European Investment Bank 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

European Investment Bank Outline Introduction of EIB The ECTF The Impact of the Crisis on the Semiconductor Industry The RSFF 28.04.2010 European Investment Bank 2

European Investment Bank Profile 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. 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 28.04.2010 European Investment Bank

European Investment Bank EIB Lending to the Automotive Sector 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 28.04.2010 European Investment Bank

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 28.04.2010 European Investment Bank

European Investment Bank 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 28.04.2010 European Investment Bank

European Investment Bank 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.) 28.04.2010 European Investment Bank

EIB Lending to ICT Sector EUR 3.0 bn in 2008 28.04.2010 European Investment Bank

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 28.04.2010 European Investment Bank

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) 28.04.2010 European Investment Bank

EIB and EIF financing tools 1 Risk Capital 2 CIP Resources (SME) 3 RSFF (SME / MidCap) Investment Loans 4 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 CIP Guarantee schemes Growth financing for SMEs Formal VC Funds SME guarantees (loans, microcredit, equity/mezzanine, securitisation 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 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 28.04.2010 European Investment Bank

EIB Financing Solutions Typical EIB financing modes Direct Loan Commercial Bank(s) Customer EIB Loan Bank Guaranteed Loan Bank Intermediated Loans EIB Commercial Bank(s) Customer Loan Loan(s) (< 12.5m) EIB Loan Guarantee Commercial Bank(s) The typical EIB financing solutions comprise: Direct Loans: where financing is provided directly to the customer alongside other lenders as appropriate. Credit risk is shared on an equal basis with other bank(s). Such investment loans are limited to 50% of the investment cost, as defined by the Bank, in order to leave room for other banks. Depending on the financial standing of the counterpart, the Bank will sometimes require guarantee. Bank Guaranteed Loans: where financing is provided directly to the customer alongside other lenders as appropriate. Credit risk is born by the guarantor. Bank Intermediated Loans: where financing is provided to the customer ’s house bank(s) passing through the Bank’s low funding cost. Credit risk is born by the intermediary bank. Due to capacity constraints of the Bank, such direct and guaranteed loans are possible for investments from € 25 mn and above. To cater for smaller loans, notably for lending to SMEs the Bank has developed so called global loans – lines of credit to local/intermediary banks, which channel/on-lend funds to the final customers. Mid-cap loans Customer 28.04.2010 European Investment Bank

European Investment Bank 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 28.04.2010 European Investment Bank 13

Risk Sharing Finance Facility – Set-up RSFF [up to EUR 10 bn assuming leverage of 5.0x ] EUR 1 bn European Commission EUR 1 bn Own Resources Direct Lending Indirect Lending / Financing 1 Corporate Lending Senior Secured Second Lien Senior Unsecured Junior Unsecured PIK loans Mezzanine, etc. Project Financing Universities Other: SPVs, PPPs, JTIs… 2 Financial Intermediaries (extend lending capacity) Risk Sharing Co-financing 3 Investment Funds Renewable Energy Others 4 Collaboration with EIF Banks Funds 28.04.2010 European Investment Bank

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 other related 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) € 30 m MAX. EIB LOAN Generally up to 50% (exceptionally up to 75%) of the total project cost 28.04.2010 European Investment Bank

European Investment Bank Summary ECTF for low emission technology & safety Financing of ICT fits into EIB´s policy RSFF for financing of sub-investment grade RDI projects 28.04.2010 European Investment Bank 16

European Investment Bank 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 28.04.2010 European Investment Bank