24/03/20111 European Union Regional Water Seminar, Amman 21-24 March EUROPEAN INVESTMENT BANK...

24/03/2011 1European Union Regional Water Seminar, Amman 21-24 March

EUROPEAN INVESTMENT BANK

Promoting European Objectives

Amman, 21-24 March

Thomas van Gilst, Senior Water Sector Economist


CONTENTS

1. The European Investment Bank

2. EIB Activity in the Water Sector

3. Project Identification and Development

4. EIB – EC cooperation


1. European Investment Bank

EIB Headquarters in Luxemburg


Birth: Treaty of Rome, 1958

Purpose: “Provide long term lending to promote European objectives”

Shareholders: 27 EU Member States

Governance: • Board of Governors - EU Finance Ministers

• Board of directors - Member States & European Commission

• Management Committee - EIB’s executive body

• Audit Committee - Independent, non-resident

EIB: Background Information


Breakdown of the EIB’s capitalAs at 1 April 2009


Within the Union:• Cohesion and convergence • Small and medium-sized enterprises (SMEs) • Environmental sustainability• Knowledge Economy• Trans-European Networks (TENs) • Sustainable, competitive and secure energy

Outside the Union:• Private sector development• Infrastructure development• Security of energy supply• Environmental sustainability• Support for EU presence in Asia & Latin America via Foreign Direct Investment

EIB: Priority Objectives


Projects signed

• European Union EUR 63.0 bn

• Partner countries

• Total Lending

EUR 8.8 bn

EUR 71.8 bn

Borrowings EUR 67.0 bn

Subscribed capital (at 01/04/2009)

EUR 232.4 bn

EIB: 2010 key figures


EIB Signatures 2010 (in EUR)


EIB Signatures 1958-2010


Largest Supranational Lender

0

50

100

150

200

250

300

350

400

450

EIB WorldBank

IADB ADB NIB IFC EBRD AfDB

Loans outstanding (signed)

World Bank, IFC: June 2010

EIB, IADB, ADB, NIB, EBRD, AfDB : December 2009

EUR bn


Organisation Structure

Risk Management Directorate

Operationsin the

European Union and Candidate Countries

Operations outside the European Union and Candidate Countries

Finance Directorate

ProjectsDirectorate

Management CommitteePresident

8 Vice-Presidents

28 directors18 alternates+ 6 experts

Board of Directors

Audit Committee

Board ofGovernors

27 members

Strategy and Corporate Centre

OCCO

General Secretariat

Legal Affairs

SCC SG-JU RMOps A Ops B FI PJRHIG

Inspectorate General

Human Resources

TMR

Transaction Management

and Restructuring

EIB GroupCompliance Office


EIB Activities Outside the Union

Loans of EUR 8.8bn in 2010Supporting EU Development and Cooperation Policies in Partner Countries 3 Broad categories of EIB external mandates:

Pre-Accession CountriesCandidate Countries: Croatia, Iceland, Former Yugoslav Republic of Macedonia, Montenegro and Turkey Potential Candidate Countries – Western Balkans

European NeighbourhoodMediterranean Partner Countries (FEMIP)Russia and Eastern Neighbours

DevelopmentAfrica, Caribbean and Pacific (ACP, PTOM)South AfricaAsia and Latin America (ALA)


BORROWING ACTIVITY


Funding strength adds value for customers

Loan portfolio is mainly funded through bond issues on international capital markets

Passing on to loan customers of funding advantage, benefiting from financial strength and stability – AAA rating – and strong capital market positioning

Non-profit maximising

Large and frequent international bond issuer.EUR 67.0bn issued in 2010


Diversification: 35 Currencies (2002 – 2011)


Benefits of an EIB loan

Benefits of low cost of funding passed on to clients:Large amounts

Broad range of currencies

Long maturities

Attractive interest rates

Catalyst for participation of other banking or financial partners


2. EIB Activity in the Water Sector

Delfland Waste Water Treatment Plant (NL)

Disi-Amman Pipeline, JordanSt. Petersburg Flood Barrier, Russia

Water Kiosk constructed under the EU/EIB Project, Blantyre, Malawi


General

Largest source of loan financing to the sector,

Annual loan average of about EUR 3bn over the past 5 years (financing 126 major projects),

On average EIB lending represents 30% of the total investment cost of water projects,

90% of the projects are located within the EU,

EIB lends to public or private utility companies, national or local authorities or directly for project finance deals.

