Brussels, 28/02/2011 (Agence Europe) - Over the next decade, massive investment in areas such as Europe's transport, energy, information and communication networks will be needed. But today public budgets are in need of consolidation. To address this funding issue, the European Commission and the European Investment Bank (EIB) came up with the idea of bonds to fund projects with long-term revenue potential in line with EUROPE 2020 policy priorities (see EUROPE 10323). The aim of this initiative is to help private project companies to attract capital market funding from investors such as pension funds and insurance companies. The Commission and the EIB will be to absorb part of the risk of a project. The first stage of the “Project Bond Initiative” began with the launch of a consultation of interested parties on Monday 28 February. The deadline for submissions is 2 May 2011.
The “EUROPE 2020 Project Bond Initiative” will seek to provide EU support to private “project promoters” issuing bonds to finance in particular infrastructure projects. This should help them attracting capital market financing from institutional investors. The key role of the Commission and the EIB will be to absorb part of the risk of a project. Technically, the instrument will improve the rating of the senior debt issued by the project entities. This will ensure that such debt can be placed as bonds with institutional investors. As the EU participation will be capped, there will be no unlimited or contingent liabilities for the EU budget. The initiative could be available to projects that are assessed to be economically and technically feasible, cost-effective and that have a prospect of financial viability. Options for the increased use of financial instruments for EU policy goals, as well as for their streamlining within the next multiannual financial framework for the period after 2013, were presented in the EU Budget Review.
Over the next 10 years, huge levels of investment in Europe's transport, energy, information and communication networks will be needed in order to underpin the EUROPE 2020 flagship initiatives. Developing smart, upgraded and fully interconnected infrastructures will foster the completion of the internal market. Preliminary estimates point to investment needs of €1.5 to €2 trillion for Trans-European Transport Networks, the energy sector and information and communication technologies. These needs, combined with the fact that government budgets face severe constraints, make it crucial to foster the participation of the private sector in the financing of infrastructure projects. European Economic and Monetary Affairs Commissioner Olli Rehn said: “EU budget resources must be used more effectively so that such projects attract capital market financing”.
On 11 April, the Commission and the EIB will organise a conference on the Project Bond Initiative which will feed into the consultation process. Following the completion of an impact assessment, the Commission will bring forward a proposal for the implementation of the EUROPE 2020 Project Bond Initiative. The consultation document is available at the following address: http://www./ec.europa.eu/economy_finance/consultation/pdf/bonds_consultation_en.pdf (O.L./transl.rt)