Archived - Report on Operations Under the European Bank for Reconstruction and Development Agreement Act - 2004 : 3

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Annex 1

The Bank's Financial Activities

The Bank's financial activities are divided into ordinary and special operations, depending on the source of funds. Ordinary operations are financed from the ordinary capital resources of the Bank, which comprise subscribed capital, market borrowings, and income from loans and investments. Special operations are those financed by "special funds" for specially designated purposes that are typically outside the Bank's regular activities. Unlike other regional development banks, the EBRD does not operate a concessional or "soft" loan window.

Ordinary Capital Resources

At the end of 2004, the total authorized capital of the Bank was €20 billion. Canada has subscribed to 3.4 per cent-or €680 million (C$958 million)-of the Bank's authorized capital. Canadian contributions to the Bank's capital are made in US dollars (at a pre-determined euro/US$ exchange rate).

In 2004, Canada made its seventh purchase of shares under the first capital increase (which came into effect on April 3, 1997, and doubled the initial €10-billion capital base). Under the first capital increase, 77.5 per cent of Canada's share is "callable," meaning that the Bank can request these resources in the unlikely event that it requires them to meet its financial obligations to bondholders; the balance, or 22.5 per cent, is "paid-in." Payments are being made in eight equal annual installments (40 per cent in cash and 60 per cent in non-interest-bearing demand notes encashed over five years). The following table details Canadian payments to the Bank in US dollars.

Canada's contributions to the Bank's capital are non-budgetary expenditures because our shares in the Bank represent an asset. Nonetheless, Canada's paid-in contributions to the Bank do increase the Government's financing requirements.

Canadian Payments to the EBRD

Year	Notes	Cash	Encashment of notes	Total cash outlay
	(in US dollars)
1991	11,903,502	11,903,502	11,903,502	23,807,004
1992	11,903,502	11,903,502	3,967,834	15,871,336
1993	11,903,502	11,903,502	7,935,668	19,839,170
1994	11,903,502	11,903,502	11,903,502	23,807,004
1995	11,903,502	11,903,502	11,903,502	23,807,004
1996	–	–	7,935,668	7,935,668
1997	–	–	3,967,834	3,967,834
1998	7,287,199	4,858,132	1,457,440	6,315,572
1999	7,287,199	4,858,132	2,914,879	7,773,011
2000	7,287,199	4,858,132	4,372,319	9,230,451
2001	7,287,199	4,858,132	5,829,759	10,687,891
2002	7,287,199	4,858,132	7,287,198	12,145,331
2003	7,287,199	4,858,132	7,287,199	12,145,331
2004	7,287,199	4,858,132	7,287,199	12,145,331
Total	110,527,903	93,524,434	95,953,503	189,477,937

Market Borrowings

At the end of 2004, total EBRD borrowings stood at €12.2 billion with an average remaining life of 8.3 years at an average cost of funds of LIBOR (London Inter-Bank Offered Rate) minus 34 basis points. Funds have been swapped into floating-rate instruments, primarily in US dollars and euros.

Standard & Poor's has assigned the Bank an AAA long-term and A1+ short-term credit rating. Moody's Investors Service has similarly rated the EBRD long-term bonds AAA.

Special Funds

The EBRD administers a number of bilateral and multilateral technical assistance funds. Canada has contributed to the following special funds:

Canadian Technical Cooperation Fund—The main purpose of this fund is to provide financing to hire Canadian consultants for EBRD projects across a wide range of sectors and EBRD countries of operation. Canada has contributed C$12.65 million since the fund was established in 1992 and is currently completing Canada Phase V.

Chernobyl Shelter Fund—The main purpose of this fund is to secure the sarcophagus around the destroyed Unit IV nuclear reactor in Ukraine. The total estimated cost of this 10-year project is roughly US$1.1 billion, of which US$716 million has been pledged so far. Canada has pledged US$33 million, including US$0.8 million of bilateral assistance for ventilation stack repair.

Nuclear Safety Account (NSA)—This facility was established in 1993 to help finance the closure of the Chernobyl nuclear power plant and to improve safety conditions at nuclear power plants in countries of operations until the plants can be closed. The NSA complements other bilateral and multilateral nuclear safety technical assistance and functions in parallel with multilateral efforts to achieve broader energy sector reform in the region. Canada has contributed C$19.5 million to the total fund of €280 million. Canada's contribution has been completely disbursed.

