Carty morning EIB TEN-T Project Financing and Specialised ...
Transcript of Carty morning EIB TEN-T Project Financing and Specialised ...
1European Investment Bank
Seminar on TEN-T PROJECT FINANCE AND PPPs
EIB TEN-T Project Financing and Specialised Financial Products
Andy CartyBrussels, 01 June 2010
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The European Investment Bank (EIB)Long-term finance promoting European objectives
European Union’s long-term lending bank set up in 1958 by the Treaty of Rome.Shareholders: 27 EU Member States Governance
Board of Governors – EU Finance Ministers Board of Directors - Member States & European Commission Management Committee –EIB’s executive body Audit Committee – independent, non-resident
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The European Investment Bank (EIB)European priority objectives
Within the Union:Cohesion and convergence Small and medium-sized enterprises (SMEs)Environmental sustainabilityKnowledge EconomyTrans-European Networks (TENs)Sustainable, competitive and secure energy
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Infrastructure financing needs – Transport Trans-European Networks (TEN)
The estimated TEN-T investment requirement in 2007-2013 is ca. €390bn Potential Sources of Finance:
National Public resources finance ca. 40-50%
Private sector risk finance needed to finance 20-25%
EIB loans finance ca. 15-20% of TENs investments
Commission resources (Structural Funds and TENs) cover ca. 15%
Source: DG MOVE, EIB
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EIB’s support for Trans-European Networks (TENs)
Large transport and energy infrastructure networksTransport supporting development and integrationSecurity and diversification of internal energy supply
Loans of EUR 12.7bn in EU in 2009:EUR 10.7bn for TEN TransportEUR 2.0bn for TEN Energy
Total loans of EUR 49.9bn 2005-2009EUR 42.9bn for TEN TransportEUR 6.9bn for TEN Energy
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Clear step-up in EIB TEN lending activityTotal TEN signatures (EUR bn)
0.02.04.06.08.0
10.012.014.016.0
2004 2005 2006 2007 2008 2009
27%27%46%37%42%40%Percentage of total TEN-T in Rail
0.81.60.50.00.20.0SFF in TEN-T
11.18.37.87.97.16.6Senior loans
1.12.90.91.30.20.3PPP in TEN-T
10.16.75.25.24.44.4Other Projects
1.83.23.12.72.92.2Priority Projects
TEN-T
11.99.98.37.97.36.6TEN-T
2.02.71.40.40.91.3TEN-E
13.912.69.78.38.27.9TEN
200920082007200620052004EIB Funding
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In addition to standard EIB Senior loans for TENs projects, EIB also provides:
Structured Finance Facility (SFF): to fund projects with a higher risk profile and enable equity financing; mezzanine and guarantee operations for infrastructure schemes
Loan Guarantee Instrument for TEN Transport projects (LGTT): EUR 5 bn EIB guarantee programme for which EUR 1 bn risk capital has been jointly provided by the EIB and EU budget. LGTT shares the revenue risk in the early years of TENs projects
Investments in Equity Funds: EIB invests in equity funds, e.g. Marguerite, which in turn take direct equity participations in infrastructure investments
European PPP Expertise Centre (EPEC): Expertise service provided by the EIB and European Commission to support programme and policy development as well as best practice by the public sector for PPP transactions.
Joint Assistance to Support Projects in the European Regions (JASPERS): a joint policy initiative of EIB, DG REGIO, EBRD and KfW to provide assistance for absorption of Structural & Cohesion Funds period 2007 to 2013
European Clean Transport Facility (ECTF) is a major EIB financing programme to support investments targeting RDI (Research, Development and Innovation); emissions reduction and energy efficiency in the European transport industry. EIB lending under the ECTF facility currently amount to EUR 4.2 bn and targets automotive (OEMs/Suppliers), railroad, aircraft and shipping industries as well as related infrastructure.
