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FrancisPaulodeCoehloEUROPE MEETS INDIA NOV. 2006.ppt


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FrancisPaulodeCoehloEUROPE MEETS INDIA NOV. 2006.ppt

  1. 1. EIB Financing for Investment Projects in India 9 November 2006
  2. 2. EIB: THE EUROPEAN UNION FINANCING INSTITUTION 1 <ul><li>The EU’s autonomous long-term financing institution created by the Treaty of Rome in 1958 </li></ul><ul><li>A policy-driven public bank : </li></ul><ul><li>in synergy with the other EU institutions and without burdening the public purse, the EIB contributes to the realisation of investment projects that further the economic, social and cooperation priorities of the EU. </li></ul>European Investment Bank
  3. 3. EIB LENDING OUTSIDE THE EU: EIB as a partner for economic development 2 <ul><li>11% of EIB lending supports projects outside the EU (EUR 5.1 bn in 2005) </li></ul><ul><li>Outside the Union the EIB implements the financial components of agreements concluded under European development aid and cooperation policies </li></ul><ul><li>Supports investment projects in some 150 non-member countries throughout the world </li></ul><ul><li>The Bank’s terms of reference outside the EU are determined by multi-annual mandates entrusted to it by the EU Member States </li></ul>European Investment Bank
  4. 4. ASIA & LATIN AMERICA DEPARTMENT 3 <ul><li>Operations in Asia and Latin America (ALA) started in 1993. </li></ul><ul><li>To date, the Bank has lent EUR 4.7bn in ALA region, with 93 loans in 23 countries. </li></ul><ul><li>During the period Feb. 2000- Jan. 2007, the EIB operates in ALA on the basis of a EUR 2.5 bn lending mandate . </li></ul><ul><li>In exceptional circumstances, financing can be extended outside the Mandate, with the authorisation of the Board of Governors of the EIB (EUR 500 M for the financing of the Beijing Airport expansion). </li></ul>ALA Mandate European Investment Bank
  5. 5. ASIA & LATIN AMERICA DEPARTMENT <ul><li>Eligibility </li></ul><ul><li>Projects must be in the mutual interest of the host country and the European Union (EU). </li></ul><ul><li>The EIB gives priority to private sector projects with a European participation, such as </li></ul><ul><ul><li>Projects carried out by subsidiaries of EU companies or by joint-ventures involving EU companies or, in a second place </li></ul></ul><ul><ul><li>Projects involving significant and visible transfers of technology and/or know-how from Europe </li></ul></ul><ul><ul><li>… but also supportive of public sector projects that feature strong mutual interest (climate change, regional integration) </li></ul></ul>4 ALA Mandate European Investment Bank
  6. 6. WHO CAN BORROW? 5 <ul><li>Private sector companies : </li></ul><ul><ul><li>Subsidiaries of European companies </li></ul></ul><ul><ul><li>Local-European Joint-Ventures </li></ul></ul><ul><li>Banks : global loans to support projects of mutual interest (on-lending to eligible final beneficiaries) </li></ul><ul><li>Public sector borrowers : </li></ul><ul><li>implementing a project of mutual interest for the host country and the EU ( could be eligible Public Private Partnerships that involve EU shareholders or technology transfer) </li></ul>European Investment Bank
  7. 7. FINANCING PROJECTS IN ASIA <ul><li>In Asia, the EIB offers one product only, namely medium- and long term loans . </li></ul><ul><li>Typical direct loans have been in the order of EUR 20-60 millions; </li></ul><ul><li>EIB loans are project-linked, oriented to the financing of the fixed asset component of an investment; </li></ul><ul><li>The EIB loan can finance only up to 50% of total project costs (complementarity to other sources of financing); </li></ul><ul><li>Eligible sectors: industry, mining, public infrastructure (energy, transport, telecommunications, water supply), services; </li></ul><ul><li>For smaller projects the EIB can lend indirectly through Global Loans/Credit lines for allocations of up to EUR 12.5 million. </li></ul>6 European Investment Bank
  8. 8. GENERAL OPERATIONAL ISSUES 7 <ul><li>Projects financed by the Bank must be : </li></ul><ul><ul><ul><li>economically justified, </li></ul></ul></ul><ul><ul><ul><li>technically viable, </li></ul></ul></ul><ul><ul><ul><li>financially self-supporting and </li></ul></ul></ul><ul><ul><ul><li>in line with environmental and social standards </li></ul></ul></ul><ul><li>All projects financed by the Bank are appraised by a multi-disciplinary team; confidentiality is always respected. </li></ul><ul><li>Appropriate procurement procedures are required (International Competitive Bidding when possible). </li></ul>European Investment Bank