Russia Small Business Fund (RSBF)—The purpose of this fund is to establish a facility for small business finance and micro lending in various regions of Russia. The RSBF was established in 1993 as a pilot project and became permanent in 1995. Canada has contributed C$11.3 million towards the US$300-million fund.

CIDA-EBRD Cooperation Fund for Southeastern Europe (CFSEE)—By 2002, Canada had contributed C$10 million in support of the EBRD's South Eastern Europe Action Plan, to be used for technical cooperation and co-financing activities. These funds, tied to Canadian consultants, were used in Albania, Bosnia and Herzegovina, Bulgaria, Croatia, FYR Macedonia, Romania, and Serbia and Montenegro. In 2003, an additional C$6 million was added to the CFSEE, which focuses on CIDA priority sectors and countries of focus.

CIDA-EBRD Balkan Region Special Fund (BRSF)—In addition to the CFSEE, Canada has contributed C$2 million to the Balkan Region Special Fund to support post-conflict reconstruction efforts in the Balkan region.

TurnAround Management (TAM) Programme—The TurnAround Management Programme was established in 1993 to match senior industrial advisors from market-driven economies with chief executives of selected firms in the region. The objective is to provide industrial management know-how and develop business skills so that these companies can become competitive and profitable. In 2003, Canada signed a new agreement with the TAM Programme to provide C$2.5 million over five years to be used to hire Canadians to work as advisors. This brought Canada's total contribution to the TAM Programme to C$3.05 million.

Ukraine Micro Finance Bank (MFB)—In 2000, Canada entered into a contribution agreement with the EBRD to provide C$1.25 million for the provision of technical assistance related to the development of the MFB. Over three years, Canada has assisted the MFB to develop a branch network throughout Ukraine, with special attention being paid to Slavutych, the community where many former employees of the Chernobyl nuclear power plant reside. As a greenfield operation specializing in financial services for the micro and small enterprise sector, the MFB is also serving as a demonstration bank for the Ukrainian commercial banking sector to show the commercial viability of micro and small enterprise lending.

Technical Assistance in Support of the Ukraine Micro, Small and Medium-Sized Enterprises Line of Credit II—Between 1999 and 2004, Canada provided C$3 million for technical assistance services by qualified Canadian organizations to Ukrainian commercial banks receiving loans under the EBRD's Ukraine Micro, Small and Medium-Sized Enterprises Line of Credit II for on-lending to micro, small and medium-sized enterprises. The technical assistance has included risk- and loan-evaluation training.

Northern Dimension Environmental Partnership (NDEP)—NDEP provides donor funding to address severe environmental problems in northwest Russia, particularly in the areas of nuclear waste, water and wastewater treatment, and energy efficiency. Within the framework of its mandate, the EBRD supports relevant multilateral and regional agreements on the environment and sustainable development, including the Framework Convention on Climate Change and the measures agreed to in the Kyoto Protocol. Canada became an official contributor to the NDEP Support Fund at the end of 2003 and has committed €20 million. This made Canada the NDEP's sole non-European contributor. Canada earmarked its contribution for the facility's "nuclear window," which counts towards Canada's commitment to the G-8 Global Partnership program. To deal with nuclear waste, the NDEP provides full funding within an international cooperation framework designed to address the complex challenges of cleaning up the legacy of the former Soviet navy's Northern Fleet. In this regard, the NDEP completed a Strategic Master Plan in 2004 that has been adopted by all contributors as the basis for projects in the nuclear window.

CIDA-EBRD Cooperation Fund for Central Asia and the South Caucasus—This C$2-million fund was created in 2004 for work on project preparation and implementation activities in Central Asia and the South Caucasus. The fund targets the following sectors: agribusiness, natural resources, infrastructure financing (e.g. transport, telecommunications, municipal finance), and strengthening institutional capacity development of local institutions working in private sector development and micro-lending institutions. Given CIDA's program focus, priority will be given to projects in Georgia and Tajikistan. This is the first Canadian bilateral fund at the EBRD that is untied (i.e. procurements are not limited to Canadians).

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Annex 2

Doing Business With the EBRD

For general information, please refer to www.infoexport.gc.ca/ifinet or contact the Bank's Communications Department in London (tel: +44 20 7338 6096; fax: +44 20 7448 6690).

Further inquiries should be directed to the Office of the Director for Canada, Advisor for Business Development and Investor Relations, Ms. Sandy Ferguson (tel: +44 20 7338 6509; e-mail: fergusos@ebrd.com).

