EIB Information 1-2004 (n°116)1 - 2004 • N 116 ISSN 0250-3891 1-2004 EIBInformationEIB The EIB’s annual Press conference on the EIB Group’s activity in 2003 was held on 4 February

1 - 2004 • N° 116 ISSN 0250-3891

1-2004EIB

EIBInformation

The EIB’s annual Press conference on the EIB Group’s activity in 2003 was held

on 4 February in Luxembourg and 5 February in Brussels.

European Investment Bank Group’sactivity in 2003

In 2003, the European Investment Bank (EIB) lent a total of EUR 42.3 billion (2002: 39.6 billion) for

projects furthering the European Union’s political objectives.

The European Investment Fund (EIF) – the EIB Group’sspecialised venture capital arm – took participationsworth EUR 135 million in venture capital funds and

provided a total of EUR 2.2 billion in guarantees forSME financing.

From left to right, R. Jacob, E. Uhlmann,

P. Maystadt, F. Carpenter,

R. Karsenti

Central and Eastern Europe + Cyprus and Malta 4 600

Mediterranean Partner Countries (including Turkey) 2 100

Western Balkans 372

ACP + South Africa 723

Asia and Latin America 348

European Union 34 200

Total 42 300

Contracts signed in 2003 (EUR million)

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The EIB’s operational priorities

The operational priorities of the EIB as endorsed by the Board of Governors on 3 June 2003and laid down in the Bank’s Corporate Operational Plan 2004-2006 include:

• Economic and social cohesion and regional development in an enlarged Europe• Implementation of the Innovation 2010 Initiative (i2i)• Development of Trans-European and access networks

• Environmental protection and improvement• Support of EU development and cooperation policies with Partner

Countries, in particular through the Facility for Euro-MediterraneanInvestment and Partnership (FEMIP) and the Cotonou Agreement.

IEIB’s annual Press ConferencePresenting the EIB Group’s results for 2003 to the accreditedinternational press, EIB-President Philippe Maystadt high-lighted the fact that the 2003 lending figures, with 80% ofloans going to projects in the present and future EUMember States, confirmed that the EIB is first and foremostthe financing arm of the European Union. The geographi-cal spread of financing operations also confirmed the EIB’sability to respond to new assignments given to it by theEuropean Council, for instance the Council’s request to theBank to step up its activities in the Acceding Countries andto extend and diversify its operations in the MediterraneanPartner Countries. A similar conclusion can be drawn froma sector breakdown of financing in 2003. Furthering an in-novative and knowledge-based economy, as reaffirmed inDecember 2003 by the European Council’s “Action forGrowth” initiative, constitutes a top lending priority, along-side economic and social cohesion and regional develop-ment in an enlarged EU.

The President stressed that the EIB is not only the largest in-ternational lender but at the same time the leading inter-national non-sovereign borrower, with a volume of 42 bil-lion in 2003 and an estimated amount of over 45 billion in2004. To raise these huge amounts of funds, the Bank willnot only continue to issue large benchmarks, of 3 - 5 billion,but also carry out opportunistic borrowings in many differ-ent currencies in the international capital markets.

In 2003, the EuropeanInvestment Bank (EIB) lent atotal of EUR(*) 42.3 billion(2002: 39.6 billion) for proj-ects furthering the EuropeanUnion’s political objectives.Financing in the EU MemberStates reached 34.2 billion,while 8.1 billion was madeavailable in non-EU countries.Lending in the future MemberStates of Central and EasternEurope plus Cyprus and Maltaran to a record 4.6 billion andin the Mediterranean PartnerCountries (including Turkey)to 2.1 billion. In the WesternBalkan countries the Bank as-sisted reconstruction and de-velopment projects to thetune of 372 million. Lending insupport of EU developmentand cooperation policies to-talled 1.1 billion, of which 463million went to the ACP(Africa, Caribbean, Pacific)States , 260 million to SouthAfrica and 348 million to Asiaand Latin America.

The European InvestmentFund (EIF) – the EIB Group’sspecialised venture capital arm– took participations worth135 million in venture capitalfunds and provided a total of2.2 billion in guarantees forSME financing.

Contents

European Investment BankGroup’s activity in 2003 1

Award-Winning year on the capital markets 9

The internalisation of production in Europe 11

First meeting of FEMIP’sCommittee of Experts 14

Spotlight: the “French Hospitals Programme” 16

EIB participation in plenary session of the Committee of the Regions 17

EIB Group opens a representative and liaison Office 18

Appointments and reorganisation at the EIB 19

The EIB and PPP 22

Four EIB projects received Project Finance Awards in 2003 23

Supporting Social Housing 25

For the sake of the city 29

Visit of Hungarian Prime Minister 32

The Press Release on theEIB Group’s activity in 2003

is published on the EIBwebsite (www.eib.org),

together with the brochure“The EIB Group in 2003:

projects financed” and tenbriefing notes, providingfurther details on specific

items.

(*) Unless otherwise indicated, amounts in this publication are expressed in euro.

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3eib information 1-2004

EUROPEAN INVESTMENT BANK

To fund its lending the Banklaunched 310 bond transactions onthe international capital markets,raising an aggregate amount of 42billion in 15 currencies.

As at 31 December 2003 the EIB’sbalance sheet total stood at 235 bil-lion. Outstanding lending amount-ed to 207 billion and outstandingdebt 195 billion.

Regional development in an enlarged EU

Promoting balanced regional devel-opment again featured as the top fi-nancing priority in 2003. Within theEU-15 countries, 16.3 billion wasmade available for projects in re-gional development areas in theform of individual loans and an esti-mated 6.5 billion under global loans(credit lines) to partner banks for thefinancing of SME ventures and small-er-scale public investment. Includingthe future Member States, regionaldevelopment projects attracted 27.3billion in loans, corresponding to70% of the EIB’s total lending in EU-15 and the future Member States.

Cooperation with the EuropeanCommission was expanded. TheBank is actively involved in projectappraisal and information ex-change on major projects for whichERDF, Cohesion Fund or ISPA Fundgrants are sought.

In the future Member States (includ-ing Bulgaria and Romania) financingclimbed to a record 4.6 billion (2002:3.6 billion), consisting of 3.9 billionin individual loans and 660 million inglobal loans. This further consolidat-ed the EIB’s position as the leadingexternal source of finance for in-vestment in the future MemberStates, where its total lending since1990 comes to some 25 billion.

Transport and telecommunicationsinfrastructure again took pride ofplace (accounting for 37% of ag-gregate lending in those countries).Increasing attention was focused

on protecting the environment in-cluding water resource manage-ment (16%) in order to meet EUenvironmental standards. Loansfor environmental and transportschemes were in many cases sup-plemented by grants from the EU’sISPA Programme. In the health andeducation sectors, where substan-tial infrastructural investment isalso needed, lending was steppedup markedly (14%). Some 19% ofloans were for investment in indus-try and the service sector, especiallyforeign direct investment, whichcontributes to the transfer of know-how and capital into the region.Particularly noteworthy here wasinvestment by motor vehicle manu-facturers and suppliers in the CzechRepublic and Hungary. Global loansto partner banks (14%) provided fi-nance for SMEs and for investmentby local and regional authorities.

Innovative and knowledge-basedeconomy

Through its Innovation 2010Initiative (i2i) the EIB supports vari-ous objectives: the EU strategy foran information and knowledge-based economy adopted by theLisbon European Council (2000);the target set by the BarcelonaEuropean Council (2002) of raisingresearch and development (R&D)expenditure to 3% of GDP; and theEuropean Action for Growth initia-tive agreed in December 2003.

Having originally pledged supportfor the Union’s Lisbon strategy ofstrengthening Europe’s economicvigour and competitiveness for theperiod 2000-2003, the EIB in June2003 extended its commitment asfar as 2010 (Innovation 2010Initiative). The EIB Group supportsi2i operations by medium- or long-term EIB financing and EIF partici-pations in venture capital fundsthat provide SMEs with equity re-sources in the form of venture cap-ital. i2i focuses on five economicsectors: research and development

Lending in new MemberStates after accession

As from accession in May 2004, most countries pre-viously benefiting from the Bank’s pre-accessionsupport will be eligible for financing under its pri-ority regional development remit. All the newMember States will qualify as designated assistedareas. A joint working group with the Commission’sDG REGIO is currently examining how best to coor-dinate the Bank’s activity with the operations of theStructural Funds that will be available to the futureMember States after accession and to blend EIBloans with European Commission grants. Internally,the Bank has adjusted its organisation so as tofully integrate the new members.

954043_info 4/2/04 09:13 Pagina 3

(R&D); development of SMEs; tech-nology networks; human capitalformation; and the diffusion of in-novation (including a dedicatedprogramme for the audiovisualsector).

EIB loans totalling 6.2 billion weregranted in 2003 under i2i (2002: 3.6billion). At 1.4 billion, lending forthe development of informationand communications networks fell

short of expectations for a revivalof investment activity in this sector.Lending for R&D investment, at 2.1billion, remained at the previousyear’s level, while loans for educa-tional infrastructure rose sharply to2.7 billion (2002: 900 million).

i2i financing was channelled toboth the EU’s existing and futureMember States. Particular empha-sis was placed on projects in struc-

turally weak regions in order tohelp bring the less-developed re-gions into the knowledge-basedeconomic fold.

Action for Growth aims at strength-ening Europe’s growth potentialthrough increased investment intrans-European transport, telecom-munications and energy networks(TENs), in innovation and in re-search and development including

4 eib information 1-2004

Stepping up support for TENs

In support of Action for Growth, the EIB willlaunch a TENs Investment Facility endowedwith 50 billion up to 2010. Up to 25 billion ofthe total will be made available over the com-ing three years for transport TENs, particularlyfor schemes under the Quick Start Programme.This programme, implemented in cooperationwith the European Commission and theMember States concerned, focuses on (cross-border) projects having particular importancefor the integration of the internal market in anenlarged Europe. In special cases it will be pos-sible for loans to be granted for up to 75% ofthe investment costs and for periods of up to35 years, with flexible repayment terms toboost the proportion of public/private partner-ships (PPPs) in TENs financing. The Bank will useits Structured Finance Facility for this purpose,with risks related to new operations being cov-ered by the facility’s provisions.

St. Petersburg

IstanbuIstanIstanbulbu

OdessaOdessaOdessaOKishinhinevhin

Minsk

Moskva

Kiyev

Skopjeje

Belgraderade

TTiranT ëëë

Bucuresti

Budapestes

VililniusilV

Riga

Warszazawaza

Prahaha

Lisboa

Porto

Madrid

Mü

Paris

LuxembourgLuxem

Barcelona

EdinburghEE

Roma

Lyon

Berlin

London

Oslo

HHelsinkiH

Cork

Strasbourgg

ISLAS CANARIAS (ES)

MADEIRA (PT)

AZORES

Trans-European Networks 1993-2004

Routes of priority Trans-European Networks (TENs)

Sections of Tens concerned by financing commitmentsOther infrastructure and networks of EUbenefit financed

Road and rail corridors in Central and Eastern Europe

Sections of corridors financed

Road/Rail

Electricity

Gas

Airport

Project of multi regional caracter

Intermodal hub

Port

Air traffic control

Development of oil and natural gas fields

954043_info 4/2/04 09:13 Pagina 4



environmental technologies. Partof the initiative is a Quick StartProgramme. This comprises a list ofpriority projects capable of beingimplemented speedily and can besupplemented by further well-de-veloped projects.

