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EU Project Financing

EU Project Financing

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EU Project Financing

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  1. EU Project Financing the European Union provides assistance to its Member States with Project Financing Programmes 2000 - 2006 HOW ElectraNet BSP-2 Workshop (khb)

  2. EU Project Financing The European Commission Enlargement Directorate General provides Financial Project Support under 3 titles: Phare Strengthening preparations for Enlargement Ispa Instrument for Structural Policies for Pre-Accession Sapard Special Accession Programme for Agriculture and Rural Development ElectraNet BSP-2 Workshop (khb)

  3. EU Project Financing Phare, Ispa, and Sapart facilitate 4 types of contract: Service Technical assistance, studies, provision of know-how, training Supplies Equipment and materials Works Infrastructure and other engineering works Grants A direct payment of a non-commercial nature to a specific beneficiary to promote an EU policy aim ElectraNet BSP-2 Workshop (khb)

  4. EU Credit Facilities European Investment Bank EIB EU’s long-term financing institution for capital investment projects with focus on accession countries (since 1990 EUR 15 billion) • Partner for foreign direct investment (FDI) in accession countries • Loans for up to 50 % of total investment over 10 years , typically € 40 000 to € 25 million for a single project • Works on a non-profit basis at lowest interest rates (small mark-up to cover Bank’s cost) • Currently with view to Trans-European Networks TENs (Com,Rail,E’gy), also in combination with EU Structural Funds ElectraNet BSP-2 Workshop (khb)

  5. EU Credit Facilities EIB Portfolio Current mandate for 2000 to 2007: € 8,68 billion in accession countries (and Balkans) • Transport and Telecommunication: local, national an Trans-European networks (TENs) • Energy production and distribution • Industry: direct loans to large projects, JV with EU partners, direct investments with EU firms, smaller loans through EIB global loans (lines of credit) • Environment protection • Health and Education ElectraNet BSP-2 Workshop (khb)

  6. EU Credit Facilities European Bank for Reconstruction and Development EBRD • Operating in public and private sectors at wide range of flexibility of financing instruments • Willingness and ability to bear risk allowing to act at the frontier of commercial possibilities, playing role of “demonstrator” • Co-operates and complements efforts with other lenders • Standard minimum involvement is € 5 million, average € 22 million, state sector EUR 36 million, i.e. 35% of project cost • A multinational institution (incl. EC, EIB) with specific aim ofassisting EU accession countries • Does not require governmental guarantees ElectraNet BSP-2 Workshop (khb)

  7. EU Credit Facilities EBRD Portfolio • € range of project financing: minimum € 5 mil, average € 22 mil • Credit lines: direct medium-to-long term funding to selected financial intermediaries • Co-financing facilities: project financing with local and foreign banks • Equity participation: in investment funds, to invest in medium-sized privately owned companies to expand their business • Trade facilities: including local banks in Trade Facilitation Programmes • Equity participation in banks : to support and develop sound and competitive financial services (key objective) ElectraNet BSP-2 Workshop (khb)

  8. EU Project Financing Financing with the EBRD • Highly relying on quality of projects to have a “multiplying” effect: • Demonstrating additional benefits to local economy, mobilising co-financing, relieving infrastructure bottlenecks • Foreign joint ventures main vehicles for financing: • Encourage foreign private investments in the region, transfer of technology and management skills • Reduce risk ElectraNet BSP-2 Workshop (khb)

  9. EU Structural Funds Project Financing Financing with the EBRD • Financing guidelines: • 35 % of the total project for a green-field project or long-term capitalisation of an established company • Significant equity contributions from other investors are required where special technical and management skills are required • Private sector projects to be based on no more than 2/3 debt financing and at least 1/3 equity • Additional funding by other co-financiers is typically required • Will not normally provide financing to an investor for the funding of the purchase of existing or new shares • Equity from sponsors in form of cash, equipment, plant machinery, etc. ElectraNet BSP-2 Workshop (khb)

  10. EU Project Financing Financing with the EBRD • Each project is assessed according to an appropriate country strategy. • Approval by EBRD’s shareholders providing a framework for the banking operations as well as placing priority on certain areas. • Typical capitalisation structure: • EBRD loan 35 per cent • Foreign sponsor equity 25 per cent • Local sponsor equity 15 per cent • Syndicated loan 15 per cent • Other lenders 10 per cent ElectraNet BSP-2 Workshop (khb)

  11. EU Project Financing Financing with the EBRD • EBRD procedures: • Initial approach • Evaluation an approval • Technical co-operation • Working with project advisers • Environmental procedures EBRD procurement procedures ElectraNet BSP-2 Workshop (khb)

  12. EU Project Financing Phare/ Ispa Projects DG Enlargement On-Site Delegation EU Commission DG Enlargement Supplier Contractor Project Recepient Government Ministries National Institutions Consultants Contract Award EU Banks Institutions Tender ElectraNet BSP-2 Workshop (khb)

