Public hearing on The extension of the duration of the European Fund for Strategic Investment (EFSI 2.0) 10 November 2016
Agenda EUROPEAN FUND FOR STRATEGIC INVESTMENTS (EFSI) A SUCCESSFUL FIRST YEAR EUR 138.3 bn, 27 MSs, 290 000 SMEs THE PROPOSED EXTENSION EUR 500bn by end-2020, limited budgetary impact THE MAIN CHANGES Enhanced additionality & transparency, reinforced geographic & sectorial coverage (incl. via facilitation of ESIF-EFSI combination), focus on climate action 2
A SUCCESSFUL FIRST YEAR In place since July 2015, the EFSI has mobilised EUR 138.3 billion in investments across 27 Member States, benefitting more than 290,000 SMEs. It is firmly on track to deliver the objective of mobilising at least EUR 315 billion in additional investments in the real economy by mid-2018. 62% of private sector financing mobilised for signed EFSI operations so far. 3
THE PROPOSED EXTENSION Commission proposal to amend Regulations 1316/2013 and 2015/1017: Envisaged in the Commission Communication of 1 June 2016, proposing an extension of the EFSI beyond its initial three-year period; Supported by the European Council, which concluded, on 28 June 2016, that "[t]he Investment Plan for Europe, in particular the EFSI, has already delivered concrete results" and invited the European Parliament and the Council to examine as a matter of urgency the Commission's proposal on the EFSI's future; Adopted by the European Commission on 14 September 2016, with a view of mobilising at least half a trillion euro investments by end-2020; Complemented by evaluations from the Commission, the European Investment Bank, and an independent evaluation as foreseen in the EFSI Regulation. 4
THE PROPOSED EXTENSION Evaluations Regulation (EU) 2015/2017 foresees three evaluations: Article 18(1): EIB evaluation on the functioning of the EFSI by 5 January 2017 Article 18(2): COM evaluation on the use of the EU guarantee and the functioning of the guarantee fund by 5 January 2017 Article 18(6): independent evaluation by 5 July 2018 All three evaluations are available earlier: COM evaluation was published on 14 September and accompanies the legislative proposal EIB evaluation was published on 5 October The independent evaluation will be available mid-november. E&Y won the tender, the contract was signed on 21 September. 5
THE PROPOSED EXTENSION Proposal to extend the duration and increase the firepower of the EFSI to mobilise at least EUR 500 bn by end-2020 EU guarantee: EUR 26 billion, of which a maximum of EUR 16 billion available prior to 6 July 2018, backed by a EUR 9.1 billion guarantee fund (target rate set at 35% of total EU guarantee obligations) EIB contribution: EUR 7.5 billion* Increase of the EFSI risk-bearing capacity: from 21 billion to 33.5 billion Expected by the end of 2020: EUR 100 billion of total investment by the EIB and EIF, mobilising at least EUR 500 billion of additional investment in the real economy. * Subject to final confirmation by EIB Governing Bodies 6
THE PROPOSED EXTENSION Increase of the EFSI risk-bearing capacity Guarantee fund (35%) EUR 9.1bn EUR 16bn + EUR 10bn + EUR 5bn + EUR 2.5bn* EU guarantee: EUR 26bn EIB contribution: EUR 7.5bn* EUR 33.5 bn x 15 = EUR 502.5 bn (2015-2020) targeted multiplier (same as EFSI 1) * Subject to final confirmation by EIB Governing Bodies 7
THE PROPOSED EXTENSION Limited budgetary impact to finance the provisioning of the guarantee fund Commission evaluation on the guarantee fund concludes that an adjustment of the target rate from 50% to 35% of total EU guarantee obligations is adequate while limiting risks to the Union budget Increase of the guarantee fund by EUR 1.1 bn, reaching EUR 9.1 bn: No changes to the Multiannual Financial Framework (MFF) Transfer from the Connecting Europe Facility (CEF) EUR 500m transfer from CEF financial instruments to build up the guarantee fund: EUR 155m from CEF transport, EUR 345m from CEF energy Net positive income of existing operations: EUR 450m Very limited use of the unallocated margin of the EU budget: EUR 150m 8
THE PROPOSED EXTENSION Multiplier and distribution between infrastructure and SME windows 1bn EIB + 6.5bn EU 1.5bn EIB + 3.5bn EU 2.5bn EIB + 13bn EU 2.5bn EIB + 3bnEU 9
