EIB financing for broadband infrastructures - Jussi HÄTÖNEN - European Investment Bank (EIB) - NGN Funding Executive Seminar - DigiWorld Summit 2013
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EIB financing for broadband infrastructures - Jussi HÄTÖNEN - European Investment Bank (EIB) - NGN Funding Executive Seminar - DigiWorld Summit 2013

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EIB financing for broadband infrastructures - Jussi HÄTÖNEN - European Investment Bank (EIB) - NGN Funding Executive Seminar - DigiWorld Summit 2013 EIB financing for broadband infrastructures - Jussi HÄTÖNEN - European Investment Bank (EIB) - NGN Funding Executive Seminar - DigiWorld Summit 2013 Presentation Transcript

  • EIB financing for broadband infrastructures IDATE DigiWorld Summit 2013 NGN Funding: Public / Private Interplay Jussi Hätönen Economist (ICT and Telecommunications) Projects Directorate European Investment Bank (EIB)
  • General 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. European Investment Bank 2
  • Agenda NGN investment environment in Europe The EIB financing of broadband infrastructure EIB instruments and criteria for broadband projects 3 View slide
  • Agenda NGN investment environment in Europe The EIB financing of broadband infrastructure EIB instruments and criteria for broadband projects 4 View slide
  • The scale and risk of different NGN projects Incumbents and alternative operators tend to present larger projects but mainly in densely populated areas; white and light grey areas may be bundled together. Business risk is mitigated by existing cash generation and sound business cases of projects. Local-government supported projects tend to be smaller in size, mainly covering grey and some white areas (mixed with urban). Business cases are not strong, thus the government support Small private projects presented to EIB tend to cover areas which are “overlooked” by incumbents, mainly in grey and some urban areas. Business cases vary, risk is increased by size, history, up-take agreements, market uncertainties etc. 29/11/2013 Projects Directorate | Digital Economy and Education| European Investment Bank 5
  • Experiences from the European NGN investment environment 1. Market operators continue to invest around EUR 15 bn annually for fixed network roll-outs in Europe • • Cherry picking and parallel deployments in most profitable areas Unwilling to participate in subsidized roll-outs in rural areas 2. Market uptake and willingness to pay premium for FTTH lower than anticipated • Operators are scaling back their investment plans and change to lower cost technologies (VDSL, vectoring…) 3. Several governments have created subsidy schemes for rural BB roll-out • • Since 2010 there has been 60 state aid approvals spread across 16 countries (including 14 national schemes for rural broadband) Apart from EU funds, only few national subsidy programs are fully operational 4. Investors (debt and equity) are hesitant to finance FTTH projects • Long pay-back periods and uncertain regulation increasing the market risk 5. Public sector projects increasing to complement the market failure • • • 29/11/2013 High fragmentation and lack of coordination between projects Several different models applied making it difficult to benchmark New subsidy programs (CEF, MFF etc.) Projects Directorate | Digital Economy and Education| European Investment Bank 6
  • Private versus public sector business case in FTTx build-outs Private investment Public investment Construction cost Capex + VAT Capex * conversion -5-30% Revenues ARPU*uptake ARPU*uptake + economic externalities 1.2-2x OPEX OPEX * conversion -2-5% Equity + debt Debt -10-5 pp ( ~10%) (~1-5%) Operating costs Cost of capital Investment life Asset (~20 years) IRR > 0 29/11/2013 Market (10 years) ERR > 0 Projects Directorate | Digital Economy and Education| European Investment Bank +10y 7
  • Agenda NGN investment environment in Europe The EIB financing of broadband infrastructure EIB instruments and criteria for broadband projects 8
