1 Financing and Procurement of EU Infrastructure Thomas C.
Barrett, Director European Investment Bank Irish Centre for
European Law Dublin, 28 June 2012 Slide 2 22 European Investment
Bank EIB/EC as European Partners to Public and Private sectors
Europe 2020 Strategy Infrastructure Investment needs of EUR 1.5-2.0
trillion until 2020 smart sustainableinclusive growth New sources
of finance & smarter use of public resources EIB/Commission
collaboration on: Joint financial instruments to leverage public
and private finance Promoting grant/loan blending PPP and energy
efficiency Private finance and broadband The EU2020 Project Bonds
initiative Financial and technical assistance JASPERS JESSICA EPEC
Slide 3 33 European Investment Bank Group Loans But also:
Guarantees Equity participation Combining EIB loans and EU grants
Leveraging EU and Member States budget resources Strong in-house
expertise Technical and financial advice Technical assistance
initiatives Priorities for the EIB The EU bank LENDING Attracting
FUNDING for long-term growth BLENDINGADVISING Slide 4 4 EIB support
for EU Policy EIB selects and prioritises projects in various
sectors to maximise its impact on the real economy in line with EU
priorities for growth, employment, cohesion, climate change and
economic sustainability EIB supports EU strategies, including
Europe 2020, through direct lending as well as through technical
and financial assistance by undertaking joint initiatives with the
European Commission (and other IFIs) 4 Core Priorities Innovation
and Skills including financing of research and development as well
as the modernisation of educational and vocational training systems
SME and MIDCAP Access to Finance by the provision of debt, venture
capital and guarantee through the banking system and through Funds,
both directly and on a risk sharing basis Resource Sustainability
by supporting the development of clean and renewable energy;
sustainable transport; climate action and energy efficiency
Strategic EU Infrastructure: finance for development of modern
broadband networks (Digital Agenda) as well as transport and energy
networks to complete missing links; improve competitiveness; expand
services and reduce congestion. Slide 5 5 EIB signatures and
disbursements continue to increase as a countercyclical response to
weak investment Slide 6 6 Overview of EIB lending in Ireland Total
signatures: 2009: EUR 1,020m 2010: EUR 256m 2011: EUR 475m Sectors
and priorities: SMEs through banks (Bank of Ireland, Allied Irish
Banks, Ulster Bank) Knowledge Economy through universities
(University College Dublin, Trinity College Dublin) and the Irish
School Programme Infrastructures with -PPP financing of Irish roads
and motorways (M7, M50, N6) -Transmission and distribution networks
(ESB, Eirgrid, Bord Gais) -On-shore wind farms (ESB renewable
programme) Slide 7 77 European Investment Bank Regulatory and
Procurement impact on Infrastructure Investment Legal framework
Procurement Systems Political support Sound Pipeline Regulatory
Framework Local players & Competitive Market SPVs Creditworthy
counterparts Coherent regulatory, procurement and legal rules
necessary for sustained investment Need to improve sector
performance to meet economic and social priorities Imperative of a
sustainable fiscal framework Utilise reliability of regulatory,
procurement and legal structures to minimise credit and
institutional risks Slide 8 8 Some information from EC public
consultations on Concessions 41% of respondents declared existence
of entry barriers to the market due to the fragmented national
frameworks on concessions 37,3% of the respondents are aware of
concession contracts being awarded without any publication or
transparency 44% of the business community declared being aware of
direct awards of concession contracts 32,4% of the respondents
considered that diverging rules and practices regarding concessions
constituted an obstacle to the cross-border award of the contracts
61,6% of the respondents considered that publication of the
concessions notice in OJEU would increase transparency Lack of
legal certainty (with regard to the definition and award of
concessions) Existence of entry barriers (stemming from the
disparity of national rules and unlawful practices of contracting
authorities/entities) Insufficient legal protection of tenderers
(not available for services concessioners) Slide 9 99 European
Investment Bank Conditions for Growth in Infrastructure
Productivity Infrastructure planning: Effective management of
existing infrastructure Fundamental review to replace incremental
planning Prioritisation to be based on contribution to long term
growth Infrastructure finance: Greater share of Public sector
capital to be deployed as risk based financial instruments rather
than purely as grant finance Should result in significant change in
public / private funding mix and increased private share Government
role is a variable mix of planner; economic catalyst; regulator and
investor depending on country and project requirements Markets/
Banks: Real challenges arise from reduction in longer term bank
financing; reduction in market capacity and bank deleveraging
Policy challenge: Achievement of long term strategic growth despite
short and medium term capital constraints Slide 10 10 European
Investment Bank Blending of Budget and non-Budget resources;
Blending can contribute to investment; improves financial impact;
curtails the risks borne by public authorities; and offset the
requirements on the banking sector Need to grow the volume of
Innovative Instruments across the EU & candidate countries. The
investment requirements of the transport; energy climate change and
digital broadband sectors are approximately EUR 2 trillion over the
next decade. Financing needs for major transport infrastructure
investments go well beyond the means of national budgets PPPs
currently finance an important but minority share of EU
infrastructure investments Investment needs are so significant that
they will require smarter use of public finance Innovative and
blended financial instruments can expend the role of private
finance and leverage public grant funding of projects Greater
co-financing of infrastructure by EU capital markets, currently a
significantly under-utilised source of finance for large economic
infrastructure required to compensate for the lesser role of banks.
