1. Risk-Sharing Finance Facility An innovative financing instrument for more investment in RDI towards the Innovation Union
EC – DG RTD – Directorate B – Unit B-04 – RSFF Designated Service – 18 October 2010 – Not legally binding

2. Table of Contents
RSFF – Risk-Sharing Finance Facility Innovative loans for innovative ideas
Why? Introduction 1.
What? RSFF mechanism 2.
How? Beneficiaries, eligibility, implementation, products 3.
Where are we now? Results, outlook, project examples 4.
What’s next? RSFF interim evaluation preparing the future 5. 6.
RSFF on the ground: Some project examples
Summary 7.

3. Why RSFF? Europe is facing….. Europe is reacting…..
RDI investment & finance gap in Europe
Europe is facing…..
A lack of private investment in R&D: a key factor for Europe’s relatively weak total investment in R&D (data for : EU 1.84%, US 2.68%, JP 3.40%)
A market gap for RDI investment finance; financing is scarce for such risky projects, particularly since the economic and financial crisis (2008/2009)
Impact of the crisis on public and private finance, survival of innovative SMEs: Major challenges to address with reduced means
Europe is reacting…..
Through dedicated support programmes for R&D, in addition to national support schemes in the EU Member States; grant funding
also through new “EU Financial instruments” using other forms of funding than grants
Innovation Union: involving all actors, to notably tackle under-investment

4. Table of Contents
RSFF – Risk-Sharing Finance Facility Innovative loans for innovative ideas
Why? Introduction 1.
What? RSFF mechanism 2.
How? Beneficiaries, eligibility, implementation, products 3.
Where are we now? Results, outlook, project examples 4.
What’s next? RSFF interim evaluation preparing the future 5. 6.
RSFF on the ground: Some project examples
Summary 7.

5. Risk-Sharing Finance Facility (RSFF): definition
December 2005: European Council:
EIB and EC invited to examine a financing facility with risk‑sharing components & leverage effect for an additional investment in R&D of €10 billion
5 June 2007: RSFF Co-operation Agreement
signed by Commissioner Potočnik and EIB President Maystadt
RSFF:
an innovative debt-financing instrument (loans)
co-developped by the EC and the EIB
to financially support risky investments in RDI,
notably by private companies

6. RSFF key principles
Provide loans for riskier but creditworthy RDI projects
by risk-sharing between the European Community and the EIB
Generate a leverage effect: volume of extra lending by EIB and its partner banks is a 4 to 6 multiple of the Community funds provided to the facility – a 12 to 18 multiple in terms of Projects costs
Demand-driven: projects supported on a “first come, first served” basis (market-based instrument)

7. Risk-Sharing Finance Facility
Risk-sharing EC/ EIB and leverage effect
FP 7 Contribution: up to € 1 billion
EIB Contribution:
up to € 1 billion
up to € 2 billion for
Risk coverage
for potential losses (non-repayment of RSFF loans by borrower/ beneficiary)
allows EIB to provide
RSFF loans and guarantees
of up to € 10 billion coming from capital markets
for RDI investments

8. EU financial instruments: Support for companies at their various stages1
Risk Capital 2
CIP Resources (SME) 3
RSFF (SME / MidCap)
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
Facility: CIP Guarantee schemes
Purpose: Growth financing for SMEs
Target Group: Formal VC Funds, CLOs
EIF Product: SME guarantees (loans, microcredit, equity/mezzanine, securitisation
Facility: RSFF
Purpose: RDI financing
Target Group: SMEs/MidCaps, larger companies
EIB Product: Loans (incl. Mezzanine), Funded Risk Sharing Facilities with Banks (Investors)
Bank Loans and Guarantees
Formal VC Funds
Seed/Early Stage VC Funds
Business Angels
Entrepreneur, friends, family
Seed / Start-Up Phase
Emerging Growth Phase
More established companies
investing in R&D an Innovation

