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The Connecting Europe FacilityFinancing the TEN-T

infrastructure

Stephan Ouaki

European CommissionDG Mobility and Transport

Head of Unit B4 – Connecting Europe, Infrastructure investments strategies

Valencia – 24 October 2012

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Connecting Europe FacilityOne instrument – three sectors

Financing framework 2014-2020

Sectoral policy frameworks

(setting priorities for 2020, 2030, 2050)

The "European Infrastructure Package"(European Commission proposal, October 2011)

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Revision of the TEN-T Guidelines

. Revised TEN-T map – two layers approach» Comprehensive network will cover entire EU, accessibility for all citizens and

businesses

» Core network: a selection of the most important parts of the network to be realised as a priority until 2030

. Clear technical requirements and standards with clear implementation deadlines» 2030 (core network) and 2050 (comprehensive network)

. Telematic applications for a fully interoperable network» ERTMS, SESAR, ITS, RIS, VTMIS

. Core network corridors as a means for reinforced coordination of TEN-T infrastructure development» 10 core network corridors

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Today: still a patchwork….

Priority Projects (PP) design PP's state of implementation 2012

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By 2030: the network

The TEN-T core network (rail freight)

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Governance structures for coordinated implementation

Corridor Work Plan - coherent, demand-driven project implementation;

- efficient infrastructure use

•Deployment of interoperable traffic management systems

•Removal of physical, technical, operational and administrative barriers between and within modes

•Coordination of infrastructure planning and exploitation: efficient multimodal transport and services

•Improving administrative and technical capacity

« European coordinators » in a pivotal role•Development and implementation (investment planning, costs estimation, timeline, measures for deployment of new technologies)

Core network Corridors

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10 core network corridors

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European transport systemInvestment needs

• €1.5 trillion of investment needs by 2030

• TEN-T alone: €500 billion by 2020

• TEN-T Core Network: €250 billion by 2020• Estimate based on discussions with MS on

their project portfolio

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Connecting Europe FacilityBudget (EC MFF proposal June 2011)

€31.7 billion (transport funds) €19.7bn: grant component (estimate)

With an estimated average co-funding rate of 20% could generate €98.5bn

€2bn: innovative financial instruments (estimate of market take-up) With an estimate leverage of up to 15 or 20 could generate total investments

of €30bn to €40bn

€10bn to be transferred from the Cohesion Fund (grants) To be allocated exclusively to projects in Cohesion Fund eligible Member States With an estimated average co-funding rate of 85% could generate €11.5bn

€140bn to €150bn: total amount of investments that could be generated

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CEF transport budget allocation

• 80 – 85 % of for pre-identified projects listed in CEF Annex

• horizontal priorities, • sections on 10 core

network corridors,• other important core

network sections

• 15 – 20 % for other projects on the core and comprehensive networks

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CEF funds: Centralised management

Project selection and resources allocation (EC)

!!but NOT the organisation of public procurement and awarding of contracts

Same criteria for project proposals coming from all Member States (quality, maturity, EU added value)

Concentration on projects with high EU added value (cross-border missing links, boosting multimodality, ensuring interoperability of networks across borders and modes)

Increased efficiency of EU budget spending (competition, "use-it-or lose-it" principle)

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CEF grants (1): Centralised management procedures

Work programmes (multiannual & annual)

Calls for projects Info Days (TEN-T EA + EC)

Application (paperless via TENtec; TEN-T EA support)

Selection (external experts + TEN-T EA + EC)

Funding Decisions for selected projects (EC)

Monitoring of project implementation (TEN-T EA + EC) "Use it or lose it"

€10 bn Cohesion Fund: exclusively dedicated WP and calls, more favourable co-funding rates (≈ CF rates)

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CEF grants (3): Co-funding rates

Types of ProjectsAll Member States

Member States eligible for Cohesion Fund

(a) Studies (all) 50% 80-85%

(b)Works on

Rail Cross border 40% 80-85%

Bottleneck 30% 80-85%

Other projects of common interest 20% 80-85%

Inland waterways Cross border 40% 80-85%

Bottleneck 30% 80-85%

Other projects of common interest 20% 80-85%

Inland transport connections to ports and airports (rail and road) 20% 80-85%

Development of ports 20% 80-85%

Development of multi-modal platforms 20% 80-85%

Reduce rail freight noise by retrofitting of existing rolling stock 20% 20%

Freight transport services 20% 20%

Secure parkings on road core network 20% 20%

Motorways of the sea 20%30% (Council proposal)

20%30% (Council proposal)

Traffic management systems ERTMS (rail) (+ RIS & VTMIS – Council proposal)

50% 80-85%

Other modes 20% 80-85%

Cross border road sections none(Council proposed 10%)

80-85%

New technologies and innovation for all modes of transport (Council proposal)

20% 20%

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CEF financial instruments (1): forms

