EU-EIB Project Bond Initiative launched with start of pilot phase Published on: 09/11/2012
The Europe 2020 Project Bond Initiative aims to improve capital market financing of infrastructure.
The pilot phase will benefit from € 230 million from the EU budget and will focus on encouraging capital market contributions worth more than € 4 billion for infrastructure investment in the transport, energy and communications sectors.
The Europe 2020 Project Bond Initiative, which aims to improve capital market financing of infrastructure, passed its final approval stage today. Following signature of a Cooperation Agreement between the European Commission and European Investment Bank, clarifying risk sharing, the pilot phase of the project bond initiative is ready for roll-out.
“The Project Bond Initiative provides an opportunity for re-opening capital markets as a source of financing for crucial transport, energy and communications infrastructure essential for ensuring growth and competiveness in Europe. Since the adoption of the legal base in July 2012 the EIB has made considerable progress in screening trans-European transport and energy networks and broadband projects and helping them to have access to capital market financing. The pipeline of potential projects looks prominent with first expected project signatures in early 2013", said Werner Hoyer, President of the European Investment Bank.
European Commission Vice President Olli Rehn said: "We are providing solutions to support long-term investment and to put the EU back on the road to sustainable growth. The project bond initiative is a key element in the Compact for Growth. It is an innovative means of unlocking private investment in infrastructure, enhancing competitiveness and helping to boost growth and job creation. Every euro channelled from the EU budget into the Project Bond Initiative could generate about 20 euros of infrastructure investment, underlining the role of the EU budget as an engine for growth. I am looking forward to the first projects and count on active participation by the stakeholders.”
The Project Bond Initiative is designed to stimulate capital market financing for infrastructure delivered under ‘project finance’ structures, including Public Private Partnerships (PPPs). The initiative will seek to enhance the credit rating of bonds issued by project companies to a rating level that is attractive for investors, and to lower the project’s overall financing costs. The pilot initiative will require and enable bond financing to be included in tenders for PPP projects where construction and financing are outlined in concession agreements. Public authorities that wish their projects to benefit from the potential for bond financing under the initiative will need to ensure that the requirement, or possibility, for a ‘bond finance option’ is included in tender documentation.