EFSI's financing for RDI-related projects 30 th Plenary meeting of ERAC Brussels, 22 April 2016 Jean-David MALO Head of Unit "SMES, Financial Instruments & State Aids"
EU ECONOMIC CONTEXT The European economic recovery is now in its third year. It should continue at a modest pace in 2016 despite more challenging conditions in the global economy. Against a backdrop of declining oil prices and a relatively weak external value of the euro, the economic recovery this year has been resilient and widespread across Member States. It has, however, remained slow. Labour markets are gradually improving but unemployment remains high. Euro-area real GDP is expected to rise from 1.6% in 2015 to 1.8% in 2016, and 1.9% in 2017. EU28 real GDP is expected to rise from 1.9% in 2015 to 2.0% in 2016, and 2.1% in 2017. Source: EC autumn economic forecast, Nov-2015 2
THE ECONOMIC SITUATION IS IMPROVING AND THE RECOVERY IS TAKING HOLD EUROPEAN GROWTH MAP 2012 EUROPEAN GROWTH MAP 2016 (FORECAST)
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EU ECONOMIC POLICIES 6
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EU ECONOMIC POLICIES Sustaining and strengthening the recovery: 1. 1. boost investment 2. 2. pursue responsible public finances 3. 3. carry out structural reforms to enhance competitiveness. 8
The 315bn investment plan has the potential to bring investments back in line with historical norms Real gross fixed capital formation Baseline trend vs. historical norm vs. investment plan EU-28, in 2013 prices, bn 3,039 3,021 Historical trend / Baseline forecasts 2,940 Investment plan 2,869 GFCF historical norm, assuming an investment/gdp ratio of 21-22% 2,527 2,543 2,640 2,528 2,567 2,717 2,657 2,714 2,659 2,647 2,864 2,748 2,678 2,606 2,416 forecasts 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 9
EU INVESTMENT PLAN: RATIONALE EU INVESTMENT & COMPETITIVENESS GAP HIGH LIQUIDITY IN THE MARKET PUBLIC BUDGET CONSTRAINTS EU Investment Plan EU/MS policy action + EU budget + EIB capacity to mobilise private sector funds towards strategic investments. FINANCIAL AND NON-FINANCIAL BARRIERS TO INVESTMENT 10
EU INVESTMENT PLAN: 3 PILLARS 1. MOBILISING FINANCE FOR INVESTMENT 2. MAKING FINANCE REACH THE REAL ECONOMY Mobilise at least 315bn over 3 years for investment in strategic projects and access to finance via the European Fund for Strategic Investments (EFSI) within EIB/EIF Cooperation with National Promotional Banks European Investment Project Portal European Investment Advisory Hub: technical assistance 3. IMPROVED INVESTMENT ENVIRONMENT Predictability and quality of regulation Removing non-financial, regulatory barriers in key sectors within EU Single Market Structural reforms at national level 11
Status STATUS AND NEXT STEPS EFSI regulation entered into force in July 2015 Projects already approved by EIB/EIF since April 2015 EFSI governance in place Guidance on ESIF/EFSI combinations and Rules for Investment Platforms/NPBs approved in February 2016 Advisory Hub (EIAH) operational since September 2015 Project Portal (EIPP) in pre-launch phase Next steps Investments to be submitted to EIB/EIF for EFSI financing. EIAH: needs assessment exercise EIPP: reach critical mass of projects and launch in near future 12 12
1. European Fund for Strategic Investments (EFSI) EFSI risk-bearing capacity 21 bn EU Budget Guarantee EIB Own resources 3x EIB / EIF financing 61 bn 5x Infrastructure & Innovation window SME window Investments value over 3 years 315 bn 13 13
EFSI GOVERNANCE STEERING BOARD sets the strategic orientations, operating policies, rules applicable to operations with NPBs and Investment Platforms, and the risk profile of the EFSI INVESTMENT COMMITTEE 8 independent experts selected by the Steering Board for their competence in project financing Approves or rejects the support of the EU guarantee for EFSI projects on the basis of the EFSI Regulation and the scoreboard of indicators 3 members from the Commission (Gerassimos Thomas, Irmfried Schwimann, Benjamin Angel) 1 member from the EIB (Ambroise Fayolle) Dominik Radziwill Gillian Day Thierry Déau MANAGING DIRECTOR AND DEPUTY MANAGING DIRECTOR MD (Wilhelm Molterer): Day-to-day management of the EFSI, prepares and chairs the meetings of the investment committee, public face of the EFSI Dalia Dubovske Nievez Rodriguez Noel Gregor Patterson-Jones dmd (Ilyiana Tsanova): assists the MD Vicky Kefalas Fabio Pammoli 14 14
