EU 2020 project bonds aim to encourage financing of large European infrastructure projects in the fields of transport, energy and communication technologies. The current economic crises create a particularly challenging environment for financing of such long-term large-scale projects. EU 2020 project bonds have a twofold target. They are designed to mobilise investment by lowering risk profile of projects and making them more attractive to private sector institutional investors looking for log term investment opportunities. The other objective is to stimulate recovery of project bond markets.
EU 2020 project bonds are innovative financial instruments expected to provoke a significant multiplier effect of contributions made from the EU budget. They are included in the toolbox of the Connecting Europe Facility (CEF), which is part of Europe 2020 growth strategy. Improvements to Europe’s transport, energy and digital networks aim to create jobs, boost growth and have a positive impact on competitiveness.
The pilot phase 2012-2013 is conducted under the current multiannual financial framework (MFF) with a total budget of €230 million. Up to June 2013, nine infrastructure projects in six Member States have been approved as eligible for support to test the concept. In the next MFF 2014-2020 Connecting Europe Facility has a proposed budget of up to €50 billion including contributions from two separate budget lines. However, in the political agreement on the next MFF reached between the Council and the European Parliament in June, the financial envelope for CEF is considerably lower, almost €30 billion. The Proposal for the regulation establishing the CEF is due to be on the agenda of the EP plenary in November.
This Librray Keysource was published in May 2012 and has been updated 21 October 2013.
A Push for Growth / EPC reports November 2012, European Policy Centre EPC website
This post on the EPC website reports the signature of the cooperation agreement between the European Investment Bank and the European Commission on the pilot phase of the EU Project Bond Initiative. The text quotes speeches given in the event. It highlights the need for significant investments in the near future to improve transport, energy and broadband infrastructure and the need for EU-level actions in the form of innovative financial instruments, particularly project bonds, to attract third party financing and create benefits of leverage.
The pilot phase of Europe 2020 Project Bond Initiative FAQ (reissue) / European Commission, MEMO/12/370, 23/5/2012
This concise FAQ package describes and explains the pilot phase of the Europe 2020 Project Bond Initiative. For example, it provides answers to following questions: How will the pilot phase be implemented? Who will provide the financial resources for the Initiative? What is the role of the EC and the EIB?
The Europe 2020 Project bond initiative/ Eurofi, September 2011, 1 p.
This is a one page note from Eurofi think tank explaining the concept of project bonds and their potential impact on the financing of EU infrastructure projects.
EU Support for Project Bonds, Centrum für Europäische Politik, 18 April 2011, 4p.
This briefing summarises the content of the European Commission’s consultation on the Project Bonds Initiative and provides a short economic and legal assessment.
The legislative proposal for Europe 2020 Project Bond Initiative was issued by the Commission in 2011 approved by the EP and Council of the EU in July 2012. A cooperation agreement between the European Commission and the EIB was signed in November 2012.
- 2011/0301(COD) Financing of infrastructure projects: Competitiveness and Innovation Framework Programme (2007-2013) and trans-European transport and energy networks / Legislative Observatory OEIL / Legislative Observatory, procedural file. Summary.
- Regulation (EU) No 670/2012 of the European Parliament and of the Council of 11 July 2012 amending Decision No 1639/2006/EC establishing a Competitiveness and Innovation Framework Programme (2007-2013) and Regulation (EC) No 680/2007 laying down general rules for the granting of Community financial aid in the field of the trans-European transport and energy networks / EurLex
Communication from the Commission to the European Parliament, the Council, the European Court of Justice, the Court of Auditors. the European Investment Bank, the European Economic and Social Committee and to the Committee of the Regions: A growth package for integrated European infrastructures / COM(2011) 676. 19.10.2011, 9 p.
See especially Chapter 3. CEF –A common infrastructure funding instrument and 4 . Financial instruments within CEF – maximising EU impact
2011/0302(COD) Connecting Europe Facility/ Legislative Observatory, procedural file, tabled for plenary 18/11/2013.