  13. EU Project Financing Other available Funds  Structural FundsEuropean Regional Development Fund: support SMEs, promote investment, improve infrastructure, furthering local development  • TEN-Telecom Demand driven applications, support for city and regional highways, Telework, Internet based services, interoperability and security, easy access to telecom networks (fixed, mobile, satellites) • TEN-Transport Improvement and development of trans-European transportation networks (Railroads, Road Highways) ElectraNet BSP-2 Workshop (khb)

  14. The European Regional Development Fund ERDF ERDF resources are mainly used to co-finance: Productive investment leading to the creation or maintenance of jobs • Infrastructure • Local development initiatives and the business activities of SMEs ERDF are available for the following development areas: • Communication technologies • Transport • Energy • Environment • Research and Innovation, Social Infrastructure, Urban Redevelopment, • Conversion of industrial sites, Rural Development, Tourism, Culture ElectraNet BSP-2 Workshop (khb)

  15. The European Regional Development Fund ERDF EDRF Programming 2000 – 2006 in Detail A Programmes financed by the ERDF B Responsibilities with regard to the management and monitoring of programmes C Map of eligible Objective 1 and 2 regions ElectraNet BSP-2 Workshop (khb)

  16. The European Regional Development Fund ERDF EDRF is part of the Structural Funds regulation adopted by the Council in 1999 Objective 1Development and and structural adjustment of regions whose development is lagging behind Objective 2Economic and social conversion of areas facing structural difficulties ElectraNet BSP-2 Workshop (khb)

  17. The European Regional Development Fund ERDF Structural Funds Objective 1Main priority of the EU’s cohesion policy, to “promote harmonious development”. EU-wide appropriation of € 135 billion for areas with a GDP less than 75% of the Community average. Common Indicators: - low level of investment - a higher than average unemployment rate - lack of services for business and individuals - poor basic infrastructure ElectraNet BSP-2 Workshop (khb)

  18. The European Regional Development Fund ERDF Structural Funds Objective 2 to revitalise all areas facing structural difficulties, whether industrial, rural, urban, or on fisheries. Areas facing socio-economic difficulties being the source of high unemployment, such as: -the evolution of industrial or service sectors -a decline in traditional activities in rural areas -a crisis in urban areas -difficulties affecting fisheries activity ElectraNet BSP-2 Workshop (khb)

  19. Structural Funds The Structural Funds implementation principles Concentrationof measures on priority for development Partnership for closest co-operation between the Commission and national authorities AdditionalityandSubsidiarityto complement the Member States contributions and to act such that an objective can be achieved at national level ElectraNet BSP-2 Workshop (khb)

  20. Structural Funds Programming 2000 - 2006 Individual budgets being product of joint negotiations between the national, regional, and local authorities, the economic and social partners and other bodies Regional development programmes on the basis of a de-velopment plan or single program-ming document (SPD), for sub-mission to the Commission four months after area establishment Community initiative programmes to be submitted within six months after adoption by the Commission of the Community initiative guideline. Commission’s approval<5months ElectraNet BSP-2 Workshop (khb)

  21. Structural Funds Regional development:The development plan is negotiated with the EU Commission and results in a Community support framework (CSF). The CSF (generally Objective 1 regions) leads to programme proposals,showing - priorities for action - quantified objectives - anticipated financial resources The implementation of regional development and Community initiative programmes is the responsibility of a managing authority appointed by the Member State, also being responsible for selecting projects to be funded. Monitoring Committees are composed of Member State representatives, the regions, competent authorities, and the Commission.  ElectraNet BSP-2 Workshop (khb)

  22. Structural Funds Programme Promoters Structural Fund Public or private Co-Financing EU requirement Project A Approved Programme Project B Project N Programme Mgrs inform Promoters of public tender Programme managers appointed by Member States Projects selected by national or regional authorities ElectraNet BSP-2 Workshop (khb)

  23. Structural Funds Project co-financing rates Note: The rate of financing depends on the region concerned and, more specifically, on the Structural Fund Objective it comes under. Ceilings Objective 1: maximum of 75% of the total cost of the project (except of State regions covered by the Cohesion Fund) Objective 2: maximum of 50% of the total cost of a project (fishery) Investment in firms: A maximum of 35 % of the total cost of the project under Objective 1 A maximum of 15 % of the total cost of the project under Objective 2 Investment in infrastructure generating revenue: A maximum of 40 % of the total cost of the project under Objective 1 A maximum of 25 % of the total cost of the project under Objective 2 ElectraNet BSP-2 Workshop (khb)

  24. Structural Funds Allocation of European Funds Financial Management “legal and correct” Expenditures Community rules EU Commission Payment Authority Management Authority Reimbursement of Invoices “Evidence and Eligibility” Payments EU Level National Level Inform the Public Annual Implementation Report Ultimate Beneficiaries ElectraNet BSP-2 Workshop (khb)

  25. The European Regional Development Fund ERDF Thank You ElectraNet BSP-2 Workshop (khb)