EIB Project cycle for an EFSI project 15
EIB Group operations (as of March 2016) 16 23
EIB Group operations (as of March 2016) 17 23
EIB Group operations (as of March 2016) 18 23
INFRASTRUCTURE AND INNOVATION WINDOW SOURCES OF FUNDING TYPICAL PRODUCTS OFFERED PROJECTS IN ELIGIBLE SECTORS The Fund serves as credit protection for new EIB activities Long-term senior debt for higher risk projects Other investors join in on a project basis Research, Development, Innovation Energy infra, Renewable Energy, Energy Efficiency Transport European Fund for Strategic Investments Subordinated loans Equity and quasi-equity ICT Environment and Resource efficiency Human capital and social sectors SMEs 19 19
EFSI Infrastructure / Innovation Window Results (as of March 2016) and links with Horizon 2020 54 projects approved by EIB Board for total EFSI financing of 7.2 billion expected to trigger over 30.5 bn of investments At least 32 projects with significant RDI dimension (budget tbc) Of which 7 are RDI sector - 495 mn EFSI finance triggering expected 2.5 mn total investments 1 co-financed by EFSI and Horizon 2020 InnovFin Large Projects 2
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EXAMPLE OF EFSI RDI PROJECT New paper and pulp mill in Äänekoski, Finland EIB loan up to 275 million, of which 75 million under EFSI. Project covers production of energy from renewable sources plus innovative technology allowing the mill to become fossil-fuel free. Project also includes upgrade of waste-water treatment facilities. Expected renewable energy generation capacity corresponds to 1% of Finland s current electricity consumption. At 1.2 billion in total, one of the biggest investment projects in Finland. Expected to create 6000 jobs during the construction and maintain an estimated 2500 long-term jobs in the forestry sector. 22 22
SMES AND MIDCAP WINDOW SOURCES OF FUNDING TYPICAL PRODUCTS OFFERED FINAL RECIPIENTS AND EXAMPLES The Fund serves as credit protection for new EIF activities Venture Capital Other investors join in on a project basis SME e.g. equity in a start-up European Fund for Strategic Investments Guarantees e.g. microloans to a SME Securitisation e.g. loans for R&D project Growth finance Mid-cap company e.g. venture capital for a prototype 23
EFSI SME Window (1/4) Results (as of March 2016) and links with Horizon 2020 Increase of Risk Capital Resources Mandate (RCR) by EIB to EIF (i.e. an extra 2.5 bn for equity) Supports technology and industrial innovation Targets early to lower mid-market funds focused on SMEs and midcaps full support to target R&I constituencies (innovative SMEs and midcaps) Frontloading on: COSME Loan Guarantee Facility ( 500 million) => possible support provided to target R&I constituencies (i.e. innovative SMEs requesting loans up to EUR 150 000) Horizon 2020 InnovFin SME Guarantee ( 750 million) => full direct support to Horizon 2020 R&I constituencies (innovative SMEs and small midcaps) 3
EFSI SME Window (2/4) Results (as of March 2016) and links with Horizon 2020 (1/2) Increase of Risk Capital Resources mandate (RCR) 61 equity funds supported Cumulated EFSI / EIB support: 2.1 bn Estimated total investments to be triggered: 22.4 bn Link with Horizon 2020: 100% related to innovative SMEs/midcaps Frontloading on COSME Loan Guarantee Facility 26 (counter-)guarantees signed Cumulated EFSI support: 250.2 mn Expected cumulated loans portfolio volume: 5.6 bn Estimated total investments to be triggered: 11.7 bn Link with Horizon 2020: Data non available at this stage 4
e.g. of EFSI-BACKED COSME DEAL EIF and BGK sign agreement to benefit Polish businesses The agreement provides BGK with a counter-guarantee allowing to support PLN 1,000 million (ca. EUR 250 million) of loans to SMEs in Poland over the next two years with the support of EFSI. The loans will be provided without hard collateral thanks to a 80% guarantee which in turn is backed by a counter-guarantee from the EIF, provided under the COSME programme with financial backing from the EU. The agreement will make it possible for BGK to launch a new guarantee product and to support additional financing without requiring hard collateral (e.g. mortgage) at favourable conditions to approximately 5,000 SMEs. 26 26
