Capital markets, infrastructure, and private sector are EBRD’s investment priorities in Romania

The European Bank for Reconstruction and Development (EBRD) will focus its investments in Romania in the next four years on three strategic directions: broadening access to finance by inducing lending and developing capital markets, reducing regional disparities and boosting inclusion through commercialized infrastructure, and enhancing competitiveness in the private sector through targeted investment. EBRD’s Board of Directors have approved the new strategy for Romania at the end of September and Matteo Patrone, EBRD’s new regional director for Romania and Bulgaria presented it yesterday. “We will work to boost Romania’s private sector growth by helping to expand access to finance, with an emphasis on capital market development. With the economy rebounding, conditions are suitable for companies to enhance their competitiveness through balanced financing structures and improved management practices,” Patrone said. He pointed out that small and medium enterprises (SMEs) in particular needed access to financing and that the EBRD would work with local financial institutions to support lending especially in underdeveloped areas of the economy. “The EBRD will also work to reduce regional disparities by financing essential infrastructure to promote economic inclusion. We will also combine our investments with support for sector reforms and improved corporate governance in state-owned enterprises,” Patrone added. He explained that the institution will contribute to restructuring state-owned enterprises in the telecom, transport, energy, and logistic sectors, with a hope of privatizing them. The EBRD also plans to help enhance the competitiveness in the private sector through targeted investments. EBRD is one of the leading institutional investors in Romania. In the last four years, it has invested almost EUR 1.5 billion in 75 projects in the country, according to the bank’s data. EBRD’s board hasn’t decided yet how much money I will allocate for investments in Romania or the wider Eastern European region in the next four years, but the bank plans to increase its overall investments. “We are a demand driven bank, so our future investments here will depend on how much the country will need and how many projects will be available for financing. For example, when speaking about capital marked development, if the IPOs don’t happen, there is not much we can do to make them happen. So our future investments will also depend on how many privatizations will be made through the capital market,” Matteo Patrone explained. EBRD’s involvement in developing the capital market materialized in recent years in its participation to initial public offerings (IPOs) conducted by state-owned companies such as Romgaz (2013) and Electrica (2014), in which the bank invested some EUR 125 million. The EBRD also subscribed to several corporate bond issues, mainly by local banks, and bought a 5% stake in the Bucharest Stock Exchange (BVB). EBRD also holds the highest stake, of 14.6% in local lender Banca Transilvania, which is also listed. The bank had 174 active operations in Romania and its operating assets were worth EUR 1.67 billion, as of August 31, 2015. Private companies represented two-thirds (63%) of the portfolio and the equity share was 22%. A third of EBRD’s local portfolio (33%) was invested in infrastructure, 29% was invested in industry, commerce and agriculture (ICA), 24% was invested in energy, and 14% in financial institutions. EBRD’s total investments in Romania so far have amounted to over EUR 7 billion, but the institution has also mobilized and has also mobilized more than EUR 14 billion from other sources of financing for projects in Romania. EBRD also made EUR 6.28 billion total disbursements. Some of its most notable exits in recent years have been the sale of a 5% stake in local lender BRD, and a 2.4% stake in oil&gas group OMV Petrom. The bank predicts that Romania’s economy will grow at around 3% in 2015 and 3.2% in 2016, placing it among the fastest-growing emerging economies in south-eastern Europe.