The intention is to mobilise privatecapital alongside public resourcesand EIB loans to finance such projects.To this end, the EIB will offer inno-vative financing instruments (guar-antees, structured finance and loansecuritisation).

In support of Action for Growth, theEIB plans to lend up to 40 billion (in-cluding structured finance) to backR&D and innovation over the periodto 2010. Lending of up to 20 billionis envisaged in the period to 2006alone under Action for Growth,particularly for the Quick StartProgramme and for projects in thefuture Member States.

The European Investment Fund (EIF)supports i2i by taking equity stakesin venture capital funds. Last year itsigned 135 million in 17 operations,expanding its portfolio of participa-tions to some 2.5 billion spread over190 funds active in both the EU-15and in the future Member States.The EIF operates as a fund of funds,with a bias towards funds specialis-ing in early-stage financing andthe hi-tech sector. It is now one ofEurope’s largest venture capitalproviders in this segment. Over 80%of the resources it has invested todate have been provided by the EIB,with further capital coming from theCommission. In 2003, the EIF wasfor the first time commissioned bya third party to invest venture cap-ital on its behalf: the GermanFederal Ministry of Economics andEmployment is making available a250 million “ERP Facility“ (fundedfrom the former European RecoveryProgramme). The resources of thisfacility, supplemented by a further250 million from the EIB/EIF, will beinvested exclusively in venture capi-tal funds focusing on German high-tech companies.

The EIF also assists the investmentactivity of SMEs indirectly by pro-viding guarantees for the SME loanportfolios of financial institutionsand public guarantee agencies. Thisback-up gives banks greater scopefor lending to SMEs. In 2003, the EIFconcluded 30 guarantee operationstotalling 2.2 billion (2002: 1.2 bil-lion), bringing its guarantee port-folio to 6.3 billion. Over 250 000SMEs have thereby indirectly bene-fited from EIF guarantees.

Trans-European andaccess networks

EIB lending in support of TENs in-frastructure projects within the EUtotalled 5.3 billion. In the transportsector (4.6 billion), the principal fi-nancing operations concerned theconstruction of high-speed raillines, improvements to the road

and motorway networks, the up-grading of airport infrastructure,and the expansion and modernisa-tion of port infrastructure. A fur-ther 1 billion served to financetelecommunications projects, withanother 390 milliongoing towardsenergy TENs. In the future MemberStates, where infrastructure devel-opment and rehabilitation needsare immense, signatures for trans-port TENs projects amounted toclose on 1.5 billion.

Environmental protection

The Bank has set itself the target ofdevoting 30-35% of its total annu-al individual loans in the presentand future Member States to envi-ronmental projects. That level wascomfortably exceeded in 2003, withindividual loans in the EU-15 and

Support for regions affected by oil slick

In 2003, the EIB again demonstrated its solidarityand ability to react swiftly to environmentaldisasters and emergencies by granting an excep-tional loan to counter the catastrophic economicand ecological effects of the oil spill from the tanker“Prestige” in Galicia, Asturias and Cantabria - thethree Spanish regions worst affected.

Specifically, in March 2003 the EIB provided aglobal loan of 150 million aimed first and foremostat sustaining economic activity in these regions,with special emphasis on small and medium-sizedenterprises (SMEs) and local authorities. In addi-tion, the Bank deployed a 350 million emergencyframework loan dedicated to financing a publicinvestment programme for larger-scale projects.These loans carry particularly favourable termswhich in exceptional cases may stretch to finan-cing total project costs.

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the future Member States reachinga record 11.6 billion (2002: 10.5 bil-lion), or 42%. Environmental proj-ects financed encompassedschemes in the areas of local publictransport, urban renewal, waterand sanitation, waste disposal, en-ergy saving and renewable ener-gies. In the Mediterranean PartnerCountries and the Balkans, 677 mil-lion in individual loans was ad-vanced for environmental schemesand another 25 million in Russia,supporting a waste managementscheme in St Petersburg. In the ACP(African, Caribbean and Pacific)Countries, 54.5 million went to en-vironmental projects, at the sametime contributing to the Bank’soverarching goal of promoting sus-tainable development in thesecountries.

The Bank and the EuropeanCommission are operational part-ners in financing environmental in-vestment projects, combining theirresources particularly in the futureMember States, the Mediterraneancountries and the ACP countries.

The EIB recognises the strategic im-portance of climate change issues.In support of climate change poli-cies, the Bank had set itself the tar-get of stepping up the proportionof energy project lending that it de-votes to renewable energy sourcesfrom 7 to 15%. Thanks to numerouswind power projects this has nearlybeen achieved, and to consolidatethis positive result the Bank will ex-pand its activity into other renew-able energy areas. In 2005, the EU’sEmissions Trading Scheme will start.This should help to increase the

cost-effectiveness of renewable en-ergy and facilitate bank financingof such projects.

In 2003, the Bank published its firstenvironmental report (2001-2002).

Support for EU development and cooperation policies

Lending in the MediterraneanPartner Countries totalled 2.1 bil-lion in 2003, the first operationalyear since the launch of the Facilityfor Euro-Mediterranean Investmentand Partnership (FEMIP). More thana third of the financing directly pro-moted the growth of private busi-nesses, through foreign direct in-vestment, joint ventures resultingfrom cooperation between projectpromoters from various countries inthe region, and SME financing. Thisfocus reflected one of FEMIP’s ob-jectives, that is to say the develop-ment of the private sector - togeth-er with development of human cap-ital investment, greater technicalassistance for the design of qualityprojects and the process of eco-nomic reform, and deployment ofinnovative financial products andrisk capital.

In the past year the Bank has cre-ated the necessary organisationto enable it successfully to carryout its FEMIP activities and per-form its growing role as a devel-opment bank with an expandedtechnical assistance input. This in-cludes the opening of local repre-sentative offices - in Cairo alreadyand in the Maghreb (Rabat andTunis) shortly.

In December 2003 the EuropeanCouncil decided to enhance FEMIP,in view of the favourable resultsachieved since the Facility’s creationin October 2002. A further reviewwill be carried out in December2006, in the light of experiencegained and after consultation withthe Mediterranean partners inthe Barcelona process, to consider


New initiativesto support EU climate changeobjectives

At the 9th Conference ofParties (COP) of the KyotoProtocol in December 2003, EIBPresident Philippe Maystadtpresented the Bank’s newinitiatives to support theEU’s climate change policy.Key are an 500 millionDedicated Financing Facilityin support of European busi-nesses participating in the EUEmissions Trading Schemeand a Technical AssistanceFacility to provide conditionalgrant finance in the frameworkof the Joint Implementationand Clean DevelopmentMechanism of the KyotoProtocol. EIB participation ina carbon equity fund to in-vest in carbon credits is alsobeing explored.

The EIB, which has beenworking on climate changefor several years in co-opera-tion with the EuropeanCommission, is now againworking closely with theCommission in developingand implementing its newinitiatives, as well as withother parties specialising inthe carbon markets.

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the case for setting up a“Mediterranean Bank” with the EIBas majority shareholder.

In the Western Balkans, where EIBfinancing totalled 372 million,“new” sectors were entered such aseducation, health and local author-ity financing (water, urban trans-port and heating, and waste pro-cessing). The EIB Board ofGovernors approved in June 2003 amedium-term Strategy for theBalkans, with direct financing forprivate sector development as oneof its priorities. The Bank is closelycoordinating its operations in theregion with the EuropeanCommission, the European Agency

for Reconstruction, other interna-tional financing institutions such asthe World Bank and the EBRD, andbilateral donors.

EIB financing in the African,Caribbean and Pacific (ACP)Countries has been carried outsince 2 June 2003 under the newCotonou ACP-EU PartnershipAgreement, replacing the Lomé IVConvention. The main focus of theCotonou Agreement is on povertyalleviation.

The EU Member States have man-dated the EIB as the Union’s devel-opment finance institution tomanage, over the next five years, a

2.2 billion Investment Facility (IF)to finance projects in the ACPcountries. In addition, the EIB willmake loans of up to 1.7 billionavailable over five years from itsown resources. Priority is beinggiven to smaller-scale investmentin the private sector and to educa-tion and healthcare schemes. TheIF is structured as a revolving fund,where capital repayments areploughed back into financing newprojects. The facility is managed oncommercial principles so as to befinancially sustainable. Because ofthe developmental tasks, EIB’s ac-tivity in the ACP States has alsobeen brought together in a singleoperational unit.

FEMIP’s future development

The European Council’s decision in December 2003 to develop FEMIP further included measures to expandthe facility’s role within the EIB by introducing a number of features in support of private sectordevelopment:

• creating a special facility for higher-risk financing intended to promote investment in the private sector;

• establishing, with voluntarily contributed development aid resources and risk capital from EU andother countries, a Trust Fund to finance technical assistance and provide grants for priority infra-structure projects;

• developing FEMIP’s Policy Dialogue and Coordination Committee into an annual meeting at ministeriallevel along with regular meetings of experts, with the aims of strengthening dialogue on structuralreforms, fostering the private sector and coordinating co-financing operations.

Inauguration of EIB Office inCairo

In October 2003, the EIB officially inaugurated its Cairoregional office, the Bank’s first outside the Union.Operational since July and headed by Mr Luigi Marcon, thisoffice covers the whole of the Near East. Apart from liaisonwith the authorities of the region's MPCs, its objectives areto optimise the process of identifying and monitoringprojects and to facilitate the implementation of technicalassistance both for projects and financial institutions in thebeneficiary countries.

Egyptian Prime Minister, Mr Atef Ebeidand EIB President, Mr Philippe Maystadt, at the inauguration of the EIB’s Cairo regional office

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Financing in the ACP Countries to-talled 723 million, of which 260 mil-lion was advanced for projects inthe Republic of South Africa. Overtwo thirds of total 723 million lend-ing went to the private sector or thecommercially-run public sector forinstance for power and water in-frastructure schemes. Up to 50%went to banks, venture capital andmicro-finance funds, supportingthe financial sector and indirectlythe private sector, in line with theobjectives of the Investment Facility.

In Asia and Latin America, wherethe EIB operates in support of theEU’s cooperation policy objectives,348 million was provided, of which254 million was for 5 projects inLatin America and 94 million for 2projects in Asia.

Borrowing activities in 2003

The Bank strengthened its positionas the largest and leading suprana-tional bond issuer. The volume ofborrowing increased by 11% to 42billion, raised through 310 transac-tions in 15 currencies. Issuance inEUR accounted for the largest share(17 billion or 40% of the total). TheBank’s three core currencies (EUR,GBP, USD) accounted for 88% offunding. Issuance in 12 additionalcurrencies (12% of funding) in-volved the currencies of AccedingCountries (CZK, HUF, PLN, SKK), oth-er European countries (CHF, SEK,NOK), Asia-Pacific/Japan (AUD,HKD, JPY, NTD) and Africa (ZAR).This underlines the continuedstrength of diversification in theEIB’s funding activities.

In EUR, there was especially stronggrowth in structured issuance in theform of inflation-linked andcallable bonds. The key EUR bench-mark transactions were two new 5billion Global issues, in maturitiesof 5 and 10 years respectively. Thetotal volume of EUR benchmarksoutstanding and traded onEuroMTS, a leading electronic trad-ing platform for sovereigns and

agencies, increased to 11 issuesworth around 60 billion. In USD, theBank raised over USD 13 billion andthe main area of growth was struc-tured issuance. Sterling issuancereached close to GBP 5 billion. Keydevelopments in GBP included in-creased penetration of the retailmarket and growth in inflation-linked issuance. Such progress aid-ed the EIB in extending its power-ful lead in the non-gilt sector. TheBank further improved its presencein Asia/Japan, where JPY accountedfor the largest share of issuance andgrew strongly to JPY 291 billion(EUR 2.2 billion) via 120 structuredtransactions (2002: JPY 146 billion /EUR 1.2 billion).

