1. Funding mechanisms EIB EIB Facilities November 2013 HUDSON ing. Joost Holleman MBA Joost.holleman@hudson.com

2. Options; Grants (Domestic & Pan-European) Tax Incentives Foreign Direct Incentives European Investment Bank facilities Our services 19 years of experience throughout Europe Local consultants in 18 European countries; Feasibility studies, application, negotiation & administration Support to SMEs and Multinationals Our experience: all European topics: R&D, Energy, Transport, Training, Life sciences, ICT Hudson Financial Incentives 1 LINK TOWARDS OUR WEBSITE nl.hudson.com 3. Economic & Social Benefit Financial Profitability Risk level VC Funding & Financing routes Green box = content of presentation Banks ERR HIGH IRR HIGH IRR MEDIUM IRR Negative RISK HIGH RISK MEDIUM RISK LOW RISK HIGH RISK LOW / MEDIUM VC PURE LOAN GUARANTEE EIB facilitiesEIB LOAN PDA GUARANTEE GrantsGRANT TAX Incentive GUARANTEE Revolving fund Private Equity 2 4. Project loans for large developments in excess of EUR 25m Intermediated loans are made via local banks Structured finance provides additional support to priority projects Guarantees: helping projects attract new investors Project bonds: unlocking infrastructure funding Equity & fund investment to catalyse further activity Venture capital: helping invest in high-tech and growth SMEs Microfinance has benefited from our long term commitment Products & Services EIB 3 Risk-sharing in research, development & innovation (RSFF) Sustainable energy: maximising investment (ELENA) Green-tech demonstration support (NER300) Infrastructure project advice for new EU members (JASPERS) Urban development technical assistance (JESSICA) Transport infrastructure cash-flow guarantees (LGTT) Public-private partnership optimisation (EPEC) Flexible SME funding (JEREMIE) 5. Loans: granted to viable capital spending programmes or projects in both the public and private sectors. Counterparties range from large corporations to municipalities and small and medium-sized enterprises. Technical Assistance: provided by a team of expert economists, engineers and sectoral specialists to complement EIB financing facilities. Guarantees: available to a wide range of counterparties, e.g. banks, leasing companies, guarantee institutions, mutual guarantee funds, special purpose vehicles and others. Venture Capital: requests for venture capital should be addressed directly to an intermediary.. Microfinance: granted to professional and socially-committed microfinance intermediaries, such as microfinance institutions and microfinance investment vehicles both inside and outside Europe. Transactions in microfinance take various forms (loans, equity, guarantees and technical assistance). EIB Facilities 4 ERR HIGH IRR HIGH IRR MEDIUM RISK MEDIUM RISK LOW / MEDIUM EIB facilities Facilities 6. Structured Finance We can give additional support for priority projects using certain instruments with a higher risk profile than we normally accept. These priority areas include The Project Bond initiative a joint initiative by the European Commission and the EIB. Its objective is to stimulate capital market financing for large-scale infrastructure projects in the sectors of transport (TEN-T), energy (TEN-E) and information and communication technology (ICT). According to the Commission, the European Unions infrastructure investment needs to meet the Europe 2020 objectives in these sectors could reach as much as EUR 2 trillion. The Risk Sharing Finance Facility (RSFF) Investing in complex, long term research, development and innovation (RDI) projects can be risky. We are able to lower these risks, facilitating investment that will boost competitiveness, growth and job creation. The Risk Sharing Finance Facility (RSFF) JESSICA Integrated, sustainable urban-renewal projects are supported through JESSICA (Joint European Support for Sustainable Investment in City Areas). A range of sophisticated financial tools are used including equity investments, loans and guarantees, offering new opportunities for the use of EU Structural Funds. Guarantees for transport infrastructure cash-flow (LGTT) The high levels of revenue risk in the early stages of public-private-partnership transport projects can cause difficulties attracting private sector funding. We work to overcome concerns that traffic- dependent revenue (tolls, fares etc.) may not reach medium term targets. The Loan Guarantee Instrument for Trans- European Transport Network Projects (LGTT) can partially cover risks for projects or part-projects that are deemed of common interest (as defined in Decision No 1692/96/EC) and receive income from user-charges. EIB Facilities 5 7. Sharing PPP experience (EPEC) Public-private partnerships (PPP) offer great potential benefits but also present a unique set of challenges. The European PPP Expertise Centre (EPEC) allows its public sector members to: share experience and expertise, share