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2 nd of June 20101 European Investment Bank EPEC – Private sector Forum II Europe 2020 – A view of the future Brussels June 2 nd 2010.

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Presentation on theme: "2 nd of June 20101 European Investment Bank EPEC – Private sector Forum II Europe 2020 – A view of the future Brussels June 2 nd 2010."— Presentation transcript:

1 2 nd of June 20101 European Investment Bank EPEC – Private sector Forum II Europe 2020 – A view of the future Brussels June 2 nd 2010

2 2 nd of June 20102 European Investment Bank The European Investment Bank (EIB) Long-term finance promoting European objectives European Unions long-term lending bank set up in 1958 by the Treaty of Rome. Shareholders: 27 EU Member States Governance Board of Governors – EU Finance Ministers Board of Directors - Member States & European Commission Management Committee –EIBs executive body Audit Committee – independent, non-resident

3 2 nd of June 20103 European Investment Bank The European Investment Bank (EIB) European priority objectives Within the Union: Cohesion and convergence Small and medium-sized enterprises (SMEs) Environmental sustainability Knowledge Economy Trans-European Networks (TENs) Sustainable, competitive and secure energy

4 2 nd of June 20104 European Investment Bank Trans-European transport network (TEN-T) Progress until end 2009

5 2 nd of June 20105 European Investment Bank Infrastructure financing needs – Transport Trans- European Networks (TEN) The estimated TEN-T investment requirement in 2007-2013 is ca. 390bn Potential Sources of Finance: National Public resources finance ca. 40-50% Private sector risk finance needed to finance 20-25% EIB loans finance ca. 15-20% of TENs investments Commission resources (Structural Funds and TENs) cover ca. 15% Source: DG MOVE, EIB

6 2 nd of June 20106 European Investment Bank EIBs support for Trans-European Networks (TENs) Large transport and energy infrastructure networks Transport supporting development and integration Security and diversification of internal energy supply Loans of EUR 12.7bn in EU in 2009: EUR 10.7bn for TEN Transport EUR 2.0bn for TEN Energy Total loans of EUR 49.9bn 2005-2009 EUR 42.9bn for TEN Transport EUR 6.9bn for TEN Energy

7 2 nd of June 20107 European Investment Bank Clear step-up in EIB TEN lending activity EIB Funding200420052006200720082009 TEN7. TEN-E1. TEN-T6. TEN-T Priority Projects2. Other Projects4.4 5.2 6.710.1 PPP in TEN-T0. Senior loans6. SFF in TEN-T0. Percentage of total TEN- T in Rail 40%42%37%46%27%

8 2 nd of June 20108 European Investment Bank In addition to standard EIB Senior loans for TENs projects, EIB also provides: Structured Finance Facility (SFF): to fund projects with a higher risk profile and enable equity financing; mezzanine and guarantee operations for infrastructure schemes Loan Guarantee Instrument for TEN Transport projects (LGTT): EUR 5 bn EIB guarantee programme for which EUR 1 bn risk capital has been jointly provided by the EIB and EU budget. LGTT shares the revenue risk in the early years of TENs projects Investments in Equity Funds: EIB invests in equity funds, e.g. Marguerite, which in turn take direct equity participations in infrastructure investments European PPP Expertise Centre (EPEC): Expertise service provided by the EIB and European Commission to support programme and policy development as well as best practice by the public sector for PPP transactions. Joint Assistance to Support Projects in the European Regions (JASPERS): a joint policy initiative of EIB, DG REGIO, EBRD and KfW to provide assistance for absorption of Structural & Cohesion Funds period 2007 to 2013 European Clean Transport Facility (ECTF) is a major EIB financing programme to support investments targeting RDI (Research, Development and Innovation); emissions reduction and energy efficiency in the European transport industry. EIB lending under the ECTF facility currently amount to EUR 4.2 bn and targets automotive (OEMs/Suppliers), railroad, aircraft and shipping industries as well as related infrastructure.

9 2 nd of June 20109 European Investment Bank EIB as a financier of PPPs PPP an important additional instrument for infrastructure investment Since 1990, EIB has progressively broadened geographic and sectoral spread of its PPP lending The Bank is now Europes foremost funder of PPP projects. Portfolio of 120 projects and investment of around EUR 25 billion Signatures in 2008 in excess of EUR 3.5 billion. Despite difficult economic conditions in 2009, signatures exceeded EUR 2 billion.