Issuance in EU-Acceding countrycurrencies more than doubled(compared with 2002) to the equiv-alent of 1.3 billion, cementing theEIB’s position as the largest non-government issuer both in the re-gion and in all four markets that ittapped (CZK, HUF, PLN and SKK).This growth in local currency bor-rowing has supported continuedlending growth and the EIB’s posi-tion as the largest external lenderin the region. Borrowing highlightsincluded increased placements ofinnovative structured products andexceptionally long maturities (no-tably in CZK and SKK).

Yvonne BerghorstInformation and

Communications Department3 (+352) 4379 31 [email protected]

Growth and innovation

The EIB continued to demon-strate consistency and innova-tion in its funding strategy,which centred on issuance oflarge liquid benchmarks in thethree core currencies EUR, GBPand USD, while remaining re-sponsive to opportunities fortargeted and structured is-suance across a diverse array ofcurrencies. The global reach ofthe EIB’s funding activities,which span all major capitalmarkets, was enhanced throughgrowing penetration of keymarkets, including Asia/Japanand the US. Whilst benchmarkissuance further improved theliquidity and range of maturi-ties available to investors, is-suance in structured format wasthe primary source of growth.Structured issuance grewstrongly to EUR 9.3 billion via229 transactions (EUR 3.4 billionvia 129 transactions in 2002).

The EIB has garnered severalawards for its funding perform-ance in 2003. (see article page 9)

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T



Growing debt issuance programmewins awards

The Bank continued to pursue con-sistency and innovation in its fund-ing strategy. This involved issuinglarge liquid benchmark bonds inthe Bank’s three core currencies(EUR, GBP, USD), while remaininghighly responsive to opportunitiesfor targeted and structured is-suance across a diverse array ofcurrencies.

Effective application of this strate-gy was fundamental in enablingthe Bank to increase the volume ofissuance by 11% to EUR 42 bn andthe number of transactions by 42%to 310, in 15 currencies.

While large liquid benchmark issuesin the Bank’s three core currenciesremained the primary source of

funding, growth was mainlyachieved through tailor-madestructured issuance in a wide rangeof currencies.

Structured issuance grew to EUR9.3bn via 229 transactions (EUR3.4bn via 129 transactions in 2002),and represented 22% of fundsraised. Non-structured issuance,comprising benchmark and target-ed issuance, totalled EUR 32.8bnthrough 81 transactions, represent-ing 78% of total funds raised(against EUR 34.6bn via 90 transac-tions, or 91% of issuance in 2002).

The innovative approach to struc-tured issuance was evident in thewider range of structures offered toinvestors. Highlights included the in-troduction of callable formats cou-pled with large issue sizes in EUR andUSD, as well as building the basis fora curve of inflation linked bonds inEUR, the first in the EIB’s asset class.

Award-winning year on the capital markets

Once again the EIBhas geared up tomeet the growing demands for funding and liquidity driven by its lending operations and the EU policies that they serve. Also, the funding strategy and its effective implementation were well received by the market, with the added bonus of a series of awards.

954043_info 4/2/04 09:14 Pagina 9


Apart from enhancing its strongpresence across the major capitalmarkets, the EIB continued to playa developmental role, notably inEU-Acceding Country currencies(ACC). Issuance in ACC more thandoubled to an equivalent of EUR1.3bn, and offered innovations interms of product, maturity and is-sue size that contributed to marketdevelopment.

Also, the establishment of a treas-ury pool of funds in a fourthAcceding Country currency (SKK,with CZK, HUF and PLN already inplace), further enhanced flexibilityin lending and borrowing in thesecurrencies. The growth in borrow-ing in local currencies has support-ed continued lending growth andthe EIB’s position as the largest ex-ternal lender and largest non-gov-ernment borrower in the region.

The positive market reception forthe EIB’s borrowing activities in2003 was reflected in multipleawards. Of particular note werethree flagship awards for theBank’s asset class – ‘Supranational/ agency borrower of the year’(from Euromoney, Euroweek andIFR). Other awards included onefor ‘Euro-MTN programme of theyear’ (from IFR), where flexibilityand innovation were the centralthemes.

Commercial Paper programme respondsto liquidity requirements

Through its Global CommercialPaper programme, the Bank hascreated added flexibility for meet-ing its growing liquidity require-ments, which are based on expand-ing borrowing and lending vol-umes. At end-2003 the Bankraised the capacity of the GlobalCommercial Paper program fromEUR 5bn to EUR 10bn and, at thesame time, re-focused and expand-ed the dedicated dealer group forthe programme.

These improvements, in particularthe anticipated enhancement ofliquidity and flexibility, are expectedto broaden the appeal of the GlobalCommercial Paper programmeamong investors. This complementsthe global format of the EIB’sCommercial Paper, which alreadyallows the Bank to issue in a full

range of currencies and to takeadvantage of funding opportuni-ties in both Europe and the US.

Peter Munro, Head of Investor Relations &

Marketing, Capital MarketsDepartment

Borrowings signed in 2003

(EUR million)

Before swaps After swaps

EUR 17,318 41.1% 22,931 54.7%

GBP 7,175 17.0% 7,393 17.6%

SEK 442 1.1% 659 1.6%

Total EU 24,935 59.2% 30,983 73.9%

AUD 470 1.1% 0 0.0%

CHF 161 0.4% 161 0.4%

CZK 678 1.6% 521 1.2%

HKD 122 0.3% 0 0.0%

HUF 339 0.8% 270 0.6%

JPY 2,201 5.2% 0 0.0%

NOK 226 0.5% 0 0.0%

PLN 156 0.4% 174 0.4%

SKK 94 0.2% 94 0.2%

TWD 180 0.4% 0 0.0%

USD 12,375 29.4% 9,665 23.1%

ZAR 153 0.4% 44 0.1%

Total Non-EU 17,155 40.8% 10,928 26.1%

Total 42,090 100% 41,911 100%

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Z



The second presentation, byKristian Uppenberg of the EIB’sEconomic and Financial Studies di-vision, explored the determinantsof FDI and whether FDI inflowshave a positive impact on econom-ic growth in the host economy.Drawing on a large body of re-search, he showed that FDI was at-tracted by a broad range of factors.One of the strongest drivers of FDIis the size of and distance to thehost country. Economic fundamen-tals of this kind account for aroundhalf of world FDI flows. The rest isessentially determined by policies,although research shows that thepolicies that attract FDI are not limit-ed to incentives targeting foreigninvestors per se. Instead, FDI is at-tracted to policy and regulatoryenvironments that are favourablefor all firms, domestic and foreignalike. This includes such factors asfree trade and how well and freelythe product and factor markets areallowed to work. Other important– ultimately policy-determined –factors include the host country’sinfrastructure and human capitalstock.

As for the link between inward FDIand economic growth, most evi-dence suggests that this link is verystrong. More uncertain, however, iswhether FDI causes high growth orwhether faster-growing economiesjust attract more foreign investors.The evidence that FDI does indeedboosts growth directly is strongerin Central and Eastern Europe.

Zbigniew Zimny from UNCTAD(United Nations Conference onTrade and Development) began theday with a presentation on thelong-term trends in internationalproduction. He observed that therole of transnational corporationsin global production has risen dra-matically. The inward FDI stock nowaccounts for around 20% of globalGDP, up from only 6% two decadesago. The bulk of this upward glob-

al trend in FDI consists of mergersand acquisitions (M&A) ratherthan greenfield investment. Also,around four fifths of it has beentaking place between developedcountries. The EU has been a majornet exporter of FDI to the rest ofthe world in the past decade. Still,cross-border M&As have occurredon an even greater scale betweenthe EU countries themselves, drivenby ever-deeper integration.

The internationalisation of production in Europe

A. Steinherr, P. Maystadt , E. Perée

The annual EIB Conference on Economics and Financeon 22 January again brought together researchers fromnear and far to shed light on a topic that stands close to the mission of the EIB. This year’s conference was devoted to “the internationalisation of production inEurope”. This is clearly a topic close to the heart of theEIB. Many of the Bank’s private sector borrowers aretransnational corporations. As a policy-driven bank, the EIB needs to understand how transnational corporations and foreign direct investment affect the performance of the EU economy. The conferencecovered various issues related to this topic, including the impact that FDI has on employment, economicgrowth and regional development.

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Several recent papers have foundthat, FDI has in fact played a keyrole in the transformation of theseeconomies in a way that has directlyboosted growth.

FDI affects growth through differentchannels, however, not all of whichare as important in all countries.

While middle-income countriessuch as those in Central and EasternEurope often benefit from FDIthrough a higher level of domesticinvestment, this is not typically thecase in advanced countries that donot necessarily face financing con-straints for investment. The mainmechanism through which FDI af-fects growth in advanced countriessuch as those of the EU is when for-eign owners introduce new tech-nologies and management tech-niques to the acquired firms, and soboost the efficiency of domesticfirms.

Jozef Konings from KatholiekeUniversiteit, Leuven, broadenedthe discussion on the impact of FDIto include jobs and wages. He choseas a starting point the widespreadfear that “footloose” multination-als would keep opting for the loca-tions offering the cheapest labourand that FDI would be associatedwith widespread job losses in thericher countries. While he acknowl-edged that wage costs are substan-tially lower in the acceding coun-tries than in the current EU mem-bers, so is labour productivity.Hence, in unit labour cost terms thebenefits of relocating productionto the East are much smaller thanwage costs alone suggest. Indeed,Konings claimed that the maintrend has not primarily been a re-location of employment to the low-wage regions of Southern Europeor to Central and Eastern Europe.Instead, FDI-driven job relocationhas primarily been taking placewithin the richer Northern coun-tries. He argued that FDI to theSouth and East has been drivenmore by a desire to exploit newmarket opportunities than by theattraction of cheap labour. It fol-lows that new jobs created fromFDI in these regions have not nec-essarily come at the expense ofsimilar jobs in the investors’ homecountries.

Ari Kokko from the StockholmSchool of Economics investigatedthe role FDI plays in regional devel-

opment and whether public policycan influence the location of FDI.Kokko observed that economic in-tegration such as that within the EUtends to result in a clustering ofproduction to certain locations, es-pecially in industries characterisedby economies of scale. Because suchagglomeration effects also affectwhere FDI is located, FDI is not likelyto be a major instrument in thedevelopment of remote and disad-vantaged regions. EU regional sup-port may help redirect some of thisinvestment to peripheral regions,but on balance Kokko does not findstrong evidence that such incen-tives are substantial enough to al-leviate regional income disparitiesthat result from EU integration. Ina case study of regional support inSweden, Kokko finds evidence thatmanufacturing employment in sub-sidised regions increased in foreign-owned firms while employment indomestic firms declined. However,this difference was also observed innon-subsidised regions. Kokko con-cludes that these results, combinedwith the overwhelming concentra-tion of FDI in a few major agglom-erations, make it difficult to viewFDI as an effective regional devel-opment tool.

