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SOFIA (Bulgaria), August 27 (SeeNews) – International Finance Corporation (IFC), part of the World Bank Group, plans to invest for its own account up to $900 million (682 million euro) in Southeast Europe (SEE) this fiscal year after helping mobilize alongside partners $1.1 billion in financing for the region in fiscal 2014 ended June 30, Tomasz Telma, IFC regional director for Europe and Central Asia, said.
“For our own account we would like to invest, depending on opportunities and market conditions, $400-500 million in the Western Balkans in fiscal 2015 after investing $280 million there last year,” Telma told SeeNews in a phone interview from his office in Moscow.
IFC would also like to do a further $300-400 million in financing for its own account in Bulgaria, Moldova and Romania in 2015 after providing a combined $380 million to these countries last year.
AMPLE OPPORTUNITIES IN SEE INFRASTRUCTURE SECTOR
Logistics infrastructure in the Western Balkans needs to improve to ensure that the economies in this region are better integrated, Telma said, adding that this creates multiple opportunities for IFC to get involved both on the advisory and the financing side.
Upgrading and expanding road networks is among the top infrastructure opportunities in the region. IFC has already completed a municipal road project in Montenegro’s Podgorica and currently has advisory engagements in Macedonia and Bosnia related to road concessions. “We are also looking at a specific project for road financing in Croatia,” the official said, giving no further details.
To the extent that the fiscal problems of the countries in SEE do not allow these projects to be financed on a sovereign basis, Telma said the level of public sector participation should be as high as possible. “In some places in SEE that would not work, but in others you could set up a project as a public private partnership with a very strong participation on the public side, allowing it to be structured in a way that would attract financing.”
IFC has a lot of experience worldwide in advising governments how to structure airport concessions and recently in SEE provided equity for the launch of a company to modernize and operate the Zagreb airport.
Looking at the underinvested Belgrade airport and its emergence as a major regional air transport hub, Telma said he could see IFC possibly having an advisory role in the government’s plans to offer a concession on the airport operator.
“Provided that the concession is bankable and operated by a private entity, we think that could also be an interesting project for IFC on the funding side. The opportunity for a private partner to step in and ensure the airport is modernized properly to handle the surge in passenger traffic is quite significant,” he added.
In the infrastructure sector, IFC is also seeing a fairly high level of activity out of Romania, especially in municipal infrastructure.
“As Romania’s economy recovers from the crisis and becomes more actively involved in EU structures, we are finding that there are interesting mechanisms where we can support EU financing with IFC participation.”
RENEWABLES SEEN HELPING IMPROVE ENERGY BALANCE
Broadly speaking, renewable energy is a very interesting opportunity in SEE because of the general energy balance of the countries in the region and their dependence on power imports, Telma said.
“From a more country-specific perspective, you have opportunities in wind in places like Croatia – where a number of developers have found interesting sites and IFC has already financed two specific projects – and to some extent also in Serbia - as this market is still in its infancy when it comes to wind power, and certainly in places like Albania and Kosovo for hydro power.”
Telma added IFC is currently looking at new wind projects in Croatia – having recently taken an investment decision on the 35 megawatt Rudine wind farm project being developed there by Austrian-based RP Global, and in Serbia where concrete wind project opportunities should take shape no sooner than in 12 to 18 months.
In his view, the delay in the implementation of larger wind projects in Serbia is due mostly to the frequent changes in government and the lack of focus on some of the issues that need to be addressed from a regulatory perspective.
“The difference between the Western Balkans and Romania or Bulgaria at the moment in terms of their appeal for renewable energy investors is the clear, for the moment at least, commitment of the regulators in the former to continue to provide priority treatment for the sector,” Telma said.
“Certainly in Bulgaria, investors have been disappointed how the government retroactively adjusted the treatment of the renewable energy operators.”
Another sector seen in the past couple of years as offering an opportunity for IFC to make a difference in the region is agriculture, an area where the financing provided by the international lender targets a boost in export potential, in business efficiency and in quality standards.
“There are a number of fairly sizeable regional integrators in the Western Balkans – Serbia’s MK Group and Victoria Group alongside Croatia’s Atlantic Grupa – which are involved in a number of business lines and we found this is a good way to help support domestic output and export potential.”
BANKING, RETAILER M&A DEALS MAY SPUR EQUITY INVESTMENT
The ongoing consolidation and shake-up of the banking and retail industries in SEE could, in general, create interesting equity investment opportunities, Telma said.
IFC, which has an active equity investment portfolio in SEE totaling $400 million, is looking to invest in equity mostly in the region’s energy, infrastructure, agriculture and IT sectors.
The international lender is poised to exit one of the two Serbian lenders in its SEE equity portfolio – Cacanska Banka, where it owns a 19.99% stake.
Earlier this month, Turkey’s Halkbank said it has submitted a bid for a majority package of Cacanska equity - including the IFC stake, that has been put up for sale.
“The frequent changes in government have affected the Serbian state’s exit from the banking sector. So in that sense it is a welcome sign that the privatization of Cacanska is moving forward.”
IFC also owns a 21.05% stake in Belgrade-based Komercijalna Banka.
“Komercijalna is a larger institution and in that sense perhaps a lower priority for privatization in the present market conditions. We are there to support the bank and there are a number of ways we can do it without putting in more equity,” Telma said.