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E u r o p e a n I n v e s t m e n t B a n k

EIB financing of theTrans-European Networks

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EIB f inanc ing of the Trans-European Networks EIB f inanc ing of the Trans-European Networks EIB f inanc ing of the Trans-European Networks

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f inanc ing of the Trans-European Networks EIB f inanc ing of the Trans-European Networks EIB f inanc ing of the Trans-European Networks

EIB financing of the Trans-European Networks 1

EIB support for TENs

The need to provide freedom of movement of goods, persons, energy and

information underpins the fundamental developmental and integration

aims of the European Union (EU). At the heart of European policy, the expansion

of the Trans-European Transport and Energy Networks (TENs) remains a key

objective for the European Investment Bank (EIB), alongside other lending

priorities such as reinforcing social and economic cohesion in the EU, forging

links with EU partner countries and protecting the environment.

European transportnetworks

European policy aims to build an inte-grated network of basic transport infra-structure, transforming the networksbuilt under national considerations intoan efficient and sustainable Europe-wideinfrastructure system. This network ofmotorways, railways, waterways, portsand airports is intended to link the 25Member States to one another and withthe countries of the European Neigh-

bourhood.

Capacity problems and consequent con-gestion along long-distance routes inthe EU are restraining factors for bothtrade and mobility. Better use of exist-ing infrastructure is paramount in orderto reduce mounting costs and containthe environmental impacts of transport.Nonetheless, the construction of newor improved transport infrastructure isneeded to allow the development of theSingle Market.

Member States need substantial invest-ment to adapt their infrastructure networks

to the growing transport requirements ofan expanding EU. Indeed, a major chal-

lenge for the future of the Trans-European Transport Networks (TEN-T) is the need tointegrate the poorly endowed transportsystems of most new Member States andAccession Countries. Whilst much of thisinvestment will come from the public sec-

tor, the involvement of the private sectormust be encouraged to ensure efficiencyand innovation and to reduce the financialburden on the public accounts.

Parallel to those priority corridors withinthe European Neighbourhood area thatwill be supported by EU external policy,the EU has identified 30 priority projectswithin the TEN-T network on whichfinancial support from the EU budgetwill be concentrated. EU contributionswill remain well below the investment

requirements for these projects and forthe network generally. The EIB is expectedto contribute with its long-term loans tobridge the financial gap and acceleratethe completion of the network, envis-aged for 2020.

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EIB financing of the Trans-European Networks2

The development of TENs aims to provide:

high-quality infrastructure supporting the links between the 25 EU Mem-ber States and connecting the EU and the countries of the European Neigh-bourhood area;

interconnection and interoperability of existing national networks;

access to the basic networks, permeating the benefits of the Trans-EuropeanNetworks over the whole EU territory.

European energy networks

The EU strategy for the energy marketrests on:

tackling the problems of energy effi-ciency;

strengthening links with the energynetworks in European partner coun-tries;

facilitating the growth of an internalEU energy market;

acting as a catalyst for the provision ofrenewable energy sources.

Trans-European Energy Networks (TEN-E)are a top priority in the EUs energy policybecause of their seminal role in the crea-tion of the internal energy market as wellas in the diversification and securitisationof energy supplies in the Union.

The backing of EU initiatives

In the 1992 Maastricht Treaty, the EUMember States agreed on the need todevelop the Trans-European Networksto drive forward the integration aims ofthe Union. In 1994 at a European Coun-cil meeting in Essen, a list of 14 priorityprojects was identified as being key to thedevelopment of the transport networks,

and in 1996 the European Parliament andCouncil of the European Union approvedthe guidelines for their development. Thislist was updated in 2004 in the light of theEuropean Action for Growth initiative toinclude 30 priority projects, building onthe original list of 14.