Enhanced additionality Projects under the EFSI must address market failures and sub-optimal investment situations as part of the eligibility criteria for EFSI support. Art. 1(3) Art. 6(1) Proposal Consolidated version More detailed definition of additionality: EIB special activities supported by the EFSI should have typical features such as subordination, participation in risk sharing instruments, cross-border characteristics, etc. Art. 1(2) Art. 5(1) Annex, Section 2 Annex II, Section 3(d) In view of their importance for Europe, cross-border projects should be considered additional by definition. Art. 1(2) Art. 5(1) 10
Enhanced transparency (1) Selection of projects The Investment Committee's decisions approving the use of the EU guarantee, which are public and accessible, should include the rationale for the decision, with particular focus on compliance with the additionality criterion. Art. 1(4)(d) Art. 7(12) 11
Enhanced transparency (2) The scoreboard of indicators shall be made public as soon as an operation under the EU guarantee is signed, with the exception of commercially sensitive information. Annex, s.3 Annex II, s.5 12
Enhanced transparency (3) EFSI support: enhanced visibility Final beneficiaries, including SMEs, should be made aware of EFSI support (via the EIB/EIF or financial intermediaries). Art. 1(11) Art. 19 13
Reinforced geographic & sectorial coverage (1) More targeted and local technical assistance through the European Investment Advisory Hub (EIAH): leveraging local knowledge to facilitate EFSI support across the Union; providing pro-active support on the establishment of investment platforms; providing advice on the combination of other sources of EU funding (ESIF, Horizon 2020, CEF) with EFSI support. Art. 1(9)(b) Art. 14(2) focusing on climate action, digital sector & cross-border projects Art. 1(9)(a)(ii) Art. 14(1) 14
Reinforced geographic & sectorial coverage (2) Blending grants with EFSI support: EUR 1.1bn of CEF financial instruments to be transferred to CEF grants for blending with EFSI support Enlarged sectorial coverage to support less-developed regions and transition regions Proposals to facilitate the combination of EFSI financing with support by other sources of EU funding, in particular European Structural and Investment Funds (ESIF) 15
Omnibus provisions on ESIF and EFSI combination (1) The new "omnibus" provisions create 2 possibilities for MSs: 1st possibility: at EFSI level FR Art. 125: MS may use ESIF to enhance EFSI risk-bearing capacity CPR Art. 30a: MS has to submit a request by 30 September, financial appropriations of future years only, programme amendment required 16
Omnibus provisions on ESIF and EFSI combination (2) 2nd possibility: at platform/project level Reliance on assessment by EIB for its contribution to financial product under EFSI (no need for a new ex-ante assessment) Reporting to avail of information under Article 16 of EFSI Regulation Reliance on EIB selection procedures (no need for second selection procedure) Payment phasing in line with payment schedule for other investors (derogating from general phased/tranched payments rules) Co-financing rate of up to 100% Subordination of ESIF to EFSI (including possibility for ESIF to contribute to junior/mezzanine tranches of portfolios for guarantee instruments) Contributions can be used to originate new finance in entire territory of Member State 17
Reinforced focus on climate action (1) 40 % of EFSI financing under the infrastructure and innovation window to be geared towards projects with components that contribute to climate action, in line with the COP21 commitments Art. 1(5)(b) Art. 9(2) The EIAH should provide support in the preparation of climate action and circular economy projects or components thereof, in particular in the context of COP21. Art. 1(9)(a)(ii) Art. 14(1) 18
Reinforced focus on climate action (2) Avoiding support to motorways unless needed to attract private finance in transport projects in cohesion countries or in cross-border transport projects involving at least one cohesion country Annex, s. 1(a) Annex II, s. 2(b) 19
Governance Investment Committee Obligation on Investment Committee members to inform the Steering Board, the Managing Director and the Deputy Managing Director of any issues pertaining to a possible conflict of interest. Art. 1(4)(b) Art. 7(10) Managing Director made responsible for informing the Steering Board of potential conflict of interest situations and for proposing appropriate action. Art. 1(4)(c) Art. 7(11) 20
Thank you for your attention! 21