supporting innovation in hungary · 2015: eur. 7bn. eib in 2015: eur. 77.5bn. 9 eib at a glance 9...
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Supporting Innovation in Hungary
Budapest, 13th June 2016
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Welcome addresses:
László Baranyay
Vice-President, European Investment Bank (EIB)
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Welcome addresses:
Gábor Zupkó
Head of European Commission Representation in Hungary
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Welcome addresses:
József Pálinkás
Dr. President, National Research, Development and Innovation Office
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Welcome addresses:
Mihály Patai
Dr. President, Hungarian Banking Association
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Overview of the EIB Group financing options
Flavia Palanza
Director, Central and South Eastern Europe Department,
European Investment Bank (EIB)
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Overview of the EIB Group financing options
Flavia Palanza
Director, Central and South Eastern Europe Department,
European Investment Bank (EIB)
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The EIB Group
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Providing finance and expertise for sound and sustainable investment
projects
Leading developer of risk financing
for innovative SMEs
EIB Group financing
2015
Record for the
EIB Group: EUR
84.5bn
EIF in 2015: EUR
7bn
EIB in 2015: EUR
77.5bn
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EIB at a Glance
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We are the world’s largest International Financial Institution
1958 Established to support long-term investments primarily in the European Union. We have over 50 years’ experience in financing sustainable projects.
Shareholders Owned by the 28 Member States of the European Union.
Source of funds We raise long-term funds on the international capital markets and as a non-profit organisation we pass favourable borrowing conditions to our clients.
AAA-rated We’re triple-A rated by all major rating agencies and have a sizeable callable capital of €221bn.
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Locations
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Our Luxembourg Headquarters are home to some 2,900 staff
Specialists Among our staff we have bankers, engineers, sector economists, socio-environmental experts and lawyers. Local offices We have over 30 representative offices worldwide.
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EIB’s Activities
We support some 450 projects each year in over 160 countries
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Lending Vast majority of our financing is done through loans but we also offer guarantees, quasi-equity type instruments, etc.
90% of the lending is carried out within the EU.
Blending We blend EU with EIB funds to enhance our risk-taking capacity.
Advising Lack of finance is only one barrier to access to finance. We can advise on administrative and project management matters to help catalyse investments.
Counter- cyclical role Addressing market needs by acting as a countercyclical investor in challenging economic times.
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EIB lending breakdown in 2015
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ENVIRONMENT
EUR 19.6bn INFRASTRUCTURE
EUR 18.9bn INNOVATION
EUR 18.7bn SME
EUR 29.2bn
We focus on our key priorities:
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EIB lending breakdown in 2015 We deliver impact where it’s needed:
HEALTH 9.8m people with
access to improved health services
JOBS 4.1m jobs in small
businesses
EDUCATION 1.5m students
benefitting from EIB projects
WATER 21m people
benefitting from safe drinking water
TRANSPORT 380m additional
passengers
ENERGY 2.3m households
powered by EIB projects
URBAN 3.2m people
benefitting from urban upgrades
DIGITAL 15.3m people with new or upgraded
connections
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Types of EIB financing
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Direct Loans
Borrower (PPP) Project finance with direct project risk
Other financial instruments (in
partnership with EC)
Equity through Funds
Intermediated Loans Banks
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What is the EIF?
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OBJECTIVE? To support smart, sustainable and inclusive growth for the benefit of European SMEs.
HOW? By offering a wide range of targeted products to support SMEs and midcaps, ranging from venture capital to guarantees and microfinance.
WHERE? Working with financial intermediaries across the EU-28 and EFTA countries, candidate and potential candidate countries.