European Action for Growth

The European Action for Growth initiativewas approved in December 2003, in lightof the May 2004 enlargement of the EUto encompass ten new Member States,including eight from Central and East-ern Europe. The initiative has two basic

aims: first, to act as a catalyst for struc-tural reform, growth, job creation andthe promotion of a knowledge-basedand innovative European economy, asoutlined in the Lisbon Strategy of March2000; and second, to give an impetus tothe TENs policy.

In addition to coordinating the existingand new Community financing instru-ments for TENs and introducing regu-latory and administrative measures to

encourage investment, Action for Growthestablished the need to accelerate invest-ment on certain projects, identified onthe basis of their:

maturity; trans-frontier dimension; impact on growth and innovation; benefits for the environment.

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St. Petersburg

Istanbul

OdessaKishinev

Minsk

Moskva

Kiyev

Skopje

Zagreb

Sarajevo Belgrade

Tiran

Ljubljana

Sofia

Bucuresti

Budapest

Bratislava

Vilnius

Tallinn

Riga

Warszawa

Praha

Lisboa

Porto

Madrid

MnchenWien

Paris

Luxembourg

Bruxelles

Barcelona

Dublin

Belfast

Edinburgh

Athinai

ThessalonikiRoma

Milano

Lyon

Stockholm

BerlinAmsterdam

London

Kbenhavn

Oslo

Helsinki

Cork

Strasbourg

ISLAS CANARIAS (ES)

MADEIRA (PT)

AORES (PT)

EIB operations in supportof Trans-European

Networks and corridors

Routes of priority Trans-European Networks (TENs)

Sections of TENs concerned by financingcommitments

Other infrastructure and networks of EU benefitfinanced

Road and rail corridors in Centraland Eastern Europe

Sections of corridors financed

Road/Rail

Electricity

Gas

Airport

Multi-regional project

Intermodal hub

Port

Air traffic control

Development of oiland natural gas fields

Multi-lane electronictoll system

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Veuillez trouverune accroche

The estimated cost ofthe 30 TEN-T

priority projects isEUR 600 billion. Of the

30 priority projects,21 are rail schemes,but road, port and

airport schemes arealso included.

The 30 priority transport projects

1 High-speed train/combined transport north-south (Berlin-Erfurt-Halle/Leipzig-Nuremberg & Brenner axis Munich-Verona & Messina bridge)

2 High-speed train PBKAL (Paris-Brussels-Cologne-Amsterdam-London)

3High-speed train south (Madrid-Barcelona-Perpignan-Montpellier &Madrid-Vitoria-Dax- Bordeaux-Tours & Lisbon/Porto-Madrid

4 High-speed train east (Paris-eastern France-southern Germany including

Metz-Luxembourg branch)

5 Conventional rail/combined transport: Betuwe line (Rotterdam-Dutch/Germanborder- Rhine/Ruhr)

6High-speed train/ combined transport, France-Italy-Slovenia-Hungary(Lyons-Turin & Turin-Milan-Venice-Trieste-Koper-Dikava & Ljubljana-Budapest)

