EIB financing for Ultra High Speed Broadband investments

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1 EIB financing for Ultra High Speed Broadband investments Harald Gruber DigiWorld Summit 2016 Montpellier, 16 November 2016 European Investment Bank Group 1

2 Digital investment gaps in EU Digital economy sector is suffering from large underinvestment in Europe: R&D: accounts for R&D/GDP gap with US Infrastructure: Overall growth constraints due to lack of high speed broadband infrastructure Cybersecurity: EU is lagging (NSA ) European Investment Bank Group 2

3 Share of inhabitants and FTTH cost European population density vs. cost distribution of DAE targets 50% of the European population live in urban areas and additional 30% in suburbs 50% 20% Urban (> 500 inhab. Per km2) 30% 30% Suburban ( inhab. Per km2) 20% 50% Rural (<100 inhab. Per km2) 20% of total investment cost is required to cover 50% of European population in urban areas 50% of cost is required to cover the 20% of European population in rural areas Market operators are investing in urban and partly suburban areas which are already well covered with copper/cable infrastructures % of total EU population % of total EU wide FTTH cost European Investment Bank Group 3

4 Investment hurdles for broadband infrastructure High fragmentation of broadband infrastructure projects typically aiming at the roll-out at regional or even at community level; Lack of focused equity investors in the market to support projects with a year investment horizon; Long payback periods for investments requiring long-term debt facilities which are not available in the market; Lack of sufficient sector knowledge and technical understanding among investors in the industry and the associated technological, regulatory and market risks; Lack of visibility of service development for the incentives to adopt high speed broadband infrastructure European Investment Bank Group 4

5 Role of EIB EIB has policy mission to tackle insufficient investment Main business of financing projects On average lending for for broadband accounts for about EUR 2bn per year Sector limits are not binding, i.e. funds are available, but projects must fill requirements Projects financed by the Bank must be: economically justified technically viable financially self-supporting European Investment Bank Group 5

6 Contribution to national plans EIB supports national plans both at highest level, but also in the context of regional deployment schemes. Awareness of resources involved and on the way of how to leverage additional, private sector financing. Competitive awards can be very effective, but need to make provisions for long term sustainability European Investment Bank Group 6

7 Project size EIB scope for financing broadband infrastructure Large (>50m) EIB senior loan EIB s SA and InnovFin large projects. EIB involvement through multisector infrastructure equity funds EFSI opportunity to extend higher-risk lending beyond corporate finance Medium (15-50m) Small (<15m) EIB senior loan EIB framework loans available through intermediaries. EIB s SA and InnovFin MGF. EIB products not yet available EIB products not yet available EIB products not yet available Specialized infrastructure fund could fulfill the market gap and areas where EIB cannot operate due statutory reasons Senior debt Junior/ mezzanine debt Risk level Equity European Investment Bank Group 7

8 Impact of EFSI and follow on More availability of funds for investment by mobilizing private capital No sector limits: first come, first take principle for projects Usual EIB criteria for project viability apply But better possibility to cater for higher risk profiles Opening up for new financial instruments, e.g. market study under way for exploration for need of equity fund specialized on small scale broadband infrastructure companies Wider availability of advisory services, including advisory hub European Investment Bank Group 8

9 THANK YOU European Investment Bank Group 9

10 Backup slides European Investment Bank Group 10

11 European Investment Bank Group 11

12 Example Gigaclear Founded in December 2010 Passing FTTH at more than properties in rural parts of in UK, with more already in construction 12 M loan facility under InnovFin MidCap Growth Finance During 2016 Gigaclear plans to build its pure fibre, ultrafast broadband network to at least additional properties. This will involve a major investment by the company, one third of which is being financed through the EIB facility. European Investment Bank Group 12

13 Example enet An open access network operator enet holds the concession to manage, maintain and operate 2 phases of the Irish State s Metropolitan Area Network (MAN) programme, covering 94 towns and cities across the country 12 M loan facility under InnovFin MidCap Growth Finance Will allow enet to develop for the delivery of Fibre to the Business (FTTB) networks in a number of Irish towns and cities, including Claremorris, Loughrea, Ardee and Kilkenny European Investment Bank Group 13