A common infrastructure financing instrument for 2014-2020
The CEF was established by Regulation 1316/2013 with the aim to promote the development of high-performing and environmentally sustainable interconnected transport, energy and communications networks across Europe, thereby contributing to economic growth and social and territorial cohesion within the Union. The agreed budget for CEF amounts to EUR 30 442 259 000 for the period 2014-2020, of which EUR 11.3 billion are earmarked in the Cohesion Fund for transport infrastructure.
The budget is allocated to transport projects (EUR 24.05 billion); the energy sector has received EUR 5.35 billion, whereas telecom projects benefit from EUR 1 billion in financing. The overall contribution from the EU budget to the CEF financial instruments has been set at max. 8.4% of the overall financial envelope of the CEF, i.e. EUR 2.55 billion over 2014-2020. This amount may however change during the Commitment Period, in particular as a result of decisions taken by the budgetary authorities (Council of the European Union and European Parliament) or by the European Commission.
The CEF provides a common financing framework for the three sectors, including co-ordinated annual work programmes, a common Committee, flexibility between sectoral budgets, increased conditionalities and the use of infrastructure specific financial instruments
The use of financial instruments under the CEF encompasses the CEF debt instrument and the CEF equity instrument. The objective of these instruments is to facilitate access to project and corporate financing of infrastructure projects in the transport, energy and broadband sectors, to overcome market failures and to create leverage effects with European Union funding.
An ex-ante assessment setting out the rationale for using Financial Instruments within the CEF to complement grant funding was finalised in August 2014. The study concluded that the launch of the Debt Instrument under the CEF in cooperation with the European Investment Bank was timely and recommended that the Commission considers launching the Equity Instrument in a second phase.
An addendum to the CEF ex-ante assessment is currently under preparation to set the basis for the establishment of the Equity Instrument under the CEF, taking also into account market developments after the launch of the European Fund for Strategic Investments (EFSI) CEF Debt Instrument
The CEF Debt Instrument was launched in 2015 jointly by the European Commission and the European Investment Bank (EIB), and is currently implemented by the EIB. The goal of the CEF Debt Instrument is to offer an alternative to traditional grant funding by offering competitive financial products for priority investments in transport, energy and telecommunications.
The CEF Debt instrument builds on the portfolios previously developed under the Pilot Phase of the Project Bond Initiative (PBI) and the Loan Guarantee for TEN-Transport (LGTT) instruments, thus offering the possibility of having a single multi-sector instrument in place which could further strengthen the leverage effect of EU budget funds.
The Instrument provides an extension of the credit enhancement of project bonds provided under the PBI, a new credit enhancement mechanism targeting loan financing by the banking sector (building on the experience of LGTT), as well as loans, guarantees and equity-type debt financing support to corporates.
Projects supported under CEF Debt Instrument
On 20 June 2016, with the support of the new senior debt credit enhancement (SDCE) financing product provided under the CEF Debt Instrument, the A8 A-Modell motorway project in Germany reached financial close on a EUR505 million refinancing of the toll road This marks the first transaction where the EIB has provided the SDCE financing and also the first transaction to be closed under the new CEF Debt Instrument.
CEF Equity Instrument
The Equity Instrument, currently under development, aims at providing equity or quasi-equity financing to smaller and riskier projects in the field of broadband, transport, and energy.
In December 2016, the European Commission and the EIB announced the launch of the Connecting Europe Broadband Fund. The Fund, which would lead to an Investment Platform combining private and public finance commitments, including from National Promotional Banks, should raise EUR 500 million at first closing and will invest in equity and quasi-equity in 7-12 broadband projects each year from 2017-2021. The European Commission will invest EUR 100 million from the budget allocated to CEF Equity Instrument. The Fund should benefit also from support from the European Fund for Strategic Investments (EFSI) and is expected to become operational in mid-2017.