EIB Financing of RDI in Energy

Elisabetta Cucchi

Policy Officer

Institutional Strategy Department

Brussels 29 October 2013

2

1. EIB: profile and objectives

2. EIB instruments to support RDI in energy

3. Expected developments in MFF 2014-2020

Table of Contents

3

1. EIB: profile and objectives

4

European Investment Bank Profile

EIB was created by the Treaty of Rome in 1958

EIB is a not-for-profit, EU policy driven institution

EIB is 100% owned by the 27 EU member states

EIB has subscribed capital of EUR 232.4 bn as of 2011 (before EUR 10bncapital increase)

EIB is AAA/Aaa rated by Moody’s, S&P and Fitch with stable outlook

EIB funds itself on the capital markets: EUR 71 bn in 2012

EIB signed loans amounting to EUR 50 bn in 2012 (EUR 44bn in EU)

EIB is the largest multilateral financing institution,

EIB is the majority shareholder in the European Investment Fund

For more information, please visit: www.eib.org

The European Investment Bank is the European Union‘s long-term financing institution. The Bank

acts as an autonomous body set up to finance capital investments furthering European integration

by promoting EU policies.

5

EIB: Supporting European priority objectives

Convergence

Small and medium-sized enterprises (SMEs) and

mid-cap enterprises (midcaps)

Environmental sustainability

Knowledge Economy

Trans-European Networks (TENs)

Sustainable, competitive and secure energy

6

EIB support to the Energy Sector

0

2

4

6

8

10

12

14

16

18

20

2007 2008 2009 2010 2011 2012

EUR bn Renewable Energy

Energy Efficiency

Energy Networks

Security of supply

On average 15-20% of EIB total yearly lending

In 2012 energy loans of EUR 8.4 bn (EUR 7.2bn inside the EU and EUR 1.2bn outside the EU)

In 2012 EUR 2.8 bn to RE and EUR 0.8bn to EE

Recent Energy Review prioritises “no regrets” sectors : energy efficiency, renewable energy,

networks and RDI

7 7

EIB is lending considerable sums to renewable energy projects.

EIB contribution to Renewable Energy

European Investment Bank – 2013 EIBI Conference| Brussels 26.06.2013

0

500

1000

1500

2000

2500

3000

3500

4000

4500

5000

2008 2009 2010 2011 2012

EUR m Biofuel - manufacturing

Biomass/Biofuel

Geothermal power stations

Hydroelectric power stations

RE dedicated transm. lines

RE sources miscellaneous sectors

Solar Energy (incl. manufacturing)

Wind Energy (incl. manufacturing)

8

Total signatures in support of the Knowledge Economy over 2000-2012: EUR 123 billion

Breakdown by objective: 50% R&D, 27% Innovation and 21% education & training, 2% other

Transaction sizes for RDI have ranged from EUR 8m to EUR 600m

Approximately 50% of the transactions were pure private sector investments

EIB financing of the Knowledge Economy

0

2000

4000

6000

8000

10000

12000

14000

16000

18000

20000

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

To

tal L

oan

Vo

lum

e (

M E

UR

)

Innovation

Education and Training

R&D

9

2. EIB instruments to support RDI in energy

10

Knowledge transfer,

Early-stage

Equity for Venture Capital,

Mezzanine Funds Debt

Entrepreneur, friends, family

Business Angels

Seed/Early Stage VC Funds

Formal VC Funds

Bank Loans and Guarantees

Seed / Start-Up Phase Emerging Growth Phase Development Phase Later Stage

Counterparts

EIF EIB

The European Investment Bank Group

EIB Group Product Offer for RDI

Bank Loans and Guarantees

Facility: Competitiveness

and Innovation Programme

(CIP), Ecotech, EIB Risk

Capital Mandate

Purpose: IP financing,

technology transfer, seed

financing, investment

readiness, early-stage VC

Target Group: VC Funds,

Business Angels,

Universities

Competitiveness and

Innovation Programme

(CIP), EIB Risk Capital

Mandate, Fund of funds

mandates

Growth financing for SMEs,

mid-caps

Formal VC Funds, Mezz

funds

RSFF, RSI (RSFF for SMEs; new product in

development) EIB loans, CIP

EIB own funds RDI financing,

SMEs/MidCaps, Banks, PE Investors (sub-

investment grade), Corporates, Public Sector

entities

Loans (incl. Mezzanine), Funded Risk

Sharing Facilities with Banks

11

Direct Lending Indirect Lending / Financing

EU

Corporate / Project Financing Senior Loans (pari passu)