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EIB as a financier of PPPs• PPP an important additional instrument for infrastructure investment
• Since 1990, EIB has progressively broadened geographic and sectoral spread of its PPP lending
• The Bank is now Europe’s foremost funder of PPP projects. Portfolio of 120 projects and investment of around EUR 25 billion
• Signatures in 2008 in excess of EUR 3.5 billion. Despite difficult economic conditions in 2009, signatures exceeded EUR 2 billion.
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EIB support for major transport PPPs
TRANSMONTANA MOTORWAY (PT) - €289m
IP4 AMARANTE-VILA REAL (PT) - €200m
DOURO LITORAL PPP (IC 24) (PT) - €350m
A1 MOTORWAY - 2ND PHASE (PL) - €575m
2ND COEN TUNNEL PPP (NL) - €194
AEROPORTI DI ROMA II (IT) - €80m
M6 DUNAUJVAROS-SZEKSZARD (HU) - €200m
BAIXO ALENTEJO MOTORWAY (PT) - €225mE-K-P-P-T MOTORWAY PPP PROJECT (GR) - €200m
SCUT ACORES (PPP) TRANCHE BBVA (PT) - €60mAUTOROUTE A88 PPP (FR) - €102m
SCUT ACORES (PPP) TRANCHE BST (PT) - €60mTRAMWAY DE REIMS PPP (FR) - €107m
M80 MOTORWAY PPP (GB) - €157mAUTOROUTE A 19 (TEN/SFF) (FR) - €200m
M25 WIDENING TRANCHE A (GB) - €448mAUTOVIAS RENOVACION PPP (ES) - €211m
METRO DE SEVILLA DBFO 1&2 (ES) - €10mMETRO DE MADRID IV- TR C (ES) - €50m
AUTOBAHN A-5 PPP TEN (DE) - €225mINFRABEL RAIL TUNNEL PPP (BE) - €313m
2009200920082008
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EIB Structured Finance Facility - SFFPurpose of SFF is to create value added by financing riskier parts of selected transactions and by increasing EIB leverage and financing capacity. EIB’s total SFF financing of EUR 4.2 bn in 2008, EUR 5.8 bn in 2009
SFF Target Companies risk profile
Moody's S&P and Fitch… …A1 A+A2 AA3 A-
Baa1 BBB+Baa2 BBBBaa3 BBB-Ba1 BB+Ba2 BBBa3 BB-B1 B+… …
Corporate Ratings
SFF allows EIB to increase the leverage on its own Funds and those of the EU Budget through Structured Finance
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LGTT – EUR 5 bn Loan Guarantee instrument
LGTT is a specialized risk based instrument developed by the EIB in cooperation with the European Commission.
The LGTT Guarantee Facility is designed to provide contingent mezzanine debt and thereby to protect senior debt in TENs projects that are exposed to traffic risk.
It provides up to 20% of additional mezzanine debt funds to meet traffic down side scenarios
LGTT makes the capital structure more robust to traffic; project and financial uncertainties
In current market circumstances, LGTT proved decisive to attract senior lenders and to close PPP projects with traffic risk components.
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European PPP Expertise Centre
- European PPP Expertise Centre a collaborative initiative of the EIB, the Commission and EU Member States.
- EPEC’s mission to assist the public sector to address shortcomings in organisational capacity and promote expertise and experience sharing.
- Good practice guidance is disseminated among EPEC’s members with the aim of enhancing public sector management, reducing PPP costs and increasing deal flow.
- Analysis of the impact of the credit crisis, and the responses of the public sector (guarantee instruments, co-lending facilities, funding competitions and book building) has been the core component of EPEC’s work in 2009.
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Technical Assistance – JASPERS
Joint Assistance to Support Projects in the European RegionsJoint policy initiative of EIB, DG REGIO, EBRD and KfWAssistance for absorption of Structural & Cohesion Funds period 2007 to 2013Assistance with project presentation and identificationAnalysis of horizontal issues such as grant/loan blendingProject implementation support to follow in second phase
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European Clean Transport Facility (ECTF)
ECTF facility is targeting RDI (Research, Development and Innovation) investments in emission reduction and energy efficiency in the European transport industry.