EIB lending covers the whole water cycle.


Long tenors and adequate grace periods

Investment, programme, framework and global loans

Funding of 50 (exceptionally 75)% of total project cost

Co-funding with EC, IFIs, commercial banks

Facilitation of PPP models, where appropriate (eg, Disi)

Support to client throughout the project cycle (eg MOSP)

Due diligence based on multi-criteria: technical, financial, procurement, environmental, and social (EU Directives, international standards). Special focus on cost recovery + sustainability

Range of Instruments. Assessment criteria


1.9

0.2

2.6

0.4

2

0.3

2.9

0.1

3.7

0.4

0

0.5

1

1.5

2

2.5

3

3.5

4

4.5

EUR bn per year

2005 2006 2007 2008 2009

EIB Lending to the Water Sector 2005-2009

Partner countries

EU & EFTA countries

2.1

3.0

2.3

3.0

4.1Total over 5 years: EUR 14.5 bn

EIB’s Lending to the Water Sector 2005-2009


Breakdown by Region

EIB Financing in the Water Sector over the last 5 years (2005-2009)

ACP, OTC, South Africa: 2.0%

ALA: 0.6%

Candidate and potential candidate countries; 0.7%

EU & EFTA countries: 90.7%

Mediterranean Partner countries: 5.9%

Russia, Eastern Europe, Southern Caucasus; 0.1%


REGION PROJECTS (N°)

LOANS

(EUR m)

EU 97 13,149

Non-EU 29 1,355

TOTAL 126 14,502

EIB Water Sector: Signed Loans 2005 - 2009

Note % of projects in non EU >> % loans in non EU

Effort in non-EU also an order of magnitude higher


EIB’s Water Sector Lending Policy

River basin approach (IWRM)

Sector development

Adaptation to climate change

Water efficiency

Development of new water supply

Wastewater and sanitation services

Research and Innovation

Maximise Added Value


Implementing the Policy: Key Actions (1/2)

IWRM (Integrated Water Resources Management):

Promote IWRM + water services provision in a project

Support transboundary cooperation

Consolidation of institutional framework:

Support appropriate level of integration of utilities to improve efficiency and enhance borrowing capacity

Enhance financial sustainability (sustainable cost recovery)

Adaptation to climate change (CC):

Adaptation part of new lending priority in EIB CC Strategy

Promoters should consider adaptation in project design

EIB supports technical assistance (TA) with grants

Preparation, implementation of flood risk management project


Implementing the Policy: Key Actions (2/2)

Water efficiency: Support efficiency in: (i) use by consumers; (ii) allocation of

resources; (iii) systems (losses); (iv) management of utilities Promote principle of cost recovery in line with WFD Support industries aiming at improving “water footprint”

Development of new water supply: Demand side management and efficiency as 1st priority Finance: (i) desalination with pre-requisites; (ii) dams, basin

transfers and fossil water under strict conditions

Wastewater and sanitation services: Always consider them when undertaking water supply projects Sustainable cost recovery (incl. subsidies) Sustainable financing (blend loans, grants)


PROJECT CYCLE

A Test for Sound Investment


The EIB project cycle


Stages of the Project Cycle

Pre-Appraisal – preliminary assessment of the project’s suitability – including EC consultation

Appraisal – assessment of the soundness of the project, taking into account technical, legal, environmental, social and other impacts of the projects – board approval includes EC

Negotiation – signature of the contract

Monitoring – verification of compliance with the contract and possible due diligence requirements


Institutional & Organisational PerformanceGovernance, planning, regulation of sector and providersRegulated and viable service providersAdequate technical and human resources to execute projectsOperational sustainability – financial (revenues) and human resources to operate the system as well as the means to maintain the assets

Supports sector development:Real and well-understood objective: The justificationConsistency with a strategic approach, project should support sector improvement & development: The Master PlanSystematic project selection: The Options AssessmentFast-track solutions, phasing to achieve quick results: The Commitment Replicability and demonstration effects: The Feed-back, show the way

An appropriate process:Rational and transparent process of establishing and assessing priorities and comparing options Participation of stakeholders, local and national ownershipConsistency with policies in other sector (eg energy, agriculture, industry)

Key project appraisal topics: Sustainability


Quality of project planning and design :

Technical, financial and economic viabilityTechnical: Demand forecast, design, technology, planning and phasing to cope with uncertainty & costFinancial: Cost recovery, debt service, robust IRREconomic: Cost-effectiveness of selected solution, least cost solution, acceptable ERR

Environmental and social soundnessEnvironmental & social: Options assessed, E&SIA, EMP, affordability for low-income populationsClimate Change: Energy efficiency measures; resilience of the project to climate change impacts, and impacts on resilience of surrounding region.

