1 Presentation to Diplomatische Akademie Wien European Infrastructure Financing What new developments are occurring? 2 June 2004

2 Created by the Treaty of Rome in 1958, to provide long-term finance for projects promoting European integration; Subscribed capital EUR 163.7bn; EIB shareholders: 25 Member States of the European Union EIB’s lending in 2003: EUR 42bn (EUR 34bn within the EU); funds raised via bonds “not for profit” - organisation European Investment Bank: European Union’s Financing Institution

3 Economic and social cohesion in an enlarged EU Support for SMEs i2i, R&D, Dissemination of innovation, technology networks, education, health Environmental protection and improvement Support for EU development aid and cooperation policies Promoting European Union policies EIB PROJECT ELIGIBILITY Development of Trans-European and access networks

4 Low cost of "AAA" rating funding benefit passed on to clients; Large amounts; All major currencies, including more and more those of the New Member States; Long maturities; Catalytic effect of participation on other banking or financial partners. WHAT ARE THE BENEFITS OF AN EIB LOAN

5 In 2003, EUR 4.6bn for investments in the 10 New Member States in Central and Eastern Europe, Cyprus and Malta FOCUS: FINANCING EU ENLARGEMENT  Communications infrastructure (including TENs);  Regional development;  Industrial competitiveness (including Foreign Direct Investment);  Environmental protection;  Health and Education 5

6 EURm n Acceding states n Accession states n Applicant states n Candidate states n Energy n Communications n Water n Industry n Education, Health n Global loans A firm commitment to accession Poland Czech Rep Hungary Cyprus 705 Malta 25 Slovenia 974 Lithuania 249 Latvia 276 Estonia 192 LOANS IN THE NEW MEMBER STATES : EUR 13.5bn Slovakia 880 6

7 A firm commitment to accession LOANS IN ACCESSION, APPLICANT AND CANDIDATE STATES : EUR 6.1bn Romania Bulgaria 565 Turkey Serbia & Montenegro 498 Croatia 446 Albania 108 FYRM 93 Bosnia-Herzegovina 185 EURm n Acceding states n Accession states n Applicant states n Candidate states n Energy n Communications n Water n Industry n Education, Health n Global loans 7

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9 Long term Public Sector Political Commitment and adequate financial involvement of the public sector Focused, dedicated and experienced public sector team – PPP Task Force. Favourable legal and institutional framework. Transparent + competitive procurement (concept, construction and operation phase) Realistic risk sharing. Partnership. “Must” for successful PPPs

10 Learning Process Extra costs Value added Benchmarking Risk-sharing Procurement Extra costs of PPPs Value added

11 TRANS-EUROPEAN NETWORKS AND EUROPEAN TRANSPORT CORRIDORS Projects financed by the EIB ( ) Oil/Gas platform Priority TENS Section financed Other TENS Transport corridors, CEC Section financed Road/Rail Airport Electricity Gas Air traffic management Port Inter-modal freight centre Projects of multi- regional character

12 1.Reconfirmed European Priorities A new start for a quicker implementation of TENs after the “van Miert Group” proposals

13 Reasons for sluggish TENs implementation Absence of common priorities / timetables Structural constraints (e.g. technical interoperability; limited deregulations) Administrative, legal and environmental requirements Inadequate economic viability Limited commitment of state funds but need for high public financing and grant support

14 TENs after “van Miert” Total investment requirements up to 2020 estimated at EUR 235 billion in “priority projects”. 8 “priority projects” concerning investments in Central Europe. Austria is represented with 6 cross-border projects, i. a. the “Brenner Basis Tunnel” Total investment requirements in overall TEN infrastructure estimated at EUR 600 billion. EIB indicated as key financier for these projects. However : lack of financial resources is not the main cause of slow project implementation.

15 TEN Railway Priority Projects Completion before 2007 : –Fast rail connection Paris, Brussels, Cologne, Amsterdam, London –Cork-Dublin-Belfast- Stranraer –Betuwe Line –Öresund Link (completed) Completion before 2010 : –Nürnberg-München/Kufstein-Innsbruck –Madrid-Barcelona-Perpignan; Madrid-Hendaya –TGV Est –Torino-Venezia –Multimodal link Portugal/Spain with rest of Europe –Kerava-Lahti –West Coast Main Line

16 TEN Road Priority Projects Completion before 2007 : –none Completion before 2010 : –Lisbon/La Coruna; Lisbon/Valladolid; Lisbon/Seville (as part of the multimodal link Portugal:Spain with rest of Europe) –Helsinki/Turku (as part of Nordic Triangle) –IRL/UK/BENELUX road link

17 TEN Long-term Horizon Projects Firm government commitment for projects to be operational by 2020 : –8 railway projects in a list of total 18 –2 motorway projects –4 intermodal projects Longer-term horizon projects : –3 railway projects in a list of total 4 –no road project Cohesion projects : –Accessibility and interconnections of networks –Cross-border connections

18 TEN Long-term Benefits Time savings equivalent to EUR 8 bn/year Reduction of CO 2 emissions by 17 m tonnes/year Reduction of other emissions equivalent to external costs of EUR 700 m Stimulate international trade, in particular in Central and Eastern Europe Safety improvements Boost GDP growth by 0.23% pa

19 2.Trans-European Networks Investment Facility (TIF)

20 Financing for Trans European Transport networks Substantial public sector investment in TENs networks EU budgetary sources, EIB finance and private sector PPP finance as complementary sources Role of public financing nevertheless remains a keystone in major new infrastructure investments

21 EIB’s role in TENs growth initiative 1)Expand EIB financing commitments by increasing its capacity for existing senior debt 2)Increased acceptance of project risks through the EIB “Structured Finance Facility” instruments 3)Use of financing instruments including EIB guarantees and provision for equity and mezzanine finance 4)Increase leverage of EIB financing instruments by a.more effective combination with EU budgetary funds and guarantees b.increased co-financing with capital, banking and insurance markets 5)Capitalise on substantial EIB experience by greater utilisation of EIB expertise in support of public authorities (e.g collaboration with national PPP Task Forces and specialist infrastructure entities) New TENs Investment Facility (TIF): 5 products

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

23 Equity investors (contractor, concession holder, etc.) EIB Project Capital markets / banks Share capital Long and medium term loans Senior secured or guaranteed extra long term loan (1)Increased EIB senior lending

24 (2)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

25 EIB Project Junior lenders and equity Capital markets / banks Long term loans Medium term junior loan and share capital (2)Increased “Structured Finance Facility”

26 (3) 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 assured through EU financial markets

27 EIB Project Capital markets / banks Private sector Member States & EU GuaranteesGuarantees Funding (3) EIB and EU guarantees

28 (3) Equity and mezzanine finance Unquestionable lack of equity and mezzanine finance for infrastructure projects. However: investments must pay! Increase availability by leveraged investment with private sector infrastructure funds Equity and mezzanine available to priority TENs projects Equity funding for PPP project companies and construction sector Increase multiplier effect of EIB / EU finance by establishment of infrastructure funds

29 Projects Infrastructure funds EIB Fund 1 EU Public authorities Private financiers Fund 2Fund n Equity and mezzanine (3) Equity and mezzanine finance

30 (4) Strengthen EIB Institutional Role Strategic Advisor to the Commission, to Member States and Public Authorities on TENS (in particular realization of QSPs). Information on financing techniques used in Europe. 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. Collaboration with EU-TENs Project Co-ordinators.

31 Address : 100, Boulevard Konrad Adenauer, L-2950 Luxembourg Contact : Franz-Josef Vetter Tel :