9. RSFF added-value for the borrower and the Research Community
Up to additional EUR 10 billion funding for RDI
Diversification and increased access to financing: additional supply of loans/guarantees from EIB, especially in the context of a scarce access to credit for risky RDI projects
Customised offer: debt financing adapted to project implementation and the borrower’s repayment capacity (maturity, grace period, repayment modalities)
Reasonable financing costs: non-subsidised loans but advantage of EIB’s AAA based funding and its non-profit lending policy  reduces overall project cost

10. Table of Contents
RSFF – Risk-Sharing Finance Facility Innovative loans for innovative ideas
Why? Introduction 1.
What? RSFF mechanism 2.
How? Beneficiaries, eligibility, implementation, products 3.
Where are we now? Results, outlook, project examples 4.
What’s next? RSFF interim evaluation preparing the future 5. 6.
RSFF on the ground: Some project examples
Summary 7.

11. legal entity establised in MS or AC
Beneficiaries of RSFF financing
Mid-Caps and large corporates (typically unrated / sub investment grade / turnaround situations)
SMEs
Research Institutes
Universities
Special Purpose / Project Companies
Research Infrastructure promoters
Any size and ownership
legal entity establised in MS or AC

12. Multi-annual R&D budgets
Eligible project costs
Project capital expenditures in tangible assets.
Intangible assets:
Research staff cost
Incremental working capital requirements
Acquisition of Intellectual Property Rights
Multi-annual R&D budgets
(typically 3-4 years) Financing up to 50% of total cost
except particular cases in line with EIB strategic orientations (e.g. environment, renewable energies)

13. Eligible-cost categories:
from research, developement to innovation
Fundamental research EC window
Definition stage / feasibility studies EC window
Industrial research EC window
Pre-competitive development activity EC window
Pilot and demonstration projects EC window
Innovation EIB window
partly EC window

14. RSFF financial products: tailor-made to borrowers’ needs
Corporate Loans (senior / junior)
Guarantees
Project Finance
Mezzanine Loans
Risk Sharing Facilities with banks (for all loans of less than EUR 7.5 million)
Other structured products
Development of specific RSFF products by the EIB (notably towards SMEs)

15. RSFF Project selection
Roles of EIB and EC
demand-driven: projects supported on a “first come, first served” basis (no call for proposals, no expert panels)
EIB:
Screens potential RSFF projects and is responsible for all direct contacts with project promoters
Evaluates potential projects (not the EC): creditworthiness and financial viability
EC (“RSFF Designated Service”):
Checks the eligibility potential RSFF projects submitted by the EIB (decision by « Eligibility Committee »): Only RSFF projects falling into the thematic priorities of FP7 and really concern R&D are supported by the FP7 budget (for risk coverage)
Follows - up on RSFF projects and monitors the use of the EC RSFF contribution (EIB obliged to report any material change)

16. Table of Contents
RSFF – Risk-Sharing Finance Facility Innovative loans for innovative ideas
Why? Introduction 1.
What? RSFF mechanism 2.
How? Beneficiaries, eligibility, implementation, products 3.
Where are we now? Results, outlook, project examples 4.
What’s next? RSFF interim evaluation preparing the future 5. 6.
RSFF on the ground: Some project examples
Summary 7.

17. RSFF results and portfolio
Mid-2007 – October 2010
Volumes:
Loans approved: more than EUR 8 billion, 82 projects
=> (60% over initial expectations)
Loans signed: more than EUR 5 billion, 54 projects in 19/20 countries (MS & Associated Countries)
Very strong demand in 2009 (despite or even because of the financial crisis): loan volume of approx. EUR 3 billion
Estimation: news jobs created and 500 jobs safeguarded in the RDI area since 2007 (source: EIB Independent Evaluation Unit)

18. RSFF results mid-2007 to October 2010 and geographical breakdown
Geographical spread: projects located in 20 countries (approved RSFF projects)

19. Sectorial distribution of the RSFF signed portfolio
RSFF results mid-2007 to October 2010 and sector breakdown
Sectorial distribution of the RSFF signed portfolio
Main sectors financed so far:
engineering and automotive industry, renewable energy technologies, life sciences, ICT, Research Infrastructures, plus risk-sharing facilities with partner banks

20. Table of Contents
RSFF – Risk-Sharing Finance Facility Innovative loans for innovative ideas
Why? Introduction 1.
What? RSFF mechanism 2.
How? Beneficiaries, eligibility, implementation, products 3.
Where are we now? Results, outlook, project examples 4.
What’s next? RSFF interim evaluation preparing the future 5. 6.
RSFF on the ground: Some project examples
Summary 7.