11 2 nd of June 201011 European Investment Bank EIB Structured Finance Facility - SFF Purpose of SFF is to create value added by financing riskier parts of selected transactions and by increasing EIB leverage and financing capacity. EIBs total SFF financing of EUR 4.2 bn in 2008, EUR 5.8 bn in 2009 SFF Target Companies risk profile SFF allows EIB to increase the leverage on its own Funds and those of the EU Budget through Structured Finance

12 2 nd of June 201012 European Investment Bank LGTT – EUR 5 bn Loan Guarantee instrument LGTT is a specialized risk based instrument developed by the EIB in cooperation with the European Commission. The LGTT Guarantee Facility is designed to provide contingent mezzanine debt and thereby to protect senior debt in TENs projects that are exposed to traffic risk. It provides up to 20% of additional mezzanine debt funds to meet traffic down side scenarios LGTT makes the capital structure more robust to traffic; project and financial uncertainties In current market circumstances, LGTT proved decisive to attract senior lenders and to close PPP projects with traffic risk components.

13 2 nd of June 201013 European Investment Bank LGTT – State of play The pipeline at the end of 2009 stands at 17 active projects The project pipeline is estimated to represent 20 projects by the end of 2010 and roughly 25 - 35 projects by the end of 2011. LGTT is fully on track, facilitating the progress of traffic based PPP throughout the Union. It covers the majority of eligible deals in the market.

14 2 nd of June 201014 European Investment Bank Technical Assistance – JASPERS Joint Assistance to Support Projects in the European Regions Joint policy initiative of EIB, DG REGIO, EBRD and KfW Assistance for absorption of Structural & Cohesion Funds period 2007 to 2013 Assistance with project presentation and identification Analysis of horizontal issues such as grant/loan blending Project implementation support to follow in second phase

15 2 nd of June 201015 European Investment Bank European Clean Transport Facility (ECTF) ECTF facility is targeting RDI (Research, Development and Innovation) investments in emission reduction and energy efficiency in the European transport industry. This Risk Sharing facility targets larger scale investments with corporate sponsors (or project finance structures). Such risk-sharing facility is used for example for investments in: (i)intelligent traffic management (e.g. variable message signs, advanced traveller information systems, advanced drivers assistance, speed advisory/control, electronic tolls, etc.), and (ii) Smart vehicles (e.g. Advanced Drivers Assistance, accident sensors, automated guided vehicles, navigation systems, inter-vehicle communications systems etc.), and Green vehicles (application of ICT in reducing the congestion of vehicles).

16 2 nd of June 201016 European Investment Bank 16 European Investment Bank EIB Fund Investments FundFirst closing Fund CommitmentTotal EIB Commitment Geographical FocusSector Focus EUR (M) Emerging Europe Convergence Fund Aug-0565550 CEEITC expansion Dexia Southern EU Infrastructure FundMar-0612025 FR, IT, ES, PTPPP Dutch/Northern EU Infrastructure Fund Aug-0512115 NW EuropePPP Barclays European Infrastructure Fund Jul-0631528 UK, IE, FR, DEPPP San Paolo IMI Infrastructure Fund Dec-0612018 ITPPP Enercap Power Fund Jun-079825 CEERenewable Energy DIF Renewable Energy Fund Sep-0731425 Benelux, FR, DE, Scandinavia Renewable Energy Mid Europa Fund III Aug-07153135 Central & Eastern EuropeITC expansion Meridiam Infrastructure Fund Oct-0654750 EUPPP Green Alliance Renewable Fund Dec-074115 ES,PTRenewable Energy Espirito Santo Infrastructure Fund May-089615 ES,PTRenewable Energy DIF Infrastructure Fund II Dec-0822035 NW EuropePPP / Renewable Energy Dasos Timberland Fund I May-098517 Worldwide (40% Europe)Timberland assets Meridiam Infrastructure Fund II Dec-0917550 EUPPP SE Europe Energy Efficiency Fund Dec-099525 SE Europe including Turkey Energy Efficiency & Renewable Energy 2020 European Fund for Energy, Climate Change & Infrastructure [Marguerite] Dec-09710100 EURenewable Energy, TEN-T, TEN-E Total 5243528

17 2 nd of June 201017 European Investment Bank 17 European Investment Bank 2020 European Fund for Energy, Climate Change and Infrastructure – the Marguerite Fund The Fund targets an equity base of EUR 1.5bn and an associated Debt Co- Financing Initiative (DCI) of EUR 5bn Major publicly funded Core Sponsors (EIB, CDC, CDP, ICO, PKO and KfW) as well as the European Commission, CGD and Bank of Valetta are backing this Fund; also Nordic Investment Bank and Black Sea Trade & Development Bank support it through the Debt Co-financing Initiative. Public and private sector investors from all EU countries are expected to join at a later stage. Target sectors: TEN-T, energy and climate change Focus on solid IRR targets - Fund to give preference to projects with satisfactory Economic Rates of Return (ERR) Expected to be a model in the future for other similar public and private funds so as to attract Capital Market Institutions (including private and public pension funds and insurance companies) to invest in TENs infrastructure

