1. Mario Cucchi and Guido Borsani Funding regional projects through financial engineering in Lombardy, Italy 7 th Monitoring Committee Meeting Thessaloniki, 15 th of July 2005

2. © 2005 Finlombarda S.p.A. 2 Lombardy is the largest Italian Region and represents over 1/5 of the whole national economy Context History Mission Strategic Positioning Activities Tools Examples Population: 9.032.554 (15,6% of Italian population) GDP: ≈ 250 billion € (20% of Italian economy) Unemployment rate: 8% in Italy) Rating: S&P: AA- Fitch: AA Moody ’ s: Aa1 (vs. Aa2 Italy)

3. © 2005 Finlombarda S.p.A. 3 Finlombarda’s History 1971 INCORPORATION of FINLOMBARDA SpA 19992004 19982001 INCORPORATION of FINLOMBARDA GESTIONI SGR SpA Context History Mission Strategic Positioning Activities Tools Examples TIME REGION OF LOMBARDY OTHERS

4. © 2005 Finlombarda S.p.A. 4 Finlombarda is aimed at supporting the economical, social and territorial development of the Region Finlombarda is… …a bridge between the public and private finance …an institution that promotes and manages innovative financial products …an institution that finance “excellence” for the competitiveness of Lombardy’s economy Context History Mission Strategic Positioning Activities Tools Examples

5. © 2005 Finlombarda S.p.A. 5 Comparative analysis of the credit enhancement positioning in PPP in Europe Germany Spain Italy The Netherlands Ireland France Group 1 Group 2 United Kingdom Group 3 Strong Weak Relative importance of PFI and private tools&products Relative importance of public financial players in public interest financing Areas of general interest missions (urban development, venture capital, local economic development) Source: Advention 2002 U.S..A Context History Mission Strategic Positioning Activities Tools Examples

6. © 2005 Finlombarda S.p.A. 6 Areas of activity PUBLIC FINANCE CORPORATE FINANCE Credit facility for SME: More than 20 tools set up More than 20 tools set up Financial advisor for SME UE Programmes Management Technological Vouchers Credit facility for SME: More than 20 tools set up More than 20 tools set up Financial advisor for SME UE Programmes Management Technological Vouchers Closed-end Funds: NEXT Fund NEXT Fund EUROMED Fund EUROMED Fund MEZZANINE Fund MEZZANINE Fund Closed-end Funds: NEXT Fund NEXT Fund EUROMED Fund EUROMED Fund MEZZANINE Fund MEZZANINE Fund Structured finance for public infrastructures: Public Utilities Fund Public Utilities Fund Advisory services to PPP and PF projects: PF Regional Unit PF Regional Unit PF Fund PF Fund Infrastructure Fund “Obj. 2” Structured finance for public infrastructures: Public Utilities Fund Public Utilities Fund Advisory services to PPP and PF projects: PF Regional Unit PF Regional Unit PF Fund PF Fund Infrastructure Fund “Obj. 2” Closed-end Funds: SOCIAL HOUSING Fund SOCIAL HOUSING Fund Closed-end Funds: SOCIAL HOUSING Fund SOCIAL HOUSING Fund Context History Mission Strategic Positioning Activities Tools Examples

7. © 2005 Finlombarda S.p.A. 7 Three different tools to fulfil Regional economic policy expectations MANDATE FUNDS Region of Lombardy Finlombarda SpA VENTURE CAPITAL, MEZZANINE FINANCING INVESTMENT FUNDS REGIONAL FUNDS PRIVATE and THIRD PARTIES FUNDS MANAGEMENT FUNDS Finlombarda Gestioni SGR PUBLIC FUNDS REGIONAL FUNDS GRANTS & CREDIT FACILITIES CREDIT FACILITIES REVOLVING FUNDS REGIONAL FUNDS PRIVATE and THIRD PARTIES FUNDS ≈ € 300 Ml≈ € 40 Ml≈ € 100 Ml Context History Mission Strategic Positioning Activities Tools Examples