Turning to the impact of FDI onacceding countries, Magdolna Sassfrom the Hungarian Academy ofSciences looked at FDI in Hungary,which was the first acceding coun-try to open up to widespread for-eign ownership of productive as-sets. This gave Hungary certain first-mover advantages, as reflected inits ability to attract a dispropor-tionately large share of inward FDIduring the early years of transition.This helped it more quickly trans-form the business sector and putthe economy on a solid upwardgrowth trend. Domestic investmenthas been conducted primarily byforeign-owned firms. However,with the completion of mass pri-vatisation and as other countrieshave become increasingly hos-pitable to inward FDI, Hungary’sshare of FDI inflows has fallen in

Z. Zimny

K. Uppenberg

A. Kokko

J. Konings

M. Sass

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recent years. Part of this decline –but by no means all of it – is due tothe fact that Hungary does not in-clude reinvested earnings in its FDIdata, contrary to the practice ofmost other countries. This statisticaldiscrepancy has become increasing-ly problematic as the share of rein-vested earnings in total FDI hasrisen dramatically in recent years.More recently, inward FDI inHungary has also been hamperedby concerns about macroeconomicstability, especially the wideningfiscal deficit and accelerating wagegrowth. As Hungary faces growingcompetition to its position as an at-tractive production location in theregion, this puts a greater emphasison sound economic policies.

Gábor Hunya of WIIW, Vienna, pre-sented a case study of FDI in theBaltic countries, illustrating thestrong geographical forces at playin the location choice of multina-tional firms. In Estonia and Latvia,in particular, Nordic investors pre-dominate. On the one hand, FDI hasplayed a major role in financing in-vestment in these countries. On theother hand, the sectoral composi-tion reflects a possible drawback inthe relatively small size of theseeconomies. A large portion of FDIinto the Baltic countries has beenmarket-seeking activities in serviceindustries, such as finance. By con-trast, investment in manufacturing– and especially in high technologysectors – has been relatively modest.This raises questions as to whetherthe pool of skilled labour and thelevel of infrastructure in thesecountries may have been inade-quate to attract major manufactur-ing operations. There is a risk thatthe broader economic benefitsfrom FDI are correspondinglysmaller because of a lack of positivespillover effects.

The final presentation, by ThierryMayer of CEPII in Paris, was a casestudy of location choice of foreigninvestors within France. Using adetailed regional data set on for-eign-owned operations in France,

Mr Mayer could address a string ofhighly pertinent questions thatcannot be addressed in many othercountries for lack of data. For in-stance, in his study he observes thatforeign investors have a tendencyto locate in regions closer to theirhome countries, but that this geo-graphical home bias weakens overtime. When including data on re-gional subsidies, he also finds verylittle evidence that such policy sup-port has made much difference inthe location choice of foreign in-vestors. In most cases, the funda-mental economic forces are over-whelmingly stronger in this deci-sion process, preventing subsidiesfrom altering the investor’s originalchoice. This was found to be partic-ularly the case in industries charac-terised by a greater degree of ag-glomeration and positive spillovers,i.e. those very industries that mighthave the greatest broader eco-nomic impact if successfully relocatedto supported regions. In Mayer’sstudy, only Italian investors seemsignificantly attracted by regionsthat receive subsidies for invest-ment, but this is typically in indus-tries where positive spillover effectsare relatively small. Hence evenhere the case for public support isrelatively weak.

An eighth scheduled presenter,Frank Barry from UniversityCollege, Dublin, could unfortu-nately not attend the conferencedue to a last-minute injury. Themain points of his contribution nev-ertheless deserve mentioning. In acase study of FDI in Ireland, one ofBarry’s most pertinent observationsis that Ireland’s success in attract-ing massive inflows of FDI may notbe easily replicated by other EUcountries. Ireland’s ability to attractvery large inflows of FDI wascaused by a broad set of factors,only some of which were policy-driven. Preferential tax treatment,improved macroeconomic policies,deregulation and a notable boostto the stock of relevant humancapital were all elements that couldbe ascribed to policies. Other factors,

such as close cultural and linguisticties to the United States (which hasbeen the key extra-EU investor) andrelatively competitive labour costs,seem to have tipped the scale deci-sively in favour of boosting Ireland’srole as the location choice of extra-regional multinationals seeking aproduction base in Europe. Thislatter group of factors is less easilyreplicated by other EU countries,making Ireland’s success ratheruntypical.

Together, these illuminating pre-sentations and the discussions thataccompanied them served the valu-able role of further exploring thesubject of FDI and the internation-alisation of production, allowingthose who attended to better un-derstand the economic and busi-ness environment in which theBank operates.

The presentations are accompaniedby papers that will be publishedsoon as the EIB Papers, Volume 9.

Kristian UppenbergEconomic and Financial Studies

G. Hunya

T. Mayer

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SSet up to operate as a think-tank,this Committee is charged with thetask of putting forward practicaland operational recommendationsto FEMIP’s Ministerial Committee,made up of the Economics andFinance Ministers of the EU and theMediterranean Partner Countries(MPCs).

The Committee of Experts was wel-comed to Marseille by Mayor Jean-Claude Gaudin and the meetingwas closed by Mr Renaud Muselier,French Secretary of State forForeign Affairs. Mayor Gaudin ex-pressed his pride that Marseille wasagain playing host to the EIB andthe financial authorities of the27 MPCs. He added that “peacebetween the peoples of theMediterranean is built on mutualunderstanding and respect butunderpinned by the sharing ofwealth”.

Mr Philippe de Fontaine Vive, forhis part, commented: “Back in April2003, Marseille played host to theEIB in connection with a seminaron sustainable investment in theMediterranean. At that time FEMIPwas equipping itself for its role andthat meeting helped to chart itspriorities and ambitions: namelyto foster development of the pri-vate sector and foreign direct in-vestment in the partner countries,in preparation for the Euro-Mediterranean customs union in2010.”

The enhanced FEMIP

“Not only has FEMIP achieved itsobjectives”, continued Mr Philippede Fontaine Vive, “but theEuropean Council of December2003 decided to further enhance itsrole in response to proposals putforward by the EIB. Our gathering

in Marseille during these two dayshas put flesh on the bones, as it hasentrusted the Committee of Expertswith the task of preparing for theannual meetings of the Ministers ofEconomic Affairs and Finance – a ver-itable Euro-Mediterranean ECOFIN.In this spirit, the enhanced FEMIPrepresents a key instrument forclose cooperation among all thepartners concerned. It is supportingthe institutional reforms that arethe responsibility of each of thepartner countries. This initiative isbeing mounted in concert withthose of the other principal fun-ders, and I am confident that astrategic partnership agreementbetween the EIB, the World BankGroup and the Commission tostrengthen our cooperation will beconcluded in the near future.”

Concentrating on the two themesof privatisation and private compa-

First meeting of FEMIP’s Committee of Experts

The first meeting of the Committee ofExperts of the “Facilityfor Euro-MediterraneanInvestment andPartnership” (FEMIP)was held in Marseilleon 16 and 17 February2004, under the chairmanship of EIBVice-President Philippede Fontaine Vive.

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nies’ access to the various sources offinance, the 70 experts from theMediterranean region came upwith the following conclusions:

• Privatisation in the partner coun-tries: the importance of establish-ing an appropriate regulatory en-vironment was strongly empha-sised in these debates; FEMIP willbe able to contribute in thepreparation of projects and byproviding financial instrumentssuch as risk capital, long-termloans and technical assistance.

• Access by private companies tothe various sources of finance:efforts must focus on three broadareas:

The banking sector: reforming thebanking sector so as to achievegreater concentration and expo-sure to international competition;improving service quality; trainingstaff, particularly in credit riskanalysis and the use of non-personalsecurity.

Companies: improving the trans-parency of accounts and developingpartnership with other investors.

Financial products: developing newproducts (leasing, risk capital, fi-nancial services) and new structures(investment funds, developmentcapital companies, investment banks,guarantee funds).

In his closing address, Mr Philippede Fontaine Vive noted that: “In2003, FEMIP provided EUR 2.1billion, of which 740 million was

for foreign direct investment and400 million for SMEs in theMediterranean Partner Countries;on the financing side, FEMIP thusdemonstrated its ability to meetexpectations and the calls made onit. It now needs to establish itself asthe benchmark for quality Euro-Mediterranean dialogue. The keysummit will clearly be the meetingof FEMIP’s Ministerial Committee tobe held in Alexandria on 7 and 8June 2004.”

Helen KavvadiaInformation and


Recent FEMIP meetings

The last meeting of FEMIP’s Ministerial Committee took place in Napleson 10 and 11 November 2003. On 16 January 2004, the EIB and CGEMorganised a conference in Casablanca, under the patronage of HisMajesty King Mohammed VI, aimed at informing the industrial andfinancial sectors as well as professional associations represented inMorocco of the opportunities offered by the new FEMIP to bolster theprivate sector in the MPCs. Another conference was organised inLondon in cooperation with UK Trade & Investment and MEA, on 22January 2004, to inform the industrial and financial communities andprofessional associations represented in London of the opportunitiespresented by FEMIP for strengthening the private sector in the EU’sMediterranean Partner Countries.

Additional information on the EIB’s operations in the MPCs since 1974,the Facility’s genesis, the MPCs’ economic environment and themeetings of FEMIP’s Ministerial Committee is available on the Bank’swebsite in the section devoted to the Mediterranean PartnerCountries.

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this Plan, the Government willmake additional resources availableto the hospitals concerned enablingthem to invest some EUR 1.2 billiona year, or 6 billion over five years.This outlay would be on top of theinvestment carried out each year bythe hospitals. In total, the goal is toinvest nearly an additional EUR 10billion over a five-year period, ofwhich more than half will be fi-nanced from outside sources.

The “French HospitalsProgramme”

Based on this agreement, the EIB’s“French Hospitals Programme” willearmark EUR 500 million for the fi-nancing of medium-scale hospitalinvestment in France. The hospitalsconcerned are public healthcare in-stitutions (EPS) and private not-for-profit “Participants in the Public

Hospitals Service” (PSPH) whichhave “Multiannual InvestmentProgrammes” in the EUR 25-150million bracket.

Implementation of the EIB’s pro-gramme rests on a partnership withtwo leading French banking groupsand lenders to the French hospitalssector: Dexia Crédit Local and theCaisses d’Epargne Group. The re-gional directorates and networks ofthese two partners helped to iden-tify the investment schemes thatwill benefit from EIB funding onfavourable maturity and interestrate terms. Around 100 hospitalsare in the frame, with a range ofprojects: rebuilding or extension ofhospital sites, construction of newhospital facilities, remodelling ofmedical or medico-technical serv-ices, establishment of logistics ortechnical centres serving a numberof hospitals, renovation of existinghospitals, etc. More than half theschemes pinpointed are located inregional development areas.

Full gamut of financing facilities

Establishment of this programmecompletes the three tiers of supportfacilities that the EIB provides forFrance’s healthcare sector.

• For large hospitals, the EIBmakes available direct or inter-mediated individual loans cover-ing part of the long-term exter-nal funding that they requireto round off their financingplans. The University Hospitalsof Strasbourg and Toulouse andthe Fort-de-France and LyonsHospitals thus benefit from multi-annual agreements giving themaccess to EIB funds.

I

Spotlight: the “French Hospitals Programme”

Support for “PlanHôpital 2007”

In December 2003, the EuropeanInvestment Bank and the FrenchHealth Ministry signed a statementof intent under which the EIBwill join forces with the FrenchGovernment and other financial in-stitutions in the framework of the“Plan Hôpital 2007”. The statementof intent was signed in Paris byMr Jean-François Mattei, Ministerfor Health, the Family and theDisabled and Mr Philippe deFontaine Vive, EIB Vice-President.

