OREANDA-NEWS. January 25, 2013. The EBRD has signed up to a risk-sharing partnership with ZAO Raiffeisenbank (RBRU) under which Russian cities and their municipal utility companies will be offered long-term local currency loans ranging from RUB 20 million to RUB 300 million to fund badly needed municipal infrastructure renewal, reported the press-centre of EBRD.

Loans would be mostly offered to small and medium size municipalities of less than 400,000 people and could be attracted either directly by municipalities or by local utility companies such as vodokanals (water utilities), district heating companies and transport operators, whether privately-owned or owned by municipalities.

The loans will have a maximum maturity of 10 years, making this programme unique for a market where municipalities traditionally rely on short-term budget loans by Russia’s state-owned banks because no commercial alternatives are currently available.

The EBRD’s commitment under this 50/50 risk-sharing facility with RBRU could reach RUB 1.95 billion (equivalent to EUR 47 million).

RBRU will select and prepare projects and submit them for the EBRD’s final approval under a set of simplified procedures agreed between the two institutions and will utilise the wide regional network of RBRU, including more than 180 offices in 75 regions to search for eligible projects.

This streamlined process will make funding available to small and medium-sized municipalities, municipal companies, private operators of municipal infrastructure and energy services companies planning to rehabilitate and modernise infrastructure, as well as to adopt energy efficiency measures.

Technical consultancy support to borrowers, which is standard for EBRD projects, will be available, as well as for the preparation of priority investments programmes and their implementation.

The EBRD has long been active in funding municipal infrastructure projects in Russia, having so far lent the equivalent of nearly EUR 1 billion (equivalent to RUB 40 billion at today’s rates) to 28 Russian cities and regions over an area inhabited by 16 per cent of the country’s population, mainly to finance water and district heating projects.

The Bank’s goal in teaming up with RBRU is to encourage commercial banks to consider entering this market and providing the longer-term, medium-sized loans which these smaller and less developed municipalities need to carry out the long overdue renewal of critical infrastructure.

Russia has 274 municipalities with a population ranging from 50,000 to 400,000.

Obsolete infrastructure is costly to maintain as well as being the source of significant losses of water and energy.

ZAO Raiffeisenbankis a subsidiary of Raiffeisen Bank International AG. Raiffeisenbank ranks 11th among the Russian banks in terms of assets, based on Q3 2012 results (Interfax-CEA). According to the same Interfax-CEA data, ZAO Raiffeisenbank ranked 5th in terms of liabilities of individuals and 10th with regard to consumer lending