We provide risk financing to stimulate entrepreneurship and innovation in Europe
“
”
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EIF in a nutshell
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” We are a value-driven institution with over 360 staff, committed to EU policy objectives and financial sustainability
Strong capital base of EUR 4.5bn
Shareholders 61.3% European Investment Bank (EIB), 26.5% European Commission (EC), 12.2% by 29 public and private financial institutions (FIs)
AAA-rated
by the three major rating agencies
Over 20 years
of market experience in SME financing
”
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EIF’s Counterparts
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We work with a wide range of counterparts to support SMEs “ ”
Intermediaries and Counterparts Fund managers Commercial banks Development and
promotional banks Guarantee institutions Leasing companies Corporates Business angels Microfinance
institutions
Resources and Mandators European Investment
Bank EIF own resources European Commission Member States/regions Managing authorities Corporates/Private Public institutions Other third parties
micro- enterprises,
SMEs and small mid-caps
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Investment Plan for Europe: context
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The Investment Plan for Europe consists of three strands: 1. Improved investment environment: regulatory and structural reforms
at EU and national levels for predictability, removing obstacles, aiming at a friendlier investment environment
3. Mobilising finance for investment: The EFSI, via EIB, address the current shortage of (higher) risk-financing in EU
to better
Aim: to mobilise at least €315 billion in investment across the EU
2. Making finance reach the real economy: stepped-up technical assistance / advisory by establishing European Investment Advisory Hub (EIAH) in EIB and by EC facilitating a project directory
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What is the European Fund for Strategic Investment (EFSI)
• Not a new legal entity, but a contractual arrangement between EC & EIB Group
• A EUR 21 billion guarantee instrument to the EIB group
to leverage EUR 315 billion additional investment • Essentially in support to riskier investment
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EFSI-supported investment comes in addition to the EIB’s existing line of business
without withEFSI EFSI
"normal" activity"higher risk" activity
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SOURCES OF FUNDING
TYPICAL PRODUCTS OFFERED
FINAL RECIPIENTS
AND TYPICAL PROJECTS Long-term senior
debt for higher risk projects
Equity and quasi-equity
Subordinated loans
Other investors join in on a project
basis Transport
infra
Energy infra Broadband infra
Energy Resource efficiency
Renewable energy Research
Education
Innovation
SMEs
Long-term investment
funds
The Fund serves as
credit protection
for new EIB activities
European Fund for Strategic Investments
EIB EFSI ‘Products’
Continuously under development and adopted to market needs. Also, increased capacity through EIF.
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Corporates of all sizes
Utilities
Public sector entities
SMEs (<250 employees) or MidCaps (<3,000 employees)
National Promotional Banks (NPBs) or commercial banks for intermediation
Dedicated investment platforms possible
EFSI eligible counterparts
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European Fund for Strategic Investment in 2015
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42 Projects
Approved and/or signed projects
84 Operations
EUR 5.7bn
Total financing under EFSI
EUR 25bn
EUR 1.8bn EUR 25bn
Mobilising total investment of
EIB
EIF
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0
500
1000
1500
2000
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Outstanding exposure : ca EUR 11 billion or 10% of GDP
EIB lending in Hungary
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Some flagship projects in Hungary
• R&D of the Hungarian Academy of Sciences (two loans) EUR 280m • Debrecen Pharma R&D EUR 100m
• Knorr-Bremse R&D EUR 56.4m
• Dunaujvaros Paper Recycling EUR 78.3m
• Daimler greenfield automotive plant EUR 400m
• Financing of fundamental research
• R&D for new active pharmaceutical Ingredients, innovative drug compounds and new generic drugs
• R&D on brake systems for rail and commercial vehicles and construction of a technical centre
• Construction and operation of a new 350 kt p.a. production line for containerboard
• Capital expenditures related to the construction of a
car manufacturing plant in Hungary (Kecskemet) for the production of MercedesType A- and B-Class Family
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EIF’s Exposure in Hungary
“ ”
First EIF operation in Hungary: 2006 7 financial partners and guarantee
providers 2 supported Private Equity funds
investing in Hungarian SMEs
Notable success stories exist both in Guarantees, Equity and Microfinance and we are open and ready for more to come…
Guarantees, Equity & Microfinance transactions in Hungary
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Objectives and Opportunities of the InnovFin Programme
Julia Taddei Seconded National Expert, DG Research & Innovation, European Commission
Nitan Pathak Business Development, European Investment Fund (EIF)
Marc D’hooge InnovFin Programme Manager, EIB
Laura Busato Advisor, Innovation Finance Advisory, EIB
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InnovFin: A Quantum Leap InnovFin builds on the success of RSFF but will be much larger and broader
1.20
3.00
0.00
0.50
1.00
1.50
2.00
2.50
3.00
3.50
RSFF Innovfin
EU and EIB Group Contributions
11.3 18.5
1.4
5.5 0.5
0.00
5.00
10.00
15.00
20.00
25.00
30.00
RSFF InnovFin
Loans (EUR bn) Guarantees Equity
Loans, Guarantees and Equity
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InnovFin Product Overview
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InnovFin Product Overview • InnovFin Product Overview
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InnovFin SME Guarantee
This guarantee
instrument
covers the risk
related to losses
of a portfolio
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Final Beneficiaries
Innovative
SMEs Small Mid-
caps
EU 28 & H2020
Associated Countries
Transactions (senior debt only)
Loans, credit lines,
bonds, leases
Amount: up to EUR
7.5m (EUR or LCY)
Maturity: up to 10 years
Purpose
Business Transfers
Tangible & Intangible
Assets
Working Capital
Direct Guarantees Counter - Guarantees
Key Guarantee Terms
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Guarantee Fee
Financial Intermediaries are required to transfer the Financial Benefit to SMEs & Small Mid-caps
Guarantee Fee: SME
0.50% p.a.