The objective of the “Plan Hôpital2007” is to speed up modernisationof France’s hospitals by helpingthem to carry out capital invest-ment that budgetary constraintswould otherwise have ruled outduring the five-year period. Under

EIB Information regularly highlights specific projectspresenting a particular interest not only because oftheir innovative financial, economic or environmentalfeatures, but also on account of their exemplary fulfilment of the Bank’s objectives.

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• For medium-sized hospitals, it of-fers the best possible terms underthe French Hospitals Programmein partnership with Dexia and theCaisses d’Epargne.

• To help fund small-scale health-care schemes, it makes additionalresources available to banks underits “global loan” facility, in orderto enable them to improve theirlending terms.

The EIB has developed the FrenchHospitals Programme as part of itssupport for improved healthcare inEurope. This has been one of theEIB’s priority objectives since 1997,on the principle that such invest-ment contributes to the EuropeanUnion’s social cohesion by helpingthe less advantaged regions gainaccess to the best healthcare andhospital services.

Since then, the EIB has financed theupgrading and creation of hospital

infrastructure and healthcare facili-ties in the European Union to thetune of almost EUR 4.5 billion.Outside the EU, the healthcare sec-tors in Poland, Syria, Tunisia, Serbiaand Cyprus have also attracted EIBloans totalling some EUR 330 million.

Sabine ParisseInformation and

Communications Department3 (+352) 43 79 31 38

[email protected]

OOn 20 November 2003, EIBPresident Philippe Maystadt wasinvited to Brussels to address theplenary session of the Committee ofthe Regions for the first time.

The Bank’s participation reflects itsoverall strategy of openness anddialogue with the Community’s otherinstitutions and bodies. It affordedan opportunity to give the electedmembers of regional and localcouncils a presentation on the EIBGroup’s role, the Bank’s operationalpriorities, its contribution to the“Growth Initiative” and the EIF’s im-portance as an investor in venturecapital funds, particularly in theObjective 1 regions. The Presidentconfirmed to the Committee mem-

bers the priority thatthe Bank attaches toregional developmentand to economic andsocial cohesion in theenlarged Union.

This exchange of viewsnevertheless revealedthat the Bank is stillinsufficiently known,even within the Com-munity bodies. Several membersregretted its lack of visibility, withsome still confusing the EIB’s rolewith that of the ECB.

The presentation attracted livelyinterest from the members, and MrBas Verkerk, Deputy Mayor of The

Hague, expressed the wish to visit theBank with a group of Councillorsfrom the city.

Fabienne De MaertelaerBrussels office

EIB participation in plenary session of the Committee of the Regions

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TThe EIB Group’s Paris Office, opera-tional since mid-January 2004, willserve to strengthen liaison with in-ternational institutions and organi-sations based or represented inParis, in particular the World BankGroup, OECD and Council of EuropeDevelopment Bank, as well as withother organisations that haveshared areas of interest with the EIBand its subsidiary, the EuropeanInvestment Fund.

A further objective of this Officewill be to bring the EIB Groupcloser to the French authoritieswith which it deals, as well as topolitical circles and governmentalauthorities wishing to garner in-formation about its activities. Thenew unit will also provide compa-nies and other players operating inareas eligible for EIB or EIF financ-ing with support in their contacts

with all parts of the Group, partic-ularly its operational Directorates.

The opening of this Office slots in-to the wider policy of establishinga local presence close to the EIB’sinstitutional and operational in-terlocutors, in order to enhanceawareness of the ways in which theBank operates in support of theEuropean Union’s objectives, bothwithin the Member Countries andin the Partner Countries. In keepingwith this policy, under which therewas already a representative Officefor liaison with the European insti-tutions in Brussels as well as otherOffices in the Union, last June theEIB established an Office in Cairo –its first outside the Union. In thecontext of activities under FEMIP,the Bank is also preparing to set upoffices in the Maghreb. It is likewiseconsidering opening representative

offices in Africa to back up itsfinancing operations under theCotonou Agreement InvestmentFacility.

Henry Marty-GauquiéDirector – liaison with

international organisations EIB Group Office in Paris

EIB Group opens a representativeand liaisonOffice in Paris

Contact details for theOffice are as follows:

European Investment BankParis Office21, rue des Pyramides F-75001, Paris

3 (+33-1) 55 04 74 555 (+33-1) 42 61 63 02

The European Investment Bank Group recently set up a representative and liaisonOffice in Paris. Forming part of a policy of establishing a local contact point for operatorsand institutions with which theGroup has dealings, this Officewill have the task of monitoringinstitutional relations with non-EU international organisationsand supporting operations fromthe French capital.

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Appointments and reorganisation at the EIB

LuisBOTELLA

Mr Luis Botella Morales was appointed the Bank’s Financial Controller in December 2003.

A qualified accountant, he joined the EIB in 1987 as manager of the accounting area,with particular responsibility for adapting practice to International Accounting Standardsand European Directives. Appointed Head of the Accounting Division of the FinanceDirectorate in 1990, he was in charge of coordinating the changeover to the euro in 1998.In 1999, he was promoted to the Bank’s Senior Management Cadre as Associate Directorof Accounts, encompassing the new autonomous Financial Control and AccountancyDepartment when it was created in July 2000. Prior to his new appointment, Mr LuisBotella had been Deputy Financial Controller since February 2002.

AlainGODARD

Mr Alain Godard was appointed Director of the new ALM (Asset/Liability Management)Financial and Operational Risks Department of the Risk Management Directorate inJanuary 2004.

Previously, from 1999, Mr Godard headed the Financial Policy, ALM and Market RiskManagement Division of the Finance Directorate. At the time of his appointment, Mr Godard was also Director of the ISIS project, responsible for the Finance and Risk component. He will retain this responsibility alongside his office duties. Mr Godardentered the Bank in 1994 as an economist. From 1995, he was in charge of various services and projects in the areas of Asset/Liability Management, Risk and ManagementControl. Previously, Mr Godard was a consultant for Price Waterhouse in Paris andLondon, responsible for advisory services to the banking and financial community. He is a graduate in Economics and Finance and holds an MBA from the CommercialInstitute of Nancy (ICN). He is also a qualified accountant.

Financial Controller

Directors

FranciscoDE PAULA COELHO

Mr Francisco de Paula Coelho has been appointed Director of the Department forLending Operations in Asia and Latin America with effect from 1 April 2004.

A graduate of the Solvay Business School, Free University of Brussels (ULB), Franciso dePaula Coehlo worked successively as Financial Analyst at UNIDO, Assistant EconomicsProfessor at the Free University of Lisbon and consultant on promoting investment foremerging countries in New York, before joining the World Bank. He entered the EIB in1987 as a loan officer for ACP countries. In 1989, he moved to the Finance Directorate,first in the Treasury Department as Bond Portfolio Manager and then as Head of the Back Office Loans Division. In 2000, he was appointed Director of the Planning andSettlement of Operations Department.

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Director of Paris Office

Associate Directors

HenryMARTY-GAUQUIÉ

Mr Henry Marty-Gauquié was appointed Director for liaison with international institutions and organisationsbased or represented in Paris and Director of the EIB Group’s office in Paris as from 1 October 2003.

After gaining a doctorate in International Law at the University of Paris X, specialising in European Law at theUniversity of Paris I and graduating from the Paris Institute for Political Sciences, he began his career in 1978working for the French Prime Minister in the General Secretariat of the Interdepartmental Committee forEuropean Economic Cooperation (SGCI). As a French Government official at the Court of Justice of theEuropean Communities, from 1981 he held various positions within the European Institutions (Court of Justiceand Court of Auditors) before joining the EIB’s Information and Communications Division in 1989. In 1994, this Division was upgraded to Department, which he headed as Director of Communications and the Bank’sSpokesperson from 1995 until his latest appointment.

Henri-PierreSAUNIER

Mr Henri-Pierre Saunier was appointed Associate Director and Special Adviser in the Finance Directorate in July 2003.

A graduate of the French Legal Studies Centre of Saarland University and the Paris Political Studies Instituteand Research Officer at the National Research Support Centre (CNAR - Rural development), Mr Saunier joinedthe Bank’s Finance Directorate in 1971. Initially assigned to Borrowings, he moved to its Treasury in 1972 wherehe contributed inter alia to the creation of the first Back Office, to funds statements and projections and tocomputerisation of the Treasury. In 1980, Mr Saunier became head of Coordination in the Directorate forLending Operations in the Union. Finally in 1982, he was entrusted with the task of setting up theCoordination unit in the Finance Directorate which he supervised as Head of Division from 1984 until this latest appointment.

GuyBERMAN

Mr Guy Berman was appointed Associate Director of Operations Evaluation in July 2003.

Guy Berman has engineering degrees from the Paris Polytechnic and Mining Schools and a doctorate in geography from Paris University, and is a General Engineer of the French Mines Inspectorate. He joined theBank in 1980 as a loan officer for projects in ACP countries. In 1987, he was promoted to head a GeographicalDivision with responsibility for operations in various ACP countries and subsequently for project monitoringreports for the whole of this group of countries. Mr Berman was later assigned to operations coordination and led the SERAPIS project for renewing operations support IT applications throughout the Bank until it wasapproved at the beginning of 2002. Since the end of 2002, he has been in charge of ex-post sector evaluationswithin the Union.

Ms Grammatiki Tsingou-Papadopetrou was appointed Director of the South-East Europe Department of theDirectorate for Lending Operations in Europe in January 2004.

Ms Tsingou, a Civil Engineer and Economist (MSc), is a graduate of the Universities of Thessaloniki (Greece) andBristol (UK) and joined the Bank in 1985 following a career in Greece’s Public Works Ministry and at the GreekPermanent Representation to the European Union. Initially a loan officer for Southern Africa, she was subsequently involved in negotiation on the Bank’s behalf of the Third Lomé Convention and the RedirectedMediterranean Policy. In 1993, she was appointed loan officer for Central Europe. In 1996, she was made Headof Division with responsibility for Poland and the Baltic States and was promoted to Associate Director of theDepartment for Lending Operations in the Accession Countries in 2001. At the time of the appointment, Ms Tsingou was also EIB Alternate Director at the EBRD and in charge of the Bank’s operations in Russia under the new mandate entrusted to the EIB.

GrammatikiTSINGOU

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A Lending Directorate – the new shape of Europe

Momentous decisions taken by the European Council in 2003 concerning Enlargementwill radically alter the European Union as we know it today, as well as its policies andinstitutions. In order to respond effectively to the diversification of its activities and tocope successfully with the new challenges for the EIB presented by an enlarged Europe,the Bank’s Management Committee has decided to adapt the organisation of theDirectorate for Lending Operations in Europe.

Since January 2004, its new structure has therefore consisted of eight operationaldepartments:

Department headed by

The United Kingdom, Ireland, Denmark and EFTA Mr Thomas Barrett

Spain and Portugal Mr Carlos Guille

France and Benelux Mr Laurent de Mautort

Germany, Czech Republic and Slovakia Mr Joachim Link

Italy and Malta Mr Antonio Pugliese

Central Europe Mr Emmanuel Maravic

South-East Europe Ms Grammatiki Tsingou-Papadopetrou

The Baltic Sea Mr Thomas Hackett

New Directorate – Risk Management

In addition, the Bank’s Management Committee has decided to concentrate all credit riskactivities in one new “Risk Management” Directorate under the responsibility of DirectorGeneral Pierluigi Gilibert. This new Directorate will comprise two departments - “CreditRisks” headed by Mr Per Jedefors and “Financial and Operational Risks” headed by Mr AlainGodard – and a Coordination Division.

