Financing Agribusiness in Financing Agribusiness in Serbia and MontenegroSerbia and Montenegro

Levent Aydinoglu, Associate BankerLevent Aydinoglu, Associate Banker

Belgrade, 27 May 2004Belgrade, 27 May 2004

Structure of the presentationStructure of the presentation

EBRD and agribusiness

EBRD experience in agribusiness financing in CEE and CIS

Selected agribusiness transactions

Opportunities for financing agribusiness in Serbia and Montenegro

Contact Information

What is the EBRD?What is the EBRD?

International financial institution, promotes transition to market economies in 27 countries from central Europe to central Asia

Owned by 60 countries and two inter-governmental institutions

Capital base of €20 billionCumulative commitments €22 billion

Unaudited September 2003

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Catalyst for changeCatalyst for change

EBRD investments have attracted an additional € 47 billion from domestic and foreign investors

The EBRD uses donor funding to assist project preparation and catalyse foreign investment

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Mobilised

EBRD

Cumulative funds mobilised € 47.1 billion

Financial flexibility - LoansFinancial flexibility - Loans

Financing structured to meet project-specific needs including repayment schedules

Tailored to particular situation of the country/region and sector

Pricing reflects risks with project, borrower and country

Wide range of loans

fixed or floating rate loans

choice of currencies

short to long-term

maturities

AAA-rated multilateral institution founded in 1991, owned by 60 national and two supranational shareholders

Playing a leading role in Central & Eastern Europe (CEE) and the former Soviet Union (CIS)

Business oriented - working closely with private sector clients on commercial transactions

EBRD and AgribusinessEBRD and Agribusiness

EUR 3.25 bn invested in 205 projects.

EUR 56.1m invested in 6 projects in Serbia and Montenegro.

Serbia is the 12th largest recipient of the EBRD financing in the agribusiness sector following Russia, Ukraine and Poland.

EBRD and AgribusinessEBRD and Agribusiness

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95 96 97 98 99 00 01 02 03

EBRD annual investments in Agribusiness (million €)

Food Processors

Agricultural Inputs

Production

Primary Processing

Foodservice Distribution

Packaging Production

Consumer

•seeds•fertiliser•farm machinery•agricultural chemicals•bio-tech•distributors

•grains•oilseeds•livestock•poultry•dairy•fish•horticulture•produce

•crushers (sunflower, soya bean)•millers•grain handling•produce market

•meat•bakery•snacks•beverages•frozen foods•fish•pet food

•glass bottles & jars•PET bottles•cans•carton containers

•restaurants•supermarkets•institutions•distributors

EBRD and agribusiness: EBRD and agribusiness: Financing of entire food chainFinancing of entire food chain

EBRD and agribusiness: EBRD and agribusiness: Financing local & foreign market leadersFinancing local & foreign market leaders

Recent Agribusiness Projects in Serbia and Recent Agribusiness Projects in Serbia and MontenegroMontenegro

Name of Project EBRD Finance (Euro)

Debt/Equity

Serbia/EPH/Warehouse Receipt Programme

6m Debt

Fresh & Co 10m Equity

Frikom 10.1m Debt

Grand 7m Debt

Marbo 7m Debt

SFIR 16m Debt

Grand Coffee

Local entrepreneur with successful track record

Serbia and Montenegro's largest coffee company

€7 million debt to finance domestic and regional expansion

Selected Investments in 2003Selected Investments in 2003

Bonduelle Selected Investments in 2003Selected Investments in 2003

Bonduelle, world’s top processed-vegetable producer

€15m equity investment

For the construction of a greenfield vegetable canning plant, located in the Kransnodar region, Russia

To produce 60,000 tonnes of fresh packaged vegetables

Financing to DOEP (Cereol’s subsidiary) leading producer of refined edible oil in Ukraine

A syndicated loan of US$ 43m, structured and arranged by EBRD, to co-finance purchases of sunflower seeds and related working capital requirements.

Selected agribusiness transactionsSelected agribusiness transactions

(1) Working capital:(1) Working capital: lack of security and of financial support to farming and primary

processing sector

(2) Government policies:(2) Government policies: changing laws/regulations, complex restructuring of agri-

conglomerates, EU accession talks cause further uncertainties

(3) Production efficiency/competitiveness:(3) Production efficiency/competitiveness:

structural reasons for lower yields

(4) Global industry challenges apply as well…(4) Global industry challenges apply as well… bargaining power of food producers vs retail chains

EBRD experience in agribusiness EBRD experience in agribusiness financing: Key issues facedfinancing: Key issues faced

Strong processors are the key to a healthy sectorStrong processors are the key to a healthy sector– provide a sustainable market for agricultural products

It is better to focus on the best companiesIt is better to focus on the best companies– with long term views, and competitive advantages (marketing, distribution)

There are no standard financial solutionsThere are no standard financial solutions– agribusiness companies often need tailor made solutions

We have to understand the whole food chainWe have to understand the whole food chain– to make sure sufficient quality supplies are available

A better legal and institutional framework is a mustA better legal and institutional framework is a must– For farmers and processors to get the financing they need

EBRD experience in agribusiness EBRD experience in agribusiness financing: Key issues learntfinancing: Key issues learnt

Opportunities for financing agribusiness in Opportunities for financing agribusiness in Serbia and MontenegroSerbia and Montenegro: Traditional finance: Traditional finance

Debt Senior, subordinated,

convertible

Working capital

Long-term maturities

Denominated in major currencies

Flexible tailor-made security package

Political risk guarantees

Equity Common stock

Preferred shares

Mezzanine financing

Large minority positions

Political risk guarantees (portage equity)

Co-financing / Syndications

Substantial in-house syndication department

Equity / debt underwriting

Large number of high quality food producers with well known branded product

Increasing penetration of organised retail and the opportunities and challenges this creates

Restructuring of food industry is not complete yet.

Financing needs are enormous.

Opportunities for financing agribusiness Opportunities for financing agribusiness in Serbia and Montenegroin Serbia and Montenegro

Opportunities for financing agribusiness in Opportunities for financing agribusiness in Serbia and MontenegroSerbia and Montenegro: Structured finance: Structured finance

Example: Warehouse Receipt Programme

WR1 2

3

€

€

Sale 4 5

6

WR

WR

€

Risk participation with local bank OR

credit line to the local bank

Example: Suppliers financing

1

€

Off-take +

Know

how

Guarantee

€

Loan

2

3

4

€

Funded or un-funded participation

Opportunities for financing agribusiness in Opportunities for financing agribusiness in Serbia and MontenegroSerbia and Montenegro: Structured finance: Structured finance

Levent AydinogluTel: +44 207 338 7021Email: Aydinogl@ebrd.com

Associate Banker, Agribusiness Team

ContactsContacts