This Risk Sharing facility targets larger scale investments with corporate sponsors (or project finance structures).
Such risk-sharing facility is used for example for investments in:
(i) intelligent traffic management (e.g. variable message signs, advanced traveller information systems, advanced driver’s assistance, speed advisory/control, electronic tolls, etc.), and
(ii) “Smart” vehicles (e.g. Advanced Drivers’ Assistance, accident sensors, automated guided vehicles, navigation systems, inter-vehicle communications systems etc.), and “Green”vehicles (application of ICT in reducing the congestion of vehicles).
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EIB Fund Investments
5285243Total
Renewable Energy, TEN-T, TEN-E
EU
100710Dec-09
2020 European Fund for Energy, Climate Change & Infrastructure [Marguerite]
Energy Efficiency & Renewable Energy
SE Europe including Turkey
2595Dec-09
SE Europe Energy Efficiency Fund
PPPEU50175Dec-09
Meridiam Infrastructure Fund II
Timberland assetsWorldwide (40% Europe)1785May-09Dasos Timberland Fund I
PPP / Renewable Energy
NW Europe35220Dec-08
DIF Infrastructure Fund II
Renewable EnergyES,PT1596May-08
Espirito Santo Infrastructure Fund
Renewable EnergyES,PT1541Dec-07Green Alliance Renewable Fund
PPPEU50547Oct-06Meridiam Infrastructure Fund
ITC expansionCentral & Eastern Europe351531Aug-07Mid Europa Fund III
Renewable EnergyBenelux, FR, DE, Scandinavia25314Sep-07
DIF Renewable Energy Fund
Renewable EnergyCEE2598Jun-07Enercap Power Fund
PPPIT18120Dec-06San Paolo IMI Infrastructure Fund
PPPUK, IE, FR, DE28315Jul-06Barclays European Infrastructure Fund
PPPNW Europe15121Aug-05Dutch/Northern EU Infrastructure Fund
PPPFR, IT, ES, PT25120Mar-06Dexia Southern EU Infrastructure Fund
ITC expansionCEE50655Aug-05Emerging Europe Convergence Fund
EUR (M)EUR (M) Sector FocusGeographical Focus
Total EIB CommitmentFund Commitment
First closingFund
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2020 European Fund for Energy, Climate Change and Infrastructure – the Marguerite Fund
The Fund targets an equity base of EUR 1.5bn and an associated Debt Co-Financing Initiative (DCI) of EUR 5bn
Major publicly funded Core Sponsors (EIB, CDC, CDP, ICO, PKO and KfW) as well as the European Commission, CGD and Bank of Valetta are backing this Fund; also Nordic Investment Bank and Black Sea Trade & Development Bank support it through the Debt Co-financing Initiative. Public and private sector investors from all EU countries are expected to join at a later stage.
Target sectors: TEN-T, energy and climate change
Focus on solid IRR targets - Fund to give preference to projects with satisfactory Economic Rates of Return (ERR)
Expected to be a model in the future for other similar public and private funds so as to attract Capital Market Institutions (including private and public pension funds and insurance companies) to invest in TENs infrastructure
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Future Financing of Trans-European Networks (TEN)
TEN-T investment programme is so large that there is currently uncertainties relating to the scale of investments and the way it is to be financed. Continued EIB effort to develop private sector participation in TENs funding
Source: DG MOVE, EIB
Comprehensive Network EU 27, 2020 horizonTranseuropean Transport Network 2007-2013
EU 27
Cost (€ billion)TEN-T Basic Network 390- New Member States (EU 12) 70- Old Member States (EU 15) 320
Community contribution (€ billion)Programme TEN-T 8Cohesion Fund 35ERDF (regions convergence ) 9EIB Loans and guarantees (estimated) 60-70
Total Community contribution (€ billion)Grants 52Grants and Loans 112-122
Balance to be financed from public (national) or private sources 270-280
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Europe 2020 StrategyCommunication from the Commission
3 mutually reinforcing priorities:Smart growth, developing an economy based on knowledge, innovation, education and digital society; Sustainable growth, promoting a low-carbon, resource-efficient and competitive economy; and Inclusive growth, fostering a high employment economy delivering social and territorial cohesion.
