THE INVESTMENT FACILITY AND THE EU-AFRICA INFRASTRUCTURE TRUST FUND MANAGED BY THE EUROPEAN INVESTMENT BANK EDF SEMINAR - PRAGUE Luis Baptista (ACP / IF Department) Prague, 27th April 2010 European Investment Bank 1
THE EUROPEAN INVESTMENT BANK European Investment Bank 2
Breakdown of the EIB s capital European Investment Bank 3
Largest Supranational Lender EUR bn 350 300 250 200 150 100 50 0 EIB World Bank IADB ADB NIB EBRD IFC AfDB Loans outstanding (signed) EIB, IADB, ADB, NIB, EBRD, AfDB : December 2008 World Bank, IFC: June 2009 European Investment Bank 4
EIB: 2009 key figures * Projects signed European Union Partner countries, (Of which ACP countries) Total Lending EUR 70.5 bn EUR 8.5 bn (EUR 0.85 bn) EUR 79.0 bn Borrowings EUR 79.4 bn Subscribed capital (at 01/04/2009) EUR 232.4 bn European Investment Bank 5
THE COTONOU AGREEMENT AND THE INVESTMENT FACILITY European Investment Bank 6
ACP the oldest mandate entrusted to the EIB Over 45 years experience in supporting the implementation of Europe s development policies Background information European Investment Bank 7
EIB lending to African Caribbean & Pacific States (ACP) Dates back to 1963 (1 st Yaoundé Convention) Series of Conventions since then (Yaoundé and Lomé) to provide finance in the ACP Regions Since 2003: the EIB manages the Investment Facility under a 20-year framework Cotonou Partnership Agreement + lending from its own resources. 5/6 yearly successive financial protocols current one: 2008-2013 (10th EDF) EIB s role focuses on the Financial Cooperation: European Investment Bank 8
Grants OCTs EUR 30m European Investment Bank 9
The Cotonou Agreement Private sector development, through The objectives Economic growth The means Value added of the Investment Facility (IF): Use of a wide range of risk-bearing instruments EIB s own resources Benefits of AAA rated inst. The constraints: - Ensure the long term financial sustainability of IF; Poverty reduction & Millennium Development Goals - Mitigate the risk of MS who are guaranteeing OR loans; European Investment Bank 10
Lending in ACP countries - instruments - European Investment Bank 11
The Investment Facility A revolving fund providing Flexible / risk-bearing financial instruments denominated in EUR, widely traded currencies or local currencies Senior loans Junior or subordinated loans Quasi-equity (participating, conditional or convertible loans) Equity (direct and indirect) Guarantees Intermediated loans Security package adapted to instrument and project (unsecured, project security, charge on assets, covenants..) European Investment Bank 12
EIB Own Resources Funds borrowed on the capital markets providing Senior debt + Intermediated Loans denominated in EUR and widely traded currencies 1 st class guarantee or prime-quality security usually required (unless sovereign risk) Mainly Public sector investments: sovereign/sub-sovereign borrowers European Investment Bank 13
Who can benefit? Sovereign and public sector entities Private entrepreneurs Investment funds/other financial intermediaries ACP and EU Member States entrepreneurs Large enterprises and MSMEs European Investment Bank 14
Terms and conditions EIB operates on market related terms: rates are based on EIB reference rate (AAA rating), including administrative margin + Risk pricing margin Whenever possible the principle of cost recovery applies appraisal, due diligence and commitment fees can apply Fixed or variable rates Long maturities and grace periods EIB = catalyst encourages co-financing max. 50% of funding provided by EIB Direct or indirect intervention Grants are available: - for project related technical assistance - to ensure concessionality whenever required European Investment Bank 15
Identifiable investment projects: Greenfield developments, expansion/rehabilitation schemes or acquisition of assets generating economic benefits Sustainable projects: Technically sound; Financially viable; Acceptable economic return; Complying with environmental protection and procurement regulations and prevailing social legislation and norms. Sectors: Project Eligibility Covering a broad range of sectors but excluding armaments, non-ethical drugs and gambling. European Investment Bank 16
Size of projects Primary Target: Direct Financing (preferably, but not limited to): Project cost ideally > EUR 35m Indirect Financing e.g.: CREDIT LINES or through the EUROPEAN FINANCING PARTNERS SCHEME for smaller projects. Direct financing can nevertheless apply for small projects, especially in the case of the smaller ACP countries Decision on direct financing of a project is made on a case by case basis European Investment Bank 17
Spotlight: lines of credit EIB line of credit (usually senior loan) Commercial Bank / Microfinance institution Sub-loans A B C F Micro, Small and Medium sized Enterprises: A to F European Investment Bank 18
Overview of Operations Nearly 7 years down the road (31/12/2009) Total signatures of EUR 3.9 bn EUR 2 489 m under the IF (EUR 450 m in 2009) EUR 1 446 m under EIB own resources ( EUR 403 m in 2009) 75 % of the portfolio relate to private sector operations Close to 80 % of the portfolio relate to Africa More than one third of total investments went to African infrastructure European Investment Bank 19