Canadian Project Sponsors: Canadian companies interested in potentially sponsoring a project with the EBRD are requested to direct initial inquiries either to the Office of the Director for Canada, to the Project Inquiries in London (tel: +44 20 7338 6282 or +44 20 7338 6252; fax: +44 20 7338 6102) or to the Bank's resident office in the country of operation. Summaries of EBRD private sector operations can be obtained on the Bank's Web site at http://www.ebrd.com/.

Canadian Suppliers of Goods and Works: The EBRD makes available information on all stages of public sector project development, from the point a project has been identified by the Bank through to its approval. Procurement opportunities and co-financing notices, as well as contract awards information, can be accessed on the Bank's Web site free of charge (see address above).

Canadian Consultants: The EBRD's Web site contains technical cooperation notifications and invitations for expressions of interest for consultancy services pertaining to both public and private sector projects. The EBRD is currently working on an e-Procurement initiative expected to be launched in 2005. This initiative will involve the selection of consultants through a Web-based process.

Current procurement information can be found at http://www.ebrd.com/oppor/procure/index.htm

Individual Canadians: The EBRD maintains a recruitment section on its Web site, which provides information on specific employment competitions at the Bank as they become available. In general, applications for employment for permanent positions and summer jobs should be sent to:

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Annex 3

EBRD Membership as at December 31, 2004

	Share of the Bank’s capital
	(%)
European Members
Austria	2.28
Belgium	2.28
Cyprus	0.10
Denmark	1.20
Finland	1.25
France	8.52
Germany	8.52
Greece	0.65
Iceland	0.10
Ireland	0.30
Israel	0.65
Italy	8.52
Liechtenstein	0.02
Luxembourg	0.20
Malta	0.01
Netherlands	2.48
Norway	1.25
Portugal	0.42
Spain	3.40
Sweden	2.28
Switzerland	2.28
Turkey	1.15
United Kingdom	8.52
European Union	3.00
European Investment Bank	3.00
Non-European Members
Australia	0.50
Canada	3.40
Egypt	0.10
Japan	8.52
Korea, Republic of	1.00
Mexico	0.15
Mongolia	0.01
Morocco	0.05
New Zealand	0.05
United States	10.00
Countries of Operations
Albania	0.10
Armenia	0.05
Azerbaijan	0.10
Belarus	0.20
Bosnia and Herzegovina	0.17
Bulgaria	0.79
Croatia	0.36
Czech Republic	0.85
Estonia	0.10
FYR Macedonia	0.07
Georgia	0.10
Hungary	0.79
Kazakhstan	0.23
Kyrgyzstan	0.10
Latvia	0.10
Lithuania	0.10
Moldova	0.10
Poland	1.28
Romania	0.48
Russia	4.00
Serbia and Montenegro	0.47
Slovak Republic	0.43
Slovenia	0.21
Tajikistan	0.10
Turkmenistan	0.01
Ukraine	0.80
Uzbekistan	0.21

Notes

^[1] In 2004, Governors voted to make Mongolia a country of operations, recognizing its close linkage with the former Soviet economy and its long history with a centrally planned economy. This process will not be complete until all members adopt the necessary amendment to their domestic legislation governing their relations with the Bank. [Return]

^[2] On December 31, 2004, one euro purchased 1.6292 Canadian dollars. [Return]

^[3] The CIS includes Armenia, Azerbaijan, Belarus, Georgia, Kazakhstan, the Kyrgyz Republic, Moldova, Russia, Tajikistan, Turkmenistan, Ukraine and Uzbekistan. [Return]

^[4] Includes the Czech Republic, Hungary, Poland, the Slovak Republic, Slovenia and the three Baltic States (Estonia, Latvia and Lithuania). [Return]

^[5] Advanced transition countries include Croatia, the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, the Slovak Republic and Slovenia. The early transition countries are the Bank's seven poorest countries of operations: Armenia, Azerbaijan, Georgia, the Kyrgyz Republic, Moldova, Tajikistan and Uzbekistan. Intermediate transition countries include the balance of the EBRD's countries of operations, excluding Russia. The EBRD considers Russia to be in a category of its own. [Return]

^[6] Southeastern Europe includes Albania, Bosnia and Herzegovina, Bulgaria, Croatia, the Former Yugoslav Republic of Macedonia (FYR Macedonia), Romania, and Serbia and Montenegro. [Return]

^[7] Reserves are Bank capital set aside to cover unexpected losses. [Return]

^[8] NDEP members include Russia, the EBRD, the EU, the Nordic Investment Bank, Canada, Denmark, Finland, France, Germany, the Netherlands, Norway, Sweden and the UK. [Return]

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