the european fund for strategic investment and trans-european

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The European Fund for StrategicInvestment and Trans-European

Networks

Representation of Saxony-Anhalt

1European Investment Bank Group

Monica Peña SastrePolicy Adviser, EIB Brussels Office

02.06.2015

EIB: The EU Bank

••European Investment Bank •2

Investing in Europe’s growth

Natural financing partnerfor the Members Statesand EU institutions since1958

Around 90% of lending iswithin the EU

Shareholders: 28 EUMember States

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Lending priorities 2014

03/06/2015European

InvestmentBank Group

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EIB Group lending in 2014

03/06/2015 EuropeanInvestment

Bank Group

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28/02/2013 5European Investment Bank Group

EIB lending in Germany 2010-2014

Examples of EIB lending in Sachsen-Anhalt•IBSA KMU- und Mid-cap Darlehen, EUR 100 m credit line, 2014•Sachsen-Anhalt Forschung, EUR 400 m for public sector research, 2005• Otto Versand Neue Laender, EUR 77 m for the extension of a distributionfacility for a mail order business in Haldensleben, 2003•Zellstofffabrik Stendal, EUR 1bn for construction of a greenfield NorthernBleached Softwood Kraft Pulp (NBSKP) Mill in Saxony-Anhalt, 2003

Investment Plan for Europe: context


The Investment Plan for Europe consists of three strands:1. Improved investment environment: regulatory and structural

reforms at EU and national levels for predictability, removingobstacles, aiming at a friendlier investment environment

2. Making finance reach the real economy: enhanced EIB-EC-MScooperation on project identification (the “Project Directory”)and stepped-up technical assistance / advisory

3. Mobilising finance for investment: The EFSI, via EIB, to betteraddress the current shortage of (higher) risk-financing in EU

Aim: to mobilise at least €315 billion in investment across the EU

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Pipeline of viable projects

Task Force EC-EIB-Member States:• Member States were asked to identify potentially viable

projects of European relevance to be realised in theshort and medium term

Identified around 2,000 projects across Europe worth someEUR 1.3 trillion of potential investments• Outcome: a forward-looking and transparent pipeline of

investable projects.• Purpose: to create confidence and encourage investors

to invest and build expertise in Europe

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No automatic financing by EC or the EIB for these projects

European Investment Bank Group

European Fund for Strategic Investments (EFSI)


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Mobilising new investment


EFSIEIBGroup

Eligible sectors

Wide eligibility criteria - Operations consistent with Unionpolicies that support any of the following general objectives:• development of infrastructure including in transport,

telecommunications, digital and energy infrastructure;infrastructure projects in the environment, natural resources,urban development and social fields

• research and development and innovation• investment in education and training, health, information and

communications technology• develop and modernise the energy sector, renewable energy,

security of energy supply and energy and resource efficiency;• financial support for mid-cap companies and SMEs.

European Investment Bank Group 10

EIB in charge of verifying that eligibility criteria are properly applied

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Eligible counterparts

Corporates of all sizes

Utilities

Public sector entities

SMEs (below 250 employees) or MidCaps (below 3,000

employees)

NPBs or commercial banks for intermediation

Dedicated investment platforms possible


EIB normal “know your customer” and compliance requirements

Eligible operations

Commercially sound

Economically and technically viable

Added value (additionality)

Investments boosting employment and growth

Bank intermediation is possible

Pricing commensurate with the risk – no subsidy element


- Typically higher risk profile than normal EIB’s normal operations- Risk-absorbing products to foster the implementation of additional

projects and to support the development of SMEs and MidCaps

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How will the EFSI operate?

All operations are EIB or EIF operations EIB and EIF normal appraisal and processes apply EIB governing bodies approve every operation


- If you know the EIB, get in touch with your normal contact person- If you do not, go on EIB’s website and find the individual in the

Operations Department responsible for the Member State where theproject is located or where your company is located

- If in doubt, check out the EIB web page or contact the EIB InfoDesk


Project promoters Public authorities Member States Private sector

Project support (JASPERS,project preparation andimplementation support)

Financial instruments (fi-compass, bilateral servicesfor MAs)

Access to finance (InnovFinAdvisory, EPEC, NPST)

EIB’s existingadvisory programmesand activities

European Investment Advisory Hub(EIAH)

New investment supportalso in areas relevant to thescope of EFSI (could bedelivered by EIB advisory oroperational teams)

Identification of needs asthey arise

Network of institutions incl.EIB Group, EC, NationalPromotional Banks, etc.