Slide 11 11 European Investment Bank EIB Financing Instruments for
infrastructure EIB has at its disposal an extensive range of
instruments to finance public and private sectors EIB lending
instrument for Investment Grade operations Structured Finance
Facility For low and sub investment Grade operations Project
Finance Direct Loans Project SPV Project finance with direct
project risk LGTT (Mezzanine) Equity through Funds Intermediated
Loans Banks Innovative financing: the A5 Autobahn, Germany Widening
of an existing motorway between Baden- Baden and Offenburg to six
lanes drawing on EIB senior, mezzanine and equity finance. Public
Sector Financing Slide 12 12 European Investment Bank The European
PPP Market in 2011 - Global Overview Successively, the UK (2009),
Spanish (2010) and French (2011) markets accounted for the largest
share of EU PPP markets in those years. In value terms, the 2011
market was in line with that of 2010, but it shrunk significantly
in terms of the number of transactions. The EUR 5.4 billion
Tours-Bordeaux HSR project was the largest PPP in the Rail sector
in recent years. Key figures: Value EUR 17.9 billion in 2011 EUR
18.4 billion in 2010 Deals 84 in 2011 112 in 2010 Average deal
value EUR 213 million in 2011 EUR 163 million in 2010 Large deals
(>EUR 500 million) 7 in 2011 10 in 2010 Source: EPEC PPP
database Slide 13 13 EIB PPP Financing Population = 535 000 (266
000 premises incl. 25 000 businesses) EIB Annual signatures
averaged above EUR 2.5 billion since 2000, reaching EUR 3.8 billion
in 2010 with EUR 2.6 billion in the transport sector. In 2011
signatures reached EUR 3.6 billion of which EUR 2.7 billion in the
transport sector. The Bank is now one of the major funders of
projects in Europe with a portfolio of about 140 projects and
investment of around EUR 30 billion. EIB lending volume to PPP
transactions by year EUR billion Source: EPEC PPP database EIB has
provided substantial policy support and organisational capacity to
foster the development of PPP markets and investments since the
1990s. EIB lending has been a key source of medium and long term
debt for the European PPP market since 2007 Slide 14 14 European
Investment Bank Group Growth & jobs: Building Europes
infrastructure EUR 9bn for EU transport networks Favouring rail
over roads Almost a third of financing achieved through private
public partnerships - PPPs Slide 15 15 Track record of Structured
Credit Enhancement . through EIB/EC Blended Loan Guarantee for
TEN-T (LGTT) List of Transactions IP4 Amarante Vila Real (PT)
-First LGTT to close (2008) -EUR 20 million LGTT -30-year DBFO
Baixo Alentejo (PT) -344 km motorway -EUR 25 million LGTT -30-year
DBFO Autobahn A5 (DE) -Range of EIB instruments applied -EUR 25
million -Successful closing in the middle of the financial crisis
C-25 Eix Transversal (ES) -One of few demand-risk PPPs in Spain
-EUR 70 million LGTT Autobahn A8 (DE) -Both shortlisted bidders
submitted offers with LGTT -EUR 60 million LGTT LGV SEA (FR) -First
rail project to include LGTT -Largest HSR PPP in France -EUR 200
million LGTT, largest to date London Gateway (UK) -First port
project to include LGTT -LGTT protects container throughput -GBP
100 million LGTT Total investments of more than EUR 12bn enhanced
by LGTT European Investment Bank Slide 16 16 Objective To increase
the debt financing availability for large scale infrastructure
projects Target Sectors Transport Energy Broadband How? EU/EIB
joint support to project companies issuing bonds and raising loans
to finance infrastructure projects Form of support Funded/unfunded
subordinated credit enhancement by EIB to ensure investment grade
rating of the senior debt Result More private sector financing
attracted from the capital markets to finance key infrastructure
Potential investors Long-term institutional investors and financial
institutions. EC/EIB; New Project Bond Initiative European
Investment Bank Slide 17 17 EIB Equity Funds The EIB invests in,
advises and manages equity funds to provide a full range of
financial products in support of European priority objectives
Infrastructure and Environmental Funds: Within the EU and in the
Mediterranean Partner Countries (FEMIP) the Bank is an active
investor in infrastructure and environmental equity and debt funds.
