AAL Investment Forum 2010 - View from the European Investment Bank

European Investment Bank

AAL Investment Forum

September 14th, 2010
Odense, Denmark

New Products & Special Transactions | European Investment Bank

Disclaimer

This Presentation is incomplete without reference to, and should be viewed solely in conjunction with, the oral
briefing provided by the European Investment Bank (“EIB”). The terms and conditions are intended as an outline
for discussion purposes only and made on an indicative basis. All figures set forth in this Presentation are subject
to change, to a satisfactory due diligence and to all necessary internal approvals of EIB (in particular of its credit
committees).

The information in this Presentation reflects the prevailing conditions and the view of EIB as of this date and are
accordingly subject to change and based on carefully selected sources believed to be reliable. EIB has not
independently verified this information and does not make any representation or will be liable that such
information is accurate, valid, timely and complete.

This Presentation is provided without any liability whatsoever by EIB and shall not constitute any obligation of EIB
to extend credit facilities to the Company or to carry out a due diligence review of the aspects relevant for the
financing of the Project.

Neither this presentation nor any of its contents may be duplicated, published or used for any other purposes
without the prior written consent of EIB.


14/09/2 New Products & Special Transactions | European 2

Agenda


Overview of ICT financing

Risk Sharing Finance Facility

Financing Models and Concepts

Typical Loan Process

Summary & Contact Details


Profile

The European Investment Bank is the European Union‘s long-term financing institution. The
Bank acts as an autonomous body set up to finance capital investments furthering European
integration by promoting EU policies.

EIB was created by the Treaty of Rome in 1958
EIB is a not-for-profit, policy driven institution
EIB is 100% owned by the 27 EU member states
EIB has subscribed capital of EUR 232.4 bn as of 2009
EIB is AAA/Aaa rated by Moody’s, S&P and Fitch with stable outlook
EIB funds itself on the capital markets: EUR 79.4 bn in 2009
EIB signed loans amounting to EUR 79.1bn in 2009 (c.93% in EU)
EIB is the largest multilateral financing institution
EIB is the majority shareholder in the European Investment Fund


Lending and Own Capital Figures (as of end-2009)

Lending Own Capital

FYE 2009


General Organizational Structure

Board of Governors
27 members

Audit Committee

Board of Directors
28 Directors (18 Alternates)
+ up to 6 experts

Management Committee
President of the EIB
+ 8 Vice-Presidents

EIB Group
Compliance Office OCCO

IG SCC SG-JU RH Ops A Ops B FI PJ RM TMR

Inspectorate Strategy and General Human Operations Operations Finance Projects Risk Management Transaction
General Corporate Secretariat Resources in the EU and outside the Directorate Directorate Directorate Management and
Centre Candidate EU and Restructuring
Legal Affairs
Countries Candidate
Countries


Policy Objectives

1. Within the European Union
• Cohesion and convergence
• Small and medium-sized enterprises (SMEs)
• Environmental sustainability
• Knowledge Economy
• Trans-European Networks (TENs)
• Sustainable, competitive and secure energy
1. Outside of the European Union
Private sector development
Infrastructure development
Security of energy supply
Environmental sustainability
Support for EU presence in Asia and Latin
America via Foreign Direct Investment (FDI)
1. Under EU Mandates
Pre-accession
European Neighborhood
Development


Interaction with the EU Institutions

European Council Court of Auditors
ECOFIN Cooperation Agreement on external
Financial Counsellors Group control of EU funds managed by the EIB
Other working groups
European Parliament Regular interaction with
Address to plenary session Economic and Social Committee
Report on annual report of EIB Committee of the Regions
Parliamentary questions Court of Justice
EMAC and other committees
European Commission
One Board Member and one Alternate
Commission opinion on all projects
Coordination with Directorate-General for
Economic and Financial Affairs
Staff operational contacts
Memoranda of Understandings (MOUs) on key
policy issues
Full partner in EU programming activities


Current Initiatives to complements EIB’s lending instruments

Initiatives with the European Commission:
RSFF – Risk-Sharing Finance Facility for higher-risk promoters
JASPERS – Joint Assistance to Support Projects in European Regions to prepare projects supported by
EU Structural and Cohesion Funds
JEREMIE – Joint European Resources for Micro-to-Medium Enterprises in the regions to encourage more
business start-ups and new ventures. Managed by the EIF
JESSICA – Joint European Support for Sustainable Investment in City Areas for investment in sustainable
urban development