analysis discuss best practice help maximise returns. Flexible SME funding (JEREMIE) Small and medium-sized enterprises (SMEs) can access finance and financial engineering products through the JEREMIE programme. National and regional authorities can opt to deploy money from EU Structural and Social Funds in the form of market-driven financial instruments instead of offering grants. A major advantage is that unlike grants, which can only be spent once, a pool of funds can be re-invested several times. Support is provided to selected local financial intermediaries via national or regional governments. Equity & Fund We stimulate and catalyse private capital through investment in equity and funds. We work with new and established fund managers in traditional and innovative segments that are not yet mainstream. ELENA Many EU towns and regions lack the necessary technical expertise and organisational capacity to implement large energy efficiency and renewables projects. The benefits of cutting energy use and pollution are clear, but the challenge is to guarantee value for money and timeliness, as well as securing extra funding. ELENA (European Local ENergy Assistance) is there to help. Run by the EIB, it is funded through the European Commissions Intelligent Energy-Europe programme. NER 300 We support the European Commission as an agent in the implementation of the NER300 initiative: the worlds largest funding programme for carbon capture and storage demonstration projects and innovative renewable energy technologies. EIB Facilities 6 8. EUROPEAN INVESTMENT BANK (EUROPE) Financing available throughout all regions Connected to priorities per state / country Connected to long term strategies per country 7 9. European Investment Bank (EIB): The European Investment Bank was created by the Treaty of Rome in 1958 as the long-term lending bank of the European Union. The task of the Bank is to contribute towards the integration, balanced development and economic and social cohesion of the EU Member States. The EIB raises substantial volumes of funds on the capital markets which it lends on favourable terms to projects furthering EU policy objectives. The EIB continuously adapts its activity to developments in EU policies. Besides supporting projects in the Member States, its main lending priorities include financing investments in future Member States of the EU and EU Partner countries. The EIB operates on a non-profit maximising basis and lends at close to the cost of borrowing. The Bank's consistent AAA rating is underpinned by firm shareholder support, a strong capital base, exceptional asset quality, conservative risk management and a sound funding strategy. 8 10. Loans EIB clients are public and private sector bodies and enterprises. The project promoted by the public or private client must be in line with the lending objectives of the EIB and be economically, financially, technically and environmentally sound. Sectors:The EIB finances a broad range of projects in all sectors of the economy. Projects must adhere to at least one of the EIB lending objectives. Financing Facilities: As a rule, the Bank lends up to 50% of the investment costs of a project. 9 11. Loans The EIB has two main financing facilities: Individual loans: provided to viable and sound projects and programmes costing more than EUR 25 million which are in line with EIB lending objectives. Intermediated loans: credit lines to banks and financial institutions to help them to provide finance to small and medium-sized enterprises with eligible investment programmes or projects costing less than EUR 25 million. Microfinance has also been provided by the EIB in some countries. We lend to individual projects for which total investment cost exceeds EUR 25m. This support is often the key to attracting other investors. These loans can cover up 50% of the total cost for both public and private sector promoters, but on average this share is about one-third. Multi-component loans We also finance multi-component, multi annual investment programmes using a single framework loan. This funds a range of projects, usually by a national or local public sector body, most frequently regarding infrastructure, energy efficiency/renewables, transport and urban renovation. Conditions: The project must be in line with our lending objectives and must be economically, financially, technically and environmentally sound. Financing conditions depend on the investment type and the security offered by third parties (banks or banking syndicates, other financial institutions or the parent company). Interest rates: Interest rates can be fixed, revisable or convertible (i.e. allowing for a change of interest rate formula during the lifetime of a loan at predetermined periods).10 12. We make loans to local banks and other intermediaries which subsequently "on-lend" to the final beneficiaries: Small-and-medium-sized businesses Mid-Cap