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Financing Gas Distribution Infrastructure for Transport in EU-Russia Energy Dialogue

This article discusses the role of the European Investment Bank (EIB) in financing gas distribution infrastructure for gas-fuelled transport in the EU-Russia Energy Dialogue. The EIB's objectives, financing lifecycle approach, and activities outside of the European Union are also explored.

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Financing Gas Distribution Infrastructure for Transport in EU-Russia Energy Dialogue

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  1. EIB Financing of Distribution Infrastructure for Gas-fuelled TransportEU-RUSSIA ENERGY DIALOGUE Gunnar Muent Brussels, 24th June 2011

  2. European Investment Bank - background The European Investment Bank is the European Union‘s long-term financing institution. The Bank acts as an autonomous body set up to finance capital investments furthering European integration by promoting EU policies. • EIB was created by the Treaty of Rome in 1958 • EIB is a not-for-profit, policy driven institution • EIB is 100% owned by the 27 EU member states • EIB has subscribed capital of EUR 232.4 bn as of 2009 • EIB is AAA/Aaa rated by rating agencies • EIB funds itself on the capital markets: EUR 79.4 bn in 2009 • EIB signed loans amounting to EUR 79.1bn in 2009 • EIB is the largest multilateral financing institution

  3. European Investment Bank - objectives • Within the European Union • Cohesion and convergence • Small and medium-sized enterprises (SMEs) • Environmental sustainability • Knowledge Economy • Trans-European Networks (TENs) • Sustainable, competitive and secure energy • Outside of the European Union • Private sector development • Infrastructure development • Security of energy supply • Environmental sustainability • Support for EU presence in Asia and Latin America via Foreign Direct Investment (FDI) • Under EU Mandates • Pre-accession • European Neighborhood • Development

  4. Criteria Projects financed by the Bank must be: • economically justified • technically viable • financially self-supporting and • environmentally sound • appropriate procurement procedures are required (International Competitive Bidding when appropriate)

  5. EIB and EIF Financing Lifecycle Approach 1 Risk Capital CIP Resources (SME) 2 RSFF (SME / MidCap) 3 4 Investment Loans • 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 • CIP Guarantee schemes • Growth financing for SMEs • Formal VC Funds, CLOs • SME guarantees (loans, microcredit, equity/mezzanine, securitisation • RSFF • RDI financing • SMEs/MidCaps, Banks, PE Investors (sub-investment grade) • Loans (incl. Mezzanine), Funded Risk Sharing Facilities with Banks (Investors) • Investment Loans • RDI financing • MidCaps/Large Corporates/Public Sector Entities (investment grade) • Loans, Guarantees Bank Loans and Guarantees Formal VC Funds Seed/Early Stage VC Funds Business Angels Entrepreneur, friends, family Later Stage Counterparts Seed / Start-Up Phase Emerging Growth Phase Development Phase

  6. EIB products • Medium- and long termloans • Direct loans of EUR 25-100m; larger amounts are possible • Intermediated loans: For smaller projects, indirect lending through credit lines to local financial intermediaries (sub-loans of between EUR 0.1 and EUR 12.5m) • Equity for infrastructure funds under the EPF (up to EUR 150m) • Readiness of cooperation with other financial institutions asfinancial intermediaries as guarantors, as partner in project identification and as financial arrangers

  7. EIB Activities Outside the Union • Supporting EU development and cooperation policies in Partner Countries • EIB external mandates: Pre-accession countries: • Candidate countries - Croatia, Turkey and Former Yugoslavia, Republic of Macedonia • Potential candidate countries - Western Balkans European Neighbourhood: • Mediterranean Neighbourhood (FEMIP) • Eastern Europe, Southern Caucasus, Russia Development: • Africa, Pacific and Caribbean (ACP) • South Africa • Asia and Latin America (ALA)

  8. Prospects for lending in Eastern Partners • Amount of Mandates • 2007- 2013 Eastern Neighbourhood Mandate: EUR 3.7bn • Eastern Partner Facility: EUR 1.5bn • Signed so far: EUR 1 bn • Operations under appraisal and awaiting signature: EUR 2bn • Strategy: Fully absorb Mandates within their period of validity Focus on: • economic infrastructures • environment • Access to EU markets • Strengthening physical links with the Union and FDI

  9. Sectors and beneficiaries • Eligible sectors: • Energy • Environment • Transport • Telecommunication • Industry • Beneficiaries: • State / Central Government • Regions • Municipalities • Utilities • Private companies • Project Finance Structures • PPPs

  10. EIB RSFF funds complement other sources of debt capital available for low/sub investment grade RDI intensive corporates • EIB RSFF funds are highly attractive for potential beneficiaries because of: • Highly attractive terms & conditions (AAA rating and non-for-profit pricing) • Long maturities of up to 10 years or more • Direct EIB participation of up to EUR 300m per transaction (depending on rating) • Strong technology/industry expertise • EIB does not sell assets on the secondary market (buy and hold strategy) • No cross selling (just long-term lender) • Signalling Effect: EIB as a quality stamp • Debt and Mezzanine Debt Product Own Resources EUR 1bn EUR 1bn EIB (RSFF) 2007 - 2013 Approx. EUR 10bn Debt Financing Banks Investors Final Beneficiaries Low/Sub Investment Grade RSFF - A new Source of Risk Capital

  11. Examples of what can be financed – LNG terminals • Examples: • Sagunto LNG plant - TEN • Grain LNG Terminal – TEN • Fluxys LNG Terminal – TEN • Offshore LNG Toscana • Gate LNG Terminal • … EIB lending volume since 2000: EUR 3.6 bn

  12. Examples of what can be financed – passenger cars • CNG fuelled engine development: • Major European OEMs • Suppliers EIB lending volume: > EUR 200 m per year

  13. Examples of what can be financed – marine engines • RDI for LNG fuelled marine engines: • Financing of investments of major European OEMs • Suppliers EIB lending volume: > EUR 100 m per year

  14. Examples of what can be financed - ships • Purchase of LNG fuelled ships: • first operations under appraisal …

  15. Examples of what can be financed – LNG/CNG • first operations under appraisal

  16. EIB lending to investments in LNG/CNG technologies - track record • What can be financed ? • Infrastructure • Acquisition of vehicles/ships • RDI for Systems/Components • Eligible investment costs • Capex • Opex & capex for R&D • Capex & opex for innovation • Eligibilities: • Trans European Networks – TENs • Protection of the Environment & Sustainable Communities • Knowledge Economy – RDI • Convergence

  17. THANK YOU !! Gunnar Muent Head of Innovation & Competitiveness Department European Investment Bank g.muent@eib.org

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