EIB Financing of Projects in the Broadband Sector Adrian Kamenitzer, Director

1. EIB Financing of Projects in the Broadband Sector Adrian Kamenitzer, Director Equity, New Products and Special Transactions (a.kamenitzer@eib.org)

2. A few words about the European Investment Bank • EIB is “the EU Bank” – the only bank owned by, and representing, the interests of the EU Member States • Works closely with the EU institutions to implement EU policy • The EIB has financed telecom infrastructure projects since early 1970s • In 2001, the Bank included the financing of telecom and digital infrastructure as a priority • EIB lending policy in the digital sectors have been aligned with the EU policies in the area • DAE, DSM, Connectivity for a European Gigabit Society

3. EIB Financing of Projects in the Broadband Sector • Reality however is different – average connections speeds in the EU countries vary greatly but in many cases below EU targets • Within countries, the situation is even worse in less well covered rural areas (digital divide) • Requirements of the Gigabit society cannot be met with the existing digital infrastructure in the EU • Broadband data consumption is expected to grow 127x from 2005 to 2021 ! • Growth between 2016 and 2021 is expected to reach three fold ! • Substantial acceleration in high performing broadband networks is needed • Investments in high-performance optical fixed-line networks are key

4. EIB Financing of Projects in the Broadband Sector • Focus of EIB lending – high performance standards, technology neutrality and rural areas • Investments in less densely populated, rural areas and high performance digital infrastructure are areas where the Bank believes its value added is needed

5. How we do it Corporate Finance Special Initiatives Project Finance • OVERVIEW • Financing of existing operators to support additional capital to extend their networks. • Financing of (ring-fenced) broadband projects of corporates / public sector / PPPs • Structured operations and intermediated structures to support further financing of broadband initiatives • EIB COUNTER-PARTIES • Incumbents, alternative operators, wholesale operators etc • Special purpose vehicles (PPPs), project companies • Funds, Banks and other financial intermediaries • Counterparty • Project • Intermediary / Portfolio • RISK • EXAMPLES • Adamo (ES) • eNet (IE) • Gigaclear (UK) • Reggefibre (NL) • EWE (DE) • Iliad (FR) • IP-Only (SE) • Axione (FR) • Nord Pas de Calais (FR) • Haute Savoie (FR) • Schleswig Holstein (DE) • Niedersachsen (DE) • Hessen (DE) • Connecting Europe Broadband Fund (Regional)

6. Connecting Europe Broadband Fund (CEBF) • Many of the broadband initiatives across Europe are localized, relatively small in size and highly diverse depending on the local conditions (e.g. state-aid, regulation) • The initiatives typically suffer from a financing gap caused by the lack of historical evidence for investors and long payback periods • There is a need for instruments that can provide long-term financing to financially sustainable smaller broadband initiatives • The Connecting Europe Broadband Fund initiative was created during 2016 by the EIB, EC and the three large European NPBIs - CDC, KfW and CDP • The aim of CEBF is to fulfill the market gap for long-term equity financing for smaller regional investments across Europe • Following a market consultation and public tender, Cube Infrastructure Managers was selected as the fund manager for the CEBF • Subject to successful fund raising of minimum of EUR 100m private capital to the initiative, it is expected that CEBF will start operations during the first half of 2018 Financing Gap C.E.B.F.

7. Provisional terms of the CEBF Fund strategy: Contribute to the roll-out of wired and wireless Next Generation Access (“NGA”) networks and ancillary telecom infrastructures through financing of broadband infrastructure investments Types of investments: Technically and economically viable greenfield projects located in grey or white NGA areas (i.e. most often semi-dense or rural areas). Investment instruments: Equity and quasi-equity (mainly minority positions) Investment sizes: Ticket size between €1 million and €30 million (estimated average at €12 million) Geographic Focus: EU 27 + EFTA Fund life: 20 years Anchor Investors: EIB, EC, KfW, CDC and CDP with total commitment of EUR 390m Other investors: Minimum 100m from private investors (pre-condition) Fund structure and governance: Layered fund, Standard AIFM compliant set-up following best market practices Decision-making: Operational and investment decision-making fully delegated to the Fund Manager in line with industry practice SENIOR (A) LAYER Min EUR 100m private investment MEZZANINE (B) LAYER JUNIOR (C) LAYER €100m €140m €190m