1 The support of the European Investment Bank for EU water and wastewater projects - Lending...

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The support of the European Investment Bank for EU water and wastewater projects- Lending Policy & Eligibility- Loan approval process

Pierre-Emmanuel NoelSenior Banker, European Investment Banknoelpe@eib.org

AQUA PUBLICA SEMINARBrussels, 8 March 2013

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Outline of the Presentation

PART 1 - EIB’s lending policy for water & wastewater

PART 2 - A step-by-step overview of EIB’s approval process, from initial exploratory contact to loan disbursement

PART 1 - EIB’s lending policy for water & wastewater

PART 2 - A step-by-step overview of EIB’s approval process, from initial exploratory contact to loan disbursement

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EIB and Infrastructure Finance – A Snapshot

EIB was created by the Rome Treaty in 1957 as a not-for-profit, policy-driven financing institution

EIB is directly owned and governed by the 27 EU Member States (not by the EC)

EIB finances infrastructure in selected areas: Climate Action (renewables, energy efficiency, etc.) Trans-European Networks (energy, transport, telecoms) Social infrastructure (housing, hospitals, schools) Environment (water and wastewater)

EIB also supports Knowledge Economy, SMEs, Convergence areas

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EIB’s Business Model

EIB endeavours to attract the cheapest possible funding from the capital markets thanks to its AAA rating ... EIB is one of the largest EUR and GBP issuers (« leading Gilt alternative »)

... and to lend to eligible projects promoted by creditworthy public or private sponsors

The EIB lending rates represent the sum of: The EIB cost of funding (including internal administrative costs); and The risk margin to compensate EIB for the statistical credit loss

The lending targets of EIB are set annually by its Board of Directors, with: An overall lending ceiling A lending target per country and per policy objective

Annual profits are kept in reserve to fund future capital increases

EIB, the « Water Bank » !

The EIB is the largest source of loan financing to the global water sector to date as compared with other international financing institutions and commercial banks

In the five-year period 2007- 2011, EIB direct lending to water projects (excluding hydropower irrigation) reached EUR 16.1bn

A total of 158 major water supply, sanitation and flood protection projects were financed during this period, mostly within the EU (88% of the lending volume).

EIB has significantly increased its support to the sector from an average EUR 1.9bn per year in the period 2002-2006 to an average EUR 3.2bn per year over the past five years

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The Water Sector: over EUR 16bn of EIB loans in 5 years

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Lending to Water & Wastewater – Eligibility criteria

Any water or wastewater investment project that contributes to quality enhancement, compliance with EU w&ww directives or climate action (asset resilience, etc) is potentially eligible Water distribution networks (new or upgrade) Wastewater plants (new or upgrade) Flood protection Sewage networks (new or upgrade)

Two types of structures: Direct lending: EIB does lend directly to public and private

entities in charge of water (investment size at least EUR 100m) Intermediated lending: EIB may also lend to smaller schemes,

provided that they are bundled under a framework loan (where a commercial bank acts as an intermediary).

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EIB in Belgium, France and the UK

• SPGE• CILE• SWDE• Hydrobru• Aquafin• Aquiris• Programme France Eau & Assainissement I & II• EIB lends to 9 out of the 10 UK water and

sewage companies (largest lender to the sector)

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PART 1 - EIB’s lending policy for water & wastewater

PART 2 - A step-by-step overview of EIB’s approval process, from initial exploratory contact to loan disbursement

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The EIB loan approval process (1)

Step 1 – Informal approach (cover email and supporting memo) Identity of promoter/borrower Nature, timetable and cost of the investments Rationale for the investments Credit aspects (rating, financials, guarantees, etc)

Step 2 – Preliminary Clearance EIB banker makes submission to obtain EIB’s

management committee approval in principle for the project

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The EIB loan approval process (2)

Step 3 – EIB due diligence EIB sends a DD Questionnaire

Requesting more information on the project (technical, economical, procurement, environment)

EIB team will come on site for the “appraisal mission” (presentations, discussions and site visit, legal & credit structuring of the loan)

Step 4 – EIB Board approval (Final Clearance) This final approval may be obtained within 2-5

months following the “appraisal mission” Contracts may be signed and disbursed over a period

generally up to 3 years

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Conclusion

EIB Projects walk on two legs:

(1)A Sound Project• Eligible

(2)A Sound Credit• Bankable

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Contact

Pierre-Emmanuel NoelSenior Banker – Western Europe, Public Sector & InfrastructureNoelpe@eib.orgwww.eib.org