Other Initiatives:
ECTF – European Clean Transport Facility (approved by Ecofin)
SFF – Structured Finance Facility established by EIB in 2001 to support sub-investment grade projects
CCF – Carbon Credit Funds created in collaboration with institutions such as EBRD and World Bank
ELENA – European Local ENergy Assistance technical assistance facility financed through the Intelligent
Energy Europe programme
Infrastructure Funds


EIB/EIF investment cycle coverage

Risk Capital CIP Resources (SME) RSFF (SME / MidCap) Investment Loans

Facility: High Growth Competitivness and RSFF Investment Loans
Innovative SME Scheme Innovation Program
(GIF), Ecotech (CIP) Guarantee Innovation financing RDI financing
schemes
Purpose: IP financing, SMEs/MidCaps, Banks, MidCaps/Large
technology transfer, Growth financing for PE Investors (sub- Corporates/Public
seed financing, SMEs investment grade) Sector Entities
investment readiness (investment grade)
Formal VC Funds, Loans (incl. Mezzanine),
Target Group: VC CLOs Funded Risk Sharing Guarantees
Funds, Business Angels Facilities with Banks
SME guarantees (loans, (Investors) Special Operations
EIF Product: Fund-of- microcredit,
Funds equity/mezzanine, Special Operations
securitisation)

Bank Loans and Guarantees
Formal VC Funds
Seed/Early Stage VC Funds
Business Angels
Entrepreneur, friends, family

EIF EIB
Later Stage
Seed / Start-Up Phase Emerging Growth Phase Development Phase
Counterparts


Agenda








EIB support for the Lisbon Agenda and ICT Transactions in particular
Lisbon Agenda: EUR 86.7bn loans signed since launch in 2000

1996-2008 period: Number of ICT projects* - 155 (left) and loan volume – EUR 31bn (right)
0.5%
0.5% 0.5% 3.0% 0.5%

11.0% 11.0%

13.0%
75.0%
85.0%

Telecoms Telecom equipment manufacturing Telecoms Telecom equipment manufacturing
Media PC & office equipment manufacturing Media PC & office equipment manufacturing
Softw are, consultancy, data processing Softw are, consultancy, data processing

* Including Lisbon Agenda and RSFF


Agenda








Risk Sharing Finance Facility – Policy Objectives

General Policy Objective of the Renewed Lisbon Strategy (2008-10): “Transform EU into the world’s
leading knowledge – based economy”

RDI gaps in Europe
 Average corporate R&D spending as % of GDP in US & Japan is around 3%, in
Europe it lags significantly at levels around 1.5%
 Innovative companies investing much in RDI (Capex + Opex) have more difficulties
securing stable financing at acceptable rates

Solution
EIB to fill the gap left by the commercial banks by providing tailor-made financing
solutions to innovative European companies rated BBB- and below

EIB and EC commit EUR 1.0bn each of provisioning capital to set up the “Risk Sharing
Finance Facility”. The EUR2bn capital is later levered up to EUR 10bn by EIB
(see next slide)


Risk Sharing Finance Facility – Set-up

EUR 1bn RSFF EUR 1bn European
[up to EUR 10bn assuming Commission
leverage of 5.0x ]
Own Resources

Direct Lending Indirect Lending / Financing
1
Corporate Lending 2 Financial Intermediaries
Senior Secured (extend lending capacity)
Risk Sharing
Second Lien
Co-financing
Senior Unsecured
Junior Unsecured
PIK loans
Mezzanine, etc. 3 Investment Funds
Renewable Energy
Others
Project Financing
4 Collaboration with EIF
Universities
Banks
Other: SPVs, PPPs, JTIs … Funds


Risk Sharing Finance Facility – Scope of work

Geographic Scope: EU 27 and FP7 Associated countries (Switzerland, Israel, Norway, Iceland,
Lichtenstein, Turkey, Croatia, FYROM, Serbia, Albania, Montenegro,
Bosnia & Herzegovina, Faroe Islands)

RDI Scope: fundamental research, definition stage/feasibility studies, industrial research, pre-
competitive development activity, pilot and demonstration projects, and innovation (under EIB
window)

Industry Scope: Engineering, Automotive, Life Sciences, Energy, ICT and RDI Infrastructure
(e.g. Fiber optic networks)