EFSI SME Window (3/4) Results (as of March 2016) and links with Horizon 2020 (2/2) Frontloading on Horizon 2020 InnovFin SME Guarantee 36 (counter-)guarantees signed Cumulated EFSI support (i.e. FLP): 416 mn Expected cumulated loans portfolio volume: 4.47 bn Estimated total investments to be triggered: 6.73 bn Link with Horizon 2020: 100% for innovative SMEs/small midcaps Add 10 (counter-) guarantees, representing EU FLP of 122 mn, an expected cumulated loans volume of 1.22 bn and estimated triggered investments of 1.92 bn already signed without EFSI support N.B. EFSI frontloading to be reimbursed from 2016 to 2020 by H2020 ARF Budget 27
e.g. of EFSI-BACKED Horizon 2020 InnovFin DEAL EIF and Bpifrance sign agreement for innovative French companies Under the agreement, Bpifrance will provide finance to innovative companies in France for a total of EUR 420 million over the next two years with support of EFSI, allowing EIF to provide a new financing boost for highly innovative businesses under the Horizon 2020 initiative InnovFin, the EU's Finance for Innovators. Bpifrance has recently launched a product called "Prêt d'amorçage investissement" ("PAi") to address the needs of start-up companies. It will combine this product with the EU guarantee at a 40% guarantee rate. 28 28
EFSI SME Window (4/4) First conclusions and next steps Thanks to EFSI (as of March 2016) At least 25.5 bn (of estimated triggered investments already relate to R&I constituencies 37% of the Horizon 2020 InnovFin SME Guarantee objectives were already met by end-2015. Full objectives initially scheduled for the period 2014-2020 expected to be reached in 2017, or even before Some additional products to come on stream in 2016, building on Horizon 2020 and EFSI complementarities: Early-stage dimension of forthcoming EFSI Equity Investment Platform, building on revamped InnovFin SME VC (including support to VC fund-offunds programme SME VC Business Angel Co-Investments Technology Transfer Financing Facility) New product: "Uncapped guarantee for unsecured loans for innovative SMEs and small midcaps" 6
2. Making finance reach the real economy Strengthening advisory services: EIAH European Investment Advisory Hub (EIAH) EC/EIB www.eib.org/eiah Technical assistance Pooling resources & expertise including from MS Transparency on investments in Europe: EIPP European Investment Project Portal (EIPP) will go live soon as soon as a critical mass of projects is reached Matching investment opportunities proposed by project sponsors with investors' interests "Soft launch" underway project promoters can submit projects via http://ec.europa.eu/eipp 30
ABOUT THE ADVISORY HUB DEMAND PROJECT PROMOTERS PUBLIC AUTHORITIES MEMBER STATES PRIVATE SECTOR ACCESS POINT WEB CONTENT + WEB PORTAL + SUPPORT TEAM European Investment Advisory Hub (EIAH) DELIVERY CHANNELS Existing advisory programmes and activities Project support throughout the project cycle Support to Financial instruments Enhance access to finance: INNOVFIN ADVISORY Additional advisory and technical assistance New investment support also in areas relevant to the scope of EFSI (could be delivered by EIB advisory or operational teams) Identification of needs as they arise SUPPLY EIAH s partner institutions expertise Network of institutions incl. EIB Group, EC, National Promotional Banks, etc. European Commission Integrated collaboration model 31 31
EIPP projects must: 1. have a minimum size of EUR 10 million 2. fall within an eligible EFSI sector 3. be compatible with EU law and law of relevant MS 4. be expected to start within three years from submission to EIPP 5. have as promoter a legal entity established in an MS Publication in EIPP of a project can be denied if the information is inaccurate or if its publication may entail legal or reputational risks fo the European Commission and/or the Member States
THANK YOU FOR YOUR ATTENTION MORE INFORMATION AVAILABLE AT: ec.europa.eu/invest-eu www.eib.org/invest-eu http://www.eif.org/what_we_do/efsi/ www.eib.org/eiah ec.europa.eu/eipp http://www.eib.org/products/blending/innovfin/?lang=fr Contact for project promoters: via EIB InfoDesk (info@eib.org) or relevant Operations Department #InvestEU 33 33