EBRD raises stake on Romania by $70 million

The European Bank for Reconstruction and Development (EBRD) is planning to expand its activity in Romania by the end of the year, by investing some $70 million in various economy sectors.

EBRD has already “struck a deal” for a $6 million investment in Banca Transilvania and is planning on allotting another $60 million to the wood and tyre-making industry.

EBRD’s Board of Directors on September 4 will consider granting a $30 million loan to Michelin Romania and a 35 million euro one to Austria-based Kronospan Group to build a wood-processing mill in Brasov.

“The credit will be used to upgrade the group’s factories in Romania and will be part of an investment plan to be run over several years,” Mircea Podina, HR and Communication manager with Michelin Romania, told Mediafax.

EBRD feels its financing will contribute to the development of the company and help the tyre-making industry in Romania become more competitive on both the domestic and international market. The investment is also set to make a powerful impact on the technology and know-how transfer sector on the Romanian market, as well as on the foreign business circles in Romania.

Michelin Romania was established early this year, when the world leading tyremaker signed a deal with Romanian tyre producer Tofan for the acquisition of Victoria and Silvania tyre factories, of Tofan Recap, Tofan Group’s recapping division, of 20 purchase warehouses, as well as the entire franchised Automaxima network of sales points.

The 35 million-euro investment in the wood industry will actually be a financial support directed to Kronospan Holdings Limited (Cyprus), subsidiary of the Austria-based Kronospan Group, European wood processing leader.

The Austrians need 200 million euros to build the factory, an investment to lead to 3,000 new jobs. The first installation of the new factory will become operational in Q2, next year, with the remaining two productive lines to be turned on some time throughout 2003.

EBRD is the largest foreign investor in Romania, with more than 1.6bn euros by the end of last year. The money was used for funding 60 projects, which practically absorbed more than 10% of EBRD’s commitments in Central and Eastern Europe. The bulk of European Bank for Reconstruction and Development’s investments were made in telecommunications, transports, finance, tourism, agricultural business and public utilities.

Of the total 1.6bn euros invested by the end of last year, 1.4bn euros account for granted credits, while the remaining 182 million euros account for shareholdings. More than half of the money was invested in the private sector, which benefited from total funding worth more than 943 million euros.