantee
schemes
• Different sources of financing (institutional investors vs. banks), with different regulatory
requirements and expectations
Introduction of
Financing Alternatives
• EIB Project Bond Credit Enhancement (PBCE)
• Strong involvement of multilaterals (e.g. EIB) on all project levels (junior funds,
guarantees, L/C)
• EFSI / Juncker plan
EU-wide Investment
Programmes

Power and Renewable Energy Markets in CEE

Power Market Overview
Power Prices
1. Electricity prices at an historic low
! EUR 34.40 per 1 year EEX future
! Economic down-turn leading to weak demand
! Low prices for CO2 allowance certificates (EUA)
! Low prices for coal (US “shale gas revolution”)
! German renewables shifting Europe’s merit order curve
! Important differences CEE / WE: E- Consumption p. c.
(57%); overaged generation fleet (e.g. RO: 49% of 11GW
to retire from the system by 2025)
2. Retroactive cuts of green subsidies
! CEE: CZ, BUL, RO
! WE: I, ES
3. New EU – Guideline to align Support Systems
! Applicable from 1 July 2014, transition period until 2017
! Higher market proximity: Quota Systems, auctions
! Poland first one to implement: 2015/ 2016
Wholesale Power Prices in EUR / MWh Notable Market Developments
Page 10
Futures Cal-16 (EUR/MWh)
EEX: 31,73 POLPX:40,25 PXE: 31,30 OPCOM: 37,77*
13.05.2015
*CAL-15
0,00
10,00
20,00
30,00
40,00
50,00
60,00
70,00
ROM CZK POL DE/AUT

0,00
0,02
0,04
0,06
0,08
0,10
0,12
0,14
0,16
0,18
0,20
0,22
PV Small PV Utility Wind onshore Wind offshore Biogas Coal lignite Coal hard CCGT natural
gas
Page 11
Source: Frauenhofer ISE, Germany Nov 2013
Power Market Overview
LCOE in €/ kWh

New RES Act
Green Certificates Auctions
Concerned
Existing Plants (feeding first MWh before end of 2015) New Plants (obligatory)
Existing Plants (optional)
Duration 15 years 15 years
Key Changes
• Substitution Fee frozen at PLN 300.03 / MWh
(no indexation)
• Limited Support for biomass co-firing (0.5 GCs)
• Cancelling support for existing hydro plants > 5 MW
No support for biomass co-firing
No support for biomass > 50 MW
• Right of the government to adapt mandatory quotas impose further regulatory risk on existing plants (as before).
• Important parameters of the future auctions still open: Auctioned capacities, timing, reference prices (= maximum feasible bid prices per
technology and auction)
Other Comments
Page 12
Most important renewables market in CEE: Poland
New RE Support Scheme: Contract for Differences (CfD) for new
Projects, Grand - fathering for operational plants

Most important renewables market in CEE: Poland
New Support Scheme: Contract for differences
I II III IV V VI VII VIII IX X XI XII
Bid
Price

Your contacts at Erste Group
Markus Kriegler
Managing Director
Head of Project Finance
1060 Vienna, Mariahilferstraße 41 - 43
Tel.: +43 (0) 50100 – 12563
Fax: +43 (0) 50100 - 9 12563
mobile: +43 (0) 664 842 5352
markus.kriegler@erstegroup.com
Marcus Hinrich Fischer
Director
Project Finance / Infrastructure
1060 Vienna, Mariahilferstraße 41 - 43
Tel.: +43 (0) 50100 - 18093
Fax: +43 (0) 50100 - 9 18093
mobile: +43 (0) 664 818 2496
marcushinrich.fischer@erstegroup.com

Disclaimer
This document was created by Erste Group. The information herein has been obtained from, and any
opinions herein are based upon, sources believed to be reliable, but we do not represent that it is
accurate or complete and it should not be relied upon as such. This document is for information purposes
only. It is not intended to be an offer, or the solicitation of any offer, to buy or sell any securities referred to
herein. All opinions, forecasts and estimates herein reflect our judgment as of the date of this document
and are subject to change without notice. While this document has been prepared in good faith, we
cannot accept responsibility for the accuracy of the information contained herein and the recipient should
not rely on it as a substitute for an independent review. Erste Group is not liable for any damage that
arises in connection with the information contained herein. This document may not be reproduced,
distributed or published without the prior consent of Erste Group.
This document is intended
solely for the use of the
recipient.

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