21. RSFF interim evaluation 2010: IEG members
Mrs Erika MANN, Chair, CEO of ErikaMann Sprl; MEP from Germany from 1994 until summer 2009; and Senior Fellow of the Atlantic Council;
Mr Luc SOETE, Rapporteur, Director of UNU-MERIT, United Nations University; Professor of International Economic Relations, School of Business and Economics, Maastricht University; and Member of the Dutch Adviesraad voor Wetenschap en Technologie (AWT);
Mr Frank GANNON, Director General Science Foundation Ireland;
Mr Arnaud HIBON, Vice President Head of European Parliament Affairs of EADS and Director European & NATO Affairs of EUROCOPTER;
Mr Ewald NOWOTNY, Governor of the Oesterreichische Nationalbank (OeNB) and Member of the Governing Council of the European Central Bank (ECB);
Mrs Carmen VELA, Manager Director of INGENASA (SME) and Member of the Advisor Committee of the Spanish Minister of Science and Technology and the EAG of Cell Factory.

22. RSFF interim evaluation 2010 (Feb-July 2010)
Main conclusions by the IEG:
1. The RSFF is considered a uniquely innovative, demand-driven instrument;
2. It has been successfully introduced as a new scheme into the European Union’s research funding under FP7 and therefore helped drastically to expand the financing for RDI;
3. The RSFF had a positive dual leverage effect: Allowing EU funding for loans to finance R&D and helping private investors/ companies to finance riskier RDI activities, even in times of economic crisis (2008/2009); appears an efficient “anti-cyclical” instrument
4. The implementation of the RSFF, at a particularly difficult time, appears to have been carried out in a highly efficient and effective manner;
5. The IEG is therefore highly positive about the first roll-out phase of the RSFF.

23. RSFF interim evaluation 2010 (Feb-July 2010)
The IEG made 10 recommendations for the future of the RSFF.
Period :
No.1: Immediate release of the EU contribution of € 500 million (€ 400m SP Cooperation; € 100m SP Capacities) as foreseen in the legal base of FP7
No. 5: Additional EU contribution of up to € 500 million to RSFF coming from EC FP7 Specific Programme 'Cooperation' and/or non-FP7 resources
No. 2 to 4: Improvements possible for some already supported target groups (SMEs, Research Infrastructures) through introduction of specific approaches and change of risk-sharing
Period post 2013:
No. 7, 9 and 10: Continuation and expansion of the scale and the scope of the RSFF – as a visible part of ‘FP8’ – to address future RDI financing needs with a revolving dedicated EU budget of no less than EUR 5 billion for R&D and Innovation (EU support also for Innovation)
No. 6: A certain degree of rationalisation of existing/future financial schemes should be targeted (avoiding duplication of efforts)
No. 8: Regular monitoring

24. Context: New EU financial instruments for RDI
Trend at European level to make increasingly use of financial instruments like the RSFF, in addition to traditional grant funding (REHN Group / Innovation Union)
Advantages of financial instruments:
Limited budget resources can be used in the form of risk-sharing or guarantees to mobilise private funding (« leverage effect »)
Unless risks/ losses exceed expectations, budgets for risk-sharing can be recycled and reused for further projects (revolving funds)
Flexibility to better meet the funding needs of target groups/ beneficiaries and address funding gaps in the market
New financial instruments ( ) part of key documents on RDI in Europe: the “Europe 2020 Flagship Initiative” and “Innovation Union” (as “key measure”)

25. Next steps – Issues at Stake
Commission's response to the IEG report
Endorsement of the recommendations of the IEG.
Timing of the response.
Possible Commission Communication on the RSFF interim-evaluation.
EP and Council's position
EP and Council's official response.
Way forward for the eventual release of the second tranche of the EC contribution.
Risks
Within the budgetary discussion.
Loan volume objective and role of the EC contribution.