7 Greek motorways (Pathe & Via Egnatia) & Sofia-Kulata - Greek/Bulgarian bordermotorway & Nadlac-Sibiu motorway

8 Portugal/Spain multimodal link

9 Conventional rail link Cork-Dublin-Belfast-Larne-Stranraer

10 Malpensa airport, Milan

11 resund fixed rail/road link between Denmark and Sweden

12 Nordic Triangle rail/road

13 Ireland/United Kingdom/Benelux road link

14 West coast main line (rail), United Kingdom

15 Galileo

16 Freight railway line Sines-Madrid-Paris

17 Railway line Paris-Strasbourg-Stuttgart-Vienna-Bratislava

18 Rhine/Meuse-Main-Danube inland waterway route

19 High-speed rail interoperability on the Iberian peninsula 20 Fehmarn Belt railway line

21 Motorways of the sea

22 Railway line Athens-Sofia-Budapest-Vienna-Prague-Nuremberg/Dresden

23 Railway line Gdansk-Warsaw-Brno/Bratislava/Vienna

24 Railway line Lyons/Genoa-Basel-Duisburg-Rotterdam/Antwerp

25 Motorway route Gdansk-Brno/Bratislava/Vienna

26 Railway line/road Ireland/United Kingdom/continental Europe

27 Rail Baltica line Warsaw-Kaunas-Riga-Tallinn

28 Eurocaprail on the Brussels-Luxembourg-Strasbourg railway line

29 Railway line of the Ionian/Adriatic Intermodal Corridor

30 Inland waterway Seine-Scheldt

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The priority electricity and natural gas transportation projects

Electricity

1France-Belgium-Netherlands-Germany: electricity network upgrading in order toresolve congestion in electricity flow through the Benelux

2Borders of Italy with France, Austria, Slovenia and Switzerland: increasing electric-ity interconnection capacity

3

France-Spain-Portugal: increasing electricity interconnection capacity betweenthese countries and for the Iberian Peninsula and grid development in islandregions

4 Greece-Balkan countries-UCTE System: development of electricity infrastructureto connect Greece to the UCTE System

5United Kingdom-Continental Europe and N. Europe: establishing/increasing elec-tricity interconnection capacity and possible integration of offshore wind energy

6Denmark-Germany-Baltic Ring (including Norway-Sweden-Finland-Denmark-Ger-many): increasing electricity interconnection capacity and possible integration ofoffshore wind energy

Natural gas

1

United Kingdom-Northern Continental Europe, including Netherlands, Denmarkand Germany-(with connections to Baltic Sea Region countries)-Russia: gas pipe-lines connecting some of the main sources of gas in Europe, improving the inter-operability of the networks, and increasing the security of supply

2Algeria-Spain-Italy-France-Northern Continental Europe: construction of new gaspipelines from Algeria to Spain, France and Italy, and increasing network capacityin and between Spain, Italy and France

3Caspian Sea countries-Middle East-European Union: new gas pipeline networksto the EU from new sources, including the Turkey-Greece, Greece-Italy and Turkey- Austria gas pipelines

The priority list ofTEN-E projects comprisesa series of electricityand natural gastransportation schemes,ranging from smallcross-border power links

to transcontinental gaspipelines.

EU budgetary funding for TENs

The development of TENs is supported by Community grants as well as loans from the EIB. The EU products available for TENsinclude:

TENs budget line (with multiannual allocations for large projects and yearly allocations for smaller ones) a line in the EUbudget devoted solely to the development of TENs projects;

Structural and Cohesion Funds the Structural and Cohesion Funds are the EUs main instruments for supporting social

and economic development and restructuring in Member States. They account for over one third of the EU budget and areused to support regional development, including transport and energy infrastructure.

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The role of the EIB

The EIB is a leading source of bank financefor the Trans-European Networks in theUnion and Accession Countries. From theinception of the policy in 1993 to Decem-ber 2005, loans amounting to EUR 69.3 bil-lion for transport TENs and EUR 9.1 billionfor energy TENs were signed.

Bank operations generally furthering thedevelopment of the TENs also contrib-ute positively to other European priorityobjectives. The TENs policy continues tofacilitate economic and social integra-tion as well as the development of less-favoured regions within the EU. In 2005,approximately 61% of lending for majorEuropean transport and energy net-works went to regionally assisted areasand, in addition to the direct effects that

the construction of transport and energyinfrastructure has on these developingregions, a number of indirect long-termbenefits are expected as a result of syn-ergies created.

The promotion of clean transport andenergy infrastructure also contributes tothe EIBs long-term corporate objective ofenvironmental protection and improve-ment. The prioritisation of rail projects

over road, combined with the prioritystatus attributed to natural gas projects,reaffirms the Banks commitment to theEuropean policy for the protection of thenatural and urban environment.

