EIB IN THE WATER SECTOR Thomas van Gilst EIB IN THE WATER SECTOR Thomas van Gilst EWA Brussels 7 November 2017 . 07/11/2017 European Investment Bank 2 1. The EIB: the EU Bank • Natural

European Investment Bank 107/11/2017

European Investment Bank

EIB IN THE WATER SECTOR

Thomas van Gilst

EWA Brussels

7 November 2017


1. The EIB: the EU Bank

• Natural financing partner for the EU institutions since 1958 – A policy driven Bank

• Headquartered in Luxembourg with 40 local offices

• Largest multilateral lender and borrower in the World (AAA)

• Around 3000 staff includingfinance professionals, engineers, sector economistsand socio-environmentalexperts

• Around 90% of lending isinside the EU

Investing in Europe’s growth



The EIB: capital breakdown


EIB priorities:

SMEsInfrastructureEnvironment Innovation

EUR

16.9bn

EUR

19.7bn

EUR

13.5bn

EUR

33.6bn


11/15/20175

The EIB: a major lender to the water sector

• The largest source of loan financing to the global water sector

• Can lend up to 50% of investment costs for individual projects (average = 30)

• Lends to public or private utility companies, national or local authorities

• Lending covers the whole water cycle (water resources, water supply, sanitation, flood protection) – projects mainly water supply and sanitation

European Investment Bank 607/11/201711/15/2017

0,0

1.000,0

2.000,0

3.000,0

4.000,0

5.000,0

6.000,0

2012 2013 2014 2015 2016

Central Asia

Latin America

Candidate countries

Asia (excl. Central Asia)

ACP States

Russia, E.Europe,Sth.CaucasusMediterraneancountriesMember states

Total loan volume: EUR 19.85Bn

Loan signatures in the water sector in 2012-2016 by region (EUR m)


EU member states – Lending tothe water sector in 2012-2016 (EUR m)

189262

300

400

458

645

1.015

1.330

1.500

1.562

2.820

5.438

Sweden

Poland

Portugal

Slovenia

Finland

Greece

Bulgaria

Austria

Cyprus

Romania

Ireland

Hungary

Netherlands

Spain

France

Belgium

Germany

Italy

United Kingdom

• 33% in UK

• > 75% in five countries


NON-EU regions – Lending to the water sector in 2012-2016 (EUR m)

20

118

199

341

645

535

449

Central Asia

Asia (excl. Central Asia)

Latin America

Candidate countries

Mediterranean countries

ACP States

Russia, E.Europe, Sth.Caucasus



EIB project cycle

15/11/2017European Investment Bank Group 9

We support sound and sustainable projects

EIBprojectcycle

Step 1 ProposalStep 2 Appraisal

Step 3 Approval

Step 4Signature

Step 5Disbursement

Step 7 Repayment

• Technical assessment

• Environmental• Social• Financial• Economic

Finance contract is signed

• EIB Management Committee

• Investment Committee(for operations potentially benefiting from an EU guarantee under EFSI)

• EIB Board of Directors


Project example: BLOMINMÄKI Wastewater Treatment Plant

• ESPOO,• KAUNIAINEN• KIRKKONUMMI• SIUNTIO• WESTERN VANTAA

Scope• New wastewater treatment plant in the bedrock• Wastewater conveyance tunnels and water

pipelines• Closure of the ageing Suomenoja plant

Project objectives:• Provide capacity (550,000 population

equivalent) to treat western Helsinki’s wastewater to very high standards (i.e. including nutrient removal)

• COP objective: Environment and Climate Action

Funding sources Euro million

EIB loan 200

Other sources 203

Total project cost 403


Minimize impacts on landscape and population

E18 Helsinki – Turku MotorwayHelsinki – Turku Motorway E18


1. Inlet basin

2. Fine screens

3. Grit removal

4. Primary sedimentaion

5. Aeration basins

6. Final sedimentation

7. Biological filters

8. Sludge thickening

9. Digesters

10. Reject water treatment

11. Outlet air chimney

12. Office building

13. Storage/work room

14. Exit shafts

15. Sludge and biogas

treatment

16. Sludge storage silos

17. Disk filters, 10-20 µm

17

Only visible components

State of the art underground solutionwith innovative technologies


Key Drivers for EIB Financed Water Projects inside EU

Service Delivery/continuity

• Network extension

• Assets renewal

• Climate Change (adaptation)

• Service rationalization

• Post disaster emergency

Compliance:

• Urban Wastewater Treatment Directive

• Water Treatment Directive

• Water Framework Directive

• Floods Directive

• Local regulations

Micropollutants ?


Today 2030

Evolving international context Water security: a risk for economic growth in the EU


How can EIB lending evolve to strengthen water security and economic growth?

– increase focus on smaller utilities (the most at risk) through EFSI loans and advisory.

– Increasing focus on water for industries.