26. Table of Contents
RSFF – Risk-Sharing Finance Facility Innovative loans for innovative ideas
Why? Introduction 1.
What? RSFF mechanism 2.
How? Beneficiaries, eligibility, implementation, products 3.
Where are we now? Results, outlook, project examples 4.
What’s next? RSFF interim evaluation preparing the future 5.
RSFF on the ground: Some project examples 6.
Summary 7.

27. RSFF project examples Innovative anticancer treatments: helping bring 4 cancer drugs to the market
   
PharmaMar: Spain’s leading biotech company dedicated to developing innovative anticancer treatments from marine origin
Biopharmaceutical research & development in the areas of
oncology and orphan diseases
Different forms of cancer targetted, including rare cancers
EUR 30 million RSFF loan

28. RSFF project examples Cleaner engines: improving energy efficiency
AVL: Austrian family-owned specialist with strong reputation for producing fuel-saving technologies for powertrain systems
Offers research and development support to many major car manufacturers worldwide.
EUR 30 million RSFF loan to help AVL extend powertrain R&D and research in the areas of hydrogen fuel-cell technology, nanocomposites and engine technologies, supporting the European Union objectives of decreasing emissions and reducing the impact of transport on climate change.

29. RSFF project examples Financing solar power: using indigenous renewable energy to contribute to combat climate change
Solucar Solar Thermal Power project :
Europe's first commercially operating power station using the sun's energy, west of Seville (Spain)
EUR 50 million RSFF loan to further develop a large scale application of Concentrating Solar Power (CSP) technology, generating electricity without greenhouse-gas emissions
Field of mirrors to concentrate solar radiation on a tower-mounted thermal receiver

30. RSFF for SMEs: Successful examples
Direct RSFF loan finance: EUR 65 million for a Belgian SME for its investment in R&D and Innovation for digital cinema solutions
Indirect RSFF loan finance through an financial intermediary: EUR 30 million for an Israelian holding company/ fund investing into 5 early-stage med-tech enterprises; support for R&D and development of new medical technologies and devices
Indirect RSFF loan finance through others: EUR 200 million for Philips for its mid-term R&D activities (medical technologies), in co-operation with universities and a number of smaller and medium-sized companies (outsourcing of R&D) within the “Open Innovation” approach of Philips

31. Table of Contents
RSFF – Risk-Sharing Finance Facility Innovative loans for innovative ideas
Why? Introduction 1.
What? RSFF mechanism 2.
How? Beneficiaries, eligibility, implementation, products 3.
Where are we now? Results, outlook, project examples 4.
What’s next? RSFF interim evaluation preparing the future 5.
RSFF on the ground: Some project examples 6.
Summary 7.

32. Summary: RSFF in a nutshell
RSFF is a new instrument supported by FP 7 to provide EIB loan funding for more investment in R&D and Innovation
RSFF finance can be used complementary to an FP 7 grant, instead of an FP 7 grant or for projects not involved in FP 7 but contributing to the FP 7 objectives
RSFF financing is demand - driven, projects are supported on a “first come, first served” basis; RSFF project evaluation is made by the EIB
RSFF risk-sharing between the EC and the EIB is an internal procedure and does not affect the client/ beneficiary applying for an RSFF loan
RSFF addresses a wide range of beneficiaries

33. RSFF contact in DG RTD Directorate B – « European Research Area:
Research programmes and capacities »
Unit B.04 – « Regions of Knowledge and Research Potential »
RSFF Team
Jean-David MALO, Head of Unit B.04 ( )
Martin KOCH
Marie-Cécile ROUILLON
Conrad GANSLANDT
Andreea Bianca PUIA

34. RSFF contact in the EIB
Directorate for Operations in the European Union and Candidate Countries
Thomas C. BARRETT
Division: Action for Growth Instruments
Innovation 2010 Initiative (i2i)
Marc D’HOOGE
Sarah McCANN

35. Thank you very much for your attention !