18 2 nd of June 201018 European Investment Bank Future Financing of Trans-European Networks (TEN) TEN-T investment programme is so large that there is currently uncertainties relating to the scale of investments and the way it is to be financed. Continued EIB effort to develop private sector participation in TENs funding Source: DG MOVE, EIB

19 2 nd of June 201019 European Investment Bank Ideas on Future Financing of TEN-T Europe 2020 Strategy – Communication from the EC Europe 2020 Strategy Priority 1: Smart growth (Innovation, Education, Digital Society) Priority 2: Sustainable growth (Climate, Energy and Mobility, Competitiveness) Priority 3: Inclusive growth (Employment and Skills, Fighting Poverty) 4 Working Groups to determine how the EIB can best support the new policy framework Preliminary outcomes A lot can already be done with our current offering However, to close market gaps, the Bank may need to expand or develop Ways to leverage EU Budgetary funds Risk-sharing activities Capital-light structures

20 2 nd of June 201020 European Investment Bank EIBs Role in Facilitating additional TEN-T investment Facilitating Investment by Capital Market Institutions in infrastructure through guarantee and subordinated debt instruments Establishing Equity Funds to finance TEN-T Infrastructure such as the 2020 European Fund for Energy, Climate Change and Infrastructure – the Marguerite Fund Improvement of the coordination of EU Funds Expand the development of knowledge sharing/expertise advice such as EPEC and JASPERS European Clean Transport Facility (ECTF) Possible broadening of the scope of LGTT

21 2 nd of June 201021 European Investment Bank Facilitation of the issuance of bonds through subordinated debt instruments Greater availability of subordinated debt tranches could enhance the credit of projects. The size of this tranche would depend on the risk profile of the project/portfolio as the purpose is to uplift the credit profile of the higher ranking senior debt financing to single-A rating Institutional investors would be interested to invest in the sector. The subordinated tranche could, inter alia, be provided on contingent basis by EIB (subject to its standard credit and other requirements), which would make it similar in structure to LGTT, Suitable for risk sharing between public and private institutions. TEN-T budget could contribute to such instrument through risk sharing. Shareholder funding Subordinated Tranche Senior Tranche – Project Bond Normal or elevated level of equity/shareholder/mez zanine debt Size depends on the project Target rating A/AA Expansion of Investment by Capital Market Institutions

22 2 nd of June 201022 European Investment Bank In order to reach a larger pool of candidate projects, EIB/EC consider that broadening the scope of LGTT to availability-based schemes is worth examination. This would allow targeting significant investments in the rail and inland waterway projects which are in many cases being procured as availability-payment –based PPPs. A clear focus would be to introduce even stronger support for TEN-T priority Projects, most of them in the Rail sector, but also including priority projects like SESAR or Canal Seine Nord. This innovation could substantially open Rail PPPs to Capital Market Financing and provide ground braking solution for difficult multi-national projects like SESAR. Ideas on Future Financing of TEN-T Possible broadening of the scope of LGTT

23 2 nd of June 201023 European Investment Bank Guarantee for Availability based Projects Definition / Objectives Unfunded guarantee instrument designed to enhance the credit of the project. The unfunded nature provides a supplementary buffer to down sides, as they exceed the project funding and are more cost efficient. Encourage primarily the bond but also the bank debt financing of TEN-T railway projects The GAP Facility would: Improve the rating be assigned to the senior debt/bonds to A, AA-levels; Consequently enable certain institutional investors to invest in an asset class that matches their own liabilities; maximise provided service to institutional investors lacking specialist expertise in the sector, project finance or PPPs

24 2 nd of June 201024 European Investment Bank Improvement of the Coordination of EU Funds The TEN-T budget and Cohesion Fund are among the most important providers of Community support for the implementation of the TEN-T projects Their roles, availability, as well as the way they are managed vary substantially. An improved system of coordination could be envisaged, perhaps based on EC/EIB/National Task Forces These task forces could i) assists national authorities to make the best use of the available Community resources and ii) oversee and coordinate the implementation of the TEN-T network, ensuring the commitment to individual projects.

25 2 nd of June 201025 European Investment Bank Contacts Thomas C. Barrett, Director, tel: +352 43 79 87006 Jukka Luukkanen, Head of Division, tel +352 43 79 86412 Matthias Woitok, Deputy Head of Division - LGTT, tel: +352 43 79 87336 Institutional and Operational Policies within the EU: Alfredo Panarella Head of Unit, tel. (+32)(0)2 235 00 82 Jos é Brito Liaison with European Parliament, tel. (+32)(0)2 235 00 76

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