Key project appraisal topics: Quality


Transparent and sound procurement strategyProcurement: International and national open procurement, following EU procurement Directive

Professional project implementation strategyProject Management: Use of modern project management tools to deliver the project in time and within budgetConstruction Contract: Use of international best practice and of FIDIC documentsConstruction Supervision: Experienced (international and national) consulting companies to guarantee construction quality and lifetime of assets

Common issues: Over-designed, low cost recovery, high env. or social impact, not affordable to all users

Key project appraisal topics: Procurement and implementation


The Past : Investment backlog, poor services, inefficiencyHigh inefficiency/wastage of resources

Deteriorating infrastructure due to lack of funds

The Present & Future: Increasing CAPEX, competition, risksMore demanding environmental/service quality objectives

Economic growth & urbanisation (water for food, energy…)

Adaptation to climate change

The “3 G’s”: Gaps of financing, project quality and capacityGrants limited by budget, tariffs by politics, loans by risk

Poorly prepared projects cannot attract enough funding

Weak regulatory, absorption and implementation capacity

Project assessment driven by sector challenges


EC-EIB cooperation

Leveraging


EIB-EC Cooperation at project level

EC most important contributor of:TA funds for:

Studies or targeted upstream preparatory activities (regulatory, institutional, etc);Pre-feasibility or feasibility studies (eg Western Balkans Investment Framework in BiH & Montenegro)Project Management Units at the implementation stage (avoiding delays & cost overruns)

Co-financingDirect to project promoter or through EIB (Municipal Finance Facility; EUWF)

Main pro’s:Softens the burden of loans, making the difference between EIB involvement in many ACP nations and not;Accelerates and improves project development.


EIB-EC Cooperation: Mediterranean example(“Facility for Euro-Mediterranean Investment and Partnership”)

TA since 1990’s through METAP (Med. Env TA Programme) establised by WB; EC; UNDP; EIB;Provided grant finance for FS’s for subsequent investment in environment projects (including W&S);By end 2007 39 project preparation studies financed from EIB own resources leading to Euro 2.8 bn in investments (1 bn financed by EIB);Since 2002, FEMIP support fund, using non-repayable aid granted from the EC’s budget (EUR 105 million for 2003-2006 and EUR 12 million/year for 2007-2013.Since 2004 also the FEMIP Trust Fund to fund upstream work such as the “reuse of wastewater in agriculture” study in 2009.Since 2009, EIB also receives funds from NIF (Neighbourhood Investment Facility) managed by the EC and the NIF Trust Fund.30% (40 m) of all TA had been used in the W&S sector as at end 2010.


Example of Femip Support Fund for projects across the Med region

The “Mediterranean Hot Spot Investment Programme - Project Preparation and Implementation Facility” project (MeHSIP-PPIF), which was launched in March 2009, aims to support one of Horizon2020*’s four components, namely the “Pollution Reduction Projects” component.

The Technical Assistance provides the EIB with a methodological approach to the identification and development of projects contributing to the Horizon 2020 objectives.Currently 78 projects identified (estimated investment costs Eur 5.35 billion)

*Horizon2020 is an ambitious initiative launched in 2005 by the Member States of the European Union and the Mediterranean partner countries with the aim of substantially reducing pollution of

the Mediterranean Sea by 2020.


THANK YOU FOR YOUR ATTENTIONFor more information please contact :

Thomas van Gilst ([email protected] )

EUROPEAN INVESTMENT BANK

http://www.eib.org/

[email protected]

Tel: (+352) 43 79 22000

Fax: (+352) 43 79 62000

mailto:[email protected]

http://www.eib.org/

http://www.eib.org/

http://www.eib.org/

mailto:[email protected]

24/03/20111 European Union Regional Water Seminar, Amman 21-24 March EUROPEAN INVESTMENT BANK...

Documents

Transcript of 24/03/20111 European Union Regional Water Seminar, Amman 21-24 March EUROPEAN INVESTMENT BANK...