– Increasing support to innovation in the water sector.


Example of targeting smaller Utilities: Viveracqua Hydrobond

Credit Risk - highlights

• Local municipality-owned companies, providing regulated water services under concession agreements

• Internal ratings ranging from 4/Baa2 to 6+/B1 (4/Baa2: 1 case; 4-/Baa3: 2 cases; 5+/Ba1: 5 cases; 6+/B1: 1 case)

• EIB underlying documentation to include typical corporate clauses for operations with Italian water companies

HYDRO SPV 130/99

Issuer 1

Issuer 2

……….

Issuer 9

Issuance of Bonds

Subscription price

Remuneration and repayment of Bonds

Issuance of Notes

Subscription price

Interest and principal on the Notes

Liquidity and credit support on the Notes

EIB +

Investors

Cash reserve (20%) Veneto

Sviluppo

Liquidity and credit support on the Notes



European Fund for StrategicInvestments (EFSI)

Financing: EUR 61bn

EU Guarantee EUR 16bn EIB EUR 5bn

Infrastructure and Innovation Window

EUR 15.5bn

SME Window

EUR 5.5bn

Deployed by EIF

Final investments: EUR 315bn

EFSI - European Fund for Strategic Investments EUR 21bn

Deployed by EIB


Pre- seed Stage of developmentStartup Small MidCaps

<250 employeesMidCaps

250-500Large MidCaps

500-3,000

Emerging Large Caps

Seed stage

First “Valley of Death”

Second “Valley of Death”

Access t

o f

inan

ce

Fu

nd

ing

siz

e (

EU

Rm

)

Intermediaries (Funds)

Intermediaries (Banks)

Mandates/ SLA Global Loans

Investment Loans

Contingent Loans

Qu

asi-

equ

ity

C

o-i

nve

stm

ents

/Dir

ect

Equ

ity

Tech

Tra

nsf

er /

VC

VC

/ S

ME

Fun

ds

VC

/ S

ME

Fun

ds

PE

/ M

idC

apFu

nd

s

< 1.0m

< 7.5m

< 10m

< 25m

Innovation finance gap

Growth Finance Gap – expansion capital EUR 7.5m-25m

5. EIB products for financing innovation

Market Gaps and EIB Group approach


4. Challenges of financing innovation in Water

financing innovation

The water market is

mature, with limited growth rates overall.

Regulatory constraints

The exit opportunities for investors (IPOs/M&A), are limited

Water is not a strongly

innovative sector

The water market is

fragmented

Market uptake of new

technologies is difficult

The market is undervalued


EIB support on offer

Innovation Finance Advisory

• Facilitate access to long-term funding for mid-caps/large-caps

• Review of strategy and business plan

• Review of key assumptions-sensitivities, riskallocation, develop “credit story”

• Review of eligibility for various financing options,advise on capital structure

• Support project/company to ensure that it meetsEIB/EFSI eligibility and viability and risk assessment(with support of other operational services whereneeded)

F

Promoter/ Project

definitionPre-financing

• Objective

• Shareholders / sponsorsdefinition

• Strategy

• Business plan

• Due diligence

• Negotiations

• Structuring

• Documentation

Innovation Finance Advisory intervention

Improved access to finance

Funding Appraisal

• Fees applicable to be agreed on a case by case basis, depending on the scope of work involved, and in line with the agreement with the EC

• No fees applicable on Public Sector projects


Would you like to know more?

Consult the Hub’sadvisory offer

www.eib.org/eiah

Contact the Hub for more info

[email protected]

Request support fromthe Hub

www.eib.org/eiah/contact


Thank you for your attention

Thomas van Gilst

Head of Water Management DivisionProjects Directorate

Phone: (+352) 437982741Fax: (+352) 4379 52741eMail: [email protected]

European Investment Bank100, boulevard Konrad AdenauerL-2950 Luxembourg

For more information

please contact:

Questions?


Impact of regulatory uncertainty on EIB lending

New method for hydric tariffsAverage increase in tariff: +2.7%compared to 2012

Ronchi Decree:liberalization of thewater sector

Referendum on theabrogation of the RonchiDecree (2009) followed bylegislative uncertainty:Italians voted YES

Testo Unico Ambientale(2006): new stringent limits forwater quality and newmanaging units (AATO) at theregional level

155

418

51

102

4

150

200

258

310

0,00

50,00

100,00

150,00

200,00

250,00

300,00

350,00

400,00

450,00

2007 2008 2009 2010 2011 2012 2013 2014 2015

EIB lending to the water sector in ITALY (excluding MOSE project), EUR M

Amount disbursed Expected

Documents

EIB IN THE WATER SECTOR Thomas van Gilst EIB IN THE WATER SECTOR Thomas van Gilst EWA Brussels 7 November 2017 . 07/11/2017 European Investment Bank 2 1. The EIB: the EU Bank • Natural