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http://www.eib.org

New Lisbon Airport Workshop22 Nov 2005

Lisbon

EIB - European Union’s financing institution: Created by the Treaty of Rome in 1958, to provide long-term

finance for projects promoting European integration;

Subscribed capital EUR 163.7bn;

EIB shareholders: 25 Member States of the European Union;

Lending in 2004: EUR 43bn (EUR 40bn within the EU);

Borrowing in 2004: EUR 50bn (EUR 28bn in EU currencies).

1. THE EIB GROUP – THE EIB AND THE EIF

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2. Strategic Outlook

Priorities

Economic and social cohesion in an enlarged EU

Implementing of the Innovation 2010 Initiative (i2i)

Development of Trans-European and Access networks (TENs)

Support of EU Development and Cooperation Policies in Partner Countries

Environmental Protection and Improvement, including Climate Change Financing Facility and Renewable Energy.

EIB implements EU policies; a policy driven Bank

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• Support for European Union policies. Multi-sector and trans-national technical experience in the

EU. Long-term lending (typically 25 years or more for

infrastructure, but in project finance depends on the life of the concession )

Can finance significant proportion of capital requirement (typically 25-45% but up to 50% possible).

Flexible amortisation schedules reflecting project cash flow and long grace periods.

Competitive funding cost and various financing structures offered.

3. Main features of EIB involvement

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59%

19%

9%

13%

4. EUROPEAN COMMMUNICATIONS INFRASTRUCTURE 2000-2004: Individual loans: EUR 44.8bn

Land-based transport

Air transport

Telecommuni-cations

Sundry

Arteries of the single market

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Roads, motorways 40%

Aviation 16%Ports 2%

Urban transport 12%

Railways 24%

Major infrastructure projects 6%

5 Sector split within transport sector

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6. Why project finance ?

Accelerate priority infrastructure under strict budgetary constraints.

Implement projects of national interest within a definite timescale.

Compare and control costs (value for money/public sector comparator).

Minimise public sector funding but maintain ultimate public sector ownership (concession with reversion).

Identify, define and allocate risks to the parties best able to carry them.

Reinforce the competitive environment.

Specify measurable outputs and services to be provided (performance testing).

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7. Value added from EIB

Experienced partner in project finance deals : capacity to conduct own technical and financial due dlligence.

Complementarity with banking sector and capital markets

Catalysing agent (deal making experience, more resources available for investments, facilitating private investment and private involvement in investment of public interest)

Cautious risk philosophy approach but readiness to assume post completion risk (subject to compliance with rigorous tests).

Recent developments : possibility of assumpting limited amounts of preconstruction risk for high priority projects (SFF facility). Also prospects for new facility for promotion and funding of TEN’s (Community Guarantee Instrument for TEN-Transport – CGIT).

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8. The EIB and project finance

In-house due diligence capacity: stamp of approval.

Non exclusivity : arm’s length approach with all bidders (stimulate competition).

Strict compliance with EU procurement rules but flexible appraisal and decision structures adapted to national tender framework (with or without prequalification, shortlisting/preferred bidder approach).

Careful attention to environmental considerations and compliance with European and national regulation and decisions.

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Public sector expertise (preparatory, investment and supervisory phases).

9. Essential conditions for successful PPPs 

Adequate planning and legal/administrative context

Adequate definition of technical characteristics and long-term project operation

Competitive and transparent procurement (Nb, for EIB, no exclusivity, open tendering in line with EU Directives)

Balanced concession structure, adequate distribution of risks and rewards.

Sustainable and bankable financial structure : cost effective investment ; realistic demand and revenue forcasts ; transparent and enforceable definition of public sector financial support for investment and operation, if needed (preferably at tender stage) ; adequate coverage of debt finance and returns to equity shareholders.

Experienced private partners with a long-term vision

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10. Planning Context

Site selection methodology

Public Inquiry

Surface access issues

Strategic Environmental Assessment

Impacts of environmental constraints

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11. Technical Aspects

Coherent master plan providing long term flexibility

Detailed terms of reference for development requirements

Phasing strategy

Appropriate development to serve all users

Capacity to meet demand and levels of service

Residual value and suitability at concession end

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12. EIB Appraisal Process

Two-stage appraisal exercise for PPP/Concession contracts

Stage 1 – prior to or during procurement Review of project feasibility (cost, technical, economic) Environment and procurement Review of draft concession agreement

Stage 2 – following selection of concessionaire Financial Profitability analysis Final design solution Risk mitigation

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http://www.eib.org