businesses Large businesses Local authorities National administrations Public sector bodies All intermediated loans must further at least one of our public policy goals: Increase in growth and employment potential including SME and Mid-Cap support Economic and social cohesion by addressing economic and social imbalances, promoting the knowledge economy/skills and innovation and linking regional and national transport infrastructure Environmental sustainability - including supporting competitive and secure energy supply Action for climate-resilient growth Intermediated Loans 11 13. We can give additional support for priority projects using certain instruments with a higher risk profile than we normally accept. These priority areas include trans-European transport and energy networks and other infrastructure, the knowledge economy, energy and SMEs. This support is provided by our Structured Finance Facility (SFF) using a mix of the following instruments: senior loans and guarantees incorporating pre-completion and early operational risk subordinated loans and guarantees ranking ahead of shareholder subordinated debt mezzanine finance, including high-yield debt for SMEs experiencing high-growth or are undergoing restructuring project-related derivatives Such has been the success of the SFF that its scope was doubled recently to enable us to generate operations up to a maximum of EUR 3.75bn. Structured finance 12 14. Guarantees & Securitisation Within the EU the Bank may provide guarantees for senior and subordinated debt. The guarantee is either a standard guarantee or debt service guarantee similar to that offered by monoline insurers. Depending on the underlying funding structure of the operation, an EIB guarantee may be more attractive than an EIB loan. It can provide: higher value-added and lower capital charges - under Basel II, EIB guarantees provide a zero risk weighting to the guaranteed obligation We guarantee large and small projects to make them more attractive to other investors. We provide guarantees for senior and subordinated debt, either in a standard form or as a debt service guarantee similar to that offered by monoline insurers. Beneficiaries can be large private and public projects or partner intermediaries providing SME financing. 13 15. Guarantees & Securitisation Advantages of a guarantee Depending on the underlying funding structure of the operation, a guarantee may be more attractive than one of our loans. It may either provide greater value-added or require lower capital charges. Under capital adequacy rules our guarantees provide a zero risk weighting to the guaranteed obligation. Guarantee instruments The Loan Guarantee Instrument for Trans-European Network Transport (LGTT) is designed to guarantee medium term revenue risks from public-private partnership transport schemes. Risk sharing instruments are also used in the SME funding schemes JEREMIE and CIP schemes, as well as complementing the Risk Sharing Finance Facility (RSFF) which boosts research, development and innovation. 14 16. The Project Bond initiative is a joint initiative by the European Commission and the EIB. Its objective is to stimulate capital market financing for large-scale infrastructure projects in the sectors of transport (TEN-T), energy (TEN-E) and information and communication technology (ICT). According to the Commission, the European Unions infrastructure investment needs to meet the Europe 2020 objectives in these sectors could reach as much as EUR 2 trillion. The Project Bond initiative is designed to enable eligible infrastructure projects promoters, usually public private partnerships (PPP), to attract additional private finance from institutional investors such as insurance companies and pension funds. The Europe 2020 Project Bond Initiative - Innovative infrastructure financing 15 17. Project bonds Improving credit quality This will be achieved by providing credit enhancement to those promoters, whose debt will effectively be divided into two tranches: senior and subordinated. The subordinated debt, or Project Bond Credit Enhancement (PBCE) can take the form of a loan from the Bank, with the support of the European Commission and is given to the promoter at the outset. It may also take the form of a contingent credit line which can be drawn upon if the revenues generated by the project are not sufficient to ensure senior debt service. The PBCE underlies the senior debt and therefore improves its credit quality, offering peace of mind to institutional investors. The bonds themselves will be issued by the promoters not by the Bank or the Member State in question. The support will be available during the lifetime of the project, including the construction phase. 