european investment bank financing instruments for...
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European Investment BankFinancing Instruments for TEN-T
SESAR Implementation: Workshop on Financing and FundingBrussels, 17 February 2011
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1. EIB Experience in TEN-T and the Air Transport Sector
2. EIB Financing Instruments Supporting TEN-T Projects
3. Financing SESAR Implementation
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European Investment Bank
EIB Support of TENs and PPPsTENs development is a priority objective of EIB. In the PPP segment the EIB has lent over EUR 25 billion since 1990
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2004 2005 2006 2007 2008 2009
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1990 1992 1994 1996 1998 2000 2002 2004 2006 2008
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EIB PPP FinancingSince 1990, EIB has progressively broadened geographic and sector spread of its PPP lending. The Bank is now one of the major funders of projects in Europe. Portfolio of 120 projects and investment of around EUR 25 billion.Annual signatures averaging above EUR 2 billion since 2000, reaching EUR 3.4 billion in 2010 with EUR 2.4 billion in the transport sector
TENIn 2009 EIB financed EUR 13.9bn in Trans-European Networks (TEN) infrastructure within the EU. This reflects EIB’s increasing presence in order to fill the liquidity gaps left by commercial lenders in the aftermath of the financial crisis.TEN-T projects represent on average 86% of the total TEN lending.
European Investment Bank
EIB Experience in the Air Transport SectorLending to air transport projects represents a major share of EIB’s Transport sector activity
Between 2000 and 2010:
The EIB has financed over 70 air transport projects…
Providing loans over EUR 15 billion…
Representing around 11% of its entire Transport sector lending
The EIB finances projects in four main areas within the sector:
Airport development
Air Traffic Management
Research & Development
Aircraft acquisitions (only until 2007 due to change in Transport Lending Policy)
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European Investment Bank
EIB Experience in the Air Transport SectorRecent projects
New Berlin Brandenburg Intl. AirportExpansion and provision of a new passenger terminals at Dublin, Munich, Nairobi, Frankfurt....Upgrade and expansion of all the aircraft pavements at Chisinau Airport in MoldovaLarge scale upgrade of the baggage handling system at Amsterdam Schiphol Airport
Airport Development
Upgrade works to all AENA controlled air navigation systems in Spain
Upgrade works to all NAV controlled air navigation systems Portugal
New ACCs at Belgrade and Zagreb
Air Traffic Management
Finmeccanica (Italy) to develop innovative aircraft fuselage structuresR&D of a new generation aircraft engine undertaken by Snecma, part of the Safran Group (France)Airbus R&DRolls-Royce R&DSoyuz launch facilities at Guayana
Research & Development
No lending for aircraft acquisitions after 2007 due to change in lending policy (exception: SATA)
Prior to 2007 the EIB was active in this area providing financing for acquisitions at SAS, TAP, Iberia, Austrian, Cargolux, Air France, LOT, MALEV, TAROM, Egyptair, THY and others
Aircraft Acquisition
European Investment Bank
Lessons Learnt and SESAR Are past air transport projects financed by the EIB relevant in the context of SESAR?
