Innovative Financial Instruments supporting the delivery of the policy objectives of the Cork 2.0 Declaration 03/05/2017 European Investment Bank Group 1
EIB the EU bank at a glance EU Institution EU s long-term lending bank set up in 1958 by the Treaty of Rome. EIF over 20 years of experience in SME support AAA rated All major rating agencies with a strong capital base Funding on the international capital markets Largest multilateral lender / borrower 2016 EUR 83.8 bneib Group Active in over 160 countries Objectives Finance and expertise for sound, sustainable investment projects in support of EU policy objectives Governance Board of Governors Board of Directors Management Committee Headquartered in Luxembourg Around 3 000 staff supported by network of external offices 03/05/2017 European Investment Bank Group 2 03/05/2017 European Investment Bank Group 2
EIB Lending priorities aligned with EU key priorities Environment Infrastructure Innovation SMEs (incl. Farmers) EUR EUR EUR EUR 16.9bn 19.7bn 13.5bn 33.6bn EIB group support to Agriculture/Bioeconomy 2012-2016: ~29 bn EUR total lending to bio-based value chain >50.000 SME-loans to farmers, forestiers, fishers through partner banks 03/05/2017 European Investment Bank Group 3
EIB Group products to deliver on EU/EIB priorities EIB s traditional loan products LENDING Innovativeness: New finance mechanisms in cooperation with EU Commission and Member States European Investment Fund (EIF) InnovFin EU Finance for Innovators products European Fund for Strategic Investment (EFSI) European Structural Investment Fund - Financial Instruments FI BLENDING ADVISING 03/05/2017 European Investment Bank Group 4
EIB Group Products to deliver on EU/EIB priorities Project loans To private Bio-Based Industries: energy and resource efficiency, circular economy and/or RDI; including MidCaps. To public entities or concessionary PPPs to invest in public, agriculture-related infrastructure. Framework loans RDP loans: co-finance operational programs with EAFRD Multi-Beneficiary Intermediated Loans (MBIL) Finance SMEs and microenterprises through credit lines to intermediated Banks. Other SME financing through EIF Equity, microfinance, debt products under own exposure or blending with EU funds. 03/05/2017 European Investment Bank Group 5
European Fund for Strategic Investments (EFSI) Agriculture/Bioeconomy: Some 35 operations with total investment cost of > EUR 4.9 bn approved/ in the pipeline (@ 27-04-2017) Disclaimer: Not official EFSI figures 03/05/2017 European Investment Bank Group 6
Financial Instruments key concepts Leveraging EAFRD When designing financial instruments, a key goal is to maximise the market impact through leveraging private finance participation. This creates greater results than grants. Passing of benefits to the end beneficiary Instruments are designed to ensure that a traceable financial benefit to the end beneficiary is realised and becomes a contractual obligation. Generating returns or reflows for future use Instruments are also designed to create potential reflows of capital which the Managing Authority can then re-utilise again, which is additional positive outcome. 03/05/2017 European Investment Bank Group 7
Financial Instruments Blending public resources into Financial Instruments is an innovative alternative for efficiently delivering on EU policy goals New Financial instruments can mobilise additional 3 rd party contributions, thus levering the finance capacity of public funds to: Extend the reach to viable, self sustaining investments Foster competitive and diversified agricultural and rural economy EC DG-AGRI, MS authorities and EIB-Group are stepping up collaboration to explore the development of new agri-tailored financial instruments ADVISING: FI-Compass EAFRD agreement EIB/DR AGRI BLENDING Experiences : EFSI / INNOFIN EAFRD Pilot Instruments: Other Instruments: EIB-Forest Funds 03/05/2017 European Investment Bank Group 8
EAFRD mandate activities Discussions with DG AGRI Pre-negotiation with MA Negotiation with MA Signed with MA EARFD Languedoc- Roussillon Calabria Campania Friuli Venezia Giulia Piemonte Puglia Toscana Umbria Veneto Midi-Pyrénées Romania Total Expected Funding (EUR) 15m 10m 10m 5m 5m 10m 10m 5m 15m 12m 87m 184m 03/05/2017 European Investment Bank Group 9 9
EIF - First Loss Portfolio Guarantee Languedoc-Roussillon Portfolio of New Loans (EUR 75m) Objective: access to finance, with improved lending conditions for Final Recipients (reduced interest rates and/or collateral requirements) Total Loans amount Bank risk Leverage 5x (1/0.8/0.25) 80% Coverage on a loan by loan basis up to the cap rate of 25% EUR 15 m from EAFRD and Region own 03/05/2017 European Investment Bank Group 10
A Combined EAFRD/EFSI Instrument - creates significant increase in market impact - made possible by revised regulation Indicative example Without EFSI : Portfolio of new loans Worth EUR 62.5m 60% Increase in market impact Indicative example With EFSI : Portfolio of new loans Worth EUR 100m Standard FLPG Product creates 6.25 leverage factor on allocated EAFRD EFSI-enhanced FLPG Product creates 10 leverage factor on allocated EAFRD EAFRD Contribution of EUR 10m Cap of 20% EFSI of EUR 6m EAFRD Contribution of EUR 10m Cap of 20% 12.5% Guarantee rate of 80% Guarantee rate of 80% 03/05/2017 European Investment Bank Group 11
EIF AGRI Italia Multiregional Guarantee Platform Guarantee Fee according to the price of the risk borrowers Senior pricing Region 1 Senior (EIB/CDP/EIF ) Region N Senior (EIB/CDP/EIF ) Tranching EIF Guarantee 1 Guarantee Rate 50% Loan by Loan Guarantee Fee IF 1 Funding FI Risk FI Risk IF 2 FI Risk 0% pricing EAFRD EAFRD Tranching Guarantee Fee EIF Guarantee 2 Guarantee Rate 50% Loan by Loan FI Risk Funding FI Risk FI Risk 03/05/2017 European Investment Bank Group 12
Forest Funds (Dasos Ireland) 1) Designed to promote the development of the forest-based sector in Ireland: - consolidated management of fragmented forest assets - increase of forest cover through afforestation - creation of new job opportunities in the forest value chain. 2) Fund strategy to develop a forest portfolio of up to 18 000 ha, through acquisition and consolidation of individual assets or portfolios of assets within a single co-investment vehicle under joint management. 3) EIB co-invests with Dasos Timberland Fund II and the Ireland Strategic Investment Fund. Target size of the co-investment vehicle is EUR 200 m. 03/05/2017 European Investment Bank Group 13
Benefits from blending public resources into FI Efficient budget allocation with high impact: EU/MS have more financing power with less money due to leverage Revolving effect High Impact - Increased access to finance in a market traditionally perceived as high risk: lower interest rates No recourse to land and private property possible 03/05/2017 European Investment Bank Group 14
Conclusions EIB group, EC commission and MA at member state level are making good progress towards the blending of public resources into FI. Target is to levering the finance capacity of public funds to help fostering competitive and diversified agricultural and rural economy FI are based on the principle of repayment supporting viable businesses, but not all activities suitable for FI. Regulatory environment needed some adjustments at implementation, operation and monitoring level. Migration from grant to debt based support requires a change in mindset at all levels. 03/05/2017 European Investment Bank Group 15
EIB contacts & Questions Werner Schmidt Director Environment and Sustainable Territorial Development Department Projects Directorate Phone: (+352) 4379 88697 email: w.schmidt@eib.org 03/05/2017 03/05/2017 European Investment Bank Group 16