16 18. Stimulating equity & fund investment We stimulate and catalyse private capital through investment in equity and funds. We work with new and established fund managers in traditional and innovative segments that are not yet mainstream. Our value added A seal of approval for the investment proposal Catalytic effect on fund raising Promoting best practice in governance An experienced investment team with private equity expertise Extensive industry knowledge through our economics and engineering specialists Early involvement Ability to move fast Equity and fund investments 17 19. We make selective investments in funds which have a focused investment strategy addressing EU priority objectives. 1. Infrastructure & environment: In the EU and in Mediterranean partner countries we invest in equity and an innovative range of debt funds. To date, we have invested in infrastructure equity funds, infrastructure debt funds and environmental funds. 2. Carbon funds: We have established a number of market-based instruments to encourage carbon trading in order to boost market capacity and complement private sector activity. 3. Beyond the EU: We also invest in equity and funds in the Africa, Caribbean & Pacific and in the Mediterranean regions. 4. Urban areas: We support sustainable urban development through equity investment, loans and guarantees through the JESSICA initiative. 5. Venture capital and private equity: The EIB Groups European Investment Fund (EIF) is a specialist provider of risk finance to small and medium-sized enterprises in Europe. 6. Energy efficiency and renewables: We provide equity capital for energy efficiency and renewable energy projects in developing countries through our innovative fund-of-funds GEEREF. Equity and fund investments 18 20. Venture capital Through our venture capital facility, we finance venture capital funds and security packages for funds as well as offering conditional and subordinated loans. We bridge market gaps by working with the financial sector in each EU country. This activity is managed by theEuropean Investment Fund (EIF), part of the EIB Group. The EIF sets-up, manages and advises venture capital fund-of-funds, most of which are entrusted by third parties such as the EIB, the European Commission, the Member States and regional authorities. 19 21. Sharing risk in research, development & innovation (RSFF) Investing in complex, long term research, development and innovation (RDI) projects can be risky. We are able to lower these risks, facilitating investment that will boost competitiveness, growth and job creation. The Risk Sharing Finance Facility (RSFF) improves access to debt financing for all types and size of private company and public institution undertaking RDI projects. We share risks with promoters, banks and others This attracts other financing partners We offer good terms thanks to our AAA rating and non-profit orientation We have extensive structuring expertise We make a long-term commitment Availability of all major currencies 20 22. Many EU towns and regions lack the necessary technical expertise and organisational capacity to implement large energy efficiency and renewables projects. The benefits of cutting energy use and pollution are clear, but the challenge is to guarantee value for money and timeliness, as well as securing extra funding. ELENA (European Local ENergy Assistance) is there to help. Run by the EIB, it is funded through the European Commissions Intelligent Energy-Europe programme. How ELENA helps ELENA covers up to 90% of the technical support cost needed to prepare, implement and finance the investment programme. This could include feasibility and market studies, programme structuring, energy audits and tendering procedure preparation. With solid business and technical plans in place, this will also help attract funding from private banks and other sources, including the EIB. So whether it is the retrofitting of public and private buildings, sustainable building, energy-efficient district heating and cooling networks, environmentally-friendly transport etc, ELENA helps local authorities get their projects on the right track. Budget Funds are currently available to support projects under the Facility. When funds will be exhausted, a notice will be posted on this webpage. Maximising investment in sustainable energy (ELENA) 21 23. We support the European Commission as an agent in the implementation of the NER300 initiative: the worlds largest funding programme for carbon capture and storage demonstration projects and innovative renewable energy technologies. A Cooperation Agreement details the respective roles of the two institutions in implementing the NER300 Decision, notably, as far as concerns the EIB. Monetisation of the 300 million EU allowances set aside in the New Entrants Reserve of the EU Emissions Trading System for the initiative. NER300 - Green-tech demonstration support 22 24. New and future EU Member States often require technical support to prepare major infrastructure schemes financed by the Structural and Cohesion Funds. JASPERS (Joint Assistance to Support