Structure of EIB financing in these projects bears limited relevance to the issues/complexity/volumes presented by SESAR
EIB has substantial experience in the air transport sector and has lent extensively to projects across Europe
EIB financing for nearly all projects involved the same instrument:
Standard EIB loan with a state or first class bank / single corporate signature guarantee without EIB taking direct project risk or using
innovative financing solutions
HOWEVER
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1. EIB Experience in TEN-T and the Air Transport Sector
2. EIB Financing Instruments Supporting TEN-T Projects
3. Financing SESAR Implementation
European Investment Bank
EIB Financing InstrumentsEIB has at its disposal a wide and flexible portfolio of financing instruments to support TEN-T projects
Direct Loans
ProjectSPV
Project finance with direct project risk
MezzanineLGTT
Equity through Funds
Standard Loans“Traditional” EIB lending instrumentGuaranteed basisRepresents the bulk of EIB’s lending volumes
Intermediated LoansBanks
Structured Finance Facility (SFF)
Established in 2001
Expands the ability of EIB to provide financing
Allows lending to projects with a higher risk profile
Allows for more flexible financing solutions
Public Sector
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European Investment Bank
Instruments OverviewStandard EIB Loans
Represents close to 80% of EIB’s overall TEN-T lending volume
Either fully guaranteed or guaranteed during construction and early operation
Guarantee from sovereign, bank or corporate
Provided on a direct or bank-intermediated basis
Recipient is either public sector borrower or project company on a project finance basis
European Investment Bank
Instruments OverviewSFF – Project Finance Loans with direct project risk
Represents around 20% of EIB’s overall TEN-T lending volume
“Real” project finance loan with the EIB taking direct project risk
Provided on a pari passubasis with commercial banks already during construction period
Recipient is ring-fenced project company (SPV)
Senior Bank Debt
SPVProjectCosts
Commercial Banks
Equity & quasi-equity
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European Investment Bank
Instruments OverviewLoan Guarantee Instrument for TEN-T
Specialized instrument jointly developed by the EIB and the EC
Provides contingent mezzanine debt thereby protects senior debt in projects exposed to traffic risk
Mitigates traffic risk during early operation protecting against traffic downside scenarios
Improves capital structure and senior debt credit quality
Lowers refinancing risk in Mini-Perms structures
Potentially allows for funding cost reduction
Senior Bank Debt
Up to 20% of Senior Debt
SPVProjectCosts
Equity & quasi-equity
Commercial Banks
LGTT
Contingent mezzanine facility
European Investment Bank
Instruments OverviewInvestment Funds / Marguerite
EIB invests equity in selected infrastructure funds with investment mandate covering TEN-T toProvide additional sources of equity finance for infrastructure projectsEnable it to extend its reach to eligible target projects beyond its traditional lending activitiesOvercome shortage of equity in certain sectors or geographiesAs of late 2010 has invested in close to 20 funds
• Marguerite Fund“2020 European Fund for Energy, Climate Change and Infrastructure”, established in 2009Infrastructure investment vehicle for long-term public and private institutional investors
Invests in projects that enhance security and independence of EU energy supply, contribute to greenhouse gas emissions reduction, reduce transmission/transportation costsInvestment mandate specifically includes TEN projects
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1. EIB Experience in TEN-T and the Air Transport Sector
2. EIB Financing Instruments Supporting TEN-T Projects
3. Financing SESAR Implementation
European Investment Bank
Financing Solutions for SESAR
At this stage it is not possible to judge…
Can the existing EIB instruments be used to provide financing to SESAR projects?
Standard guaranteed loans – provided to ANSPs along the basis of past EIB loans to the sector?
Project finance loans – provided to larger, individual, ring-fenced projects?
LGTT – provided to individual projects with quantifiable traffic risk?
• Can new joint instruments developed by the EC and EIB be among the innovative financing solutions sought?
New instruments – issued by the proposed SESAR Deployment Fund or used by a well-defined group of projects?
How could the EIB contribute to potential financing mechanisms for SESAR deployment?
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European Investment Bank
Main IssuesMuch better understanding of the actual projects is indispensible especially with regards to critical structuring issues in order to allow private capital or EIB participation
If private sector capital is to be used (debt or equity) core parameters need to be established before financing solutions can be devised and analysed in a meaningful manner
Funding sources
Is private capital needed?
Is debt financing necessary?
Is a PPP approach acceptable?
Risk allocation
Risk of deployment (being abandoned due to policy change)?
Risk of obsolescence of technology put forward by SESAR?
Risk of compatibility with other major emerging systems?
Projects vs. policy objectivesClearly defined projects or group of similar projectsClear cost-benefit analysisSound business casesEstablished eligibility and economic benefits
Loans vs. grantsClearly defined borrowersCash-flows to service debt (and provide fair return to equity investors)Are revenues of the borrower linked to the assets created?Can ring-fenced (group of) projects be structured?Investment schedule: investment with firm long-stop date or ongoing investments in the future?