Guarantee Fee: Small Mid-Cap
0.80% p.a.
Financial Intermediary
50%
Gua
rant
ee
Guar
ante
e Fe
e
Financial Intermediary
Guarantee from EIF
Innovative SMEs / Small Mid-caps
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Transfer of Benefit (indicative example)
Funding Costs
Fixed Costs
Margin
Without InnovFin Financing at 4%
0.5%
0.5%
1.5%
0.5%
0.5%
1.5%
50% of financing 50% of financing
Cost of the guarantee :
0.5% (or 0.8% for small midcap)
1.5%
Reduction of Cost of Risk
with InnovFin
0.5%
Cost of Risk
Indi
cativ
e pr
icin
g m
odel
com
pone
nts
With InnovFin Financing at 3.5%
Total = 4% Total = 3%
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TT, VC and BA Funds and co-investment Funds
focusing on companies in Early Stage
Focus on Horizon 2020 objectives
(e.g. ICT, life sciences, clean energy, technology)
Enterprises in pre-seed,
seed, start up phases (seed & A rounds included)
First 4 transactions signed as of February 2016.
Open Call for Expression of Interest until 30/09/2020
Investment size up to EUR 30m
up to 50%** of total commitments (CATALYTIC)
Pari-passu, at least 30%* investment from private
investors
* 10% in the case of BA Co-investment Funds ** Up to 70% in the case of BA Co-investment Funds, subject to conditions.
InnovFin SME Venture Capital – key features
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InnovFin SME Venture Capital – EIF’s assessment Investment readiness Fit with the mandate
Team and Track Record (WHO) Adequate skill-set Track-record Cohesion /stability/succession Carry split Team commitment Governance structure: independence/ conflict of
interests Reputation (referencing)
Market Opportunity (WHY) Deal flow/pipeline Competition
Investment Strategy (HOW) Focus, deal flow and pipeline Value creation / Unique Selling Point Coherence with the market opportunity, the
team and the fund parameters Fund Parameters (WHAT)
Fund model: fund size / diversification / reserve policy / investment pace
Terms and Conditions Management company budget Legal structure / compliance
Eligibility
Sectors covered
Countries covered
Stage of investments
Policy fit
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InnovFin Product Overview
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How does the MidCap Guarantee work?
EIF Financial Intermediary
Innovative Mid-Caps
3,000 employees
New Loans
50% Guarantee EUR 25m
50% loss coverage for new mid-cap loans of up to EUR 50m not covered under InnovFin SME Guarantee
Can be complemented with EIB funding (global loan)
Pari-passu sharing of risk and pricing
Full delegation to financial intermediaries
Favourable capital treatment
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How does MidCap Growth Finance work?