Integrated collaborationmodel

Additional advisoryand technicalassistance

EIAH’s partnerinstitutions’ expertise

•Web content + Web portal + Help Desk team

Managed by EIB in partnership with EC

European Investment Advisory Hub (EIAH)

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EIB financing solutions

Public/PrivateSector


•CEF(EIB/EC)•Instruments

•CEF(EIB/EC)•Instruments

•ProjectFinance•ProjectFinance

•Corporates•Corporates

•PBCE•PBCE

•Guarantees•Guarantees

•SeniorCorporate•SeniorCorporate

•Subordinated Corporate•Subordinated Corporate

•Capital markets•Capital markets

•Banking market•Banking market

•Airports•Airports

•Ports•Ports

•Public Utilities•Public Utilities

Greenfield InfraProjects

Corporates

Products

•Senior Loans•Senior Loans

•Subordinated•Loans

•Subordinated•Loans

The CEF toolbox of Debt Financial Instruments

Public/Private Sector

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CEF Debt Financial Instrument Toolbox

Credit Enhancement of Project Bond (PBCE)Example: Enhancement of the bond issue for gridconnection project (such as Greater Gabbard/Gwynt y Morprojects in UK)

Credit enhancement of Bank Loans (subordinated or asa guarantee)Example: Credit enhancement of bank loans to a PPProads project, such as enhancement of a bond issue plusbank finance for the A7 motorway PPP project Germany

Senior/Subordinated loans or Guarantees forCorporatesExample: Subordinated debt to a TSO to supportborrowing capacity for new investments and expansion

EuropeanInvestment

Bank

17 28/02/2013 18European Investment Bank Group

CEF Debt Instrument and EFSI

• The new EFSI is complementary to the CEF Debt

Instrument, but will target a wider range of sectors

common products, such as project bonds, could be

applied across a wider range of sectors

• A coherent and consistent approach to the two

instruments will be ensured upon implementation

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No earmarking for TENs but one of key areas

Overcoming fragmentation of joint EU-EIB FIs:

• Wide eligibility criteria – EIB sector criteria apply (e.g. CEF focus on

PCIs only)

• Wider more flexible range of financial products for all sub-sectors (e.g.

EE/RE in energy, urban transport)

• High level of resources available (e.g. energy and ICT in PBI pilot

phase)

Possibility to use EFSI/ESIF resources to boost existing instruments (e.g.

EEEF or PF4EE)

Challenge remains pipeline identification and project preparation

EFSI and TENs


Pipeline identification activity along several strands: Direct engagement with Sponsors and Investors: identification of

financing needs and scope for EIB financing

Coordinating with DG ENER/DG MOVE/DG CONNECT: on PCIsto identify opportunities / need for EIB financing

Engagement with Corridor Groups/Coordinators: focus linked tocorridor priorities and project readiness

Screening of Investment Task Force list for potential EIBfinancing (with EFSI/non-EFSI resources)

Discussions with INEA to identify projects not successful in thecurrent CEF call but with potential for EIB financing

EIB pipeline development initiatives

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EIB lending to transport

Usually between 20 – 25% of total EIB lending

Recommendations for TEN-T projects


• Emphasise importance of European dimension and selection processbased on system analysis, prioritisation, value-for-money and demand /economic analysis

• Transport capacity should consider phasing with demand / technicalstandards / funding – [single vs double track rail, ½ profile vs full profileroads]

• Rehabilitation and upgrading of existing assets increasingly important inmature corridors

• Coordination and utilisation between transport modes, corridors andcountries for better use of resources e.g. between passenger and freightrail

• Allow for proper planning with proper risk allocation between public andprivate sector

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Project examples


Project Bond- A7 motorway Germany• First PBI project in Germany – signed 26 August

2014 and second greenfield project

• PPP project (A-Model program) for the upgradeof a major motorway subject to high congestionsand bottlenecks (widening of 65 km of motorway)

• EUR 430m, 29-year amortizing Bond (purchasedon a deferred basis)

• PBCE of EUR 85m to provide creditenhancement from BBB to A-

• Priced at swaps + 140bp

• The PBCE solution proved to be morecompetitive against bank debt structures andunwrapped bond solutions

Cost of NGA Capex for DA 2020 scenarios

ProjectsDirectorate |

Digital

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European population density and total cost of DAE targets

•Urban•(> 500

inhab. Perkm2)

•Suburban•(500-100 inhab.

Per km2)

•Rural•(<100 inhab.

Per km2)

•50%

•20%

•30%

•30%

•50%

•20%

•% of total EU population•% of total EU wide FTTHcost

•Sha

re o

f inh

abita

nts

and

FTTH

cost

• 50% of the European population livein urban areas and additional 30% insuburbs

• Building a nation-wide NGN networkin Europe would cost aroundEUR 220 bn*

• 20% of this cost is required tocover 50% of Europeanpopulation in urban areas

• 50% of this cost is required tocover the 20% of Europeanpopulation in rural areas

• Market operators are investing inurban and partly suburban areaswhich are already well covered withcopper/cable infrastructures

•* Based on consultancy assignment commissioned by the EIB


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• EIB funding prerequisites

• Projects must be:

• Technically sound

• Financially viable

• In compliance with regulation

• Show acceptable economic return

Financing options by market segments

•Black Areas

•Estimated total investments around EUR 220 bn until 2020* - on average c. 50% of the total market cap for the sector

•Black areas

•Grey + White

•Certain Grey•Areas

•White & Certain Grey Areas•Government funding plus “New risk-sharing instruments” ormodified existing ones will be needed to make themamenable for EIB funding.

