EU FUNDS: issuing bonds to finance "viable projects"...to
follow
28 February 2011
The European Commission today launches a public consultation on
the "Europe 2020 Project Bond Initiative" which aims at boosting
the funding of projects with long-term revenue potential in line
with the Europe 2020 policy priorities.
This comes the announcement made by President José Manuel Barroso
in his State of the Union Address1. Its objective is to help the
private project companies to attract capital market funding from
investors such as pension funds and insurance companies. The Europe
2020 Project Bond initiative has been identified in the Annual
Growth Survey as a priority measure to enhance growth.
In the launch of this initiative, European Commissioner for
Economic and Monetary Affairs Olli Rehn said: "Financial
instruments should play a larger role in the funding of
public-interest projects. Today public budgets are in need of
consolidation. But at the same time, we need to promote sustainable
growth in Europe. EU budget resources must be used more effectively
so that such projects attract capital market financing. This is why
we are joining forces with the European Investment Bank in this
Project Bond Initiative."
European Investment Bank President Philippe Maystadt said:
"Infrastructure finance in Europe has suffered since the financial
crisis and banks face new constraints on long term lending. Project
bonds could be a way to attract capital from other investors, such
as pension funds and insurance companies, and be a useful addition
to traditional financing options."
In the transport area, the assessment of the investment plans of
the Member States reveals that around € 21.5 billion per year is
needed in the post-2013 period to remove significant bottlenecks,
construct missing cross-border links, and interconnect transport
modes.
The stakeholders' consultation paper has been prepared under the
guidance of President Barroso and in close collaboration with
Vice-President Siim Kallas (responsible for Transport), as well as
Vice-President Neelie Kroes (Digital Agenda) and Commissioners
Günther Oettinger (Energy) and Janusz Lewandowski (Budget).
Huge infrastructure investment needs in the this decade
Over the next decade, record investment volumes in Europe's
transport, energy, information and communication networks will be
needed in order to underpin the Europe 2020 flagship actions.
Developing smart, upgraded and fully interconnected infrastructures
will foster the completion of the internal market. Preliminary
estimates point to investment needs of €1.5 to 2 trillion for
Trans-European Transport Networks, the energy sector and
information and communication technologies. These needs, combined
with the fact that government budgets face severe constraints, make
it crucial to foster the participation of the private sector in the
financing of infrastructure projects.
Europe 2020 Project Bond Initiative
The Project Bond Initiative should provide EU support to private
"project promoters" issuing bonds to finance in particular
infrastructure projects. This should help them attracting capital
market financing from institutional investors. The key role of the
Commission and the EIB will be to absorb part of the risk of a
project. Technically, the instrument will improve the rating of the
senior debt issued by the project entities. This will ensure that
such debt can be placed as bonds with institutional investors. As
the EU participation will be capped, there will be no unlimited or
contingent liabilities for the EU budget.
The Initiative could be available to projects that are assessed
to be economically and technically feasible, cost-effective and
that have a prospect of financial viability.
What comes next?
The consultation is open for comments from today.
The deadline for contributions is 2 May 2011.
On 11 April, the Commission, together with the EIB, will organise a
conference on the Project Bond Initiative which will feed into the
consultation process.
Following the completion of an impact assessment, the Commission
will bring forward a proposal for the implementation of the Europe
2020 project Bond Initiative.
Various links
Links to the Digital Agenda:
http://ec.europa.eu/information_society/digital-agenda/index_en.htm
DG ECFIN: http://ec.europa.eu/economy_finance/consultation/index_en.htm
Memo:
http://europa.eu/rapid/pressReleasesAction.do?reference=MEMO/11/121&format=HTML&aged=0&language=EN&guiLanguage=en
