mario cucchi and guido borsani funding regional projects through financial engineering in lombardy,...
TRANSCRIPT
Mario Cucchi and Guido Borsani
Funding regional projectsthrough financial engineering in Lombardy, Italy
7th Monitoring Committee Meeting
Thessaloniki, 15th of July 2005
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Lombardy is the largest Italian Region and represents over 1/5 of the whole national economy
Context
History
Mission
Strategic Positioning
Activities
Tools
Examples
Population: 9.032.554 (15,6% of Italian population)
GDP: ≈ 250 billion € (20% of Italian economy)
Unemployment rate: < 4% (> 8% in Italy)
Rating:
•S&P: AA-
•Fitch: AA
•Moody’s: Aa1 (vs. Aa2 Italy)
Year Lombardy Italy % Lombardy
on Italy
GDP (million €) 2002 254,447.0 1,258,349.0 20,2%
Employees industrial companies (thousand)
2003 1,382 4,887 28,3%
Medium size companies
2003 4,738 16,633 28,5%
Industrial companies 2004 117,154 551,241 21,3%
Export (thousand €) 2002 74,827,542 264,494,941 28,3%
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Finlombarda’s History
1971
INCORPORATIONof FINLOMBARDA SpA
1999 2004
1998 2001INCORPORATIONof FINLOMBARDAGESTIONI SGR SpA
Context
History
Mission
Strategic Positioning
Activities
Tools
Examples
TIME
REGION OF LOMBARDYOTHERS
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Finlombarda is aimed at supporting the economical, social and territorialdevelopment of the Region
Finlombarda is…
…a bridge between the public and private finance…a bridge between the public and private finance
…an institution that promotes and manages innovative financial products
…an institution that promotes and manages innovative financial products
…an institution that finance “excellence” for the competitiveness of Lombardy’s economy
…an institution that finance “excellence” for the competitiveness of Lombardy’s economy
Context
History
Mission
Strategic Positioning
Activities
Tools
Examples
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Comparative analysis of the credit enhancementpositioning in PPP in Europe
Germany
Spain
Italy
The Netherlands
Ireland
France
Group 1
Group 2
United Kingdom
Group 3
Strong
Strong
Weak
Weak Relative importance of PFI and private tools&products
Relative importance of public financial players in public
interest financing
Areas of general interest missions (urban development, venture capital, local economic development)
Source: Advention 2002
U.S..A
U.S..A
FINLOMBARDAGESTIONIsocietà di gestione del risparmio
FINLOMBARDAGESTIONIsocietà di gestione del risparmio
Context
History
Mission
Strategic Positioning
Activities
Tools
Examples
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Areas of activity
PUBLIC FINANCEPUBLIC FINANCEPUBLIC FINANCEPUBLIC FINANCECORPORATE FINANCECORPORATE FINANCECORPORATE FINANCECORPORATE FINANCE
Credit facility for SME:Credit facility for SME: More than 20 tools set up More than 20 tools set up
Financial advisor for SMEFinancial advisor for SME
UE Programmes ManagementUE Programmes Management
Technological VouchersTechnological Vouchers
Credit facility for SME:Credit facility for SME: More than 20 tools set up More than 20 tools set up
Financial advisor for SMEFinancial advisor for SME
UE Programmes ManagementUE Programmes Management
Technological VouchersTechnological Vouchers
Closed-end Funds:Closed-end Funds: NEXT FundNEXT Fund EUROMED FundEUROMED Fund MEZZANINE FundMEZZANINE Fund
Closed-end Funds:Closed-end Funds: NEXT FundNEXT Fund EUROMED FundEUROMED Fund MEZZANINE FundMEZZANINE Fund
Structured finance for public Structured finance for public infrastructures:infrastructures: Public Utilities FundPublic Utilities Fund
Advisory services to PPP and Advisory services to PPP and PF projects:PF projects: PF Regional UnitPF Regional Unit PF FundPF Fund
Infrastructure Fund “Obj. 2”Infrastructure Fund “Obj. 2”
Structured finance for public Structured finance for public infrastructures:infrastructures: Public Utilities FundPublic Utilities Fund
Advisory services to PPP and Advisory services to PPP and PF projects:PF projects: PF Regional UnitPF Regional Unit PF FundPF Fund
Infrastructure Fund “Obj. 2”Infrastructure Fund “Obj. 2”
Closed-end Funds:Closed-end Funds: SOCIAL HOUSING FundSOCIAL HOUSING FundClosed-end Funds:Closed-end Funds: SOCIAL HOUSING FundSOCIAL HOUSING Fund