  9. 9. FAVOURABLE LENDING CONDITIONS 8 <ul><li>Long term maturity of up to 12 years (infrastructure projects up to 25 years) </li></ul><ul><li>F ixed and variable rate loans in any of the leading convertible currencies (USD, EUR, GBP, JPY) . </li></ul><ul><li>Low cost financing : The EIB operates on a non-profit making basis : </li></ul><ul><ul><li>it on-lends the funds it borrows in the international capital markets, adding a thin margin to cover its operating costs. </li></ul></ul><ul><ul><ul><li>For example </li></ul></ul></ul><ul><ul><li>Q uoted interest rates are all-in costs: th e EIB normally charge s no up-front structuring fees or commitment fee s, with the exception of a EUR 40,000 appraisal fee . </li></ul></ul><ul><li>Exemption from withholding tax + carve-out of selected political risks from the guarantee. </li></ul><ul><li>For private sector projects: add guarantee fee charged to the borrower by guarantors. </li></ul>European Investment Bank
  10. 10. SECURITY 9 <ul><li>Security for the EIB loan is negotiated individually and involves normally a: </li></ul><ul><ul><li>bank or corporate guarantee for private sector projects, </li></ul></ul><ul><ul><li>Sovereign guarantee for public sector borrowers. </li></ul></ul><ul><li>For private sector projects, the guarantee covers essentially the credit risk of the borrower; political risks are carved out of the obligations of the third party guarantor. </li></ul><ul><li>The political risks that are not assumed by the guarantors are the risks of: non-transfer of currency, expropriation and war, civil strife and denial of justice upon breach of contract. </li></ul>European Investment Bank
  11. 11. Break-down of EIB Activity in Asia 10 European Investment Bank EIB Loans in Asia Eur bn 2.03 November 2006
  12. 12. European Investment Bank European Investment Bank 11 EIB Loans in Asia Sectoral Distribution EUR bn 2.03 bn November 2006
  13. 13. COOPERATION TO DATE WITH INDIA <ul><li>Two loans extended by EIB to Indian borrowers: </li></ul><ul><li>EUR 55 M to Powergrid in 1993 </li></ul><ul><li>EUR 50 M to Rabobank in 2003 </li></ul><ul><li>This accounts for only 2.5% of total EIB financing in ALA and 5% of total financing in Asia. </li></ul><ul><li>India accounted for only 1.9% of the stock of outward FDI from the EU in Asia (excl. Japan) and Latin America. </li></ul><ul><li>This level of EIB financing in India does not reflect India’s economic potential nor the importance of the strategic partnership between the EU and India. </li></ul>12 European Investment Bank
  14. 14. EIB FUTURE COOPERATION WITH INDIA <ul><li>Our mission: contribute to furthering the EU cooperation with India. </li></ul><ul><li>EIB aims at stepping-up its support of projects of mutual interest in India. </li></ul><ul><li>Engage in a dialogue with companies and banks. </li></ul><ul><li>Sectoral focus: infrastructure, environment with a particular focus on combating climate change. </li></ul>13 European Investment Bank
  15. 15. CAPITALISE ON THE BENEFITS OF EIB FINANCING <ul><li>Will continue to be demand-driven </li></ul><ul><li>The EIB has a lot to offer to support investment projects in India: </li></ul><ul><li>Long maturities </li></ul><ul><li>Low cost (AAA rating) </li></ul><ul><li>Catalyst for other funding: EIB participation can facilitate mobilisation of other financing through its expertise and experience </li></ul><ul><li>EIB preferred creditor status (exemption of withholding taxes and commitment of governments to make foreign exchange available to borrowers to service debt to the EIB) </li></ul><ul><li>Risk sharing (coverage of political risks) </li></ul><ul><li>We look forward to developing our cooperation with Indian authorities, companies, and banks to support effectively the deepening of the partnership between India and the EU. </li></ul>14 European Investment Bank
  16. 16. HOW TO PROCEED? 15 <ul><li>General information on EIB is available on: www. eib .org </li></ul><ul><li>A brochure that explains more in detail the EIB’s ALA facility can be obtained from : </li></ul><ul><li>Loan applications for large-scale projects may be sent directly and with no particular formalities to: Head of Division : Matthias Zöllner – tel: (352) 4379 6516 - e-mail : m. zoellner @ eib .org </li></ul><ul><li>Deputy Head of Division: Philippe Szymczak – </li></ul><ul><li>tel: (352) 4379 6519 – e-mail: p. szymczak @ eib .org </li></ul>European Investment Bank
  17. 17. THANK YOU