Brussels, 09/03/2005 (Agence Europe) - On 7 March, the European Commission adopted a communication by written procedure suggesting the creation of a European loan guarantee instrument to help finance 30 priority trans-European transport network projects (TEN-T). The aim of the proposal is to stimulate private investment and public-private partnerships (PPP) by limiting the risk of losses during the start-up phase of the projects. The communication is to be examined by the Ecofin Council.
It was at the request of the European Council of December 2003 and after consultation with the market players that the Commission decided it would be appropriate to suggest creating the new instrument. According to estimates made, the Commission would have a budget of one billion euros to cover up to EUR 20 billion of debt for the projects concerned, the communication states. Financing of this instrument would be covered by the new financial regulation for TEN, presented by the Commission in the context of the 2007-2013 financial perspectives. In practice, the EU guarantee would be composed of a liquidity reserve, called the “standby credit line”, which would only be drawn upon in cases where cash flows are insufficient to service senior debt. These standby credit lines would cover nearly 10% of the total preferential debt (up to 20% in the high risk cases), for a maximum of five years. If the guarantee is used, the Commission would obtain a financial claim which would rank subordinate to senior debt, but senior to equity. This debt should be paid back “with interest” by the borrower if the project becomes profitable. In order to be eligible for the European loan guarantee, projects should also benefit from comparable loan guarantees from national public authorities, the communication stipulates. Once approved, the new instrument, whose management would be assured by the European Investment Bank (EIB) could be launched in 2007, a Commission press release states.