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European Investment Bank EIB Participation at the International experts workshop: “Assessing the economic competitiveness of the European Automotive Embedded.

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Presentation on theme: "European Investment Bank EIB Participation at the International experts workshop: “Assessing the economic competitiveness of the European Automotive Embedded."— Presentation transcript:

1 European Investment Bank EIB Participation at the International experts workshop: “Assessing the economic competitiveness of the European Automotive Embedded Software industry” Andres Gavira Etzel Brussels 28th April 2010

2 European Investment Bank Outline Introduction of EIB The ECTF The Impact of the Crisis on the Semiconductor Industry The RSFF

3 European Investment Bank European Investment Bank Profile EIB was created by the Treaty of Rome in 1958 EIB is a not-for-profit, policy driven institution EIB is 100% owned by the 27 EU member states EIB has subscribed capital of EUR bn as of 2009 EIB is AAA rated EIB funds itself on the capital markets: EUR 79.4 bn in 2009 EIB signed loans amounting to EUR 79.1 bn in 2009 EIB is the largest multilateral financing institution The European Investment Bank is the European Union‘s long-term financing institution. The Bank acts as an autonomous body set up to finance capital investments furthering European integration by promoting EU policies.

4 European Investment Bank 4 Dec 2008 – Dec 2009 Loans approved: EUR 8.7 bn, of which: 1.ECTF: EUR 4.8 bn 2.OEMs: 84%; suppliers: 16% Size of supported investment programmes: EUR 28 bn EIB has become the largest R&D financier of the European automotive sector EIB Lending to the Automotive Sector

5 European Investment Bank The ECTF programme – scope & objectives EIB’s “European Clean Transport Facility” (ECTF) Objective: “...support investments targeting (Green Cars): Research, Development and Innovation; emissions reduction; and energy efficiency.” Beneficiaries: OEMs & suppliers in the main transport sectors: Automotive Aircraft Rail Maritime Lending volume: EUR 8 bn in 2009/2010

6 European Investment Bank ECTF Outlook... EIB lending to the sector will continue in 2010 Risk appetite of commercial banking sector remains limited Bond market offers easier access for the better rated companies, others (if any) may only place high-yield bonds Strict focus on: R&D for low emission technology & safety  ICT has a key role! Facilities for small car platforms in convergence areas Development activities of automotive suppliers  ICT has a key role! The link to ICT

7 European Investment Bank ICT Policy Context Semiconductors are the basis for ICT. ICT elegibility comes through the Knowledge Economy objective. Investment concerns: R&D Innovative production facilities Adoption of innovative products/processes EIB is technology / product neutral. Investments cover the complete semiconductor eco-system (IDM’s, equipment suppliers, research institutes, etc.)

8 European Investment Bank EIB Lending to ICT Sector EUR 3.0 bn in 2008

9 European Investment Bank What is different with this crisis? Crisis has had an unprecedented, deep impact on semiconductor sector Will lead to an international redistribution of production Europe will have to react to this swiftly Green shoots are emerging, opportunities are out there: Investment needs for broadband, green technologies, to assist demographic change Europe has long R&D traditions and favourable political environment

10 European Investment Bank Sources for funding of investments Cash flow (adversely affected by current market environment) Equity (expensive in current environment) Debt (difficult due to de-leveraging efforts) Subsidies (competition with other more visible sectors)

11 European Investment Bank Risk Capital 1 CIP Resources (SME) 2 RSFF (SME / MidCap) 3 Entrepreneur, friends, family Business Angels Seed/Early Stage VC Funds Formal VC Funds Bank Loans and Guarantees Seed / Start-Up PhaseEmerging Growth PhaseDevelopment Phase Investment Loans 4 Later Stage Counterparts EIB and EIF financing tools Investment Loans RDI financing MidCaps/ Large Corporates/ Public Sector Entities (investment grade) Loans, Guarantees RSFF RDI financing SMEs/MidCaps, Banks, PE Investors (sub-investment grade) Loans (incl. Mezzanine), Funded Risk Sharing Facilities with Banks (Investors) CIP Guarantee schemes Growth financing for SMEs Formal VC Funds SME guarantees (loans, microcredit, equity/mezzanine, securitisation Facility: High Growth Innovative SME Scheme (GIF), Ecotech Purpose: IP financing, technology transfer, seed financing, investment readiness Target Group: VC Funds, Business Angels EIF Product: Fund-of- Funds

12 European Investment Bank Bank Guaranteed Loan EIB Commercial Bank(s) Customer LoanGuarantee Direct Loan Commercial Bank(s) Customer EIB Loan Bank Intermediated Loans EIB Commercial Bank(s) Customer Loan Loan(s) (< 12.5m) EIB Financing Solutions Typical EIB financing modes

13 European Investment Bank EIB Loans Long Term Tenor Attractive Pricing EIB does not sell assets on the secondary market (buy and hold strategy) Signalling Effect: EIB as a quality stamp Minimal loan size EUR 12.5 million (= minimal project size of EUR 25 million) Traditionally, investment grade projects

14 European Investment Bank Risk Sharing Finance Facility – Set-up Own Resources EUR 1 bn RSFF [up to EUR 10 bn assuming leverage of 5.0x ] Direct LendingIndirect Lending / Financing European Commission EUR 1 bn Corporate Lending Senior Secured Second Lien Senior Unsecured Junior Unsecured PIK loans Mezzanine, etc. Project Financing Universities Other: SPVs, PPPs, JTIs… Financial Intermediaries (extend lending capacity) Risk Sharing Co-financing Investment Funds Renewable Energy Others Collaboration with EIF Banks Funds

15 European Investment Bank The EIB Project Approach ELIGIBLE COSTS € 20 m Time Year 1 € 10 mYear 2 € 30 mYear 3 Total€ 60 m € 30 m MAX. EIB LOAN Facilities: project capital expenditures for tangible assets Activities: project capital expenditures for intangible assets, research staff cost, incremental working capital needs and other related operating expenses Facilities: project capital expenditures for tangible assets Activities: project capital expenditures for intangible assets, research staff cost, incremental working capital needs and other related operating expenses R&D budgets typically cumulated over 3 years (investment programme) Generally up to 50% (exceptionally up to 75%) of the total project cost Eligible project cost includes: What can be financed? An example

16 European Investment Bank Summary ECTF for low emission technology & safety Financing of ICT fits into EIB´s policy RSFF for financing of sub-investment grade RDI projects

17 European Investment Bank Andres Gavira Etzel Senior Engineer ICT & e-Economy Division Phone: (+352) European Investment Bank 100, boulevard Konrad Adenauer L-2950 Luxembourg


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