How mobility management can help tackle climate change: the

perspective of the EIB

Mario AymerichDeputy Head of DivisionUrban Transport & DevelopmentEuropean Investment Bank

Rationale for the participation of the EIB in a project

The EIB can become involved either:

• Up stream, where the EIB financial contribution is critical and the EIB’s technical know-how can influence the project’s concept

• Down stream, where the the EIB’s contribution supports the overall financial package

Urban transport projects fall within main priorities of the Bank:

• Environment • Regional development

and possibly:

• Innovation• Social cohesion

EIB, the policy bank of the European Union

A policy-driven Bank

Project cycle in the EIB

Importance of an early participation of the EIB

Eligibility criteria

Banking criteria

Contract signature

Supervision

Promoter’s request

Project appraisalEconomicTechnical

EnvironmentalProcurement

FinancialLegal

Management Committee

Contractnegotiation

Board ofAdministratorsLoan approval

ProjectLender

Guarantor

EIB’s environmental and sustainable objectives

Preserve, protect and improve the environment, EIB’s “Environmental Statement” on the web

• Promoting social well-being• Minimising adverse environmental impact in all projects• (public consensus)

• EIB environmental investment focuses on:• tackling climate change• protecting and enhancing biodiversity• promoting the sustainable use of natural resources & waste

management• improving the quality of life in the urban environment

A project assessment with many facets

EIB project requirements: the « three pillars »

Eligibility = consistency

with EU priorities

Technical quality and economic

soundness

Financial viability and

adequate security

Comply with procurement and environmental protection regulations

Reasons for financing public transport projects

Sustainable urban development

• Urban public transport projects require public support:

• Infrastructure (100%)

• Operation (x%, depending on operator’s efficiency)

• Therefore:

• A “technical fee” and an “operation contract” must be assumed at political level

• Efficient allocation of tasks and risks need to be well understood by all parties, and properly shared

• A metropolitan transport authority might be required

• Planning context

• General and legal information about the enterprise, its principal partners or sponsors

• Technical and environmental data of the project

• Economic data (market, jobs created, economic rate of return)

• Financial data; operating costs (incl. depreciation and overheads), forecast financial statements (operating account and balance sheet), financing plan

• Compliance with environmental protection and procurement regulations

• Guarantee securityA test for sound investment

Project basic information the EIB needs

The reality implementing complex projects

Implementation delays

• Administrative obstacles• Legal framework

(undeveloped) • Land acquisition• Protestors• Insufficient detailed design • Optimistic proposals

(commercial aggressive) • Remains, soil conditions,

environmental constraints• Weak partner agreements

Cost overruns

• Unrealistic timetable• Construction or technical

problems• Latent/unexpected defects• Weak management• Conflict of interest

(shareholders)• Insufficient financial support• Optimism bias, both on

traffic forecasts and investment costs

Unfortunately, many major projects use to suffer

The main objective of a PPP is not just to build a nice project but to provide high quality services over a long term period.

PPPs are useful finance schemes, but only under a very clear operational context and both the public and the private sectors must recognise and assume their respective obligations.

PPPs require a close collaboration among all parties, who must always consider the user as the prime recipient of the services to be provided.

About public-private partnership

RISK Assessment– who takes decisions– clear definition of responsibilities – Government partnership – legal & institutional framework (contract issues)– managerial arrangements (who takes each risk)– construction risks (technical, timing, cost)– technology related risks (R&D, deployment…)– financial risks (structure, money cost…)– operation risks (availability maintenance)– market risks (demand, tariffs, payment mechanism)– residual value (concession conditions)– other (political, force majeure…)

Critical (strategic) PPPs aspects

… and risk analysis, in particular dealing with PPPs, becomes a major issue

Metropolitana di RomaGlobal warming benefits

• Reduction in CO2 emissions:

• Linea B1: 202 135 tonnes• Linea C: 3 072 643 tonnes

• Total reduction of about 3.3 billion tonnes over approximately 35 years (economic asset life).

• Assuming a value of 35 EUR/tonne, this has a net present value of 57 M EUR over the 35 year period of time for both projects.

• This represents approximately 2.5% of the investment cost.

A crucial lesson learned

The Green Paper

« Towards a new culture for urban mobility »

EIB projects “include the construction, extension or rehabilitation of collective transport infrastructures or the acquisition of rolling stock”.

But, this is not all. Urban development (including social housing) in the context of integrated plans (Leipzig Charter) and, in general, urban environment enhancement projects are also eligible for the Bank.

New financial instruments, including higher assumption of risks (both during construction and operation), are being developed.

Joint initiatives with the EC

JASPERS (Joint Assistance to Support Projects in European RegionS) is a major joint policy initiative of the EIB, the European Commission and EBRD to assist beneficiary countries (principally the new Member States and acceding countries of the EU) to absorb EU Structural and Cohesion Funds over the next budgetary planning period 2007-2013.

JESSICA (Joint European Support for Sustainable Investment in City Areas) is a joint initiative of the Commission, the EIB and the Council of Europe Development Bank. The aim is to use Structural Funds to finance Urban Development Funds (UDFs) using revolving financial mechanisms to support revenue-generating projects within integrated urban plans supporting the sustainable development of urban areas. The EIB may act as holding fund of UDFs and is contributing to the initiative with its expertise and complementary financing of projects through loans.

The Clean Buses initiativeThe Bank is currently preparing a new loan facility (namely using leasing financial principles) oriented to provide advantageous long-term financing to urban transport operators replacing or expanding their bus fleets with new vehicles outperforming existing environmental regulations.

Pending issues:

• European label (adherence of the EC)• Green and/or joint procurement• Introduction or EuroV and IV standards• Incentives to R&D (EC framework programs)• Particular treatment of O&M costs

www.eib.org

Thank you