Outlook Infrastructure Overall focus Financial sector Projects that foster: (i) regional integration (ii) environmental sustainability (renewable energy, energy efficiency and climate change adaptation) Explore new initiatives for cooperation: blending resources, notably blend more EIB loans with European Commission grants (A new Caribbean Trust Fund, Energy and Water Facilities, etc). Rely more on models of delegated cooperation/mutual reliance Enhanced coordination with other bilateral and multilateral donors to maximise aid effectiveness. Emphasize the role of technical assistance & capacity building. Continue the dialogue and constructive relations with Civil Society Organisations and NGOs, in particular. European Investment Bank 20
For more information http://www.eib.org/ info@eib.org European Investment Bank 21
THE EU-AFRICA INFRASTRUCTURE TRUST FUND European Investment Bank 22
History of the ITF: December 2005: European Council approves the EU strategy for Africa February 2006: the EC and the EIB sign a MoU to establish a Trust Fund April 2007: The ITF Agreement is signed by the EC, the EIB and nine EU Member States. Today: three further Member States have joined the ITF; financial contributions have grown from EUR 87m to EUR 383m European Investment Bank 23
The key objective of the ITF: Leverage of funding through Loan-Grant Blending Mechanism Fund Grant resources from the Commission and EU Member States contributions Fund Lending resources & technical capacity of nominated Financiers investment Projects (must combine certain characteristics) European Investment Bank 24
Key eligibility criteria: The ITF can support infrastructure projects with the following characteristics: Trans-border infrastructure projects (or a national project with a demonstrable regional impact) African Ownership Carried out by public, private or mixed-capital entities Targeted infrastructure sectors (no quota per sector): Energy Transport Water & Sanitation Telecommunications / IT European Investment Bank 25
Forms of GRANT support: Grants from the ITF can be: Interest rate subsidies (IRS) can be applied in flexible ways to reduce the total amount of debt payable by the borrower Technical assistance (TA) preparatory work for eligible projects, project supervision and targeted capacity building Direct Grants (DG) to finance project components with social or environmental benefits Insurance Premia (IP) - Payment of early-stage premia for launching infrastructure projects (No quota per form of Grant) European Investment Bank 26
The Executive Committee (*) Governing body of the Trust Fund, Examines and decides on Grant Requests (**) Submission of Grant Requests Governance Structure and Grant Request Process EU-Africa Infrastructure Partnership Steering Committee provides orientations on strategy to the Executive Committee ITF Secretariat Assistance to the Executive Committee The Project Financiers Group informal professional group: identifes, discusses Grant Operation and submits requests to the Executive Committee Requests for project financing Trust Fund Manager EIB - Responsible for treasury and accounting Identification of projects: public or private sponsors/project promoters (*) 3 categories: (1) Voting Members = Donors, (2) non-voting Members: M.S. non-donors, (3) ITF Manager and ITF Secretariat (non-voting) (**) double majority voting rule European Investment Bank 27
Governance Structure: Donor pledged contribution amount (EUR) Financier Austria Belgium European Commission Finland France Germany Greece Italy Luxembourg The Netherlands Portugal Spain The United Kingdom 1,000,000 1,000,000 308,700,000 5,000,000 5,000,000 1,000,000 1,000,000 5,000,000 2,000,000 2,000,000 1,000,000 10,000,000 40,000,000 382,700,000 Austrian Development Bank Belgian Investment Company for Developing Countries (BIO) European Investment Bank To be determined Agence Française de Développement - AfD Kreditanstalt für Wiederaufbau - KfW Ministry of Economy and Finance SIMEST Lux-Development S.A. Private Infrastructure Development Group (PIDG)* SOFID COFIDES, S.A. Proposed: African Development Bank * to be agreed by the Executive Committee European Investment Bank 28
Operational Results 2007-2009: Operational Results by amount (in m EUR) (n.b. the total amount of CIPs exclude CIPs which have received a subsequent full approval) Millions 140 120 100 80 60 40 20 0 cleared in principle (CIP) 2007 2008 2009 cumulative 22 20 18 16 14 12 10 8 6 4 2 number of approvals approved Grant Operations 2007 2008 2009 cumulative approved Grant Operations 15,485,000 47,800,000 33,035,000 96,320,000 cleared in principle (CIP) 26,000,000 26,000,000 TOTAL 15,485,000 47,800,000 59,035,000 122,320,000 Number of approvals 4 4 13 21 CIP = initial decision on eligibility European Investment Bank 29
Operational Results - by type of Grant: EU-Africa ITF: Grant Operations (approved and cleared in principle) by Type of Grants Technical Assistance; 25,135,000 14% # : 15 Interest Rate Subsidy; 97,185,000 # : 6 European Investment Bank 30
Operational Results - by Region: EU-Africa ITF: Grant Operations (approved and cleared in principle) by Region West Africa & Sahel; EUR38,920,000 # : 10 23% Central & East Africa; EUR12,250,000 # : 5 Southern Africa (excl. RSA); EUR71,150,000 # : 6 European Investment Bank 31
Operational Results - by Sector: Transport; EUR69,050,000 # : 7 EU-Africa ITF: Grant Operations (approved and cleared in principle) by Sector 14% Energy; EUR50,670,000 # : 13 ICT; EUR2,600,000 # : 1 European Investment Bank 32
For more information please visit : www.eu-africa-infrastructure-tf.net or contact: Yves De Rosée Anja Schorr Head of Secretariat Administrative Officer y.derosee@eib.org a.schorr@eib.org Ph. +352 4379 82968 Ph. +352 4379 82970 European Investment Bank 33
Thank you! European Investment Bank 34