8. © 2005 Finlombarda S.p.A. 8 Finlombarda Gestioni SGR has launched NEXT: a closed-end fund of funds aimed at developing a Venture Capital market in Lombardy REGION OF LOMBARDY guarantees Context History Mission Strategic Positioning Activities Tools Examples

9. © 2005 Finlombarda S.p.A. 9 Finlombarda is setting up an innovative financial tool to subsidize Lombardy water and wastewater infrastructure projects Finlombarda S.p.A. REVOLVING FUND REGIONAL FUNDS PRIVATE and THIRD PARTIES FUNDS SUBSIDIZED LOANS CREDIT ENHANCEMENT FUNDING GUARANTEE Region of Lombardy BORROWERS CAPITAL MARKETS LOANS, BONDS, COMMERCIAL PAPERS Context History Mission Strategic Positioning Activities Tools Examples

10. © 2005 Finlombarda S.p.A. 10 Public fund management Corporate Finance  Advisory in Public-Private Partnership (PPP) and Project Finance (PF)  Project Finance Regional Unit  Project Finance Fund  Public utilities Fund  InfrastructuralFundObjective 2 Public Finance  Regional Facilities to SMEs (20 typology of interventions)  Special facilities to cluster  UE Programmes  Technological Voucher  EU facilities to SMEs (Objective 2 areas )  NEXT Fund  Euromed Fund  Mezanine Fund  Social Housing Fund

11. © 2005 Finlombarda S.p.A. 11 New financial tools for corporate finacing Financing is effected with a mix of: Funds from the Regional Funds managed by Finlombarda, to be lent at favourable financial condition Funds from Banks, leasing and factoring companies, at negotiated financial condition (of spread and referring interest rate) having ongoing agreements with Finlombarda (more than fifty banks co-operate with Finlombarda). A non traditional toll for the SMEs development financing (revolving fund) Transition from the grant culture to a financial culture Region Lombardy has dropped any kind of financial support to SMEs development trough grants (except technological research) This kind of intervention is costly, with a small leverage effect, with a limited impact in terms of commitment of private beneficiary and is completely unrelated to banking system Regional and EU Facilities to SME

12. © 2005 Finlombarda S.p.A. 12 New financial tools for corporate financing – the main standard conditions Standard condition of co-financing percentage financing: from 50% up to 100% of eligible investment costs public funding: from 30% up to 70% of granted loan private banks funding: remaining from 70% to 30% duration: from 5 up to 20 years interest rate: Public funds from 0% up to 1% per year Banks rate = EURIBOR + 1 up to 1,5% per year (beneficiary cost= weighted average of interest rate applied to funds) reimbursement: quarterly / half year instalments Regional Facilities to SME A non traditional toll for the SMEs development financing (revolving fund)

13. © 2005 Finlombarda S.p.A. 13 New financial tool for Corporate Financing Amount & leverage RegionalFinancial tools for SME AMOUNT OF FINANCIAL FUNDS MANAGED BY FINLOMBARDA € 210 M€ Total amount of Regional Funds for SMEs financing managed by Finlombarda out of which, about 70%, disbursed for a total amount of outstanding loans of approx 240 M€, financing investment for an amount of 500 €.

14. © 2005 Finlombarda S.p.A. 14 Regional and EU Facilities to SME Aid intensity Leverage Interest contribution Revolving fund grant PA costs New financial tools for corporate financing - financial efficiency Figurative cost

15. © 2005 Finlombarda S.p.A. 15 New financial tools for corporate finacing condition of co-financing percentage financing: up to 100% of eligible investment costs EU funding: 50% of granted loan private banks funding: remaining 50% duration: up to 6 years interest rate: EU funds: interest free Banks rate = EURIBOR + 1 up to 1,5% per year (beneficiary cost = approx 1% per year) reimbursement: quarterly / half year installments EU Facilities to SME – SPD objective 2 A non traditional toll for the SMEs development financing (revolving fund) Artisan enterprises

