The European Commission and European development banks on Wednesday 22 January signed four new financial guarantee agreements under the EU's External Investment Plan (EIP), which are expected to generate €2 billion of investment in renewable energy, infrastructure and urban services, while improving access to finance for SMEs in sub-Saharan Africa and the EU's neighbourhood.
These guarantees, worth a total of €216 million of public funds (EU budget), are intended to reduce the risks for private investors. They were signed with the European Bank for Reconstruction and Development (EBRD), the European Investment Bank (EIB), the German KfW Group and the Spanish Development Agency (AECID) at the fourth meeting of the Strategy Board of the External Investment Plan. 3 guarantees had already been signed in 2019 (see EUROPE 12367/12, 11624/3).
The €100 million agreement signed with AECID will help cities in sub-Saharan Africa and the neighbourhood to develop public-private partnerships and reduce risks for private investors engaged in financing urban infrastructure. It will focus on energy efficiency, flood protection, public transport, water purification and solid waste treatment. The guarantee gives lenders the assurance that they will recover at least part of their investment in the event of losses and reduces borrowing costs.
The €50 million agreement signed with the EBRD will help to increase investment in renewable energy in Ukraine and the EU's Southern Neighbourhood, in particular in Jordan, Lebanon and Tunisia. The guarantee will help generate up to €500 million of investment and is expected to provide 340 MW of additional installed capacity for renewable energy. "We are covering the risks in the construction phase of the project for 15 years", a European source said Thursday.
The €46 million agreement signed with the KfW Group will help to expand renewable energy production in sub-Saharan Africa, reduce the region's CO2 emissions and increase energy efficiency. It will partly cover the long-term commercialisation risks associated with renewable energy projects such as wind farms and solar panel installations.
The €20 million agreement with the EIB aims to provide affordable financing for SMEs, especially young entrepreneurs, women entrepreneurs and start-ups, by offering local banks and financial institutions first-loss protection if borrowers are unable to repay the loan.
"Every euro from the EU budget generates more than 10 euros on the ground and every euro of guarantee generates 3 euros of investment", said an EU official.
The EIP is expected to raise more than €47 billion of public and private investment with €4.5 billion of European funds and €1.5 billion of guarantees. There are still 20 guarantee agreements to be signed. (Original version in French by Aminata Niang)