•Source: EIB estimates•* Varying according to assumptions•** Black areas estimates based on industry forecasts


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• Europe needs and can tackle the investment gap in Europe

• Investment requirements for broadband in excess of EUR 200 bn

• A substantial part of the investments have insufficient financial profitabilityfor market oriented investors, especially in non-urban areas

• Role of promotional banks in redressing certain incentives for long terminvestments

• Need for investment friendly regulatory environment

• Scope for public sector in generating critical demand (e.g. e-government,e-health) and new instruments for procurement (pre-commercialprocurement)

Conclusions


Digital

21/01/2015

Examples of recent FTTx projects

•Deutsche Telekom•(Germany)2012 / 2013

• EIB loan: EUR 300 m(Project 1), EUR 450 m

(Project 2)

•Deutsche Telekom•(Germany)2012 / 2013

• EIB loan: EUR 300 m(Project 1), EUR 450 m

(Project 2)

•Iliad SA•(France)

•2009 / 2012

•EIB loan: EUR 150m(Project 1). EUR 200m

(Project 2)

•Iliad SA•(France)

•2009 / 2012

•EIB loan: EUR 150m(Project 1). EUR 200m

(Project 2)

•Breitband Schleswig –•Holstein

•(Germany)•2010

•EIB loan: EUR 125 m(intermediated by IBSH)

•Breitband Schleswig –•Holstein

•(Germany)•2010

•EIB loan: EUR 125 m(intermediated by IBSH)•Reggefiber Group B.V.

•(The Netherlands)•2010 / 2012

•EIB loan: EUR 130 m(Project 1), EUR 140 m

(Project 2)

•Reggefiber Group B.V.•(The Netherlands)

•2010 / 2012


(Project 2)

•RAIN Rural Broadband•(Lithuania)

•2012

•EIB loan: EUR 9.1 m (co-financing with structural

funds)

•RAIN Rural Broadband•(Lithuania)

•2012

•EIB loan: EUR 9.1 m (co-financing with structural

funds)

•SONAECOM• (Portugal)

•2010

•EIB loan: EUR 75 m

•SONAECOM• (Portugal)

•2010


•M-Net Breitband Munchen•(Germany)

•2009


•M-Net Breitband Munchen•(Germany)

•2009


•Fastweb•(Italy)

•2009/2013


(Project 2)

•Fastweb•(Italy)

•2009/2013


(Project 2)

•Świętokrzyskie RegionalInfrastructure

(Poland)•2013

•EIB loan: EUR ~2 m(co-financing with structural

funds)

•Świętokrzyskie RegionalInfrastructure

(Poland)•2013

•EIB loan: EUR ~2 m(co-financing with structural

funds)

•AXIONEINFRASTRUCTURES

•(France) 2014

•EIB loan: EUR 58 m(Project Bond Initiative )

•)

•AXIONEINFRASTRUCTURES

•(France) 2014

•EIB loan: EUR 58 m(Project Bond Initiative )

•)


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Project Bond- Axione Infrastructure France• First PBI project in the broadband sector and first PBI project in France• Financing of a holding company gathering 11 broadband projects currently in

operation• EUR 190m, 11-year amortizing Bond• PBCE of EUR 38m; providing credit enhancement from BB+ to BBB (1.5 notches).

Priced at swaps + 160bp• The PBCE solution proved to be significantly more competitive against bank debt

structures• Positive feedback from bond investors; EIB did not act as bond investor

Project examples


9%

31%

39%

11%

0%9% 1%

Energy Efficiency

Renewable Energy

Electricity Networks

Gas Networks

Thermal Power

Gas Production

Other Security ofSupply

On average 15-20% of EIB total yearly lending

In 2014 energy loans of over EUR 13 bn

Recent Energy Review prioritises ‘no regrets’ sectors: energy efficiency,renewable energy, networks and RDI in energy

EIB lending to energy projects in 2014

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First electricity interconnection linkingGreat Britain (Isle of Grain) and theNetherlands (Maasvlakte).

Amongst the first examples of marked-based interconnector in the EU.

Bipolar HVDC link with rated voltage of± 450 kV and rated continuouscapability of 1000 MW. Route length254 km, of which 245 km undersea.

EIB loan of EUR 150 million to Tennet. Improving diversification and security

of supply and enhancing electricitymarket integration.

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•NSOG – BritNed Interconnector

Other major EIB-financed projects in the Region: EWIC (Ireland-Great Britain), HVDC link having 500 MW capacity and route length 256 km.

EIB loan of EUR 250 million to EirGrid. German offshore HVDC links: HelWin1 (576 MW, 130 km), SylWin1 (864 MW, 205 km) and

DolWin1 (800 MW, 165 km). EIB loan of EUR 500 million to Tennet. Western Link (Scotland-Wales), HVDC link having 2250 MW capacity and route length 420

km. EIB loan to National Grid.

European Investment Bank 32European Investment Bank Group

Thank you!

the european fund for strategic investment and trans-european

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