1. 1 Financing Research Infrastructure PPPs and other funding models Financing for Research & Development 14 th December 2006, Brussels Gunnar Münt

2. 2 Table of Contents 2. 1. Financing RDI: the EIB’s Innovation 2010 Initiative Funding research infrastructure 3. Financial Structure 4. EIB financing of PPPs

3. 3 Financing RDI – the EIB’s Innovation 2010 Initiative Private and Public Sector Investment in R&D (and downstream investments), including Research Infrastructures Human Capital Formation Development of Information and Communication Technology (ICT) SME/VC Financing (EIF) Innovation 2010 initiative (i2i) launched in 2000 (Lisbon Agenda) Four strategic areas of i2i lending activities:

4. 4 RDI financing – a strategic objective for the EIB Financing activity 2000 - 2005 mEUR Year EIB i2i financing : EUR 10.6bn in 2005 (+ 34.4% 2000-2005) EIB’s i2i objective : lend EUR 50bn by 2010 to foster innovation over current decade. EUR 35bn (70%) already achieved in 2005, half of which in RDI. Plus: Growth Initiative TENs: € 50 bn by 2010 RDI: € 50 bn over decade 2000-2010 QSP: Quick Start Programme

5. 5 Financing RDI – the EIB’s Innovation 2010 Initiative Some features : EIB is one of the largest lenders to the public sector in Europe (in excess of EUR 20 bn p.a.); Since 2000, EIB has lent more than EUR 15 bn in support of public sector research infrastructure, genuine R&D and higher education; Volume of EIB lending to private-sector research facilities increasing.

6. 6 Financing RDI – the EIB’s Innovation 2010 Initiative RDI project examples Industrial RDI (pilot plants, labs, research activities) Prototypes Universities/Research organisations Hospitals with research Large Infrastructures Science parks, incubators Specific global loans for innovative SME’s

7. 7 Financing RDI projects What investments EIB can finance ELIGIBLE COSTS € 20m Time Year 1 € 10mYear 2 € 30mYear 3 Total€ 60m € 45m MAX. EIB LOAN 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. 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. R&D budgets typically cumulated over 3 years (investment programme) Up to 75% of the total project cost. Eligible project cost include:

8. 8 Financing RDI projects How to access EIB financing Projects : must be eligible, technically and economically viable; Borrowers/Promoters : must be creditworthy (bankable) No formal application requirements ! Project description, objective Key documentation : Business plan Accounts, financial projections

9. 9 Financing Research Infrastructure – EIB support – why ? Huge perceived (positive) externalities of additional R&D facilities in Europe.  Backlog of public sector investment is the main obstacle to higher R&D productivity. Huge perceived (positive) externalities of additional R&D facilities in Europe.  Backlog of public sector investment is the main obstacle to higher R&D productivity. Persistent lack of funding of public sector R&D infrastructure;  Budget constraints at all levels of government;  Failure to agree on large-scale, cross-border R&D facilities; Persistent lack of funding of public sector R&D infrastructure;  Budget constraints at all levels of government;  Failure to agree on large-scale, cross-border R&D facilities;

10. 10 Financing Research Infrastructure – EIB support – how ? Reduction in funding costs. Reduction in funding costs. EIB steps in to complement lending consortia Two effects:

11. 11 Financing Research Infrastructure – EIB support – generic examples Large research infrastructure: accelerator facilities laboratories test facilities. Large research infrastructure: accelerator facilities laboratories test facilities. Specialised equipment (e.g. supercomputers). Higher education facilities (extension, modernisation).

12. 12 Support to Research Infrastructures Large European RI projects financed by EIB Examples of Research Infrastructure projects financed by EIB Large Hadron Collider of CERN, Geneva Free Electron Laser, Trieste Nano-technology R&D centre of IMEC, Leuven Laboratory infrastructure of EMBL, Heidelberg

13. 13 Financing Research Infrastructure – Some features Long lead times, complex negotiations involving many parties (usually more than one public sector promoter involved); Projects relying on yearly budget allocations; Financing gap during construction phase; Single-purpose facilities: low recovery rate.

14. 14 Financing Research Infrastructure – Financing models Financing partners provide funding to the promoter on the basis of its financial strength. A promoter can be a company, a consortium of companies or an institution The financing partners are thereby exposed to the credit risk of the promoter, not of the project. Promoter Finance ModelProject Finance Model In the Project Finance Model, the project is realized and financed via a legally and financially standalone project company. The promoter(s) usually have the role of a strategic partner (e.g shareholder). The financing partners are thereby exposed to the credit risk project only.

15. 15 Financing Research Infrastructure – Financial structure States, regions and municipalities; Public sector “Special Purpose Vehicles” (SPV); New: Private-sector promoters/PPPs. Potential borrowers of EIB loans:

16. 16 Financing Research Infrastructure – EIB products EIB guarantees in favour of projects. Risk-sharing schemes: Partner commitment risk (e.g. in multilateral projects); Project implementation risk; Project cost overruns. Risk-sharing schemes: Partner commitment risk (e.g. in multilateral projects); Project implementation risk; Project cost overruns. Loans: Bridge financing during construction phase; Standby facility to cover temporary budgetary constraints. Loans: Bridge financing during construction phase; Standby facility to cover temporary budgetary constraints.

17. 17 New opportunities Solutions for promoters and partners Promoter of Research Infrastructure Partners Contractor, Co-promoter Operator, Other Service providers Standard EIB financing products Risk Sharing financing products

18. 18 EIB financing for PPPs: By sector

19. 19 EIB financing for PPPs: By country

20. 20 EPEC - Developing the PPP market in EU-27: Addressing the information and skills gap Consensus on value of such capacity building initiative at EU level. EIB / Commission / Member States developing concept of European PPP Expertise Centre (EPEC). New Member States likely to be principal, although not exclusive, users of EPEC’s Policy Support services. EPEC should be in a position to make a significant impact on deal flow as early as 2007.

21. 21 Contacts Tom C. Barrett barrett @eib.org@ +352 4379 7006 Director AGI Department Kim Kreilgaard k.kreilgaar@eib.org +352 4379 7313 Head of Division AGI Department Gunnar Muent g.muent @eib.org@ +352 4379 7233 Senior Loan Officer Central Europe Department