16. © 2005 Finlombarda S.p.A. 16 New financial tool for the public sector Financing of a total amount of € 421 Million is effected with fund provided under European Regional Development Fund programme with a mix of public funding: Infrastructure Fund - objective 2 areas 209 million € from ERDF 146 million € by Italian Government 66 million € by Lombardy Region

17. © 2005 Finlombarda S.p.A. 17 New financial tool for the public sector Priority 2 (territorial promotion) 2.1 development of infrastructure facilities to promote the competitiveness of local territory 2.2 foster infrastructure facilities to develop the tourist sector 2.4 development of information society Specific Measures financed by the Infrastructure Revolving Fund Priority 3 (environmental promotion) 3.1 promotion of sustainable use of protected areas 3.2 water cycle infrastructure development intervention 3.3 reclaim and recovery of polluted and deteriorated areas 3.4 promotion of environmental sustainable production and use of energy Infrastructure Fund - objective 2 areas

18. © 2005 Finlombarda S.p.A. 18 New financial tool for the public sector KEY ACTORS: Development strategy PROJECTS’ SELECTION PROJECTS’ SELECTION FINANCIAL DISBURSEMENT FINANCIAL DISBURSEMENT PROJECTS’ IMPLEMENTATION PROJECTS’ IMPLEMENTATION LOAN REIMBURSEMENT LOAN REIMBURSEMENT Managing Authority Fund’s Manager Final Beneficiaries Final Beneficiaries to the Fund Manager

19. © 2005 Finlombarda S.p.A. 19 Finlombarda S.p.A. - New financial tool for the public sector Infrastructure Fund - objective 2 areas ACTIVITIES and TOOLS The total financial aid disbursed to final beneficiaries through the Infrastructural Revolving Fund is composed by both a GRANT (40% of the project’s cost) and an INTEREST FREE LOAN (60% of the project’s total cost) to be reimbursed over a 20 years period FINANCIAL AID 40% GRANTS 40% GRANTS 60% INTEREST FREE LOANS 60% INTEREST FREE LOANS

20. © 2005 Finlombarda S.p.A. 20 Finlombarda S.p.A. - New financial tool for the public sector Infrastructure Fund - objective 2 areas RESULTS 243 beneficiaries 600.000 inhabitants 400 applications 500 million euro Local public institutions which benefited from the Fund’s financial support from September to present Population of the regional area eligible to financial support Received by the MA during the call for projects Total cost of infrastructure interventions financed by the Fund + multiplication effect

21. © 2005 Finlombarda S.p.A. 21 Finlombarda S.p.A. - New financial tool for the public sector CONCLUSIONS Compared to the traditional subsidy system, the Infrastructure Revolving Fund presents UNIQUE characteristics: INNOVATION: is the first and only case of financing public infrastructural interventions through a financial instrument in the framework of Structural Funds programs

22. © 2005 Finlombarda S.p.A. 22 Finlombarda S.p.A. - New financial tool for the public sector CONCLUSIONS Compared to the traditional subsidy system, the Infrastructure Revolving Fund presents UNIQUE characteristics: DIVERSIFICATION OF FINANCIAL RESOURCES: replaces the traditional subsidy system (grants) with a financing mix composed by both a capital grant (40% of investment ‘ s cost), and an interest-free loan (60%) according with the recent European Community ’ s guidance

23. © 2005 Finlombarda S.p.A. 23 Finlombarda S.p.A. - New financial tool for the public sector CONCLUSIONS Compared to the traditional subsidy system, the Infrastructure Revolving Fund presents UNIQUE characteristics: MULTIPLIER EFFECT: doubles the number of financed projects thanks to a rotation rate equal to almost 2 (at the end of the period the capital inflow generated by the reimbursement instalments would be roughly equal to the initial total amount of the Fund)