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Brussels 28th April 2010

EIB Participation at the International experts workshop: “Assessing the economic competitiveness of the European Automotive Embedded Software industry” Andres Gavira Etzel. Brussels 28th April 2010. Outline. Introduction of EIB The ECTF The Impact of the Crisis on the Semiconductor Industry

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Brussels 28th April 2010

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  1. EIB Participation at the International experts workshop: “Assessing the economic competitiveness of the European Automotive Embedded Software industry”Andres Gavira Etzel Brussels 28th April 2010 European Investment Bank

  2. Outline Introduction of EIB The ECTF The Impact of the Crisis on the Semiconductor Industry The RSFF European Investment Bank

  3. European Investment BankProfile EIB was created by the Treaty of Rome in 1958 EIB is a not-for-profit, policy driven institution EIB is 100% owned by the 27 EU member states EIB has subscribed capital of EUR 232.4 bn as of 2009 EIB is AAA rated EIB funds itself on the capital markets: EUR 79.4 bn in 2009 EIB signed loans amounting to EUR 79.1 bn in 2009 EIB is the largest multilateral financing institution The European Investment Bank is the European Union‘s long-term financing institution. The Bank acts as an autonomous body set up to finance capital investments furthering European integration by promoting EU policies. European Investment Bank

  4. Dec 2008 – Dec 2009 Loans approved: EUR 8.7 bn, of which: ECTF: EUR 4.8 bn OEMs: 84%; suppliers: 16% Size of supported investment programmes: EUR 28 bn EIB has become the largest R&D financier of the European automotive sector EIB Lending to the Automotive Sector European Investment Bank

  5. The ECTF programme – scope & objectives EIB’s “European Clean Transport Facility” (ECTF) Objective: “...support investments targeting (Green Cars): Research, Development and Innovation; emissions reduction; and energy efficiency.” Beneficiaries: OEMs & suppliers in the main transport sectors: Automotive Aircraft Rail Maritime Lending volume: EUR 8 bn in 2009/2010 European Investment Bank

  6. ECTF Outlook ... The link to ICT • EIB lending to the sector will continue in 2010 • Risk appetite of commercial banking sector remains limited • Bond market offers easier access for the better rated companies, others (if any) may only place high-yield bonds • Strict focus on: • R&D for low emission technology & safety  ICT has a key role! • Facilities for small car platforms in convergence areas • Development activities of automotive suppliers  ICT has a key role! European Investment Bank

  7. ICT Policy Context • Semiconductors are the basis for ICT. ICT elegibility comes through the Knowledge Economy objective. Investment concerns: • R&D • Innovative production facilities • Adoption of innovative products/processes • EIB is technology / product neutral. Investments cover the complete semiconductor eco-system (IDM’s, equipment suppliers, research institutes, etc.) European Investment Bank

  8. EIB Lending to ICT Sector EUR 3.0 bn in 2008 European Investment Bank

  9. What is different with this crisis? Crisis has had an unprecedented, deep impact on semiconductor sector Will lead to an international redistribution of production Europe will have to react to this swiftly Green shoots are emerging, opportunities are out there: Investment needs for broadband, green technologies, to assist demographic change Europe has long R&D traditions and favourable political environment European Investment Bank

  10. Sources for funding of investments Cash flow (adversely affected by current market environment) Equity (expensive in current environment) Debt (difficult due to de-leveraging efforts) Subsidies (competition with other more visible sectors) European Investment Bank

  11. EIB and EIF financing tools 1 Risk Capital CIP Resources (SME) 2 3 RSFF (SME / MidCap) 4 Investment Loans • Facility: High Growth Innovative SME Scheme (GIF), Ecotech • Purpose: IP financing, technology transfer, seed financing, investment readiness • Target Group: VC Funds, Business Angels • EIF Product: Fund-of-Funds • RSFF • RDI financing • SMEs/MidCaps, Banks, PE Investors (sub-investment grade) • Loans (incl. Mezzanine), Funded Risk Sharing Facilities with Banks (Investors) • Investment Loans • RDI financing • MidCaps/ Large Corporates/ Public Sector Entities (investment grade) • Loans, Guarantees • CIP Guarantee schemes • Growth financing for SMEs • Formal VC Funds • SME guarantees (loans, microcredit, equity/mezzanine, securitisation Bank Loans and Guarantees Formal VC Funds Seed/Early Stage VC Funds Business Angels Entrepreneur, friends, family Later Stage Counterparts Seed / Start-Up Phase Emerging Growth Phase Development Phase European Investment Bank

  12. EIB Financing SolutionsTypical EIB financing modes BankIntermediated Loans Direct Loan EIB EIB Commercial Bank(s) Loan Loan Loan Commercial Bank(s) Loan(s) (< 12.5m) Customer Customer Bank Guaranteed Loan EIB Loan Guarantee Commercial Bank(s) Customer European Investment Bank

  13. EIB Loans Long Term Tenor Attractive Pricing EIB does not sell assets on the secondary market (buy and hold strategy) Signalling Effect: EIB as a quality stamp Minimal loan size EUR 12.5 million (= minimal project size of EUR 25 million) Traditionally, investment grade projects European Investment Bank

  14. Risk Sharing Finance Facility – Set-up Corporate Lending Senior Secured Second Lien Senior Unsecured Junior Unsecured PIK loans Mezzanine, etc. Project Financing Universities Other: SPVs, PPPs, JTIs… RSFF [up to EUR 10 bn assuming leverage of 5.0x ] European Commission EUR 1 bn EUR 1 bn Own Resources Direct Lending Indirect Lending / Financing 1 • Financial Intermediaries • (extend lending capacity) • Risk Sharing • Co-financing 2 3 • Investment Funds • Renewable Energy • Others 4 • Collaboration with EIF • Banks • Funds European Investment Bank

  15. The EIB Project Approach • What can be financed? An example ELIGIBLE COSTS Eligible project cost includes: • Facilities: project capital expenditures for tangible assets • Activities: project capital expenditures for intangible assets, research staff cost, incremental working capital needs and otherrelated operating expenses Year 1 € 20 m Year 2 € 10 m Time Year 3 € 30 m Total € 60 m R&D budgets typically cumulated over 3 years (investment programme) MAX. EIB LOAN Generally up to 50% (exceptionally up to 75%) of the total project cost € 30 m European Investment Bank

  16. Summary ECTF for low emission technology & safety Financing of ICT fits into EIB´s policy RSFF for financing of sub-investment grade RDI projects European Investment Bank

  17. Andres Gavira Etzel Senior Engineer ICT & e-Economy Division Phone: (+352) 4379 82634 email: gavira@eib.org European Investment Bank 100, boulevard Konrad Adenauer L-2950 Luxembourg European Investment Bank

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