Reporting: monthly, quarterly, semi-annually, annually by EIB/NPST to DG RTD and/or DG
ECFIN


Risk Sharing Finance Facility – Benefits for Beneficiaries

Pricing advantage (EIB’s AAA rating and non-for-profit pricing)

Long maturities of up to 10 years

Direct EIB financing from EUR 7.5m up to EUR 300m per transaction

Strong technology/industry expertise

EIB does not sell assets on the secondary market (buy and hold strategy)

Relationship with co-financing partners: no cross selling of other products (just long-term lender)

Signalling Effect: EIB as a quality stamp

Diversification of funds

Note: EIB products are not grants but loan products


Agenda


Overview of ICT/NGN financing






Financing Concept under RSFF – Definition of “Eligible Project Costs”

“The Project” is an internal EIB definition of
EIB Loan Capex/Opex expenses over 3-5 years
min EUR 7.5m – max EUR 300m
falling within certain eligibility criteria of the
Bank. From a credit perspective, it could be
Company defined as a “Borrowing base” of which up
to 50% could be financed by EIB proceeds.
Eligible Costs 2010 2011 2012

€ 25m € 27m € 30m If all project costs presented by the
R&D Salaries
company are deemed “eligible” (to be
R&D Capex € 35m € 40m € 45m confirmed during the due diligence
R&D Opex, etc. € 5m € 7m € 8m meeting) and thus included in the project
definition, EIB will be able to provide a
Total Annual € 65m € 74m € 83m facility with a maximum amount equal to the
lowest of:

Total Project € 222m 50% of project costs, i.e. EUR 28.5m, and
1 Min EIB Loan € 7.5m
the applicable rating limits;
2 Max EIB Loan € 111 m (50%)
The remainder of the project costs is to be
covered though other financings or through
operating cash flows


Financing Models under RSFF

Co- Financing 1: Co- Financing 2:
2 3

Refinancing Guarantee + Refinancing

EIB (RSFF) Financing Partners EIB (RSFF) Financing Partners

EIB Loan Financing Financing
1 Agreement(s) Agreement(s)
Agreement

Company Company

Bilateral Lending:
EIB can participate in transactions usually through an EIB direct loan agreement. However, EIB typically prefers to co-finance with other
financing partners (e.g. commercial banks, investors)
In the case of co-financing EIB can provide a loan in parallel to the financing partners directly with the final beneficiary (with key
contractual terms aligned) OR…
…can provide a guarantee to the financing partners and thereby share the credit risk and enable capital relief. The guarantee can also
be complemented by EIB funding (in order to generate additional Financial Value Added)

Syndicated Lending:
EIB can participate in syndicates, though some limiting factors can apply (i.e. EIB cannot extend funding to HoldCos in acquisition
structures, only to OpCos; EIB still needs a side agreement that the company will execute the defined project, etc.)


Agenda








Loan Process – Counterparties

Company

Main relationship point Due diligence and project Mainly contract negotiations
eligibility evaluation

EIB Team

Structured Finance & Project Directorate Legal Services
Advisory
Loan Officer: origination, Economist/Engineer: economic, Internal/External Lawyers: legal
structuring, financial analysis regulatory and technical analysis due diligence, contract
negotiation

Risk Management Treasury, Other …
Indirectly involved: Credit risk management, pricing Funding, disbursement, EC
& monitoring opinions, etc.


Loan Process – Typical Project Timeline


Agenda









EIB is the triple-A rated, not-for-profit, independent financing arm of the EU
EIB provides support to viable projects which fall within the EU policy objectives
EIB resources represent attractive additional source of funding for innovative R&D intensive
European companies
Key benefits of EIB financings are: (i) attractive pricing; (ii) longer maturities; (iii) loan sizes
up to 50% of project costs (or EUR 300m for RSFF/SFF financing); (iv) no cross-selling or
other products and no sells on secondary market; (v) strong technology and sector
competences; (vi) signaling effect
Contacts: http://www.eib.org

Hristo Stoykov

Structured Finance & Advisory

Phone: (+352) 4379 87005
Fax: (+352) 4379 67292
email: stoykov@eib.org

100, boulevard Konrad Adenauer
L-2950 Luxembourg


AAL Investment Forum 2010 - View from the European Investment Bank

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