The EU budget allocation for the pilot phase of EUR 230 million consists of a re-allocation of EUR 200 million from the TEN-T budget line and EUR 10 million from the TEN-E budget line as well as EUR 20 million from the CIP ICT line.
As the budgetary resources available are constrained, the size of individual projects is expected to be large and the remaining time horizon for implementation is very short (i.e. mid-2012 and 2013), only a limited number of projects are likely to be funded in the pilot phase. The aim is to enhance a range of potentially 5-10 projects, concentrating on those that are at a relatively developed stage of the bidding and financing process or require refinancing after the construction phase, in one or more of the three targeted sectors of transport, energy and broadband.
The Initiative builds on more than ten years of experience of using financial instruments to implement EU policies. In the 2007-2013 financial framework, a new generation of successful financial instruments were put in place in cooperation with the EIB, notably the Risk-Sharing Finance Facility (RSFF) under the 7th R&D Framework Programme and the Loan Guarantee Instrument for TEN-T projects (LGTT).
Similarly to RSFF and LGTT, the EU budget would be used to provide a capital contributions to the EIB in order to cover a portion of the risk the EIB is taking when it finances the eligible projects through an EIB credit enhancement (EIB subordinated loans or contingent credit lines). While the EU budget will provide a partial risk cushion for the EIB to finance the underlying projects, the EIB would have to cover the residual risk.
This means that when EU budget funds are combined with the EIB financing, a multiplier effect of around 3 can be achieved at the EU-EIB level. However, as the EIB would enhance up to 20% of the project debt and the remainder is financed by private sector sources, the final multiplier effect is higher.
Due to this two-layer approach a multiplier effect of around 15-20 in terms of EU budget compared to the investment amount can be achieved. Therefore, the total budget amount of EUR 230 million is expected to mobilise investments of up to EUR 4.6 billion.
Finally, it is worth highlighting that the EU budget contributions would be strictly capped and not create contingent liabilities. This is due to the fact that the Commission would fully fund the agreed portion of the risk with EU budget.