1. 1 http://www.eib.org New Lisbon Airport Workshop 22 Nov 2005 Lisbon

2. EIB - European Union’s financing institution:  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;  Lending in 2004: EUR 43bn (EUR 40bn within the EU);  Borrowing in 2004: EUR 50bn (EUR 28bn in EU currencies). 1. THE EIB GROUP – THE EIB AND THE EIF

3. 3 2. Strategic Outlook Priorities  Economic and social cohesion in an enlarged EU  Implementing of the Innovation 2010 Initiative (i2i)  Development of Trans-European and Access networks (TENs)  Support of EU Development and Cooperation Policies in Partner Countries  Environmental Protection and Improvement, including Climate Change Financing Facility and Renewable Energy. EIB implements EU policies; a policy driven Bank

4. 4 Support for European Union policies.  Multi-sector and trans-national technical experience in the EU.  Long-term lending (typically 25 years or more for infrastructure, but in project finance depends on the life of the concession )  Can finance significant proportion of capital requirement (typically 25-45% but up to 50% possible).  Flexible amortisation schedules reflecting project cash flow and long grace periods.  Competitive funding cost and various financing structures offered. 3. Main features of EIB involvement

5. 5 59% 19% 9% 13% 4. EUROPEAN COMMMUNICATIONS INFRASTRUCTURE 2000-2004: Individual loans: EUR 44.8bn n Land-based transport n Air transport n Telecommuni- cations n Sundry Arteries of the single market

6. 6 Roads, motorways 40% Aviation 16% Ports 2% Urban transport 12% Railways 24% Major infrastructure projects 6% 5 Sector split within transport sector

7. 7 6. Why project finance ?  Accelerate priority infrastructure under strict budgetary constraints.  Implement projects of national interest within a definite timescale.  Compare and control costs (value for money/public sector comparator).  Minimise public sector funding but maintain ultimate public sector ownership (concession with reversion).  Identify, define and allocate risks to the parties best able to carry them.  Reinforce the competitive environment.  Specify measurable outputs and services to be provided (performance testing).

8. 8 7. Value added from EIB  Experienced partner in project finance deals : capacity to conduct own technical and financial due dlligence.  Complementarity with banking sector and capital markets  Catalysing agent (deal making experience, more resources available for investments, facilitating private investment and private involvement in investment of public interest)  Cautious risk philosophy approach but readiness to assume post completion risk (subject to compliance with rigorous tests).  Recent developments : possibility of assumpting limited amounts of preconstruction risk for high priority projects (SFF facility). Also prospects for new facility for promotion and funding of TEN’s (Community Guarantee Instrument for TEN-Transport – CGIT).

9. 9 8. The EIB and project finance  In-house due diligence capacity: stamp of approval.  Non exclusivity : arm’s length approach with all bidders (stimulate competition).  Strict compliance with EU procurement rules but flexible appraisal and decision structures adapted to national tender framework (with or without prequalification, shortlisting/preferred bidder approach).  Careful attention to environmental considerations and compliance with European and national regulation and decisions.

10. 10  Public sector expertise (preparatory, investment and supervisory phases). 9. Essential conditions for successful PPPs  Adequate planning and legal/administrative context  Adequate definition of technical characteristics and long-term project operation  Competitive and transparent procurement (Nb, for EIB, no exclusivity, open tendering in line with EU Directives)  Balanced concession structure, adequate distribution of risks and rewards.  Sustainable and bankable financial structure : cost effective investment ; realistic demand and revenue forcasts ; transparent and enforceable definition of public sector financial support for investment and operation, if needed (preferably at tender stage) ; adequate coverage of debt finance and returns to equity shareholders.  Experienced private partners with a long-term vision

11. 11 10. Planning Context  Site selection methodology  Public Inquiry  Surface access issues  Strategic Environmental Assessment  Impacts of environmental constraints

12. 12 11. Technical Aspects  Coherent master plan providing long term flexibility  Detailed terms of reference for development requirements  Phasing strategy  Appropriate development to serve all users  Capacity to meet demand and levels of service  Residual value and suitability at concession end

13. 13 12. EIB Appraisal Process Two-stage appraisal exercise for PPP/Concession contracts Stage 1 – prior to or during procurement  Review of project feasibility (cost, technical, economic)  Environment and procurement  Review of draft concession agreement Stage 2 – following selection of concessionaire  Financial Profitability analysis  Final design solution  Risk mitigation

14. 14 http://www.eib.org