  • EIB direct broadband lending in 2007-2013 11 In 2012 the EIB approvals for broadband projects reached close to EUR 2.5 bn By November 2013 the approvals have amounted to over EUR 2.3 bn for the year • After the period of LTE auctions and rollout of mobile broadband networks in 2010-2012, there is an increasing emphasis on fixed (namely fibre-based) network projects • In addition broadband has been supported through EIB’s intermediated lending operations 7 2000 5 9 5 EURm 1500 Since 2007 EIB has approved EUR 12.6 bn of direct loans for broadband infrastructures spread across 52 projects • 11 • • 2500 4 1000 500 0 2007 2008 2009 Fixed 2010 Mobile 2011 Mixed 2012 Nov-13 Number of projects 29/11/2013 Projects Directorate | Digital Economy and Education| European Investment Bank 9
  • EIB types of broadband infrastructure lending Corporate finance to telecom operators Public sector finance Intermediated loans for broadband Infrastructure and PE funds Multi-sector intermediated loans for SMEs and Mid-caps Direct lending 29/11/2013 Indirect lending Projects Directorate | Digital Economy and Education| European Investment Bank 10
  • Examples of recent FTTx projects Breitband Schleswig – Holstein (Germany) 2010 Reggefiber Group B.V. (The Netherlands) 2010 / 2012 Świętokrzyskie Regional Infrastructure (Poland) 2013 EIB loan: EUR ~2m (cofinancing with structural funds) RAIN Rural Broadband (Lithuania) 2012 EIB loan: EUR 125m (intermediated by IBSH) EIB loan: EUR 9.1m (cofinancing with structural funds) EIB loan: EUR 130m (Project 1), EUR 140m (Project 2) Deutsche Telekom (Germany) 2012 / 2013 Iliad SA (France) 2009 / 2012 EIB loan: EUR 300m (Project 1), EUR 450 m (Project 2) EIB loan: EUR 150m (Project 1). EUR 200m (Project 2) SONAECOM (Portugal) 2010 EIB loan: EUR 75m 29/11/2013 Innovation Haute Savoie (France) 2013 EIB loan: EUR 50m (cofinancing with national grants) Fastweb (Italy) 2009/2013 M-Net Breitband Munchen (Germany) 2009 EIB loan: EUR100m EIB loan: EUR 350m (Project 1), EUR 350m (Project 2) Projects Directorate | Digital Economy and Education| European Investment Bank 11
  • Agenda NGN investment environment in Europe The EIB financing of broadband infrastructure EIB instruments and criteria for broadband projects 12
  • Addressable market segments Estimated total investments EUR150-220bn until 2020* - on average c. 50% of the total market cap for the sector White & Certain Grey Areas Government funding plus “New risk-sharing instruments” or modified existing ones will be needed Grey + White Black areas Certain Grey Areas EIB Existing Instruments Projects must be: • Technically sound • Financially viable Black Areas • In compliance with regulation • Show acceptable economic return Source: EIB estimates * Band based on various studies and assumptions ** Black areas estimates based on industry forecasts 29/11/2013 Projects Directorate | Digital Economy and Education| European Investment Bank 13
  • EIB finance instruments for broadband financing Corporates Financing to telecommunications operators, utilities companies etc. to deploy broadband infrastructures Project finance Financing to ring-fenced projects of a special purpose vehicle (SPV) formed by a private and/or public sector (joint ventures, off-balance sheet etc.) Public sector Grant element (Grant + EIB loan max 90% of the project cost) Financing for public sector initiative typically together with EU and/or national grants Others Intermediated loan structures and framework loans to financial institutions, local governments and other 3rd parties Investments into infrastructure funds New instruments RSFF/GFI Project bonds … Advisory services (EPEC, JASPERS/JEREMIE etc.) 29/11/2013 EIB loan (up to 50% of the project cost or credit risk limit) Projects Directorate | Digital Economy and Education| European Investment Bank 14
  • EIB benefits for beneficiaries Pricing advantage (EIB’s AAA rating and non-for-profit pricing) Long maturities of up to 10 years for corporates (potentially longer for project finance) Direct EIB financing from EUR 7.5m up to EUR 200m per transaction (for cross-over or subinvestment grade counterparts; other limits may apply in line with the internal credit policy of the Bank) 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 29/11/2013 Projects Directorate | Digital Economy and Education| European Investment Bank 15
  • THANK YOU Jussi Hätönen Economist (ICT and Telecom) Digital Economy and Education Division Projects Directorate Phone: Mobile: email: (+352) 4379 88610 (+352) 621 368 547 hatonen@eib.org European Investment Bank 98-100, boulevard Konrad Adenauer L-2950 Luxembourg 16