Connecting Europe Broadband Fund

Transcription

1 Connecting Europe Broadband Fund EFSI: Achieving complementarity with the EAFRD and setting up investment platforms Brussels, 19 April 2016 Laure Blanchard-Brunac Broadband Unit (B5), DG CONNECT

2 Agenda 1. Rationale 2. Envisaged fund structure 3. Complementarities with EAFRD 4. Lessons learned to date

3 1. Background 1. Rationale Why an investment platform for broadband? Estimated total investments EUR bn until 2020* - on average c. 50% of the total market cap for the sector Grey + White White & Certain Grey Areas Government funding plus New risk-sharing instruments or modified existing ones will be needed, including aggregation ideas Black areas Certain Grey Areas Black Areas EIB Existing Instruments Projects must be: Technically sound Financially viable In compliance with regulation Show acceptable economic return Source: EIB estimates * Band based on various studies and assumptions ** Black areas estimates based on industry forecasts

4 INDIVIDUAL INVESTMENT SIZE 1. Rationale Need to aggregate smaller broadband projects Graphical presentation of the market split in terms of size and risk INCUMBENTS ALTERNATIVE OPERATORS LOCAL GOVERNMENT-SUPPORTED PROJECTS SMALL PRIVATE PROJECTS BUSINESS RISK Incumbents and alternative operators tend to present larger projects but mainly in densely populated areas; white and light grey areas may be bundled together. Business risk is mitigated by existing cash generation and sound business cases of projects. Local-government supported projects tend to be smaller in size, mainly covering grey and some white areas (mixed with urban). Business cases are not strong, thus the government support Small private projects tend to cover areas which are overlooked by incumbents, mainly in grey and some urban areas. Business cases vary, risk is increased by size, history, up-take agreements, market uncertainties etc. 4

5 Limited Partnership or SICAV 2. Envisaged fund structure Layered fund with public and private investors General Partner Project sponsors EFSI NPBs and Private Investors European Investment Bank Preferred equity Common equity Equity Management fee Performance fee (carry) Advice and investment decisions Equity/Quasi equity Equity Broadband projects European Commission Junior equity CEF Loans Distributions of return on investments according to income waterfall Banks

6 2. Envisaged fund structure Investment strategy of the Fund Eligible projects according to the legal base of Connecting Europe Facility (CEF), i.e. broadband projects contributing significantly to the achievement of the targets of the Digital Agenda for Europe: at least 30 mbps connections, with priority given to projects contributing to speeds of 1000 mbps Specific focus on less dense areas (white and grey areas) First closing fully invested by 2021 in minimum 15 countries, target 20 countries Investment size: min EUR 1mln, max. EUR 20 mln, average EUR 10 mln The fund would need to be additional to other sources of funding either from the market or from other EU instruments Incentives to fund manager for geographic diversification, portfolio diversification and/or high broadband speeds

7 3. Complementarities with EAFRD Launch of a BCO network GRANTS European Commission FINANCIAL INSTRUMENTS COMP AGRI CONNECT REGIO EIB World Bank EU-level T.A. - Forum/Broadband Europe - Workshops Member State EU-level T.A. - FI-Compass - JASPERS - EIAH - CCI EAFRD ERDF ESIF/CEF Managing authority OP-level T.A. Managing authority Promotional Banks Implementing body Broadband Competence Office Implementing body Commercial Banks Broadband Project Promoters

8 3. Complementarities with EAFRD Example of underlying projects Project promoter: a local utility company Number of homes passed: 15,000 Coverage: Mix of white and grey areas Financing: Subsidies, Subordinated debt from CEBF and Loan from municipal bank Project promoter: open access network operator Number of homes passed: 100,000 over several different projects Coverage: Mix of white and grey areas Financing: Equity investment from CEBF, subsidies available at project level Project promoter: municipality with concession to private (PPP) Number of homes passed: 25,000 Coverage: White and grey areas Financing : subsidies, preference shares for CEBF in the SPV, loan from banks

9 4. Lessons learned to date Necessity of a project lead, at the EC or the leading institution establishing the platform Need for an open and transparent process from the very start of the discussions with EIB and other key stakeholders Importance of identifying the relevant actors in the market segment to be addressed: may not be the usual stakeholders for the EC Comply with market practice as much as possible to ensure the investment platform will attract private investors

10 Thank you