Subordinated Debt

Financial Intermediaries

(extend lending capacity)

Risk Sharing

Co-financing

1 2

Aaa Aa A (Baa3) Ba B

RSFF [up to EUR 10bn

assuming

leverage of 5.0x ]

Risk Sharing Finance Facility (RSFF)

RSFF Value Added Proposition

Competitive terms and pricing

Long Maturities of up to 10 years

Large single loan sizes (< EUR 300m)

Strong technology/industry expertise

No cross selling / Take and hold strategy

Signaling Effect: EIB as quality stamp

12

RSI Facility under RSFF:

Under the indirect financing approach, the EIB

Group shares risk of up to 50% of loans from

house-banks to innovative SMEs and small

Mid Caps (up to 500 employees) under RSI.

Loan amounts can range from EUR 25,000 to

EUR 7.5m

Loan maturities range from 2 years to 7 years;

The key operational handling of the product is

designed to be straight forward to operate and

manage (simplicity is key);

The product provides capital relief for the

financial intermediary;

Indirect Financing under RSFF/RSI

Product Structure Chart

Bank

13

RSFF Results to end Q3 2013*

887

1,502

4,187

2,117

713

3,338

2,393

459

1,024

2,984

1,839

973

2,795

1,227

323 169

1,497 1,527

1,266

1,646

2,308

-

500.0

1,000.0

1,500.0

2,000.0

2,500.0

3,000.0

3,500.0

4,000.0

4,500.0

2007 2008 2009 2010 2011 2012 2013

Approvals

Signatures

Disbursements

2.7bn

Cumulative

RSFF Business Annual RSFF Business 2007-2013

2007-2013

15.1bn

11.3bn

8.7bn

* Provisional figures

14

RSFF Results to to end Q3 2013

Active Operations – Distribution by Country

To date direct RSFF operations have been signed in 23 countries.

Under RSI, EIF has signed agreements with 16 intermediaries in 13 countries.

1

1

1

2

1

3

2

1

2

1

1

15

RSFF Results to end Q3 2013

Active Operations – Distribution by Sector

ICT 17% Life Science &

Speciality Chemicals 22%

Engineering & Industry

40%

Energy 15%

Research Infra. 6%

16

RSFF in support of energy

Project Name Total ABENGOA RDI LOAN 49.0 ACCIONA RDI 185.0 ANDASOL SOLAR THERMAL POWER 60.0 ANDASOL SOLAR THERMAL POWER II 60.0 BORKUM WEST II OFFSHORE WINDPARK 105.5 ELDEPASCO NORTHWIND OFFSHORE WIND 133.0 GAMESA RDI 260.0 GAMESA WIND POWER RDI II 160.0 GLOBAL TECH I OFFSHORE WINDPARK 100.0 INGETEAM GREEN ENERGY TECH RDI 45.0 SOLNOVA 1&3 CONCENTRATED SOLAR POWER 110.0 SOLUCAR SOLAR THERMAL POWER 50.0 THERMOSOLAR GEMASOLAR SPAIN 80.0 ACS RDI 98.0

1,495.5

• EIB involvement: COM Decision calls on EIB and its expertise in certain areas.

• Allocates 2 advisory tasks to the Bank: a) Due Diligence of Project Applications; b) Monetisation of EU CO2 allowances.

• 1st round: 200 M EU CO2 allowances ; ~EUR 1.2 billion funding awarded.

• Funding is in principle = 50% of extra investment and operating costs for demonstration (“Relevant Cost”).

• Funding for 23 RES projects, 8 bioenergy projects out of 24 applications.

Innovation – NER300 1ST Call Results

17

18 18

Other EIB instruments for innovative RE projects

ELENA:

Joint initiative of EC and EIB to support legal and regional authorities in the implementation of

investment programmes in EE/RE/UT. Provides grant financing covering up to 90% of TA needed to

prepare, implementation and finance investment projects.

Investments in Equity Funds:

EIB invests in equity funds, e.g. Marguerite, which in turn take direct equity participations in

infrastructure investments.

European PPP Expertise Centre (EPEC):

Expertise service provided by the EIB and European Commission to support programme and policy

development as well as best practice by the public sector for PPP transactions.