FINLOMBARDAGESTIONIsocietà di gestione del risparmio
FINLOMBARDAGESTIONIsocietà di gestione del risparmio
Context
History
Mission
Strategic Positioning
Activities
Tools
Examples
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Three different tools to fulfilRegional economic policy expectations
MA
ND
AT
E
FUNDSRegion ofLombardy
Finlombarda SpA
VENTURE CAPITAL,MEZZANINE FINANCING
INVESTMENT FUNDSINVESTMENT FUNDSINVESTMENT FUNDSINVESTMENT FUNDS
REGIONALFUNDS
PRIVATE and THIRDPARTIES FUNDS
MANAGEMENT
FUNDS
Finlombarda Gestioni SGR
PUBLIC FUNDSPUBLIC FUNDSPUBLIC FUNDSPUBLIC FUNDS
REGIONALFUNDS
GRANTS &CREDIT
FACILITIES
CREDITFACILITIES
REVOLVING FUNDSREVOLVING FUNDSREVOLVING FUNDSREVOLVING FUNDS
REGIONALFUNDS
PRIVATE and THIRDPARTIES FUNDS
≈ € 300 Ml ≈ € 40 Ml ≈ € 100 Ml
Context
History
Mission
Strategic Positioning
Activities
Tools
Examples
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Finlombarda Gestioni SGR has launched NEXT: a closed-end fund of funds aimed at developing a Venture Capital market in Lombardy
REGION OFLOMBARDY
guarantees
Context
History
Mission
Strategic Positioning
Activities
Tools
Examples
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Finlombarda is setting up an innovative financial tool to subsidize Lombardy water and wastewater infrastructure projects
Finlombarda S.p.A.
REVOLVING FUNDREVOLVING FUNDREVOLVING FUNDREVOLVING FUND
REGIONAL FUNDS
PRIVATE and THIRDPARTIES FUNDS
SUBSIDIZED LOANS CREDIT ENHANCEMENT
FUNDINGGUARANTEEGUARANTEE
Region of Lombardy
BORROWERS
CAPITAL MARKETS
LOANS, BONDS,COMMERCIAL PAPERS
Context
History
Mission
Strategic Positioning
Activities
Tools
Examples
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Public fund management
Corporate Finance
Advisory in Public-Private Partnership (PPP) and Project Finance (PF) Project Finance Regional Unit Project Finance Fund Public utilities Fund
InfrastructuralFundObjective 2
Public Finance
Regional Facilities to SMEs (20 typology of interventions)
Special facilities to cluster UE Programmes Technological Voucher
EU facilities to SMEs (Objective 2 areas )
FINLOMBARDAGESTIONIsocietà di gestione del risparmio
NEXT Fund
Euromed Fund
Mezanine Fund
Social Housing Fund
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New financial tools for corporate finacing
Financing is effected with a mix of:
• Funds from the Regional Funds managed by Finlombarda, to be lent at favourable financial condition
• Funds from Banks, leasing and factoring companies, at negotiated financial condition (of spread and referring interest rate) having ongoing agreements with Finlombarda (more than fifty banks co-operate with Finlombarda).
A non traditional toll for the SMEs development financing
(revolving fund)
Transition from the grant culture to a financial culture
Region Lombardy has dropped any kind of financial support to SMEs development trough grants (except technological research)
This kind of intervention is costly, with a small leverage effect, with a limited impact in terms of commitment of private beneficiary and is completely unrelated to banking system
Regional and EU Facilities to SME
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New financial tools for corporate financing – the main standard conditions
Standard condition of co-financing
• percentage financing: from 50% up to 100% of eligible investment costs
• public funding: from 30% up to 70% of granted loan
• private banks funding: remaining from 70% to 30%
• duration: from 5 up to 20 years
• interest rate:
•Public funds from 0% up to 1% per year
•Banks rate = EURIBOR + 1 up to 1,5% per year
(beneficiary cost= weighted average of interest rate applied to funds)
• reimbursement: quarterly / half year instalments
Regional Facilities to SME
A non traditional toll for the SMEs development financing
(revolving fund)
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New financial tool for Corporate FinancingAmount & leverage
RegionalFinancial tools for SME
AMOUNT OF FINANCIAL FUNDS AMOUNT OF FINANCIAL FUNDS MANAGED BY FINLOMBARDAMANAGED BY FINLOMBARDA
€ 210 M€Total amount of Regional Funds for SMEs financing managed by Finlombarda
out of which, about 70%, disbursed for a total amount of outstanding loans of approx 240 M€, financing investment for an amount of 500 €.
