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

2nd of June 2010 1 European Investment Bank

EPEC – Private sector Forum II

Europe 2020 – A view of the futureBrussels

June 2nd 2010


The European Investment Bank (EIB)Long-term finance promoting European objectives

European Union’s 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 –EIB’s executive body

Audit Committee – independent, non-resident


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


Trans-European transport network (TEN-T) Progress until end 2009


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


EIB’s 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 2005-2009EUR 42.9bn for TEN Transport

EUR 6.9bn for TEN Energy


Clear step-up in EIB TEN lending activity

Total TEN signatures (EUR bn)

0.0

2.0

4.0

6.0

8.0

10.0

12.0

14.0

16.0

2004 2005 2006 2007 2008 2009

EIB Funding 2004 2005 2006 2007 2008 2009

TEN 7.9 8.2 8.3 9.7 12.6 13.9

TEN-E 1.3 0.9 0.4 1.4 2.7 2.0

TEN-T 6.6 7.3 7.9 8.3 9.9 11.9

TEN-T

Priority Projects 2.2 2.9 2.7 3.1 3.2 1.8

Other Projects 4.4 4.4 5.2 5.2 6.7 10.1

PPP in TEN-T 0.3 0.2 1.3 0.9 2.9 1.1

Senior loans 6.6 7.1 7.9 7.8 8.3 11.1

SFF in TEN-T 0.0 0.2 0.0 0.5 1.6 0.8

Percentage of total TEN-T in Rail

40% 42% 37% 46% 27% 27%


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.


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 Europe’s 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.


EIB support for major transport PPPs

20082008 20092009

INFRABEL RAIL TUNNEL PPP (BE) - €313m AUTOBAHN A-5 PPP TEN (DE) - €225m

METRO DE MADRID IV- TR C (ES) - €50m METRO DE SEVILLA DBFO 1&2 (ES) - €10m

AUTOVIAS RENOVACION PPP (ES) - €211m M25 WIDENING TRANCHE A (GB) - €448m

AUTOROUTE A 19 (TEN/SFF) (FR) - €200m M80 MOTORWAY PPP (GB) - €157m

TRAMWAY DE REIMS PPP (FR) - €107m SCUT ACORES (PPP) TRANCHE BST (PT) - €60m

AUTOROUTE A88 PPP (FR) - €102m SCUT ACORES (PPP) TRANCHE BBVA (PT) - €60m

E-K-P-P-T MOTORWAY PPP PROJECT (GR) - €200m BAIXO ALENTEJO MOTORWAY (PT) - €225m

M6 DUNAUJVAROS-SZEKSZARD (HU) - €200m

AEROPORTI DI ROMA II (IT) - €80m

2ND COEN TUNNEL PPP (NL) - €194

A1 MOTORWAY - 2ND PHASE (PL) - €575m

DOURO LITORAL PPP (IC 24) (PT) - €350m

IP4 AMARANTE-VILA REAL (PT) - €200m

TRANSMONTANA MOTORWAY (PT) - €289m


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. EIB’s total SFF financing of EUR 4.2 bn in 2008, EUR 5.8 bn in 2009

SFF Target Companies risk profile

Moody's S&P and Fitch… …A1 A+A2 AA3 A-

Baa1 BBB+Baa2 BBBBaa3 BBB-Ba1 BB+Ba2 BBBa3 BB-B1 B+… …

Corporate Ratings

SFF allows EIB to increase the leverage on its own Funds and those of the EU Budget through Structured Finance


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.


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.


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


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 driver’s 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).

2nd of June 2010 16 European Investment Bank 16European Investment Bank

EIB Fund Investments

Fund First closing

Fund Commitment Total EIB Commitment

Geographical Focus Sector FocusEUR (M) EUR (M)

Emerging Europe Convergence Fund Aug-05 655 50 CEE ITC expansion

Dexia Southern EU Infrastructure Fund Mar-06 120 25 FR, IT, ES, PT PPP

Dutch/Northern EU Infrastructure Fund Aug-05 121 15 NW Europe PPP

Barclays European Infrastructure Fund Jul-06 315 28 UK, IE, FR, DE PPP

San Paolo IMI Infrastructure Fund Dec-06 120 18 IT PPP

Enercap Power Fund Jun-07 98 25 CEE Renewable Energy

DIF Renewable Energy FundSep-07 314 25

Benelux, FR, DE, Scandinavia

Renewable Energy

Mid Europa Fund III Aug-07 1531 35 Central & Eastern Europe ITC expansion

Meridiam Infrastructure Fund Oct-06 547 50 EU PPP

Green Alliance Renewable Fund Dec-07 41 15 ES,PT Renewable Energy

Espirito Santo Infrastructure Fund May-08 96 15

ES,PT Renewable Energy

DIF Infrastructure Fund IIDec-08 220 35

NW Europe PPP / Renewable Energy

Dasos Timberland Fund I May-09 85 17 Worldwide (40% Europe) Timberland assets

Meridiam Infrastructure Fund IIDec-09 175 50

EU PPP

SE Europe Energy Efficiency Fund

Dec-09 95 25

SE Europe including Turkey

Energy Efficiency & Renewable Energy

2020 European Fund for Energy, Climate Change & Infrastructure [Marguerite]

Dec-09 710 100

EU Renewable Energy, TEN-T, TEN-E

Total 5243 528

2nd of June 2010 17 European Investment Bank 17European 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


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

Comprehensive Network EU 27, 2020 horizonTranseuropean Transport Network 2007-2013

EU 27

Cost (€ billion)TEN-T Basic Network 390- New Member States (EU 12) 70- Old Member States (EU 15) 320

Community contribution (€ billion)Programme TEN-T 8Cohesion Fund 35ERDF (regions convergence ) 9EIB Loans and guarantees (estimated) 60-70

Total Community contribution (€ billion)Grants 52Grants and Loans 112-122

Balance to be financed from public (national) or private sources 270-280


Ideas on Future Financing of TEN-TEurope 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


EIB’s 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


Facilitation of the issuance of bonds through subordinated debt instrumentsGreater 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/mezzanine debt

Size depends on the project

Target rating A/AA

Expansion of Investment by Capital Market Institutions


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-TPossible broadening of the scope of LGTT


Guarantee for Availability based ProjectsDefinition / 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


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.


Contacts

http://www.eib.org

Thomas C. Barrett, Director

[email protected], tel: +352 43 79 87006

Jukka Luukkanen, Head of Division

[email protected], tel +352 43 79 86412

Matthias Woitok, Deputy Head of Division - LGTT

[email protected], tel: +352 43 79 87336

Institutional and Operational Policies within the EU:

Alfredo PanarellaHead of [email protected],

tel. (+32)(0)2 235 00 82

José BritoLiaison with European Parliament [email protected], tel. (+32)(0)2 235 00 76

mailto:[email protected]




Documents

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