OREANDA-NEWS. March 06, 2008. The EBRD mission to build a strong private sector in eastern Europe took the Bank into more investments than ever before in 2007, many of them in small and medium sized companies in the region’s poorest countries, reported the press-centre of  EBRD.

The year was also marked by ground-breaking initiatives to strengthen and develop financial markets and by projects to promote good practice in energy efficiency, environmental protection and health and safety.

The Bank increased investments significantly in the less advanced economies outside of Russia and central Europe and demonstrated its capacity for assuming risk by making a much higher number of equity investments.

To meet the requirements of these less advanced economies, the EBRD placed a high priority on smaller sized investments, raising investments in the small businesses that are key to supporting broad economic growth.

EBRD investments in 2007 rose to ?5,6 billion from ?4,9 billion in 2006. Underscoring the Bank’s determination to make a broad impact across the economies in which it operates, the number of individual investments increased sharply by 17 per cent from 301to 353.

Looking ahead to the current year, EBRD Vice President Finance Manfred Schepers said the global financial market turbulence that emerged in 2007 had had a relatively limited effect on the EBRD region. But he added risks persist and he stressed the need to pursue financial market and economic reform policies.

“The EBRD is equipped and more than ready to support this process, especially as the prevailing economic uncertainty could lead to some reluctance to invest on the part of international private sector banks and investors,” Mr Schepers said.

Continuing market volatility and the threat of further economic weakness could affect 2008 revenues and reduce the value of the EBRD’s equity investments in 2008, Mr Schepers warned.

The EBRD’s net profit was ?1,9 billion in 2007 compared with ?2,4 billion in 2006, with the decline mainly reflecting lower gains from the sale of equity investments. Profits in 2006 had been boosted by one significant, individual equity divestment.

Within the overall investments for 2007, the number of small projects with a value of less than ?5 million rose 32 per cent to 182. New equity investments rose 66 per cent to ?1,7 billion.

For the first time, investments in the EBRD’s poorer countries, the Early Transition Countries Armenia, Azerbaijan, Georgia, the Kyrgyz Republic, Moldova, Tajikistan, Uzbekistan and Mongolia - topped the 100 marker, rising to 105 from 80 in 2006. In volume terms, ETC commitments increased by 43 per cent to ?416 million in 2007 from ?290 million in 2006.

The Bank’s investments in the early and intermediate transition countries reached ?2,7 billion, 16 per cent above the 2006 level.

In Russia, annual business volume was ?2,3 billion, compared with ?1,9 billion in 2006. There was a broad balance between the corporate sector, infrastructure and energy, financial institutions, support to micro, small and medium-sized enterprises and the trade facilitation programme. More than 90 per cent of annual business volume in Russia was committed to projects in the regions, where the EBRD plans to open three additional offices in 2008.

In line with the Bank’s strategy of gradually reducing investments in the 8 EBRD countries that joined the EU in 2004, annual business volume in central Europe and the Baltic countries was ?546 million, 22 per cent below the 2006 level.

The advanced transition countries** represented a share of 10 per cent of total investments (vs 14 per cent in 2006), with the early and intermediate transition countries taking 49 percent (vs 48 per cent) and Russia 41 per cent (vs 38 per cent) of the annual business volume.

After the successful transition of the Czech economy over the last 16 years, the Bank will no longer make new investments in the Czech Republic. Other EU-8 nations are expected to stop receiving investments by 2010.

Demand for projects to improve energy efficiency in EBRD countries continued unabated in 2007, with sustainable energy investments of over ?900 million for the year. The Bank has reached its three year target of investing ?1,5 billion in energy efficiency in just over 18 months.

Among energy efficiency investments, a ?600 million long term syndicated loan to Russian steel group Severstal will significantly reduce the energy consumption of the company’s steelmaking operations.

The EBRD also continued its pioneering work on the international financial markets, arranging the largest ever syndicated loan denominated in roubles – a syndicated loan for an equivalent of ?750 million for a Volkswagen plant in Russia. 80 per cent of this loan was syndicated to international commercial banks.

To fund its growing rouble funding requirements, the EBRD also issued the first “global bond” in roubles, providing access to the Russian market for global investors.

*The early and intermediate transition countries are Albania, Armenia, Azerbaijan, Belarus, Bosnia and Herzegovina, Bulgaria, FYR Macedonia, Georgia, Kazakhstan, the Kyrgyz Republic, Moldova, Mongolia, Montenegro, Romania, Serbia, Tajikistan, Turkmenistan, Ukraine and Uzbekistan.

**The advanced transition countries are Croatia, the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, the Slovak Republic and Slovenia.