Seven Flagship initiatives:Innovation union - re-focussing R&D and innovation policy on major challenges;Youth on the move - enhancing the quality and international attractiveness of Europe's higher education system;A digital agenda for Europe - delivering sustainable economic and social benefits from a Digital Single Market based on ultra fast internet;Resource-efficient Europe - supporting the shift towards a resource efficient and low-carbon economy;An industrial policy for the globalisation era - helping the EU's industrial base to be competitive in the post-crisis world;An agenda for new skills and jobs - creating the conditions for modernising labour markets;European platform against poverty - ensuring economic, social and territorial cohesion.
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EIB’s Role in Facilitating additional TEN-T investment
Facilitating Investment by Capital Market Institutions in infrastructure through guarantee and subordinated debt instruments
Establishing Equity Funds to finance TEN-T Infrastructure such as the 2020 European Fund for Energy, Climate Change and Infrastructure – the Marguerite Fund
Improvement of the coordination of EU Funds
Expand the development of knowledge sharing/expertise advice such as EPEC and JASPERS
European Clean Transport Facility (ECTF)
Possible broadening of the scope of LGTT
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Facilitation of the issuance of bonds through subordinated debt instrumentsGreater availability of subordinated debt tranches could enhance the credit of projects. The size of this tranche would depend on the risk profile of the project/portfolio as the purpose is to uplift the credit profile of the higher ranking senior debt financing to single-A ratingInstitutional investors would be interested to invest in the sector. The subordinated tranche could, inter alia, be provided on contingent basis by EIB (subject to its standard credit and other requirements), which would make it similar in structure to LGTT,Suitable for risk sharing between public and private institutions.TEN-T budget could contribute to such instrument through risk sharing.
Shareholder funding
Subordinated Tranche
Senior Tranche –
Project Bond
Normal or elevated level of equity/shareholder/mezzanine debt
Size depends on the project
Target rating A/AA
Expansion of Investment by Capital Market Institutions
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Guarantor
Project SPV
Capital Market Investors
Proceeds of Project Bond Issue
Guarantee Facility Agreement
Debt service guarantee Other senior
debt providers
senior debt
Public Authorities
Facilitation of the issuance of bonds through guarantees
• Instead of loans EIB can provide guarantees – the provision of guarantees is subject to substantially the same requirements and terms & conditions as loans. • Such guarantees could also be provided using Community Budgetary funds on Risk Sharing basis.
Expansion of Investment by Capital Market Institutions
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Possible broadening of the scope of LGTT
In order to reach a larger pool of candidate projects, EIB/EC consider that broadening the scope of LGTT to availability-based schemes is worth examination.
This would allow targeting significant investments in the rail and inland waterway projects which are in many cases being procured as availability-payment –based PPPs.
A clear focus would be to introduce even stronger support for TEN-T priority Projects, most of them in the Rail sector.
This innovation could substantially open Rail PPPs to Capital Market Financing.
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Improvement of the Coordination of EU Funds
The TEN-T budget and Cohesion Fund are among the most important providers of Community support for the implementation of the TEN-T projects
Their roles, availability, as well as the way they are managed vary substantially.
An improved system of coordination could be envisaged, perhaps based on EC/EIB/National Task Forces
These task forces could i) assists national authorities to make the best use of the available Community resources and ii) oversee and coordinate the implementation of the TEN-T network, ensuring the commitment to individual projects.
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Contacts
http://www.eib.org
Andy Carty, Special Advisor, [email protected], tel +352 43 79 77012
Jukka Luukkanen, Head of Division, [email protected], tel +352 43 79 86412