The EIB also invests extensively in non- TEN transport and energy projects, con-tributing to growth and job creation inthe less developed areas of EU MemberStates and Accession Countries and/orthe improvement of the environment,particularly through urban public trans-port infrastructure. Transport projectssigned in 2005 include the extension andimprovement of local metro and tram

services, the purchase of rolling stockand the rehabilitation of local road net-works, notably in the new Member States.In the energy sector, the upgrading ofelectricity networks and modernisationof energy plants to reduce pollution fea-tured among the projects undertaken bythe Bank in 2005.

EIB value added

The EIB contributes real value added to TENs energy and transport infrastructureprojects, relying on its ability to:

mobilise on competitive terms thelarge amounts necessary to co-financethe building of this infrastructure;

offer maturities tailored to the longconstruction and operating periodsof the schemes concerned;

provide structured finance as a com-plement to commercial bank andcapital market funding.

Since 1993, the EIB has stepped up lend-ing for TENs through a range of financ-ing instruments. Following the Actionfor Growth initiative, the EIB undertookto increase its dedicated contribution tothe TENs Investment Facility (TIF), intro-ducing a priority lending facility of EUR

75 billion for TEN-T until 2013 and a fur-ther EUR 0.5-1 billion annually for TEN-E.It is intended that approximately half ofall EIB lending to TENs should be dedi-cated to priority projects.

It should be noted, however, that a sig-nificant share of EIB lending to TENs goesto TEN projects required to achieve theoverall TEN-T network effect but notincluded in the TEN priority list. In 2005,their share of EIB financing of all TEN-Tprojects was 41%.

Other instruments include the StructuredFinance Facility (SFF) for TENs, which

allows lending to projects of sub-invest-ment-grade credit quality.

The European Commission and the Parlia-ment have underlined the need to main-tain the requisite level of investment intransport infrastructure. Private sectorinvolvement is one of the keys to advanc-ing the TENs investment programme.

The EIB plays an important catalytic role,boosting private sector investment in TENs, as demonstrated by the increasedsupport for public-private partnerships(PPPs). Over the period 2000-2005, theEIB closed PPP transactions averagingEUR 2 billion per annum (not all in thetransport sector).

The strong support of the EU for the pro-motion of private sector investment is

clearly illustrated by the planned crea-tion of a European PPP Expertise Centre. The EIB will be an active participant inthis Expertise Centre, which will facilitatethe sharing of experience among pub-lic sector PPP authorities within Europeand provide practical PPP implementa-tion assistance.

The proposed EU TENs Guarantee Instru-ment constitutes a key step for the devel-

opment of TENs financing, assisting in thefinancability of TENs projects by under-pinning senior debt credit quality andguaranteeing stand-by credit facilitiesthat can be drawn on in the event ofrevenue shortfalls in the early years of aproject (ramp-up traffic risk).

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Turkey-Greece gas interconnector

Signed in February 2006, the EIBs EUR 22 million loan to the Public Gas Cor-poration of Greece (DEPA) has facilitated the construction and operation ofan 85 km-long gas transmission pipeline that will link the Greek and Turkishnational gas systems between Komotini in Greece and Kipi at the Greek/Turk-ish border.

Designated a priority TEN-E project of common European interest, its purposeis to import natural gas from Turkey and other sources, to improve the securityof Greeces supplies, and to provide capacity for the potential future transit ofgas to neighbouring countries.

Madrid airport

In December 2003 the EIB advanced the final tranche of a total of EUR 1.9billion to state-owned Aeropuertos Espaoles y Navegacin Area (AENA), thebiggest airport operator in the world, for the upgrade and expansion of theMadrid Barajas airport. This project, in which the EIB has been involved sinceits inception in 1994, has allowed Spains major airport to increase its capacityto 60 million passengers per year and 120 aircraft movements per hour.