Management Control and new Control Committee

Finally, in order to enhance its capabilities for dealing with the management of change, themonitoring of objectives and reporting, the Bank has set up EIB Group Management Controland a Management Control Committee, under the responsibility of the Deputy SecretaryGeneral, Mr Rémy Jacob.

The Management Control structure groups together the Accounting and FinancialStatements Department, headed by Mr Luis Botella Morales, the Planning, Budget &Control Division under the responsibility of Mr Harry Grammatikos, Associate Director, andan Organisation unit. The Management Control Committee is composed of the Directors ofthe Human Resources and Information Technologies Departments, Messrs Andreas Verykiosand Patrick Klaedtke, and the Head of the Projects Directorate’s Economic and FinancialStudies Division, Mr Éric Perée.

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DDevelopment of public-privatepartnerships (PPPs) for projects thathave traditionally been carried outby the public sector is part of thegeneral trend towards privatisa-tion, deregulation and market dis-cipline, which has accelerated overthe last two decades. Challenged bya growing demand for market-ori-ented, efficient and safe publicservices, and confronted with in-creasingly constrained public fi-nance, many national governmentshave started to develop alterna-tives to the more traditional publicprocurement options.

PPPs can help to “fill the gap” be-tween investment needs and avail-able public money. However, themain logic behind PPPs is that, withinnovation, flexibility and manage-ment skills, obtained through awider pool of resources and expert-ise, the private sector can bring ef-ficiency in the design, financing,risk management, implementation

and operation of projects in a man-ner that will benefit the society asa whole. Nevertheless, to maximisethe “value for money” of PPPs anumber of conditions must be ful-filled. An important one is tochoose the appropriate PPP struc-ture and degree of private sectorinvolvement within the great vari-ety of existing models, which rangefrom traditional works or servicecontracts to full privatisation.

Since it started its activity in 1958,the EIB has dedicated a significantpart of its financial support to proj-ects aimed at improving the qualityof public services, with an emphasison physical long-term assets forwhich the Bank’s financial productsare particularly well suited. In thelast 15 years, a broad experiencehas been accumulated on the sub-ject of PPPs, the provision of effi-cient public services being one ofthe key pre requisites for achievingthe policy objectives set out in theBank’s Corporate Operational Plan.

Since the late 1980s, the EIB has ap-proved more than 100 projects inEU countries, which can be consid-ered to be PPPs in the broad sense.Total lending for these projectsamounted to 28 billion euros, ofwhich 21 billion euros had beensigned at the end of October 2003.Another 50 projects are in thepipeline involving loan applicationstotalling 10 billion euros.

The vast majority of PPP lending isconcentrated in the transport infra-structure sector (87% of total ap-provals). Health/education (9%)and water & sewerage (4%) are thetwo other main PPP sectors. With29% of approvals, the UK ranks first

in terms of PPP lending. Spain,Portugal and Denmark are second,third and fourth with 16%, 13%and also 13% respectively. The Bankis also involved in PPPs outside theEU (in Poland, South Africa andLatin America).

PPP lending really took off in themid-1990’s: 80% of approvals tookplace after 1996 and almost 50%after 2000, as a consequence of thediffusion of PPP practice in EU coun-tries. It now accounts for 30% oftotal lending for transport projects,20% for health & education proj-ects and 10% for water projects.

Flagship deals to date are DBFOroads and river crossings in the UK;Chunnel Tunnel Rail link andLondon underground; Spanish andPortuguese transport infrastructureprojects; Spata airport and the ringroad in Athens; Dutch high-speedtrain links; UK education and healthprojects.

It is likely that the volume andscope of PPP projects will keep in-creasing. The EIB intends to contin-ue and expand its support for PPPswhen and wherever national orregional governments considerthem to be the best way to achievepublic policy objectives. On thismatter, the Bank works in closecooperation with the Commission,public authorities and the privatesector.

Daniela Sacchi-CremmerInformation and

Communications Department3 (+352) 43 79 3130

[email protected]

The EIB and PPPs

Scut interior Norte,Portugal

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TGlasgow UrbanRenewal

The Glasgow Urban Renewal proj-ect won the “Municipal InvestmentAward” for 2002-2003 in Paris fromProject Finance Magazine. In thewords of the magazine, “the UKsocial housing sector has reachedanother level of funding sophistica-tion with the financial close of thebiggest housing stock transfer inEurope.”

The EIB has committed GBP 150 m(EUR 225 m) to this project, whichaims to repair and modernise socialhousing in Glasgow, Scotland’slargest city.

The project involves the transferof 81 000 homes from GlasgowCouncil to Glasgow HousingAssociation (“GHA”), and a 10-yearupgrade programme co-ordinatedby GHA. Debt funding, to a GHAsubsidiary, comprises some GBP700 m (EUR 1 bn) of long-term loansfrom the commercial banking sec-tor and the EIB, alongside contin-ued grant funding from theScottish government.

The transaction, signed by EIBVice-President Peter Sedgwick in

Glasgow, was the largest in the so-cial housing sector, as compared toother urban housing stock transfersto housing associations that havebeen a phenomenon of UK socialhousing for the past 10 years. Aswell as sheer scale, Project FinanceMagazine also highlighted the in-novation of the Bank’s approach tothe project: it came “with a numberof ‘bells and whistles’ that are firstsfor the sector”, ranging from theintroduction of “second stagetransfers” to smaller housing asso-ciations which will continue to in-volve the EIB over at least the next5 years to a special VAT regime.

The M4 PPP TollMotorway Project

The M4 PPP Toll Motorway Projectwas awarded “EMEA Infrastruc-ture Deal of the Year 2003” bythe publication Project FinanceInternational and “EuropeanTransport Deal of the year” byProject Finance (Euromoney).

The M4 PPP Project involves thedesign, build, finance and 30-yearoperation (DBFO) of a 35 Km mo-torway running west of Dublin(from Kinnegad to Kilcock) inIreland. The most interesting char-

acteristic of this project is thatthis was the first Irish road PPPtransaction and is part of a groupof 11 projects (the “Roads PPPProgramme”) expected to be fi-nalised over the next 4 years.

As there were no precedents forthis type of project in Ireland, allparties (the Irish National RoadsAuthority, the consortium of spon-sors led by the Spanish companyFerrovial, through its toll road con-cessions subsidiary Cintra, and theinternational banks) worked undertight time constraints, to identifyan acceptable allocation of risks be-tween the public and the privateparties and to develop a “bank-able” deal.

The EIB’s participation in the proj-ect, based on the Bank’s wide ex-perience in DBFO transactions else-where in the EU market, was par-ticularly appreciated by the IrishAuthorities and the sponsors, as itsignalled the Bank’s support of theIrish authorities’ policy for theirroads development programme.

The project agreements includingthe first EIB tranche of EUR 78 mwere signed in Dublin in March2003 by EIB Vice-President Michael

Four EIB projects received Project Finance Awards in 2003

Four EIB projects received Project FinanceAwards in 2003: the Glasgow Urban RenewalProject, the M4 PPP (Public-Private-Partnership) Toll Motorway Project (Ireland),the London Underground PPP Project and the Wastewater Treatment Delfland PPPProject (The Netherlands).

M4 PPP Toll motorway, Ireland

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Tutty in the presence of the IrishMinister for Transport, SeamusBrennan.

The market reception for the M4PPP financing is expected to have apositive synergy effect on the fi-nancing of the remaining transac-tions in the Roads PPP Programme,by increasing the interest of bothbanking and capital market institu-tions in this programme.

London UndergroundPPP

Tubelines – London UndergroundPublic Private Partnership Project,was named the “Best TransportProject 2003” by the Public PrivateFinance Awards of 2003 and “Dealof the Year 2003” by InfrastructureJournal.

The project is part of the moderni-sation of the London Undergroundsystem, which is one of most signif-

icant Transport projects undertakenin the United Kingdom in recentyears, and one of the largest PPPs inEurope to date. A total capital in-vestment in excess of EUR 30 billionis to be made over the next 15 yearsand the EIB is supporting the proj-ect with GBP 900 million (EUR 1.3bn) of term loan facilities: GBP 300million (EUR 436 m) were madeavailable to Tubelines at the end of2002 and GBP 600 million (EUR 872m) were committed in April 2003 toMetronet, signed in London by V-PPeter Sedgwick.

Under the London UndergroundPPP, Tubelines and Metronet areresponsible for maintaining, re-newing and upgrading the under-ground infrastructure while LondonUnderground Ltd., the public sectoroperator, remains responsible fortrain operations, customer servicesat stations and fare collection aswell as overall safety.

The Tubelines consortium consistsof Bechtel Enterprises Holdings Inc.,Jarvis plc, and Amey plc. The GBP300 million EIB term loan facility ispart of the GBP 1.94 billion (EUR2.82 billion) senior debt facilities, asubstantial part of which is to besecuritised. A syndicate of banks,led by Bank of Scotland, WestLB,Mizuho and Société Générale, isproviding the remainder of the sen-ior debt. A portion of the bank termloan is wrapped by Ambac. In theMetronet transaction the GBP 600million EIB facilities form part ofGBP 2.65 billion (EUR 3.85 billion) ofsenior debt. The other senior debtis provided by a syndicate of banksled by Deutsche Bank, CIBC WorldMarkets, Royal Bank of Scotlandand Abbey National, and both afixed-rate and index-linked bondissue wrapped by Ambac and FSA.

WastewaterTreatment DelflandPPP

The Wastewater Treatment DelflandPPP Project won the “European

Water Deal of the Year 2003” awardby Project Finance (Euromoney).

The project represents the firstsignificant non-recourse wastewaterscheme in continental WesternEurope. It equally marks a majorbreakthrough in the Netherlands,traditionally very keen to keep wa-ter management under the strictcontrol of the public sector and, lastbut not least, the first time the Bankhas participated in the financing ofa non-recourse wastewater PPPscheme.

The winning consortium, led byVeolia Water, was awarded a 30year concession comprising the con-struction of a new wastewatertreatment plant and the refurbish-ment and upgrading of an existingtreatment plant and associatedtransport system – serving theHague region – together with theoperation of both sites and of thebulk transport network. The rev-enues structure is essentially per-formance-driven.

The deal has a classic project fi-nance structure with the bulk ofconstruction and operations riskpassed through to separate special-purpose companies. The Bank con-tributed with a EUR 125 m termloan covering some 32% of financ-ing needs. The remaining seniordebt loan – arranged by Rabobankand Dexia Crédit Local – will be syn-dicated to a wider group of leadingbanks. In the wake of its successfulclosing and NPV gains for the pub-lic authority, the project is being in-creasingly hailed as a possible newmodel for procuring major waste-water infrastructure and a tem-plate for future water-treatmentdeals.

Robert Schofield, Bruno Denis,Jaime Barragan, Jukka Luukkanen,

Cheryl Fisher, Luca LazzaroliOperational Directorate for

Lending – A (Europe)

London Underground,

United Kingdom

Wastewater treatment Delfland,

The Netherlands

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I



In 1998, the Bank extended its ur-ban renewal activities to housingcomponents provided they formedan integral part of well-defined ma-jor urban renewal or regenerationprogrammes. This expansion of ac-tivities was in response to theEuropean Council of Amsterdam(June 1997) inviting the Bank tostep up lending for investmenthelping to create new jobs as wellas its operations in the urban envi-ronment sphere. The March 2000Lisbon Summit re-emphasized thatprotection and enhancement of thequality of urban environment was apriority for EU action. The EU hasbeen steadily incorporating the ur-ban dimension into its regional pol-icy, by designating urban projects as

eligible for Structural Funds and bydevising programmes specificallyaimed at cities. In response, theEIB’s approach to urban investmenthas evolved pragmatically over theyears. The Bank has developed arange of flexible products and prac-tices which enable it to support sus-tainable urban development strate-gies and investment programmes.Such investment in quality of urbanlife can help create new jobs andpromote greater economic and so-cial cohesion in the EU through thereduction of social disparity withinlarge conurbations.

