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Second International Workshop on PPPs EIB financing of PPPs : the way forward

Second International Workshop on PPPs EIB financing of PPPs : the way forward. Patrick Bœuf Projects Directorate European Investment Bank Brussels, 5 July 2004. EIB’s approach to PPPs. Policy driven approach to PPPs based on the evaluation of the benefits achievable

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Second International Workshop on PPPs EIB financing of PPPs : the way forward

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  1. Second International Workshop on PPPs EIB financing of PPPs: the way forward Patrick Bœuf Projects Directorate European Investment Bank Brussels, 5 July 2004

  2. EIB’s approach to PPPs • Policy driven approach to PPPs based on the evaluation of the benefits achievable • PPPs are an additional policy option. No bias in favour of any particular procurement method • Expand expertise and financial resources available for “infrastructure” investment • Facilitating greater private sector investment (cf. Presidency conclusions on the Growth Initiative, Brussels European Council, 12 December 2003) • Focus on strategic public services with clear value added

  3. Key PPP sectors for EIB • TENs and modernising transport infrastructure • Environmental improvements • Primary and acute healthcare services • Primary, secondary and tertiary education Supporting PPPs in areas of critical EU policy significance:

  4. EIB loans for PPP/Concession projects - Approvals

  5. Flagship deals to date - transport • DBFO roads and river crossings in the UK. • Channel Tunnel Rail Link and London Underground. • Spanish & Portuguese transport projects (inc. Vasco de Gama Bridge). • Spata airport, Athens ring road and Rion Antirion bridge. • Dutch high speed train link. • French and Irish motorway concessions

  6. PPPs and EU grants Spata airport • EU funding: Cohesion Fund 11%, EIB loan 47% • Greek State contribution 19% • Commercial debt 17% • Equity 6% • SPV: Athens International Airport S.A (55% Greek State, 45% Private Consortium) • Construction costs overruns +1.8% • Construction delays: 3 months in advance

  7. SPATA AIRPORT DURATION OF PROJECT IMPLEMENTATION 6 (Time in months elapsed in each phase) Total (10 years)

  8. PPPs and EU grants • Upfront subsidies Vs. operating subsidies/payments • Coordination between ERDF, Cohesion Fund, TENs budget • Coordination with other public grants (national, regional, local) • Coordination with EIB financing • Need for streamlined procedures – avoid multiplication of approval procedures

  9. The TENs Investment Facility • Strengthen and, where possible, accelerate the investment in TENs. • Increase the EIB resources available for the development of TENs transport to 2010. • Improve the range of financial instruments available from the Bank. … in collaboration with the Commission, Member State Authorities and the Private Sector.

  10. The TENs Investment Facility5 Building Blocks • Long term loans – Senior Debt for PPPs, Corporates and Public bodies. • Guarantee system – for Investment Grade Projects. • Structured Finance Facility – SFF. • Securitisation. • EIB institutional role.

  11. Proposal € 50 billion over period 2003-2010. Extra long maturities (35 years). Longer grace periods. Special arrangements for exceptional cases (e.g. up to 75%). Increased EIB senior lending

  12. (2)EIB and EU guarantees • EIB to provide guarantees for private finance projects with investment grade rating. • Combine EIB guarantees with public sector guarantees so as to optimise the “value for money” and “affordability” of priority investment. • The EU financial regulators should examine the Basle II regulatory framework to ensure that TENs financing can be effectively achieved through EU financial markets.

  13. (3) Increased “Structured Finance Facility” • SFF is an existing EIB senior debt product to finance higher risk projects (e.g risk during construction). • Tripled from Euro 500 m to Euro 1500 m.

  14. (4)Securitisation • Financing institutions / SPVs, promoted by public authorities, to issue AAA bonds securitised by revenues from portfolio of existing infrastructure assets held by Member States / public authorities. • Purchase of securitisation bonds by financial institutions co-financed by EIB, the capital and banking markets. • Proceeds of securitisation bonds to be dedicated by public authorities to priority infrastructure financing. Release new resources to be invested in TENs

  15. (5) Strengthen EIB Institutional Role • Strategic Advisor to the Commission, to Member States and Public Authorities on TENS. • Financial Engineering of TENs projects through PPPs, Structured Finance, Securitisation and Capital Markets. • Proposed operator of Commission Guarantee Facility for TENs. • Combined use of budgetary resources and EIB loans for TENs. • Collaboration with national PPP Task Forces on TENs. • Co-financing with specialist national financial institutions of SPVs and securitisation trusts for TENs. • Collaboration with TENs Project Co-ordinators.

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