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NETLIPSE Zurich 20th October 2008

EIB – Project Cycle. NETLIPSE Zurich 20th October 2008. 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

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NETLIPSE Zurich 20th October 2008

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  1. EIB – Project Cycle NETLIPSE Zurich 20th October 2008

  2. The European Investment Bank (EIB)Long-term Finance Promoting EuropeanObjectives • 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

  3. EIB financing Trans European Network (TEN) - Transport Objectives • TENs financing is one of the priority objectives of EIB in pursuit of Community objectives on growth; employment; cohesion; internal market and sustainability • EIB prioritises TENs investment in interconnection; intermodality and interoperability of national networks. EIB financing prioritises those projects which are more environmentally friendly. Results • In 2007, EIB financed € 9.3 billion for TENs of which €8.1 bn for TEN-Transport • EIB financing objective for TENs-Transport for period 2004-2013 is € 75 bn. At end 2007, 39.8% of target was achieved vs 40% time elapsed Sources of TENs Finance from 1993-2006 • EIB loans finance ca. 15-20% of TENs investments • Commission resources (Structural Funds and TENs) financed ca. 13% • National resources financed ca. 40-50% • Private sector risk financed 20-25%

  4. Source: “Implementation of the Priority Projects, Progress Report”, background material prepared by DGTREN for the Brno Informal Transport Council in May 2008

  5. Project Finance • Money at risk for projects, such as Large Infrastructure • Special purpose vehicle (SPV) as the borrower • Co-funding, complementing sponsors equity, by way of loans, guarantees ; other possible financial instruments • Lending and repayment based on project cash flows • Reliance on project management capacity and contracts • Relatively high ratio of debt to equity (‘gearing’) • Finite project life (debt to be repaid at project close) • Projects may obtain investment grading from rating agencies

  6. Project financial assessment • Requires project financial model covering entire project life ; validated input data and audit (model audit) • Project repayment capacity basis for financial assessment • Project financial assessment benefits from understanding the project ; projects benefit from financial assessment • Sound financial assessment does not validate the project, but suggests the nature (and level) of the financial product required (for a sample of financial products see next slide) • Despite contracts and sound project management, initial credit ratings may change : project finance assessment is required until the earlier of repayment or project-life.

  7. Sampleof financing products and / or facilities • Senior debt, with or without third party guarantee • Structured Finance Facility • Participation in Infrastructure Equity Funds • Loan Guarantees • Dedicated Instruments e.g. Loan Guarantee Instrument for TEN Transport projects (LGTT) • EPEC ; Collaboration with European Commission (e.g. TEN co - ordinator for Priority projects) and other public and private partners

  8. ManagementCommittee Staff teamsEconomicFinancialTechnicalEnvironmental Board ofDirectorsLoan approval ProjectBorrowerGuarantor LawyersContractnegotiation PROJECT CYCLE Projectidentification EIB eligibility Banking criteria Project Finance Life-Time Relationship and Contract. Contractsignature A sound project portfolio

  9. Contacts Structured Finance EU/AGI – TEN (Transport) http://www.eib.org

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