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Experience in combining grants with financial instruments in Andalusia

Experience in combining grants with financial instruments in Andalusia. Francisco Jiménez Innovation and Development Agency of Andalusia , Spain Brussels, 20 th May 2011. Index. Comparison of grants and financial instruments Different nature of instruments Different types of projects

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Experience in combining grants with financial instruments in Andalusia

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  1. Experience in combining grants with financial instruments in Andalusia Francisco Jiménez Innovation and Development Agency of Andalusia , Spain Brussels, 20th May 2011

  2. Index • Comparison of grants and financial instruments • Different nature of instruments • Different types of projects • Quantitative comparison • Situation and evolution of grants and financial instruments in Andalusia • Compatibility issues of combining grants and financial instruments • Experience and approach in combining grants and financial instruments in Andalusia

  3. Different nature of instruments Grants Financial instruments Eligible costs Limited, focused on fixed assets Broad, Flexible Analytic approach Static, investment oriented Dynamic, Cash flow oriented Time of payment After investment Before investment Cost No cost Market price Legal environment Public Private Benefit for company Profitability Financing , cash

  4. Different types of projects Grants Financial instruments • New creation of enterprises (€ 44%, # 6%) • Innovative projects • Technology based enterprises • Entrepreneurs • Productive spaces • Modernization of enterprises (€ 36%, # 47%) • Productive Installations • Incorporation of IT systems • Quality systems • Relocate of companies within Andalusia • Other: Security, design, advisory services • Research and Development (€20%, #47%) • Knowledge generation • Knowledge application • Seed & Start-up financing • High growth potential companies • Innovative companies (technology or business innovation) • Spin-offs (universities, enterprises) • Attraction • Growth & Expansion • Working capital part related to growth expansion plan of SMEs • OPEX + CAPEX • Internationalisation • Non-organic growth, acquisitions

  5. Quantitative comparison of grants and financial instruments Year 2010 Grants Financial instruments # Projects approved > 1,500 47 # Projects approved / analyst 150 8 Approval ratio 68% 24% Intensity of financing 24% 26% Average amount of investment 80,000 € 2,000,000 € Total investment approved p.a. ~ 120 MM € ~ 120 MM €

  6. Evolution of grants and financial instruments in Andalusia Grants Financial instruments € 200 MM 100 MM t 2007 2008 2009 2010 2011 2005 2006

  7. Compatibility issues on combining grants and financial instruments Financial Instruments Grants Finding the right balance between providing Grants and Financial Instruments for the same project (40% of all JEREMIE projects in Andalusia have also received some kind of grants)

  8. Operational obstacles to identify compatibility issues Information Access Difficulty in obtaining information on grants as it does not exist a centralised database/ register of grants. Timing & Organization Procedures and timings of grants and financial instruments are different and not synchronised (before, during, after). How can an excess of financing of the project be avoided? Origin of funds: Public or Private Difficulty in defining criteria whether funds should be considered as public or private: Who is the financial intermediate? Who gives the liquidity? Who takes the risk? Which are the market conditions? Project vs. Company Compatibility issues only exist at project level. However, the scope of a project is not always exactly defined. (Overlapping between projects, projects being part of another project, the company being the project etc.)

  9. Approach in combining grants and financial instruments in Andalusia Andalusia has established the following policies aiming at resolving compatibility issues between grants and financial instruments: Max 70% public Public money (combination of grants + financial instruments) must not exceed 70% of the funding requirement of a project. Transparency of information The company has to declare all received and pending grants /public financial instruments on the JEREMIE application form . Precondition: Private money The company must provide evidence of private money cash entry (at least 30%) before financial instruments are settled. Private funds have to be of a permanent nature. Computing of public instruments • Computing of different instruments with regard s to public nature of funds. Criteria = cash equivalence • Examples: • Direct grant of 100 € => public funds: 100 € • Indirect grant (bonus interest rate): (5 years, 5 %, 100 €) => public funds: 25 € • Loan or Equity of 100 € => public funds: 100 € • Guarantee of 100 € => public funds: 100 €

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