It supports both traditional and innovative fund concepts. 20 Funds
with total equity of Eur 3.6 billion. Carbon Funds: The EIB is a
major sponsor of carbon funds with a view to extend market capacity
and complement rather than substitute for private sector
participants and intermediaries. 5 Funds with total equity of Eur
500 million JESSICA Urban Funds (Joint European Support for
Sustainable Investment in City Areas): The EC/EIB/CEB is active in
the promotion of urban development funds as part of the JESSICA
initiative. 15 Funds with total equity of Eur 2 billion European
Investment Bank Slide 18 18 European Investment Bank Group Climate
Action: EIB Equity and Debt Favouring renewables and energy
efficiency Financing the installation of over 4000 mega watts of
wind and solar plants, to power over 2 million households EUR 7bn
for renewables and energy efficiency Slide 19 19 The London Green
Fund (a JESSICA Holding Fund) established in late 2009 to invest in
carbon reduction projects in line with the Climate Change component
of the London Plan Focused on energy efficiency, waste and
decentralised energy as the 3 biggest carbon reduction
opportunities for London Governed by representatives from the
Greater London Authority, the Environmental Agency and the London
Waste and Recycling Board. Energy Efficiency Urban Development Fund
35 m ERDF London Green Fund 100m* Managed by EIB London Waste &
Recycling Board London Development Agency 50m Private finance
50m32m18m * The remaining 15m may, as an option, be invested in one
or both UDFs in due course Urban Projects Private finance Waste
Urban Development Fund Equity type investment Loan type investment
Low risk High risk Min 50m Min 35m Aiming to deliver
outputs/impacts on job creation, tons of carbon saved, and minimum
energy usage savings Examples: London Green Fund (Holding Fund)
Slide 20 2009/11/201120 European Investment Bank EIB Advisory
programmes in partnership with EC and EDFIs Enhancing
infrastructure investment in Europe through technical and financial
advisory programmes EPEC - European PPP Expertise Centre Strengthen
the ability of the public sector to engage in Public Private
Partnership (PPP) transactions by building up Members
organisational capacity and sharing experience and expertise,
analysis and good practice JESSICA Joint European Support for
Sustainable Investment in City Areas Advisory services on the
structuring and management of Jessica Funds, an Innovative
financing instrument for integrated urban development, launched by
EU Commission (DG Regio), EIB and CEB. Higher productivity of EU /
public funds uses Financial Leverage Effect and Expertise JASPERS -
Joint Assistance to Support Projects in European Regions Technical
assistance between DG REGIO, EIB, EBRD, and KfW to prepare major
projects in cohesion countries Increases the capacity of the
beneficiary countries to abort EU funding in support of priority
investment JESSICA Slide 21 21 Contacts at EIB http://www.eib.org
European Investment Bank Chris Blades EPEC Head of Division
[email protected] Gianni Carbonaro Municipal and Regional Head of Unit
[email protected] Stefan Kerpen Technical Assistance Management
Head of Unit [email protected] Simon Barnes Western Europe Director
[email protected] Jacobs Peter Western Europe Head of Division Project
Finance [email protected] Bernard Gordon Western Europe Head of
Division Public sector [email protected]