The extension of Barajas - Europes major airport construction project - includedtwo additional runways and a cutting-edge Terminal (Terminal 4), which wasdesigned by Richard Rogers and opened in February 2006.

The project is of strategic importance to the Trans-European Transport Networksas it responds to the growing traffic needs of a key European airport, allowingin particular for its development as a hub for Latin American destinations.

High-speed rail in Spain

In 2002 the EIB approved a loan in the region of EUR 2.5 billion for the construc-tion of the high-speed rail infrastructure between Madrid-Barcelona-Figueres. The new line, totalling 855 km in length, includes a number of bypasses, tun-nels and other links.

The project not only provides an environmentally attractive alternative to theair and road modes which currently link Spains two largest cities, but also rep-resents a critical step towards interconnecting the Spanish and French high-speed rail networks.

The Madrid-Barcelona-Perpignan-Montpellier (TGV Sud) project was identifiedby the Essen European Council in 1994 as one of the 14 priority TENs. Within this

context, this project remains a key component of Spains plans for the improve-ment of the national rail infrastructure and forms part of the trans-Europeanrailway network planned for 2010.

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E18 motorway in Finland

In October 2005, the EIB signed a Public-Private Partnership (PPP) loan for EUR 153 million for the construction and operationof a new section of the E18 motorway. The 51.4 km section between Muurla and Lohja in south-west Finland includes eightinterchanges, seven tunnels and forty-nine bridge sites.

The Banks financing of the project will contribute towards an overall improvement in motorway standards and transport infra-structure in general in south-west Finland, serving the fastest developing areas of the country and supporting many growthcentres. It will further greatly assist in achieving shor ter travel times, helping to improve accessibility, capacity and safety.

The project forms part of the Nordic Triangle, a TEN-T priority project and a multimodal transport corridor of strategic impor-tance as it links the capital cities of the Nordic countries to each other, and improves connections to both Central Europe andRussia.

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EIB financing options

The EIB does not finance the total investment cost of a project, the objective being to capitalise on the Banks first-rate lending

terms to attract other viable sources of financing. The EIB contribution does not normally exceed 50% of the total investment

cost, although for trans-European transport schemes funding may amount to as much as 75% in exceptional cases. RestrictingEIB financing to 50% enables the borrower to establish a dynamic and diversified finance plan in partnership with other f inancial

institutions and banks.

EIB loans can be additional to local and national budgetary assistance, as well as to EU grants such as Structural Funds, dependingon the scope and nature of the individual project.

In general terms, the EIB has two main financing facilities for TENs:

individual loans for capital expenditure programmes or projects costing more than EUR 25 million, which are relevant in thecontext of large-scale infrastructure projects such as TENs;

a series of infrastructure equity funds in which the EIB is participating with the aim of injecting equity into TEN PPP projects.Since 2005 three such funds have been signed by the EIB (the Emerging Europe Convergence Fund; the Dexia Southern EU Infra-structure Fund; and the Dutch/Northern EU Infrastructure Fund), with several more in preparation.

EIB borrowers

The EIBs counterparties for TENs projects can be public authorities or private entities, including special purpose vehicles, as well asbanks and financial institutions. Local authorities (e.g. regional authorities, municipalities, cities) are increasingly important partnersfor small-scale transport and energy infrastructure.

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Contacts

For general information:

na CliffordCommunication and Information Department3 (+352) 43 79 31 00 5 (+352) 43 79 31 99U [email protected]

For press enquiries:Press Office SecretariatCommunication and Information Department3 (+352) 43 79 21 00 5 (+352) 43 79 21 99U [email protected]

European Investment Bank 100, boulevard Konrad Adenauer

L-2950 Luxembourgwww.eib.org U [email protected]

EIB 09/2006 QH-X1-06-058-EN-C

EIB Graphic Workshop. Photos: AVE, Elsam, Eiffage, Finnish Road Administration (Antti Aalto & Jouni Saaristo), Port de Barcelona.

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