2 types of financial instruments:

Equity Risk-sharing instruments to provide loans and/or guarantees (such

as LGTT or Project Bonds)

Implementation by financial partners, such as EIB, in accordance with Financial Regulation

Combination of innovative financial instruments (e.g. Project bonds) and EU direct support (i.e. grants) to optimise the impact of financing

Possibility for MS (directly or through Structural Funds), other EU funds and/or investors to top up the CEF financial instruments

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CEF financial instruments (2): implementation

Working with a financial partner such as EIB

Details of instruments set up in cooperation agreement with financial partner

Budgetary transfer to the financial partner decided every year based on expected project pipeline and needs

Work programme but no calls project promoters contact the financial partner directly

Financial partner decides on economic and financial viability of project to be supported (first come first serve basis, but efforts should be made to ensure sectoral and gradual geographical diversification)

Project bonds: Lessons learned from LGTT and RSFF EIB should be the partner for Project bonds Other financial institutions are not excluded

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Role of Regional and Local Authorities

Support for: preparation of project pipeline (including as part of Cohesion Policy

National Operational Programmes)

planning and coordination of project implementation with other TEN-T projects (particularly on core network corridors /"Corridor platforms")

synergy exploitation planning (energy, broadband works)

mobilisation of project promoters

acceleration of work permits granting

environmental impact studies

communication with the local communities impacted

If also project promoters/beneficiaries + adequate planning/commitment of budgetary resources

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Europe 2020 Project Bond Initiative: A pilot phase in 2012-2013

Project bonds to be an integral part of the CEF 2014-2020

Past experience (especially LGTT) shows time lag for banks and project sponsors to incorporate complex new ideas into their financing structures

In the case of project bonds also have to allow investors (pension funds, insurers) time to analyse and adapt asset allocation

Pilot phase in order to start this phase now rather than in 2014

Funded by reallocating up to EUR 200 million from TEN-T, up to EUR 10 million from TEN-E and up to EUR 20 million from CIP ICT budget lines

Aim to support 5-10 projects in transport, energy and/or ICT

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Project bonds: how does it Project bonds: how does it work?work?

European Investment Bank

Project BondsTarget rating

minimum A-

Bond Issue and underwriting

SPVProjectCosts

Equity & Quasi-equity

Project Bond Investor

up to 20% of total Bond

issue

Project Company will divide itsdebt into two layers:

A Senior tranche, which will be issued as Project Bonds and placed with institutional investors (insurance companies, pension funds, etc.)

A (smaller) Subordinated tranche, which would be underwritten by the Commission and the EIB, in a funded (loan) or unfunded (guarantee) form.

Subordinated debt maximum 20% of total debt

EIB and EU to receive a fee and/or credit marginA mechanism to “credit enhance” senior debt

and thus attract capital market investors

EIB Sub-debt

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Structural funds: complementary EU financial support for transport

infrastructure developmentCohesion Fund (CF)

• €34 billion (out of which €10 billion within CEF) for transport infrastructure in eligible Member States

• TEN-T sections (both core and comprehensive)• Up to 85% of eligible costs

European Regional Development Fund (ERDF/FESR)• A part of total ERDF €170 billion to be dedicated to transport

infrastructure• TEN-T sections (both core and comprehensive)• Connecting secondary and tertiary nodes to TEN-T

infrastructure• Less developed regions: up to 85% of eligible costs• Transition regions: up to 75% of eligible costs

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Connecting Europe Facility RegulationState of play

19 October 2011 – Commission proposal

7 June 2012 – TTE Council (Transport) adopted a Partial General Approach supportive of the CEF approach; limited number of outstanding issues: amounts (discussed in MFF context), €10 bn to be transferred from the Cohesion

Fund, and financial instruments (mostly to align to general Financial Regulation)

18-19 July 2012 – CoR Opinion (Mr Zagar) Generally supportive (constructive amendment on the €10bn) A number of requests for differential treatment of certain categories of regions

10 October 2012 – EP REGI Committee Opinion Generally supportive (amendments on €10 bn to be voted on 26 Nov)

12 October 2012 – EP BUDG Committee MFF 2014-2020 Report Clear strong support for providing high CEF budget (€50 bn EC proposal or more)

27 November 2012 – EP TRAN Committee to adopt Reports on CEF (and TEN-T Guidelines) Expected general strong support to Commission's proposals

end November 2012 – European Council expected to adopt political orientation for EU budget MFF 2014-2020

Budget for CEF will be determined

January 2013 – Expected EP first reading on CEF (and TEN-T Guidelines)

First half 2013 – trialogues EP, EC, Council

Mid 2013/end 2013 – Expected adoption of CEF (and TEN-T Guidelines) Regulation

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Thank you for your kind attention!

http://ec.europa.eu/transport/infrastructure/index_en.htm