German Financial Cooperation with Europe and Caucasus - Municipal Infrastructure Workshop on water / urban infrastructure

Brussels, 29th May 2009

Christian Haas, Division Chief, Water and Sanitation Europe

Thomas Wolf, Senior Engineer, Municipal Development, Europe & Caucasus

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Overview

KfW Entwicklungsbank - Who we are

KfW Entwicklungsbank – How we work

Municipal Infrastructure in Europe/Caucasus - Geographic distribution of projects

Municipal Infrastructure in Europe/Caucasus - Challenges and solutions

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Investment FinanceGermany and Europe

FinancialCooperation

Promotion of Housing; Environment and Climate Protection; Education, Infrastructure

Commitments 2008: 33,8 bn €

International Project andExport Finance

Commitments 2008: 17,6 bn €

Promotion of SMEs, Business Founders, Start-ups

Commitments 2008: 14,3 bn €

Promotion of Developing and Transition Countries

Commitments 2008:4,9 bn €

KfW Entwicklungsbank A part of KfW Group.

InternationalProject and Export Finance

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Organisational Structurefrom September 2008

Evaluation DepartmentFinancial Cooperation

Sector and Policy Division Division

Regional Team Regional TeamRegional TeamRegional Team

GovernanceAgriculture and

Environment

Water Resources,Solid Waste

Health,Education,

Social Protection

Agriculture and Natural

Resources

Social Infrastructure,Governance

EconomicInfrastructure

Finance,Economic

Infrastructure

Water Resources,Solid Waste

(North Africa)Water

Directorate IISub-Saharan Africa

Finance andPrivate Sector

InstitutionalDevelopment

social/economicInfrastructure

Regional Team

Energy

Financial andPrivate Sector

Health

DepartmentSouth and

Central Asia

DepartmentSouth and

Central Africa

DepartmentEast and West

Africa

DepartmentNorth AfricaMiddle East

DepartmentLatin America

Caribbean

DepartmentStrategy

Developmenteconomics and

research

DC strategiesand

cooperations

Promotionalinstruments and financial

products

GeneralPrinciples andFC processes

Planningand

monitoring

DisbursementManagement I

Transactionand CollateralManagement

Board of Managing Directors

DepartmentTransaction

and CollateralManagement

Loan and RiskManagement

DisbursementMgmt III, DebtReschedulingand Release

DisbursementManagement II

Regional Team

Financial SectorTransform

Energy, Transport

Water Resources,Solid Waste

Municipal Development, Environment

DepartmentEurope and Caucasus

Directorate IIIEurope, North Africa

and Middle East

Regional Team

Transport, Communications

Water andVocationalTraining

Protection of Natural

Resources

DepartmentEast Asia

and Pacific

Promotional Loans for

Infrastructure

Directorate IVLatin America and Strategy

Berlin Office

IT coordinationFinancial and

PrivateSector

Directorate IAsia

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Overview

KfW Entwicklungsbank - Who we are

KfW Entwicklungsbank – How we work

Municipal Infrastructure in Europe/Caucasus - Geographic distribution of projects

Municipal Infrastructure in Europe/Caucasus - Challenges and solutions

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Relationship between BMZ and KfW:From the intergovernmental agreement to the financing agreement

KfW Project executing

agency

Partner countryBMZ

agreement under international law

financing agreement

mandate

KfW's partners are public authorities or state-owned enterprises

provision of trust funds

commitment of trust funds and KfW funds

project monitoring,evaluation

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Our financial products

Project preparation Feasibility Study Grant funding

Investment Physical investment

Implementing consultant

Concessional long term loans with maturities between 12 and 30 years (in some countries up to 40 years).

Delivery of services Technical assistance Grant funding

Phase Instrument Funding conditions

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Overview

KfW Entwicklungsbank - Who we are

KfW Entwicklungsbank – How we work

Municipal Infrastructure in Europe/Caucasus - Geographic distribution of projects

Municipal Infrastructure in Europe/Caucasus - Challenges and solutions

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Municipal Infrastructure Sector in Southeast Europe KfW’s Current Project Portfolio

Albania: EUR 127.1 million

Bosnia Herzegovina: EUR 46.5 million

Croatia: EUR 73.5 million

Kosovo: EUR 21.5 million

Macedonia: EUR 61.4 million

Montenegro: EUR 71.5 million

Serbia: EUR 105.5 million

TOTAL: 507.0 million

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Water & Sanitation Projects in TurkeyTotal commitments ongoing projects: EUR 150 million

On-going / under preparation Concluded

z

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FZ im Südkaukasus

Financial Cooperation with South Caucasus:Overview of Water&Sanitation Projects

Total commitments ongoing projects: EUR 170 million

Sheki

Ganja

Batumi

Imishli

Borjomi

Armavir

Gyumri and Vanadzor

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Overview

KfW Entwicklungsbank - Who we are

KfW Entwicklungsbank – How we work

Municipal Infrastructure in Europe/Caucasus - Geographic distribution of projects

Municipal Infrastructure in Europe/Caucasus - Challenges and solutions

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Municipal Infrastructure - Challenges

High investment (and re-investment) needs – but limited financial resources

Insufficient cost coverage leads to poor service quality and lacking maintenance

Limited implementation capacity at municipal and central level

Limited municipal borrowing capacity (financial, legal and political)

Municipalities and their utilities have little or no experience with credit financed investments

Lack of transparency regarding diverse funding sources and their availability

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Quality at Entry:

Hands-on Experience through KfW’s long-standing presence on the ground and frequent contacts with beneficiaries also in periphery regions

Sound Preparation via international expertise for (Pre-)Feasibility Studies and own assessments with focus on technical, environmental, socio-economic and institutional needs and capabilities on project and sector level

Focus on medium-sized Municipalities to maximize development impact

Flexible Financing Solutions for tailor-made funding conditions fitting to economic and social situation

Municipal Infrastructure - KfW’s Approach (1)

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Responsible Finance: Graduation Principle 1:

Phased investments based on technical, institutional and financial performance criteria (incl. ability and willingness to reforms)

Graduation Principle 2:

1. Direct lending to municipalities

2. Lending via financial intermediaries

Intensive Monitoring in order to ensure efficient implementation on high quality standards

Investments linked with TA to improve management capacities and ensure sustainable operation also after the end of external support

Independent Evaluation with focus on sustainable impact

Municipal Infrastructure - KfW’s Approach (2)

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Municipal Infrastructure Sector Example of performance-based Programme

Exclusion of Municipality

Phase 1Urgent measures

Phase 2 Larger scale investments

Criteria 2met?

Criteria 1met?

yes yes

no no

Further TA

TAdirected towardscriteria set 1

TAdirected towardscriteria set 2

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Examples of performance criteria: municipalities

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Examples of performance criteria: utilities

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More Information

www.kfw-entwicklungsbank.de

www.deginvest.de

Newsletter published by KfW Entwicklungsbank(http://www.kfw-entwicklungsbank.de/DE_Home/Service_und_Dokumentation/

Newsletter/index.jsp)

Annual Report on Cooperation with Developing Countries(http://www.kfw-entwicklungsbank.de/DE_Home/Service_und_Dokumentation/Online_Bibliothek/Jahresberi.jsp)

Evaluation report on the effectiveness of cooperation with developing countries (http://www.kfw-entwicklungsbank.de/DE_Home/Evaluierung/Ergebnisse_und_Veroeffentlichungen/Auswertung.jsp)

Specialist publications / Online Library in the Internet(http://www.kfw-entwicklungsbank.de/DE_Home/Service_und_Dokumentation/Online_Bibliothek/index.jsp)

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Do you have any Questions?