Projects in European Regions) provides technical expertise for any stage of the project cycle, covering technical, economic and financial questions. It is geared to providing advice, ensuring coordination, developing and reviewing project structures, removing bottlenecks, filling gaps and identifying problems. This helps increase the quantity and quality of requests for EU funding. The total investment cost of the more than 550 projects supported so far is more than EUR 60bn. Advice is given on: conceptual development and project structuring; project preparation (e.g. cost-benefit analysis, financial analysis, environmental issues, procurement planning); review of documentation: feasibility studies, technical design, grant application; compliance with EU law (environmental, competition and others); conformity with EU policies.. New EU members infrastructure project advice (JASPERS) 23 25. The beneficiary sectors are: trans-European transport energy and telecommunications networks (TENs); other transport, including road, rail, river, air and sea transport clean-urban and public transport; environmental remediation; waste management; renewable energy; water and sanitation services; water risk management. New EU members infrastructure project advice (JASPERS) 24 26. JESSICA Supporting urban development (JESSICA) The main benefits of JESSICA To make Structural Fund support more efficient and effective by using non-grant financial instruments, thus creating stronger incentives for successful project implementation. To mobilise additional financial resources for public-private partnerships and other urban development projects with a focus on sustainability/recyclability. To use financial and managerial expertise from international financial institutions such as the EIB EIB involvement in JESSICA is threefold: Advising and assisting national, regional and local authorities in implementing JESSICA Promoting the use of Urban Development Funds and best practice across Europe Acting as a Holding Fund, when requested by Member States or managing authorities. These investments are delivered to projects via urban development funds and, if requested, holding funds. They must be line with Structural Funds operational programmes agreed for the current programming period. JESSICA is a policy initiative of the European Commission (EC) developed jointly with the EIB and in collaboration with the Council of Europe Development Bank (CEB). 25 27. Guarantees for transport infrastructure cash-flow (LGTT) The LGTT normally guarantees a maximum of 10% of senior debt (20% in exceptional instances) up to a maximum of EUR 200m per project, following EIB Structured Finance Facility rules. Once the EIB has become a creditor, amounts due under the LGTT will rank junior to other debt. This support substantially enhances credit quality, thereby encouraging a reduction of risk margins applied to senior project loans. These savings should surpass the cost of the guarantee to the borrower. This support is available for as much as five to seven years after project completion. The EIB and European Commission have jointly contributed EUR 1bn in capital which could support up to EUR 20bn of senior loans. 26 28. Public-private partnerships (PPP) offer great potential benefits but also present a unique set of challenges. The European PPP Expertise Centre (EPEC) allows its public sector members to: share experience and expertise, share analysis discuss best practice help maximise returns. Limiting EPEC's membership to the public sector helps ensure a free and open exchange of information. However, the EPEC speaks regularly with the private sector, not least at the twice-yearly Private Sector Forum. The EIB also provides input as a leading funder of PPPs. What help? The EPEC has a full-time executive made up of experienced PPP professionals, serving the 35-strong membership which includes national and regional authorities both inside and outside the EU. This includes a helpdesk which can either answer questions or advise on who to contact. In some instances, the executive can work with members to set up, refine or analyse policy and procedure. However, no advice is given on individual projects. This is a joint initiative of the EIB, the European Commission and several European public authorities. It is funded by the EIB and the Commission, with the membership contributing their time and expertise. Sharing PPP experience (EPEC) 27 29. The JEREMIE "toolbox" of financial instruments includes: guarantees, co-guarantees and counter-guarantees, equity guarantees, micro-loans, export-credit insurance, securitisation, venture capital, business angel matching funds investment in technology transfer funds JEREMIE stands for the Joint European Resources for Micro to Medium Enterprises. It is a joint initiative of the European Commission and the EIB Group, mainly through the European Investment Fund. JEREMIE 28