1. 1 The support of the European Investment Bank for EU water and wastewater projects - Lending Policy & Eligibility - Loan approval process Pierre-Emmanuel Noel Senior Banker, European Investment Bank noelpe@eib.org AQUA PUBLICA SEMINAR Brussels, 8 March 2013 noelpe@eib.org

2. 2 Outline of the Presentation  PART 1 - EIB’s lending policy for water & wastewater  PART 2 - A step-by-step overview of EIB’s approval process, from initial exploratory contact to loan disbursement

3.  PART 1 - EIB’s lending policy for water & wastewater  PART 2 - A step-by-step overview of EIB’s approval process, from initial exploratory contact to loan disbursement 3

4. 4 EIB and Infrastructure Finance – A Snapshot  EIB was created by the Rome Treaty in 1957 as a not- for-profit, policy-driven financing institution  EIB is directly owned and governed by the 27 EU Member States (not by the EC)  EIB finances infrastructure in selected areas:  Climate Action (renewables, energy efficiency, etc.)  Trans-European Networks (energy, transport, telecoms)  Social infrastructure (housing, hospitals, schools)  Environment (water and wastewater)  EIB also supports Knowledge Economy, SMEs, Convergence areas

5. 5 EIB’s Business Model  EIB endeavours to attract the cheapest possible funding from the capital markets thanks to its AAA rating...  EIB is one of the largest EUR and GBP issuers (« leading Gilt alternative ») ... and to lend to eligible projects promoted by creditworthy public or private sponsors  The EIB lending rates represent the sum of:  The EIB cost of funding (including internal administrative costs); and  The risk margin to compensate EIB for the statistical credit loss  The lending targets of EIB are set annually by its Board of Directors, with:  An overall lending ceiling  A lending target per country and per policy objective  Annual profits are kept in reserve to fund future capital increases

6. EIB, the « Water Bank » !  The EIB is the largest source of loan financing to the global water sector to date as compared with other international financing institutions and commercial banks  In the five-year period 2007- 2011, EIB direct lending to water projects (excluding hydropower irrigation) reached EUR 16.1bn  A total of 158 major water supply, sanitation and flood protection projects were financed during this period, mostly within the EU (88% of the lending volume).  EIB has significantly increased its support to the sector from an average EUR 1.9bn per year in the period 2002-2006 to an average EUR 3.2bn per year over the past five years 6

7. The Water Sector: over EUR 16bn of EIB loans in 5 years 7

8. Lending to Water & Wastewater – Eligibility criteria  Any water or wastewater investment project that contributes to quality enhancement, compliance with EU w&ww directives or climate action (asset resilience, etc) is potentially eligible  Water distribution networks (new or upgrade)  Wastewater plants (new or upgrade)  Flood protection  Sewage networks (new or upgrade)  Two types of structures:  Direct lending: EIB does lend directly to public and private entities in charge of water (investment size at least EUR 100m)  Intermediated lending: EIB may also lend to smaller schemes, provided that they are bundled under a framework loan (where a commercial bank acts as an intermediary). 8

9. EIB in Belgium, France and the UK SPGE CILE SWDE Hydrobru Aquafin Aquiris Programme France Eau & Assainissement I & II EIB lends to 9 out of the 10 UK water and sewage companies (largest lender to the sector) 9

10.  PART 1 - EIB’s lending policy for water & wastewater  PART 2 - A step-by-step overview of EIB’s approval process, from initial exploratory contact to loan disbursement 10

11. The EIB loan approval process (1)  Step 1 – Informal approach (cover email and supporting memo)  Identity of promoter/borrower  Nature, timetable and cost of the investments  Rationale for the investments  Credit aspects (rating, financials, guarantees, etc)  Step 2 – Preliminary Clearance  EIB banker makes submission to obtain EIB’s management committee approval in principle for the project 11

12. The EIB loan approval process (2)  Step 3 – EIB due diligence  EIB sends a DD Questionnaire  Requesting more information on the project (technical, economical, procurement, environment)  EIB team will come on site for the “appraisal mission” (presentations, discussions and site visit, legal & credit structuring of the loan)  Step 4 – EIB Board approval (Final Clearance)  This final approval may be obtained within 2-5 months following the “appraisal mission”  Contracts may be signed and disbursed over a period generally up to 3 years 12

13. Conclusion EIB Projects walk on two legs: (1)A Sound Project Eligible (2)A Sound Credit Bankable 13

14. 14 Contact Pierre-Emmanuel Noel Senior Banker – Western Europe, Public Sector & Infrastructure Noelpe@eib.org www.eib.org