Joint Assistance to Support Projects in the European Regions (JASPERS):

A joint policy initiative of EIB, DG REGIO, EBRD and KfW to provide assistance for absorption of

Structural & Cohesion Funds period 2007 to 2013.

JESSICA (Joint European Support for Sustainable Investment in City Areas):):

to finance Integrated, sustainable urban-renewal projects via a range of sophisticated financial tools

(including equity investments, loans and guarantees), offering new opportunities for the use of EU

Structural Funds.

RDI advisory: joint initiative of EIB and DG RTD in the context of RSFF to help improve the

investment readiness and access to appropriate financing of EU projects.

19

3. Expected developments in MFF 2014-2020

20

RSFF Vision for MFF 2014-2020 What is the current role of Mid-Caps in the RSFF portfolio?

Even though technically/legally possible (> EUR 7.5m), RSFF has so far not sufficiently targeted R&D intensive Mid Caps; so far only 4.6% of direct RSFF financings (or 8 Mid Caps out of >5,000).

Experience shows that the direct intervention

model via RSFF is geared towards larger

transactions starting from ca. EUR 25m. Smaller

direct transactions with SMEs and Mid-Caps are

the exception and do not reach a satisfying level

of scale and market share (see chart besides).

A complementary indirect RSFF financing model

to provide senior debt financing was one of the

original RSFF objectives back at its set-up in

2007; based on the successful RSI model, an

intermediated Mid-Cap risk sharing product

would allow RSFF to reach this segment with a

significant improvement in scale, cost efficiency

and leverage.

A more streamlined structure to provide hybrid

debt financing directly mainly through co-

investment is important as a complementary

measure to reach more efficiently mid-caps with

high-value added financings supporting RDI

investments.

Mid Caps:

5%

Large Caps

75%

SPVs / RIs

20%

Signed Direct RSFF Financings:

21

RSFF Vision for MFF 2014-2020 Where are the gaps in the EIB Group product offering?

EIB Global Loans

EUR 7.5m EUR 25m EUR 300m

RSI: Innovative SMEs

CIP: SMEs

Hig

h R

ISK

L

ow

EUR 25K

EIB/EIF Mid-Cap RSI

EIB Investment Loans/Guarantees

EIB RSFF

Individual RDI Loans

Fund of Funds Focus: SMEs (40% Buy-Out)

Av. Ticket Size: EUR 1.8m

RSFF GFI Direct (Co-)Investments

Pure RDI Invest. Focus

Mid-Caps only

Av. Ticket Size: EUR 15m

SIZE OF SINGLE TRANSACTION

Fu

nd

ing

Pre-seed

Seed

Funding

Start-up / Mezzanine/Growth Commercialization / Industrialization Growth / Stability Ph

ases

1st Valley of Death

2nd Valley of Death

EIF

Fu

nd

of

Fu

nd

s

Ap

pro

ach

D

eb

t P

F G

uara

nte

es

E

IB R

SF

F (

EC

) E

IB O

wn C

apital

Legend:

RSFF Innovation

Financing

Gap

22

RSFF Vision for MFF 2014-2020 How do the new initiatives fit into the EIB Group product offering?

EIB Global Loans

EUR 7.5m EUR 25m EUR 300m

RSI: Innovative SMEs

CIP: SMEs

Hig

h R

ISK

L

ow

EUR 25K

EIB/EIF MCI

EIB Investment Loans/Guarantees

EIB RSFF

Individual RDI Loans

Fund of Funds Focus: SMEs (40% Buy-Out)

Av. Ticket Size: EUR 1.8m

RSFF GFI Direct (Co-)Investments

Pure RDI Invest. Focus

Mid-Caps only

Av. Ticket Size: EUR 15m

SIZE OF SINGLE TRANSACTION

Fu

nd

ing

Pre-seed

Seed

Funding

Start-up / Mezzanine/Growth Commercialization / Industrialization Growth / Stability Ph

ases

1st Valley of Death

2nd Valley of Death

EIF

Fu

nd

of

Fu

nd

s

Ap

pro

ach

D

eb

t P

F G

uara

nte

es

E

IB R

SF

F (

EC

) E

IB O

wn C

apital

Legend:

23

Thank you for your attention!

Elisabetta Cucchi

cucchi@eib.org

www.eib.org

European Investment Bank – 2013 EIBI Conference| Brussels 26.06.2013