Horizon 2020 Financial Instruments @ TAIEX Workshop on EU Access to Finance day and COSME Programme 2014-2020 Belgrade, Republic of Serbia 8 March 2016 Martine Diss, Deputy Head of Unit and Drazen Budimir, Policy Officer H/3 COSME Financial Instruments DG Internal Market, Industry, Entrepreneurship and SMEs (GROWTH)
Policy Context Juncker Commission = a team with a mission! Address difficult geo-political situation, "societal challenges" Strenghen economic recovery and build a Europe that delivers growth and jobs for its citizens Role of Research, Science and Innovation = cross-cutting, includes: mobilising innovative financial instruments available under Horizon 2020, facilitating investment in education, research and innovation infrastructure focusing more on applied research, with a greater participation of the private sector and a special focus on SMEs, in particular in Horizon 2020. maximising synergies with the implementation of the European Structural and Investment Funds at national and regional level, and with COSME.
Horizon 2020 Three priorities Excellent science Access to Risk Finance Industrial leadership Societal challenges
Why EU support to gain access to risk finance for innovation (and growth)? Barriers to Innovation&Growth Source: European Commission and European Central Bank, SMEs Access to Finance Survey 2013, Analytical Report. "68% of companies consider the lack of financial resources as the main obstacle to the commercialisation of innovative products or services." Source: European Commission, 2014 Innobarometer survey The role of public support in the commercialisation of innovations
= new generation of financial instruments (debt, equity, guarantees) under Horizon 2020 (RDI) Stimulate more investment in research and innovation, notably by the private sector No market distortion: intervention only to address financing gaps in the R&D&I delivery chain (notably due to high risk), and as such help translate R&D results to the market (/innovation)
Finance for Innovation for SMEs Based on RSI pilot guarantee scheme under RSFF (FP7) - managed by EIF - to improve access to debt finance of innovative SMEs and Small Mid-Caps (< 500 FTEs) EIF provides guarantees and counter-guarantees to selected financial intermediaries, thus allowing them to provide loans, financial leases and loan guarantees to innovative SMEs and Small Mid-Caps with reduced risk and regulatory capital consumption. InnovFin SME Guarantee will boost by almost 4 times the RSI initiative, therefore enabling to provide an amount of EUR 9 to 10 billion of financing to benefit innovative SMEs and Small Mid-Caps over the next 9 years. Already deployed in 17 EU Member-States and 6 Associated Countries, including Serbia, where ProCredit bank has signed an InnovFin SMEG deal with EIF in January 2016 (EUR 20 million > loan portfolio of EUR 40 million) EIF's call for Expression of Interest to which interested financial intermediaries across Europe is still out! 4
Eligible Final Beneficiaries Finance for Innovation for SMEs SMEs (EC definition) and Small Mid-caps (< 500 FTE) Operating in EU-28 and H2020 Associated Countries No substantial focus on Restricted Sectors, not in any situation of exclusion nor in difficulty Unlisted (except for alternative trading platforms) Innovative (the borrower itself or enterprises from its group) investing in the production or development of innovative products, processes and/or services that present a risk of technological or industrial failure enterprises with a significant innovation potential or R&I-intensive enterprises, i.e. satisfying at least one innovation criterion out of a set of pre-defined eligibility criteria fast growing enterprises, measured by employment or by turnover: annual increase > 20%
Finance for Innovation for SMEs Part of a single EU Equity Financial Instrument (managed by EIF) supporting Union enterprises growth and research and innovation (R&I) from the early-stage to the growth and expansion stages EUR 430m in equity support for companies established in EU MS or Horizon 2020 associated countries that are in the pre-seed, seed, or start-up phase mostly; limited growth-stage finance also possible Investments managed through selected fund managers Focus on Horizon 2020 objectives (e.g. ICT, life sciences, clean energy, high-tech) Investment size up to EUR 30m up to 50% of total commitments First deals announced on 5 February 2016, including with the Italian VC fund Panakès
InnovFin Products for MidCaps Rolled out through financial intermediaries. Financial intermediaries will be guaranteed against a portion of their potential losses by the EIB. Guarantees and counter-guarantees on debt financing < 50 million For innovative midcaps (< 3000 FTEs) which are not eligible under the InnovFin SME Guarantee Direct long term senior, subordinated or mezzanine loans from EIB Amount between 7.5 million < 25 million For innovative midcaps (< 3000 FTEs), but also SMEs and small midcaps First InnovFin MidCap Growth Finance transaction with Rovio (EUR 25 million facility to support Rovio s technological innovations in various entertainment sectors. ) 5
Delivers direct loans and guarantees from EIB for larger projects Loan amount between EUR 25-300 million For R&I projects emanating from larger firms; universities and public research organisations; R&I infrastructures (including innovation-enabling infrastructures); publicprivate partnerships; and special-purpose vehicles or projects (including those promoting first-of-a-kind, commercial-scale industrial demonstration projects) First InnovFin Large Projects transaction with Belgian biopharmaceutical company UCB to provide at-risk codevelopment funding of 75 million for the development of selected UCB compounds. 6
InnovFin Thematic Finance Provides loans between EUR 7.5m and EUR 75m to innovative players active in developing vaccines, drugs, medical and diagnostic devices, and research infrastructures for combatting infectious diseases. Loan maturity: up to 7 years. Financing aims at projects that have passed the pre-clinical stage and for which clinical validation is needed for further development. Promoters must be willing to co-fund the project with own funds (shareholders equity) for at least 25% of identified project costs. InnovFin ID can only finance max. 50% (on average 33%) of overall project costs. InnovFin ID is expected to generate a MULTIPLIER of about 9x the initial contribution. Enables the financing of innovative first-of-a-kind demonstration projects in the field of renewable energy and hydrogen/fuel cells, through loans of in between EUR 7.5 and 75 million. Loan maturity of max. 15 years. The European Investment Bank can only finance 50% of the total project costs, via a broad range of instruments, after an eligibility check and due diligence. Also here a mutliplier effect of about 9x the original contribution is expected.
Activities Project advisory work Improve the bankability and investment readiness of large, complex R&I projects Advise specific public-private consortia, R&I driven companies (midcaps or larger), Joint Technology Initiatives, PPPs, R&I clusters, EC and MS Horizontal activities Improve framework conditions for access to finance (web-based portal, criteria notes, ) Prepare studies to improve effectiveness of H2020 FI to address specific sectors/r&i projects needs Develop business case for new financing mechanisms to support specific R&I policy objectives Facilitate access to RDI funding 7
Relevant links and contact details www.eib.org/innovfin http://helpingyouinnovate.eib. org InnovFin SME Guarantee: Innovfin_SMEG@eif.org InnovFin SME Venture Capital: EUequityInstrument@eif.org InnovFin MidCap Guarantee: InnovfinMGF@eib.org @ http://ec.europa.eu/programm es/horizon2020/en/h2020- section/access-risk-finance InnovFin MidCap Growth Finance:InnovfinMGF@eib.org InnovFin Large Projects: Innovfin@eib.org InnovFin Advisory: Innovfinadvisory@eib.org InnovFin Infectious Diseases: InnovfinIDFF@eib.org InnovFin Energy Demo Projects:InnovfinFDP@eib.org