JESSICA and Investment Funds

European Investment Bank

Brussels, 28 June 2011

Selecting UDFs Selecting UDFs Learning from EIBLearning from EIB

Calls for Expression of InterestCalls for Expression of Interest

Gianni Carbonaro / Rakesh Bhana

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Calls for EoI Calls for EoI Part of a learning process…Part of a learning process…

Based on the EIB experience under current HF mandates

EIB acting on behalf of MA on a non-profit basis

Moving up the learning curve together with other stakeholders

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Calls for EoI: General RationaleCalls for EoI: General Rationale

Ensuring maximum coherence with the investment strategy

Clarifying the context and identifying relevant priorities

Enabling candidates to offer a high-quality business plan

Building strong incentives for cost-effective UDF performance

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The Call – a Guided Tour …The Call – a Guided Tour …

Annex 1 – General Information about the Applicant

Annex 2 – Declarations to be made by the Applicant eg. Entry in trade registers, representations on not being subject to insolvency proceedings,

conflicts of interest, compliance with public law obligations (tax, social security)

eg. Statement of relevant experience (execution of relevant/related Urban Projects and roles held by the applicant in the project)

Annex 3 – Terms of Reference Amount allocated to the Call for EoI

Selection procedure and criteria (exclusion and selection criteria)

Business Plan template

Characteristics of potential Urban Projects

Financial model

Conditions for the financial products

Management fee

Award criteria

Selected Terms of the Operational Agreement

Instructions on Financial Forecasts and Operational Budget of the UDFs, incl. financial statements template

Instructions on Economic Analysis of Urban Projects

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EoIs Evaluation EoIs Evaluation PrinciplesPrinciples

Exclusion criteria

• Bankruptcy or analogous situation

• Professional misconduct

• Non-fulfilment of social security and tax payment obligations

• Criminal conviction

• Proof of misrepresentation

Selection criteria

• Proper submission of the relevant documentation and supporting material as specified in the Call for EoI

• Possession of adequate experience

• Completion of declarations to the satisfaction of EIB

• Co-investment: ability of the UDF managers to provide own resources for

investment or attract third party co-investment

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Criteria for Urban ProjectsCriteria for Urban Projects

General criteria• EU Structural Fund and State Aid regulations• Soundness of business model

• Experience of the applicant

Criteria related to OP• Eligible Expenditure• OP objectives• Investment by end-2015

Financial and economic criteria(will vary according to projects)

• Financial performance indicators• Economic performance and impact assessment

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Criterion Scoring

Investment Strategy 0-20

Financial forecasts of the UDF 0-25

Management fees 0-10

Project portfolio and management team 0-25

Ownership and governance structure, risk management and control procedures

0-20

Total Score 0-100

Offers Evaluation PrinciplesOffers Evaluation PrinciplesExample of Award CriteriaExample of Award Criteria

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Calls for EoI : key figuresCalls for EoI : key figuresAcross 15 EIB Holding Funds :

17 Calls launched14 closed

71 valid EoI received 17 UDFs selected, including

Commercial BankPublic BankPrivate equity / infrastructure fundPublic institutionSavings bank financial services unit

10 UDFs signed

31 UDFs expected

Selected UDF managers

47%

12%

29%

6% 6%Commercial bank

Public bank

Private equity fund

Public institution

Other

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Signature of Operational Agreement

Signature of Operational Agreement

CEoI Launch

CEoI Launch

3 to 5 months3 to 5 months

CEoI CloseCEoI Close

1 month1 month

Min 4 months achieved

2 to 4 months2 to 4

months

Min 0.5 months achieved

Min 5 months achieved

Calls for EoI – compressing timescales…Calls for EoI – compressing timescales…

InvestmentsInvestments

Current target timeframe for most calls 3 to 5 months

• timescale reduced from build-up of experience

• streamlined procedures, more standardisation

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Business plansBusiness plans

UDF business plans: strengths … Concise, clear, credible Demonstrate compliance with mandatory limits

FeesDisbursement timeframe

Evidence of compliance with OP requirements Diversified portfolio of investments

… and weaknesses: Unrealistic financial projections Poorly identified project pipeline

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Business plans: illustrationBusiness plans: illustration

•16 Projects•£200 million total spend•£70 million from UDF

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The negotiation phase : possible issuesThe negotiation phase : possible issues

Fees (e.g. unforeseen costs arising)

Risk sharing mechanisms

Maximising co-investment

Appropriate reporting requirements

Recycling mechanism

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Learning by doing for stakeholders …Learning by doing for stakeholders …

For cities• Interaction with the MA

• Project preparation/elaboration

• Satisfy the integrated plan requirements

• Start project preparation and elaboration work ASAP

For candidate UDFs• Know the OP

• Diversified project portfolio

• Engage with municipalities/MA/others on IPSUDs

For project promoters• Know the OP

• Preparation/elaboration of projects

• Engage with municipalities/MA/others on IPSUDs

• Start project preparation and elaboration ASAP

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JESSICA and Investment Funds

European Investment Bank

98-100 Bvd Konrad Adenauer, L-2950 Luxembourg

www.eib.org/jessica