Consultation on the Europe 2020 Project Bond Initiative
The Commission’s consultation on the Europe 2020 Project Bond Initiative was launched on 28 February 2011 and ended on 2 May 2011. It received 131 contributions. A summary of contributions, European Commission, 2011, 3p.
The pilot phase of the Europe 2020 Project Bond Initiative, DG ECFIN website – The Commission has adopted on 19 October 2011 a legislative proposal launching the pilot phase of the Europe 2020 Project Bond Initiative. The Initiative aims to revive and expand capital markets to finance large European infrastructure projects in the fields of transport, energy and information technology.
European Investment Bank
The Europe 2020 Project Bond Initiative – Innovative infrastructure financing, ECB website explaining briefly the scheme.
An outline guide to Project Bonds Credit Enhancement and the Project Bond Initiative / European Investment Bank EIB, Dec 2012, 32 p.
EIB has published a guide on Project Bond Initiative and Project Bond Credit Enhancement tools explaining how they work and describing procedures. It provides an outline of the whole EIB project cycle.
Parliamentary questions on Project Bonds
See in particular written questions E-005022/2011 and E-005023/2011 and oral question H-000105/2011.
Several credit rating agencies have published reports presenting their perceptions on the European 2020 Project Bond Initiative and including wider analyses of the project bond concept in general.
- European Project Bonds Making Slow Start: Non-Credit Factors Will not Always Hamper European Project Bond Market / Fitchratings Special Report, Global Infrastructure & Project Finance/EMEA, Feb 2013, 6 p.
- Credit FAQ: How Europe’s New Credit Enhancements for Project Finance Bonds Could Affect Ratings Standard and Poors / Standard and Poors Rating Services, Nov 2012, 14 p.
- Europe 2020 Project Bond Initiative: Capable of credit-enhancing PFI/PPP project bonds from low investment-grade to single-A ratings / Moody’s Special Comment, June 28 2011, 24 p.
Written responses to the Consultation on the Europe 2020 Project Bond Initiative, European Commission Public Consultation 2011
This webpage presents stakeholders’ opinions on the Europe 2020 Project Bond Initiative.
Large infrastructure to overcome the crisis? The hidden risks of the Europe 2020 project bond initiative / Elena Gerebizza and Antonio Tricarico, Counterbalance, July 2013, 12 p.
This publication takes a critical view point towards EU initiatives on financing large-scale infrastructure projects.
Can Public Private Partnerships (PPPs) lever investment to get Europe out of economic crisis? / Claire Dhéret, Hans Martens, Fabian Zuleeg, European Policy Centre EPC, 7 November 2012, 32 p.
Report by EPC done in collaboration with the EIB and input from other stakeholders. It examines Public Private Partnerships (PPP) and their role in the EU context with special focus on the current economical challenges and stakeholders’ perceptions. It inspects carefully the Europe 2020 Project Bond Initiative. After considering potential and limits of public private partnerships the report presents policy recommendations.
Investment projects are no panacea for the euro-crisis, Oxford Analytica, July 10 2012
Short analysis of the implementation and effects of the Commission’s proposal on EU Projects Bonds.
Special Report: Infrastructure Finance / Solomon Teague, Global Finance Special report, January 2012
Due to the current financial context infrastructure projects all around the world face difficulties in finding the necessary long term funding. This report explains how project bonds in general and particularly the Europe 2020 Project Bond Initiative may emerge an attractive solution.
Financing Infrastructure in Europe Project Bonds, Solvency II and the “Connecting Europe” Facility, Franco Bassinini, Gino Del Bufalo, Edoardo Reviglio, October 2011
Project bonds are long-term assets that could match well insurance and pension funds long-term investment plans and therefore provide a new source of funding for large-scale infrastructure projects. However, the EU is also in the process of implementing new rules as regards capital requirements for financial institutions (Solvency II), including insurance and pension funds. These requirements could be quite burdensome and undermine the potential leverage of project bonds. The author explains the link between project bonds and Solvency II and how they could coexist. He also sets up how and under which conditions project bonds would work.