european investment bank financing instruments for...

1

European Investment BankFinancing Instruments for TEN-T

SESAR Implementation: Workshop on Financing and FundingBrussels, 17 February 2011

1

1. EIB Experience in TEN-T and the Air Transport Sector

2. EIB Financing Instruments Supporting TEN-T Projects

3. Financing SESAR Implementation

2

European Investment Bank

EIB Support of TENs and PPPsTENs development is a priority objective of EIB. In the PPP segment the EIB has lent over EUR 25 billion since 1990

0

2

4

6

8

10

12

14

2004 2005 2006 2007 2008 2009

EUR

bn

0.0

0.5

1.0

1.5

2.0

2.5

3.0

1990 1992 1994 1996 1998 2000 2002 2004 2006 2008

EUR

bn

EIB PPP FinancingSince 1990, EIB has progressively broadened geographic and sector spread of its PPP lending. The Bank is now one of the major funders of projects in Europe. Portfolio of 120 projects and investment of around EUR 25 billion.Annual signatures averaging above EUR 2 billion since 2000, reaching EUR 3.4 billion in 2010 with EUR 2.4 billion in the transport sector

TENIn 2009 EIB financed EUR 13.9bn in Trans-European Networks (TEN) infrastructure within the EU. This reflects EIB’s increasing presence in order to fill the liquidity gaps left by commercial lenders in the aftermath of the financial crisis.TEN-T projects represent on average 86% of the total TEN lending.


EIB Experience in the Air Transport SectorLending to air transport projects represents a major share of EIB’s Transport sector activity

Between 2000 and 2010:

The EIB has financed over 70 air transport projects…

Providing loans over EUR 15 billion…

Representing around 11% of its entire Transport sector lending

The EIB finances projects in four main areas within the sector:

Airport development

Air Traffic Management

Research & Development

Aircraft acquisitions (only until 2007 due to change in Transport Lending Policy)

3


EIB Experience in the Air Transport SectorRecent projects

New Berlin Brandenburg Intl. AirportExpansion and provision of a new passenger terminals at Dublin, Munich, Nairobi, Frankfurt....Upgrade and expansion of all the aircraft pavements at Chisinau Airport in MoldovaLarge scale upgrade of the baggage handling system at Amsterdam Schiphol Airport

Airport Development

Upgrade works to all AENA controlled air navigation systems in Spain

Upgrade works to all NAV controlled air navigation systems Portugal

New ACCs at Belgrade and Zagreb

Air Traffic Management

Finmeccanica (Italy) to develop innovative aircraft fuselage structuresR&D of a new generation aircraft engine undertaken by Snecma, part of the Safran Group (France)Airbus R&DRolls-Royce R&DSoyuz launch facilities at Guayana

Research & Development

No lending for aircraft acquisitions after 2007 due to change in lending policy (exception: SATA)

Prior to 2007 the EIB was active in this area providing financing for acquisitions at SAS, TAP, Iberia, Austrian, Cargolux, Air France, LOT, MALEV, TAROM, Egyptair, THY and others

Aircraft Acquisition


Lessons Learnt and SESAR Are past air transport projects financed by the EIB relevant in the context of SESAR?

Structure of EIB financing in these projects bears limited relevance to the issues/complexity/volumes presented by SESAR

EIB has substantial experience in the air transport sector and has lent extensively to projects across Europe

EIB financing for nearly all projects involved the same instrument:

Standard EIB loan with a state or first class bank / single corporate signature guarantee without EIB taking direct project risk or using

innovative financing solutions

HOWEVER

4

2





EIB Financing InstrumentsEIB has at its disposal a wide and flexible portfolio of financing instruments to support TEN-T projects

Direct Loans

ProjectSPV

Project finance with direct project risk

MezzanineLGTT

Equity through Funds

Standard Loans“Traditional” EIB lending instrumentGuaranteed basisRepresents the bulk of EIB’s lending volumes

Intermediated LoansBanks

Structured Finance Facility (SFF)

Established in 2001

Expands the ability of EIB to provide financing

Allows lending to projects with a higher risk profile

Allows for more flexible financing solutions

Public Sector

5


Instruments OverviewStandard EIB Loans

Represents close to 80% of EIB’s overall TEN-T lending volume

Either fully guaranteed or guaranteed during construction and early operation

Guarantee from sovereign, bank or corporate

Provided on a direct or bank-intermediated basis

Recipient is either public sector borrower or project company on a project finance basis


Instruments OverviewSFF – Project Finance Loans with direct project risk

Represents around 20% of EIB’s overall TEN-T lending volume

“Real” project finance loan with the EIB taking direct project risk

Provided on a pari passubasis with commercial banks already during construction period

Recipient is ring-fenced project company (SPV)

Senior Bank Debt

SPVProjectCosts

Commercial Banks

Equity & quasi-equity

6


Instruments OverviewLoan Guarantee Instrument for TEN-T

Specialized instrument jointly developed by the EIB and the EC

Provides contingent mezzanine debt thereby protects senior debt in projects exposed to traffic risk

Mitigates traffic risk during early operation protecting against traffic downside scenarios

Improves capital structure and senior debt credit quality

Lowers refinancing risk in Mini-Perms structures

Potentially allows for funding cost reduction

Senior Bank Debt

Up to 20% of Senior Debt

SPVProjectCosts

Equity & quasi-equity

Commercial Banks

LGTT

Contingent mezzanine facility


Instruments OverviewInvestment Funds / Marguerite

EIB invests equity in selected infrastructure funds with investment mandate covering TEN-T toProvide additional sources of equity finance for infrastructure projectsEnable it to extend its reach to eligible target projects beyond its traditional lending activitiesOvercome shortage of equity in certain sectors or geographiesAs of late 2010 has invested in close to 20 funds

• Marguerite Fund“2020 European Fund for Energy, Climate Change and Infrastructure”, established in 2009Infrastructure investment vehicle for long-term public and private institutional investors

Invests in projects that enhance security and independence of EU energy supply, contribute to greenhouse gas emissions reduction, reduce transmission/transportation costsInvestment mandate specifically includes TEN projects

7

3





Financing Solutions for SESAR

At this stage it is not possible to judge…

Can the existing EIB instruments be used to provide financing to SESAR projects?

Standard guaranteed loans – provided to ANSPs along the basis of past EIB loans to the sector?

Project finance loans – provided to larger, individual, ring-fenced projects?

LGTT – provided to individual projects with quantifiable traffic risk?

• Can new joint instruments developed by the EC and EIB be among the innovative financing solutions sought?

New instruments – issued by the proposed SESAR Deployment Fund or used by a well-defined group of projects?

How could the EIB contribute to potential financing mechanisms for SESAR deployment?

8


Main IssuesMuch better understanding of the actual projects is indispensible especially with regards to critical structuring issues in order to allow private capital or EIB participation

If private sector capital is to be used (debt or equity) core parameters need to be established before financing solutions can be devised and analysed in a meaningful manner

Funding sources

Is private capital needed?

Is debt financing necessary?

Is a PPP approach acceptable?

Risk allocation

Risk of deployment (being abandoned due to policy change)?

Risk of obsolescence of technology put forward by SESAR?

Risk of compatibility with other major emerging systems?

Projects vs. policy objectivesClearly defined projects or group of similar projectsClear cost-benefit analysisSound business casesEstablished eligibility and economic benefits

Loans vs. grantsClearly defined borrowersCash-flows to service debt (and provide fair return to equity investors)Are revenues of the borrower linked to the assets created?Can ring-fenced (group of) projects be structured?Investment schedule: investment with firm long-stop date or ongoing investments in the future?

european investment bank financing instruments for...

Documents