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Regional and EU Facilities to SME finacial efficiency for kind of contribution
-40,00
-30,00
-20,00
-10,00
0,00
10,00
20,00
30,00
40,00
Inte
nsita
' di
aiut
o in
%
Leva
cost
o di
cont
ribuz
ione
per
la P
.A. (
€pe
r 10
00 €
)kind of contribution
contributo conto interessi
fondo di rotazione
contributo capitale
Aid intensity
Leverage
Interest contribution
Revolving fund
grant
PA costs
New financial tools for corporate financing - financial efficiency
Figurative cost
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New financial tools for corporate finacing
condition of co-financing
• percentage financing: up to 100% of eligible investment costs
• EU funding: 50% of granted loan
• private banks funding: remaining 50%
• duration: up to 6 years
• interest rate:
• EU funds: interest free
•Banks rate = EURIBOR + 1 up to 1,5% per year
(beneficiary cost = approx 1% per year)
• reimbursement: quarterly / half year installments
EU Facilities to SME – SPD objective 2
A non traditional toll for the SMEs development financing
(revolving fund)
Artisan enterp
rises
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New financial tool for the public sector
Financing of a total amount of € 421 Million is effected with fund provided under European Regional Development Fund programme with a mix of public funding:
Infrastructure Fund - objective 2 areas
209 million €from ERDF
146 million € by Italian Government
66 million €by Lombardy Region
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New financial tool for the public sector
Priority 2 (territorial promotion)
• 2.1 development of infrastructure facilities to promote the competitiveness of local territory
• 2.2 foster infrastructure facilities to develop the tourist sector
• 2.4 development of information society
Specific Measures financed by the Infrastructure Revolving Fund
Priority 3 (environmental promotion)
• 3.1 promotion of sustainable use of protected areas
• 3.2 water cycle infrastructure development intervention
• 3.3 reclaim and recovery of polluted and deteriorated areas
• 3.4 promotion of environmental sustainable production and use of energy
Infrastructure Fund - objective 2 areas
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New financial tool for the public sector
KEY ACTORS: Development strategy
PROJECTS’SELECTIONPROJECTS’SELECTION
FINANCIALDISBURSEMENT
FINANCIALDISBURSEMENT
PROJECTS’IMPLEMENTATION
PROJECTS’IMPLEMENTATION
LOANREIMBURSEMENT
LOANREIMBURSEMENT
Managing Authority
Fund’s Manager
Final Beneficiaries
Final Beneficiaries to the Fund Manager
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Finlombarda S.p.A. - New financial tool for the public sectorFinlombarda S.p.A. - New financial tool for the public sector
Infrastructure Fund - objective 2 areas
ACTIVITIES and TOOLSACTIVITIES and TOOLS
The total financial aid disbursed to final beneficiaries through the Infrastructural Revolving Fund is composed by both a GRANT (40% of the project’s cost) and an INTEREST FREE LOAN (60% of the project’s total cost) to be reimbursed over a 20 years period
FINANCIALAID
40%GRANTS
40%GRANTS
60%INTEREST FREE
LOANS
60%INTEREST FREE
LOANS
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Finlombarda S.p.A. - New financial tool for the public sectorFinlombarda S.p.A. - New financial tool for the public sector
Infrastructure Fund - objective 2 areas
RESULTSRESULTS
243 beneficiaries
600.000inhabitants
400applications
500million euro
Local public institutions which benefited from the Fund’s financial support from September to present
Population of the regional area eligible to financial support
Received by the MA during the call for projects
Total cost of infrastructure interventions financed by the Fund
+ multiplication effect
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Finlombarda S.p.A. - New financial tool for the public sectorFinlombarda S.p.A. - New financial tool for the public sector
CONCLUSIONSCONCLUSIONS
Compared to the traditional subsidy system, the Infrastructure
Revolving Fund presents UNIQUE characteristics:
INNOVATION: is the first and only case of financing public infrastructural interventions through a financial instrument in the framework of Structural Funds programs
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Finlombarda S.p.A. - New financial tool for the public sectorFinlombarda S.p.A. - New financial tool for the public sector
CONCLUSIONSCONCLUSIONS
Compared to the traditional subsidy system, the Infrastructure
Revolving Fund presents UNIQUE characteristics:
DIVERSIFICATION OF FINANCIAL RESOURCES:
replaces the traditional subsidy system (grants) with a financing mix composed by both a capital grant (40% of investment ‘s
cost), and an interest-free loan (60%) according with the recent European Community’s guidance
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Finlombarda S.p.A. - New financial tool for the public sectorFinlombarda S.p.A. - New financial tool for the public sector
CONCLUSIONSCONCLUSIONS
Compared to the traditional subsidy system, the Infrastructure
Revolving Fund presents UNIQUE characteristics:
MULTIPLIER EFFECT: doubles the number of financed projects thanks to a rotation rate
equal to almost 2 (at the end of the period the capital inflow generated by the reimbursement instalments would be roughly
equal to the initial total amount of the Fund)