Direct long term debt and mezzanine finance: EUR 7.5m – EUR 25m
Loans can be structured as economic equity (silent participation)
For innovative Mid-Caps and SMEs (eligible counterparty concept)
EIB can finance up to 50% of all investments over 3 years
Streamlined EIB approval process
EIF Innovative Mid-Caps
3,000 Employees
Growth Finance / Mezzanine EUR 25m
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Signature pipeline for Q1 2016
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Quasi-equity
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1
EVS (2013) EUR 12m Senior term loan
25
2
Marposs (2013) EUR 25m Senior term loan
3
Rovio (2014) EUR 25m Senior term loan
4
Manz (2014) EUR 20m Mezzanine loan
5
Pharmathen (2014) EUR 25m Senior term loan
6
Welltec (2014) EUR 25m Senior term loan
7
Pramac (2014) EUR 8m Senior term loan
8
Maier (2014) EUR 7.5m Senior term loan
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E-Net (2014) EUR 12m Subordinated loan
Novabase (2014) EUR 14m Senior term loan
Marangoni (2014) EUR 10m Senior term loan
Innocoll (2015) EUR 25m Quasi-Equity
Saes (2015) EUR 10m Senior term loan
Planon (2015) EUR 12m Senior term loan
Kiosked (2015) EUR 15m Quasi-Equity
Danobat (2015) EUR 10m Senior term loan
Biosurfit (2015) EUR 12m Quasi-Equity
Jennewein (2015) EUR 10m Quasi-Equity
Doppelmayr (2015) EUR 25m Senior term loan
Gigaclear (2015) EUR 25m Quasi-Equity
Punch (2015) EUR 25m Senior term loan
Figeac (2015) EUR 25m Senior term loan
Qwant (2015) EUR 25m Quasi-Equity
eVision (2016) EUR 13.5m Quasi-Equity
MAM (2016) EUR 25m Senior term loan
NEWICON (2016) EUR 8m Quasi-Equity
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Archos (2016) EUR 12m Quasi-Equity
System Group (2016) EUR 15m Senior term loan
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Creta Farms (2016) EUR 15m Quasi-Equity
EFSI
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MGF transactions signed to date
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Advantages
No crowding out. Complementary finance to house banks
EIB signaling effect to attract other banks & investors (quality stamp)
Long-term lending at attractive terms (no subsidised)
Growth finance without dilution of shareholders
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InnovFin Product Overview
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How does InnovFin Large Projects work?
Senior debt (pari-passu with other senior lenders)
Eligible project required. EIB finances up to 50% of R&D and innovation investments
Comprehensive due diligence including project due diligence (technical, financial, economic)
EIB standard documentation
EIF Large Projects EUR 50m – EUR 600m
Direct Lending EUR 25m - EUR 300m
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Advantages
Long term loans at attractive terms (pari-passu)
Signaling effect and quality stamp (technical expertise)
Co-financing with house-banks preferred
No cross selling & hold to maturity strategy
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InnovFin Product Overview
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Which projects can be supported?
Pre-commercial stage; technology needs to be scalable
Loan: EUR 7.5m – EUR 75m; EUR and local currency; maturity of max 15 years; EIB finances up to 50% of project costs.
Comprehensive due diligence including project due diligence (technical, financial, economic)
EIB standard documentation
Renewable energy Fuel Cells, Hydrogen
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InnovFin Product Overview
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Projects which have passed pre-clinical stage and for which clinical validation is needed for further development
Loan: EUR 7.5m – EUR 75m; EUR and local currency; Loan maturity of max 7 years; EIB finances up to 50% of project costs.
Broad range of products - standard debt instruments (i.e. senior, subordinated, and mezzanine) to risk sharing instruments (RSL) with forgiveness options
Comprehensive due diligence, including project due diligence (technical, financial, economic)
EIB standard documentation
Vaccines, drugs Medical and diagnostic devices
Manufacturing plants
Infectious diseases Innovative
Which projects can be supported?
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InnovFin Product Overview
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Innovation Finance Advisory- What do we do? Enable maximum access to finance for innovative projects
Synergies between Projects Advisory and Horizontal Activities
Arctic Arc Fuel Cells and Hydrogen Joint
Undertaking (H2M) Philips Health Continuum
Improve bankability/investment readiness
Enable earlier/ faster access to finance
Light Project Advisory
Projects Advisory
Circular Economy (CE) Key Enabling Technologies (KETs) Infectious Diseases Financing
Facility (IDFF) Bio-economy RTOs/EARTO
Improve framework conditions for financing
Develop “business case” for new financing mechanisms in RDI sectors
Prepare studies on increasing effectiveness of financial instruments to address specific sector/RDI policy objectives
Horizontal Activities
Projects Advisory
Transfer of Lessons Learned
Horizontal Activities
Pipeline Development
InnovFin Advisory
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Visit www.eib.org/innovfin
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Objectives and Opportunities of the
InnovFin Programme
Question & Answer session
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Case Study
Matching the needs of growth companies Klaus Röhrig
Owner, MAM Group
Csaba Novák CFO, MAM-Hungária
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Case Study
Financing cutting-edge life sciences industries
Gábor Gulácsi CFO, Gedeon Richter
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Case Studies
Question & Answer session
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Concluding remarks
Alain Nadeau
Head of the EIB Budapest office