Consistent with the EuropeanUnion’s policy objectives on urbanenvironmental improvement, theEIB’s financial support for socialhousing projects is focused on cre-ating more sustainable communi-ties. Social housing projects withincomprehensive urban renewal/re-generation strategies can help re-duce localised deprivation, socialexclusion and unemployment, pro-viding a better quality of life andeconomic performance of urbanareas.

Resources for financing socialhousing, including the renovationand construction of affordabledwelling units, are relativelyscarce. EIB long-term finance con-tributes to accelerating and/or in-creasing the investment of publicand private promoters attemptingto meet pressing needs in thesocial housing sector.

Rehabilitation of oldhousing units

The rehabilitation of decayinghousing units can be financed bythe EIB provided they have:

• a social dimension (programmesfor the improvement of old hous-ing assets belonging to non-profitentities, rehabilitation of dilapi-dated buildings rented or ownedby low income households);

• an environmental dimension (re-habilitation focusing on energysavings, i.e. insulation, doubleglazing, natural gas-fired heatingsystems, etc.), including therestoration of a classified building.

Over the past five years(1999-2003), the Bank haslent more than EUR 2billion (2.09) for 16 socialhousing projects locatedin the European Union(Austria, Belgium, Finland,Germany, Portugal, Spainand the United Kingdom)and EUR 213 million for 2 projects in Poland.Financing of social housing projects in the EUand the future MembersStates over this period represents a quarter(25.1%) of the total EIBlending of 9.17 billion forurban renewal projects(incl. building rehabilita-tion, urban renovationand restructuring).

Supporting Social Housing

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Construction of residential buildingsin the context of urban renewal/regeneration schemes

The transformation and upgradingof industrial buildings into residen-tial units, as well as the constructionof new residential complexes re-placing derelict housing, are eligi-ble for EIB funding if they are partof an urban renewal scheme. Inthe case of urban regenerationschemes involving a major transfor-mation of the area, the construc-tion of social housing outside theurban restructuring area to relo-cate residents (in order to reducedemographic density in the area)can also be supported by EIB fi-nancing.

EIB Financing of SocialHousing Projects

During the last five years, the EIBhas supported 7 major housing im-provement schemes in the UnitedKingdom. These include two loanstotalling EUR 139.6 million to theHousing Finance Corporation(THFC), a non-profit financial insti-tution which funds the providers ofsocial housing (the regulated sociallandlords, i.e. housing associations).The Glasgow Housing Association(GHA) was also granted a loan ofEUR 219.2 million for the urban re-newal programme for the city ofGlasgow, based on the regenera-tion of deprived neighbourhoodsthrough major rehabilitation ofhousing, the reconfiguration ofproblem estates including selectivedemolitions, and environmentalimprovements. The project in-volved the transfer of 81,000 homesfrom Glasgow Council to GHA anda 10-year upgrade programme co-ordinated by GHA. It has won the“Municipal Investment Award” for2003 from Project FinanceMagazine, which highlighted theEIB’s innovative approach featuring“a number of ‘bells and whistles’

that are firsts for the sector, rang-ing from the introduction of ‘sec-ond stage transfers’ to smallerhousing associations which will con-tinue to involve EIB over at least thenext 5 years, to a special VATregime”.

However, the majority of EIB-sup-ported housing schemes in the UKare local-impact housing projectsthrough specialised intermediariessuch as THFC, Abbey National,HBOS and other key UK institu-tions. This was the case with theEUR 240 million scheme signed withBank of Scotland (wholly-ownedsubsidiary of HBOS). The finance isto be made available as loans toRegistered Social Landlordsthrough Bank of Scotland HousingFinance to support medium tolarge-scale housing improvementprogrammes, particularly in theless-developed regions across theUK. Also worth mentioning is theEIB loan of EUR 122.7 million to theSunderland Housing Group for theupgrading of over 36,000 housingunits in the city of Sunderland inthe North East of England. As muchas a third of all homes in the areaare affected by the Sunderland pro-gramme, part of a broader strategyby both local community and busi-ness interests to combat the struc-tural industrial decline in the area.

In Finland, the EIB lent EUR 300 mil-lion in 2001 to the Housing Fund ofFinland for the rehabilitation of so-cial housing units and constructionof energy-efficient housing in ur-ban renewal areas. In charge of theFinnish national housing loan pro-gramme, this State agency providesfinancing for State-subsidisedhousing construction. Due to theextreme climate in the wintermonths, which keeps residents in-doors most of the time, special at-tention is given by FinishAuthorities to the physical qualityand durability of low-cost socialhousing. New construction appliessustainable technology and oldhousing is renovated to providebetter quality.

In 2003, the EIB granted its first loanfor housing in Spain. The first EUR50 million tranche of a EUR 100 mil-lion facility approved by the EIB’sBoard of Directors was made avail-able to the Institut Català deFinances (ICF) for part-financing theconstruction and refurbishment ofrented social housing in urbanrenewal/regeneration areas inCatalonia. The loan is being used tofinance the rental social housingcomponent of the Catalan HousingPlan for 2002-2007, which will in-crease the stock of rental socialhousing by at least 4 000 new units.

In Portugal, which suffers from a se-verely dilapidated housing stock inmany city centres and a seriousshortage of social housing for rent,the EIB lent EUR 150 million in 2003

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to Caixa Geral de Depósitos (CGD)to support housing rehabilitationprojects and urban renewal infra-structure promoted by public(mainly municipal and private sec-tor entities throughout the country.The EIB facility meets the munici-palities’ demand for long-term fi-nancing to spread the investmentburden and complements local eco-nomic development programmes inObjective 1 areas. It will also fosterthe rehabilitation of old residentialbuildings, contributing to thepreservation of the historic charac-ter of Portuguese city centres. Thisinvestment will improve healthconditions and well-being for manyfamilies belonging to the poorerpopulation strata and generate em-ployment in the construction andauxiliary industries. A first loan of

EUR 5 million was granted as farback as 1999 for the rehabilitationof the most dilapidated dwellingsin 14 social housing blocks inLisbon.

With two loans to the FlemishHousing Corporation of EUR 100 min late 2003 and EUR 75 m sched-uled to be signed at the end ofFebruary 2004, the Bank also con-tributed in Belgium to the con-struction of new social housing, therefurbishment of older socialdwellings and the conversion of ap-propriate and otherwise redundantbuildings to housing use in selectedurban localities. The majority of therenovation schemes were imple-mented in the context of broader-based urban regeneration strate-gies and are located in the main ur-ban centres of Flanders (Antwerp,Ghent, Kortrijk, Leuven, etc.) withparts of these cities still qualifyingas assisted areas. The FlemishHousing Corporation is a public en-tity whose mission is to providetechnical, financial and administra-

tive assistance to 118 local socialhousing corporations, co-ordinatetheir activities and act as a cen-tralised funding vehicle. The EIBlong-term finance will help in pro-viding the lowest income cate-gories with housing accommoda-tion at an affordable cost.

Since 2003, the EIB has also be-come involved in social housingprojects in Germany (in the city ofBerlin and in Saxony) to improvethe urban environment and ra-tional use of energy. A EUR 100million global loan was advancedvia Landesbank Berlin (LBB) to theState of Berlin’s developmentbank, Investitionsbank Berlin (IBB),for its rehabilitation/modernisationprogramme of old (pre-1970) rentalhousing stock, including invest-ment in energy saving via suchmeasures as better heating and in-sulation. Another EUR 150 m EIBglobal loan funded, throughSächsische Aufbaubank GmbH(SAB), the development bank of theFree State of Saxony, social housing

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rehabilitation and energy savingprojects in urban centres of Saxony.This will help in raising East Germanhousing standards still lagging be-hind average EU levels. Part of anintegrated strategy for urban re-generation, these projects will alsogenerate employment in areas witha high unemployment rate. Both inBerlin and Saxony, final beneficiar-ies of EIB finance are public and pri-vate housing companies/associa-tions and private individuals.

In Austria, the City of Vienna hassince 2002 benefited from EIB fi-nancial support for the comprehen-sive long-term improvement of itshousing stock (with energy-effi-cient refurbishment) within an in-tegrated plan for urban renewaland rehabilitation. Total financingof EUR 125 million over the last twoyears and a further loan of 50 mil-lion in early January 2004 were pro-vided, through the City of Viennaand a local bank, Hypo Alpe AdriaBank AG (HAA), to Wiener Wohnen(WW), the City’s not-for-profit pub-lic housing vehicle. Vienna has along tradition in social housing andWW is one of Europe’s largest land-lords, owning nearly 1 in 4 of ap-proximately 900,000 dwellings inthe city. The EIB’s commitment tosocial housing improvement willaddress the development and hous-ing needs of a city suffering from arapid process of transformationdue to its role of interface between

the European Union and pre-acces-sion countries. Bringing the facili-ties up to the required standardswill broaden their attractiveness todiverse population groups, re-inte-grating them within the urban mi-lieu.

To contribute to the sustainable de-velopment and restructuring ofEastern European cities in theirtransition towards EU standards,the EIB is also financing housingprojects in the Acceding countries.This is especially the case in Polandwhere EIB lending in this sector dur-ing the last two years amounted toEUR 213 million. A first project con-sisted in the financing of small andmedium-scale housing programmesaimed at renovating the low-costrental social housing stock showingevidence of severe deferred main-tenance affecting living conditions,as well as for the construction ofnew energy-efficient rental hous-ing. Investment was mainly concen-trated in derelict urban areas withthe largest housing deficits. Theimproved urban environment incities throughout Poland will helpto reduce regional disparities inhousing conditions, promote labourmobility and alleviate unemploy-ment. Better energy efficiency willcontribute to reduced air pollutionand CO2 emissions. A loan ofEUR 200 million was granted forthis project in 2002 to a local in-termediary, Bank Gospodarstwa

Krajowego (BGK), for HousingConstruction Associations (TBSs),often majority-owned by individualmunicipalities, and Housing Co-op-eratives (SMs) throughout Poland.Another EUR 13 million of EIB fi-nancing supported the City ofPoznan, for the rehabilitation andupgrading of 50 old buildings(many of them listed) located in ornear the historic centre of Poznanand owned by the Municipality.Significant energy-saving compo-nents, sanitary fittings and basicservices in line with EU standardswere included in the project. Thisrepresents the first phase of a widerurban renewal programme to im-prove living standards and fosterthe attractiveness of Poznan, thefifth largest city in Poland, in orderto reverse the “depopulation”trend of its central area. Strategicallysituated on the Berlin-Warsawtransport corridor, Poznan and itsregion are among the fastest grow-ing areas of the country. Overall,the project will help the city to of-fer a better urban environment andconverge with EU standards.

