European Investment Bank EIB Participation at the International experts workshop: “Assessing the...

European Investment Bank

EIB Participation at the International experts workshop: “Assessing the economic competitiveness of the European Automotive Embedded Software industry”

Andres Gavira Etzel

Brussels 28th April 2010

228.04.2010 European Investment Bank

Outline

Introduction of EIB

The ECTF

The Impact of the Crisis on the Semiconductor Industry

The RSFF


European Investment BankProfile

EIB was created by the Treaty of Rome in 1958

EIB is a not-for-profit, policy driven institution

EIB is 100% owned by the 27 EU member states

EIB has subscribed capital of EUR 232.4 bn as of 2009

EIB is AAA rated

EIB funds itself on the capital markets: EUR 79.4 bn in 2009

EIB signed loans amounting to EUR 79.1 bn in 2009

EIB is the largest multilateral financing institution

The European Investment Bank is the European Union‘s long-term financing institution. The

Bank acts as an autonomous body set up to finance capital investments furthering European

integration by promoting EU policies.

428.04.2010 European Investment Bank 4

Dec 2008 – Dec 2009

Loans approved: EUR 8.7 bn, of which:

1. ECTF: EUR 4.8 bn

2. OEMs: 84%; suppliers: 16%

Size of supported investment programmes: EUR 28 bn

EIB has become the largest R&D financier of the European automotive sector

EIB Lending to the Automotive Sector

0

3

6

9

2007 2008 2009EUR bn

EIB lending to the automotive sector

8.2 bn

1.5 bn1.7 bn


The ECTF programme – scope & objectives

EIB’s “European Clean Transport Facility” (ECTF)

Objective: “...support investments targeting (Green Cars):Research, Development and Innovation;

emissions reduction; and

energy efficiency.”

Beneficiaries: OEMs & suppliers in the main transport sectors: Automotive

Aircraft

Rail

Maritime

Lending volume: EUR 8 bn in 2009/2010


ECTF Outlook ...

EIB lending to the sector will continue in 2010

Risk appetite of commercial banking sector remains limited

Bond market offers easier access for the better rated companies, others (if any) may only place high-yield bonds

Strict focus on:R&D for low emission technology & safety ICT has a key role!

Facilities for small car platforms in convergence areas

Development activities of automotive suppliers ICT has a key role!

The link to ICT


ICT Policy Context

Semiconductors are the basis for ICT. ICT elegibility comes through the Knowledge Economy objective. Investment concerns:

R&D

Innovative production facilities

Adoption of innovative products/processes

EIB is technology / product neutral. Investments cover the

complete semiconductor eco-system (IDM’s, equipment suppliers,

research institutes, etc.)


EIB Lending to ICT Sector

Semiconductors15%

Fixed broadband36%

R&D14%

Economic Development

15%

Satellite7%

3G13%

EUR 3.0 bn in 2008


What is different with this crisis?

Crisis has had an unprecedented, deep impact on semiconductor sector

Will lead to an international redistribution of production

Europe will have to react to this swiftly

Green shoots are emerging, opportunities are out there:

Investment needs for broadband, green technologies, to assist demographic change

Europe has long R&D traditions and favourable political environment


Sources for funding of investments

Cash flow (adversely affected by current market environment)

Equity (expensive in current environment)

Debt (difficult due to de-leveraging efforts)

Subsidies (competition with other more visible sectors)


Risk Capital1 CIP Resources (SME)2 RSFF (SME / MidCap)3

Entrepreneur, friends, family

Business Angels

Seed/Early Stage VC Funds

Formal VC Funds

Bank Loans and Guarantees

Seed / Start-Up Phase Emerging Growth Phase Development Phase

Investment Loans4

Later Stage

Counterparts

EIB and EIF financing tools

Investment Loans

RDI financing

MidCaps/ Large Corporates/ Public Sector Entities (investment grade)

Loans, Guarantees

RSFF

RDI financing

SMEs/MidCaps, Banks, PE Investors (sub-investment grade)

Loans (incl. Mezzanine), Funded Risk Sharing Facilities with Banks (Investors)

CIP Guarantee schemes

Growth financing for SMEs

Formal VC Funds

SME guarantees (loans, microcredit, equity/mezzanine, securitisation

Facility: High Growth Innovative SME Scheme (GIF), Ecotech

Purpose: IP financing, technology transfer, seed financing, investment readiness

Target Group: VC Funds, Business Angels

EIF Product: Fund-of-Funds


Bank Guaranteed Loan

EIB

CommercialBank(s)

Customer

Loan Guarantee

Direct Loan

CommercialBank(s)

Customer

EIB

Loan Loan

Bank Intermediated Loans

EIB

CommercialBank(s)

Customer

Loan

Loan(s) (< 12.5m)

EIB Financing SolutionsTypical EIB financing modes


EIB Loans

Long Term Tenor

Attractive Pricing

EIB does not sell assets on the secondary market (buy and hold strategy)

Signalling Effect: EIB as a quality stamp

Minimal loan size EUR 12.5 million (= minimal project size of EUR 25 million)

Traditionally, investment grade projects


Risk Sharing Finance Facility – Set-up

Own Resources

EUR 1 bnRSFF

[up to EUR 10 bn assuming

leverage of 5.0x ]

Direct Lending Indirect Lending / Financing

European Commission

EUR 1 bn

Corporate LendingSenior SecuredSecond LienSenior UnsecuredJunior UnsecuredPIK loansMezzanine, etc.

Project FinancingUniversitiesOther: SPVs, PPPs, JTIs…

Financial Intermediaries

(extend lending capacity)

Risk Sharing

Co-financing

Investment Funds

Renewable Energy

Others

Collaboration with EIF

Banks

Funds

1 2

3

4


The EIB Project Approach

ELIGIBLE COSTS

€ 20 m

Tim

e

Year 1

€ 10 mYear 2

€ 30 mYear 3

Total € 60 m

€ 30 m MAX. EIB LOAN

• Facilities: project capital expenditures for tangible assets

• Activities: project capital expenditures for intangible assets, research staff cost, incremental working capital needs and other related operating expenses

• Facilities: project capital expenditures for tangible assets

• Activities: project capital expenditures for intangible assets, research staff cost, incremental working capital needs and other related operating expenses

R&D budgets typically cumulated over 3 years (investment programme)

R&D budgets typically cumulated over 3 years (investment programme)

Generally up to 50% (exceptionally up to 75%) of the total project cost

Generally up to 50% (exceptionally up to 75%) of the total project cost

Eligible project cost includes: Eligible project cost includes:

What can be financed? An example


Summary

ECTF for low emission technology & safety

Financing of ICT fits into EIB´s policy

RSFF for financing of sub-investment grade RDI projects


Andres Gavira EtzelSenior EngineerICT & e-Economy Division

Phone: (+352) 4379 82634email: [email protected]

European Investment Bank100, boulevard Konrad AdenauerL-2950 Luxembourg

European Investment Bank EIB Participation at the International experts workshop: “Assessing the...

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