Funding secured for State border control, though no sign of tendering

The French bank Societe Generale, one of Europe’s largest, together with the German banks KfW and Dresdner will finance the about 1bn euro deal concluded between EADS Group and the Romanian State for securing the country’s borders, banking market sources told Ziarul Financiar. They added that EADS had included the contract funding plan in its bid submitted to the Romanian authorities, where it mentioned the names of the three banks willing to provide the funding that will be secured with sovereign guarantees.

Investment banking sources say the financing contract has not been awarded through a tender, as also happened in the case of the Bechtel contract.

Officials from the three banks involved in the deal made no comment on the matter by the time of going to press. The representatives of Banca Romana pentru Dezvoltare (Romanian Development Bank – BRD), the local bank 51% held by Societe Generale, declined comment for confidentiality reasons.

The contract recently concluded by the Romanian State with the European EADS Group together with Siemens and other suppliers is, at the same time, the subject of an investigation by the European Commission. According to the latest available information, they are looking into the terms under which the contract was awarded. The European officials want to check that the deal is not being financed with PHARE funds, that is, if the Romanian authorities complied with the legislation in force when they awarded the contract without first organising a public tender.

The quoted sources added that the duration of the funding contract was of about five years, and that the contract was in form of a buyer credit. This means the banks lend the money directly to the buyer, i.e. the Romanian State.

The deal with EADS was sealed in Bucharest last month during the visit of the German Chancellor Gerhard Schroeder to Romania, with the Ministry of Administration and Interior as the signatory for the Romanian party.

The contract was signed for an integrated solution for border surveillance and security and will enable Romania to meet the requirements of the new EU members in terms of state security and border surveillance, considering the Romanian authorities hope to join the EU in 2007. The first stage of the project is scheduled to begin soon, so as to be completed by the end of 2006, with the implementation of the entire project to be finalised by 2009.

The French at Societe Generale have been involved in one of the most significant credits on the Romanian market so far, namely that granted to power producer Nuclearelectrica in December 2002. This was to enable the company to finish works on the second reactor of the Cernavoda nuclear power plant.

At the time, Societe Generale, Credit Lyonnais and BRD granted the Romanian company a loan of about $400 million, fully secured by the Romanian State.

Societe Generale has a strong position on the Romanian market, where it holds the second leading bank in the banking system, BRD. The French Group bought 51% in BRD from the Romanian State in 1998 and has made extensive investments in the restructuring and consolidation of BRD’s operations ever since.
adrian.mirsanu@zf.ro