Valérie ThillInformation and

Communications Department3 (+352) 43 79 3149

[email protected]

954043_info 4/2/04 09:16 Pagina 28

T



A recent ex-post evaluation(1), carried out by OperationsEvaluation with the help of independent consultants,examined in-depth 21 urban development projects financed financed by the EIB in the European Union.The consultants visited the projects and spoke to theproject promoters and other important stakeholders asappropriate. Operations Evaluation also studied the in-house dossiers of another 26 projects to complementthe in-depth evaluations, in order to obtain as accuratea view as possible of the EIB’s activities in this field.

The European Investment Bank hasfinanced urban development proj-ects for many years. At first it onlyprovided loans for such projects inassisted areas. The focus then wason stimulating economic develop-ment in the poorest parts of the EU.However, since the end of the 1980sthe Bank has financed these proj-ects throughout the whole Unionand the goal has become muchbroader: to improve urban qualityof life and promote greater eco-nomic and social cohesion.

In the period covered by the EV re-port (1998-2001), funding for urbandevelopment projects in theEuropean Union totalled EUR 29.5billion, or 10% of all EIB lending in

the Union. Two thirds of thatamount went to urban transport:metro and urban railways, urbanroads, tram and bus projects, andcombinations of these various elements. The remainder went to “multi-objective, (called “urbanuse” projects in the evaluation)large urban restructuring projects,such as land reclamation and sew-erage systems, the renovation ofhistorical city centres and culturaland historical buildings, and, to alesser extent, social housing and thedevelopment of office space.Examples of all such projects wereincluded in the ex-post evaluation.

The main purpose of ex-post evalu-ation in the European InvestmentBank is to determine whether theinvestments that the Bank has fi-nanced contribute to the realisationof European Union and national

policy objectives and are of goodquality. After all, to finance such in-vestment is the raison d’être of theEIB. Ex-post evaluation also looks atthe value added by the Bank’s involvement.

Multiple objectives….

So why did the Bank finance theurban development projects thatthe evaluation looked into?According to the report, for manyreasons. Typically, the range of ob-jectives listed in the project docu-mentation was extensive. For a sin-gle project, the objectives mightinclude promoting economic devel-opment, reducing traffic conges-tion or increasing the reliability ofthe transport system, attracting for-eign and domestic visitors, and soon. With that many objectives – of-ten without an obvious order ofpriority – it becomes very difficult todetermine ex-post how well theproject performed and whether itshould be considered a success orfailure.

Faced with this situation, the evalu-ators took an unusual step. In retro-spect, working on the basis ofEuropean Union and national policyobjectives, they reformulated a setof seven fundamental objectives:

For the Sake of the City

(1) “EIB Financing of Urban Projects in theEU”, July 2003

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• Promote economic development,for example by contributing toeconomic activity, or by over-coming bottlenecks, especially inurban transport.

• Improve capability (capacity andreliability) of urban public trans-port. This can be done by reduc-ing journey times or by creatingnew direct connections, by im-proving the quality of service, etc.

• Improve physical attractiveness,ambience or image of the urbanenvironment, for example by pro-viding local rest and recreationfacilities such as parks and prom-enades, or promoting public imageprojects that receive widespreadpublic and political support.

• Enhance the environment. In anurban context, a typical exampleis the decontamination of pollutedand derelict land.

• Maintain European heritage, forexample by renovating historicalbuildings or city centres.

• Strengthen the compactness ofthe European City. One of thebenefits is the preservation ofopen landscape by restricting ur-ban sprawl; another is increasedemployment options and con-sumer choices.

• Maintain social cohesion, by re-ducing disparities within largeconurbations.

Judged against these objectives,the vast majority of the projectsthat were evaluated in-depth, weresuccessful. Based on the measure-ments of actual traffic, changes inmodal distribution and financialperformance, all transport projectsmet their key objectives and thepromoters’ needs. The urban useprojects were also considered effec-tive, with the exception of one pro-gramme that was too diverse toevaluate and one project the out-come of which was poor.

...but difficult togauge

This generally positive judgmentwas based on the data collectedduring the evaluation.

In transport projects, particularlyurban metro and public transportprojects, one of the prime objec-tives was to reduce traffic conges-tion by achieving a transfer of usersfrom private transport. However,that effect was difficult to monitoras were the wider benefits. It maybe understandable that promotershave difficulty monitoring thewider benefits associated with theirinvestments, but often they are im-portant. For example, the projects’contribution to improving the envi-ronment is a secondary objective inurban transport projects, but theprojects’ benefits in this area aredifficult to gauge.

The availability of data on whetherurban use projects are meetingtheir objectives was generally limit-ed. For example, for three projectsthe promoters could not providethe data for the main indicator ofsuccess (theatre attendance for re-stored theatres, number of non-lo-cal visitors to an extended tradefair, number of visitors on a newpromenade).

When issues such as these are pin-pointed, Operations Evaluation dis-cusses them with the operationaldirectorates and makes recommen-dations to improve the Bank’s ac-tivity as required. The evaluation ofurban development projects identi-fied other issues as well, of twokinds: at project level and concern-ing the Bank’s added value.

Project issues

One of the problems observed atproject level was unproductivecompetition. Regions and citiescompete with each other on manyfronts, including on investment andfinance. The positive effects of com-petition are well known: it is oftenone of the drivers of efficient pub-lic action. But when access to at-tractive finance, such as the EIB’s,comes into play, investment deci-sions might be inspired by a “metoo” attitude. This can stand in theway of an efficient allocation of

funds; in some cases competing in-vestments may actually harm eachother. Only in three out of the 21projects evaluated in-depth, theevaluators found some evidence ofunproductive regional competi-tion. In one urban use project, twoaccess roads were constructed to adeserted harbour with the objec-tive of reviving activity, eventhough some kilometres south –but in another county – there was abigger harbour with idle capacity.Another example of unproductivecompetition was the extension of atrade fair, which was fuelled by in-ter-city competition, but was situat-ed in a market segment that al-ready suffered from excess supply.

Some of the EIB’s lending for urbandevelopment went to groupedprojects, with the number of projects ranging from two to several hundred. Grouped loans orFramework loans are not necessari-ly a problem, the crucial factor be-ing the organisation and proce-dures on the promoter’s side.However, in the case of the largeprogramme loan for hundreds ofurban projects, implemented by aseries of promoters in one of theUnion’s capitals, it was a problem.The evaluation concluded that itwas simply impossible to knowwhether the objectives of the proj-ects were achieved beyond theirphysical implementation.

A third project issue concerned theparticipation of the private sectorin urban development projects.Public Private Partnerships as suchwere not the subject of the evalua-tion, but there were ten of them inthe combined in-depth / desk re-view sample. Half of them, four urban transport projects and oneurban use project, faced problemsbecause revenues were lower thananticipated or were seriously at risk.The causes were the non-acceptanceof (increased) tolls by local users, ac-tual traffic turning out lower thanexpected, and a downturn in pro-perty market prices. After public in-tervention, four out of the five

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projects went on to achieve satis-factory results. However, the PPPsthat experienced problems showthat risk allocation between publicand private stakeholders is a crucialissue. These PPPs were among thefirst financed and the Bank has ac-cumulated vast experience, also inrisk allocation, since.

EIB issues

The EIB’s involvement can add valuein at least two ways: technical and fi-nancial. The Bank normally dealswith competent promoters in theEuropean Union and contributingtechnical value added beyond theBank’s due diligence is rarely possi-ble. But even due diligence can bean important contribution. The eval-uation gives positive marks for theBank’s project appraisal procedures.Nevertheless, in three of the 21 ur-ban development projects, the eval-uators detected superior design al-ternatives producing equivalent or

The evaluation made a qualitativejudgment of the Bank’s financialvalue added, distinguishing threelevels. The first level of value arisesfrom the loan’s terms and condi-tions. The Bank’s comparative ad-vantage in this respect has beenprogressively eroded in the decadesince most of the projects in the ur-ban development evaluation werefinanced, but borrowers still men-tion flexibility on repayment op-tions, loan tenor and grace periodon repayment of principal as fea-tures that differentiate the EIBfrom other lenders. A second levelof value is added through theBank’s quality stamp: the fact thatthe Bank agrees to a loan has oftenacted as a catalyst that brings in fur-ther finance. The evaluation showsthat this aspect of financial valueadded remains important, half ofthe projects having been co-fi-nanced with other lenders. TheBank adds most value when it pro-vides financial expertise, offeringinnovative and attractive financestructures. Among these projects fi-nanced in the 1990s, there was one

such case. In that particular case, aPPP, the Bank also accepted projectrisk and drew in other sources of fi-nance.

Learning from the past

By covering issues that are verymuch in the spotlight today, the ex-post evaluation of urban develop-ment projects not only looks back,but also helps the EIB to fulfil itsrole as the European Union’s fi-nance institution in future opera-tions. There are lessons learnedconcerning the sector, but the eval-uation also points at wider issuesthat the Bank must continue to ad-dress: awareness of regional com-petition, the problems that must be

dealt with in grouped or Frame-work loans, the importance of riskallocation in Public Private Partner-ships, and the way in which the EIBcan best add technical and financialvalue.

Cees PostOperations Evaluation3 (+352) 43 79 9275

[email protected]

ISLAS CANARIAS (ES)

MADEIRA (PT)

AZORES

Financing provided for urban development 1995-2003

Urban transport

Bypasses, ring roads

District heating and/or waste incineration

Urban development

Social housing

Urban water schemes

Regional water programmes

Natural disaster

954043_info 4/2/04 09:16 Pagina 31

TThe Prime Minister, who wasaccompanied by Mr. ImreRéthy, State Secretary of theMinistry of Economy andTransport and Mr. István Salgó,Deputy State Secretary of theMinistry of Finance and Mr.János Eros, Chief ExecutiveOfficer of the Hungarian Bankfor Development, discussedwith EIB representatives devel-opment of Hungarian infra-structure, especially the projectfor extension of the Hungarianmotorway network and up-grading of the Budapest metroin addition to EIB support inother fields such as researchand development.

EIB lending policy in Hungary isfocused on financing invest-

ment projects that contributeto economic integration ofHungary into the EU and helpto implement European stan-dards in various sectors such asthe environment. This includessupport for investment intransport and the environ-ment, energy and communica-tions, industry and foreign in-vestment, in addition to futurepossibilities in areas such ashealth and education. The EIBhas also extensively co-fi-nanced European Union funds,under the ISPA programme,and this will continue with EIBsupport for Cohesion andStructural Funds financing.

Since 1990, the EIB has lentover EUR 23 billion in total in

Central and Eastern Europe.Loans provided to Hungary sofar amount to EUR 3.2 billion,of which EUR 1.252 billion (al-most 40%) has gone to trans-port projects. Global loan facil-ities aimed at supporting smalland medium-scale projects ex-ceed EUR 700 million (approx.20% of total loans provided toHungary).

Dusan OndrejickaInformation and


is published periodically by theInformation and CommunicationsDepartment of the EuropeanInvestment Bank.

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Layout: EIB graphic workshop,Sabine Tissot

QH-AA-04-116-EN-C©EIB - 03/04 - EN

Visit of Hungarian Prime Minister

P. Medgyessy, P. Maystadt, W. Roth

Prime Minister of Hungary Mr. Péter Medgyessywho paid an official visit to the Grand Duchy of Luxembourg met President of the EuropeanInvestment Bank Mr. Philippe Maystadt and EIB Vice-President Mr. Wolfgang Roth on 3 December 2003.

954043_info 4/2/04 09:16 Pagina 32

Documents

EIB Information 1-2004 (n°116)1 - 2004 • N 116 ISSN 0250-3891 1-2004 EIBInformationEIB The EIB’s annual Press conference on the EIB Group’s activity in 2003 was held on 4 February