News / Europe 2020 Project Bond Initiative. Consultation process

Europe 2020 Project Bond Initiative. Consultation process

🕔 July 4, 2011

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The European Commission (EC) launched in February a consultation process on the Europe 2020 Project Bond Initiative, which aims to boost the funding of projects with long-term revenue potential in line with the Europe 2020 policy. this consultation process has been supported by the European Commission President José Manuel Barroso who pledged in December 2010 he would "insist" on tabling plans to introduce EU project bonds to fund infrastructure in Europe.

Months later the European Investment Bank President Philippe Maystadt also supported the idea:
"Infrastructure finance in Europe has suffered since the financial crisis, and banks face new constraints on long-term lending. Project bonds could be a way to attract capital from other investors, such as pension funds and insurance companies, and be a useful addition to traditional financing options.
Europe 2020 Project Bond Initiative (according to the European Commission)
The Europe 2020 Strategy for smart, sustainable and inclusive growth sets out a vision of Europe's economy over the next decade. To underpin the Europe 2020 and in order to complete the internal market, record investment volumes will be needed over the next decade in Europe's transport, energy, information and communication networks. Preliminary estimates point to investment needs of EUR 1.5 to 2 trillion This reality, combined with the fact that government budgets face severe pressures, make it crucial to foster the participation of the private sector in the financing of infrastructure projects.
The principal idea behind the Europe 2020 Project Bond Initiative is to provide EU support to project companies issuing bonds to finance large-scale infrastructure projects. The Initiative aims to attract additional private sector financing of individual infrastructure projects by improving the rating of the senior debt of project companies, thereby ensuring that this can be placed as bonds with institutional investors. The Commission's key role will be risk-sharing with the EIB (or other financing partners), enabling them to provide the described credit enhancement. No bond issuance will be required by Member States' governments, the EU or the EIB for this purpose.
For further information on how the bonds would help infrastructure financing, you can see this presentation that explains the initiative.
You can also read the document presenting the consultation process in which you can find the questions to the intesrested parties.
The questions were the following:
General questions 
1) Is the chosen mechanism likely to attract private sector institutional investors to the sectors of transport, energy and ICT in particular? If you are an investor, would you be prepared to buy such project bonds?
2) Are there other sectors with large-scale infrastructure financing needs that should be included?
Specific questions 
3) Would the credit enhancement facilitate/accelerate the conclusion of financing packages?
4) What minimum rating of the bonds would be sufficient to attract investors?
5) What degree of credit enhancement would be necessary to achieve this rating?
6) Which impact would the Initiative have on financing costs and on maturities?
7) Is it essential that a single entity acts as controlling creditor?
The stakeholders' consultation on the Europe 2020 Project Bond Initiative was closed on 2nd of May. A total of 100 written contributions were submitted. In addition, 31 answers were received to the online questionnaire. Read the summary of answers.
To see details of all the stakeholders' consultation, they follow:
American Chamber of Commerce to the European Union [208 KB]- APG [80 KB]- APG_APPENDIX [16 KB]- Association of British Insurers (ABI) [42 KB]- Assured Guaranty [541 KB]- Austrian Federal Economic Chamber (WKO) [94 KB]- Austrian Savings Banks Association (OSPV) [64 KB]- Bundesverband Öffentlicher Banken Deutschlands [111 KB]
BUSINESSEUROPE [659 KB]- Cable Europe [126 KB]- Caisse des Dépôts [114 KB] CECODHAS Housing Europe [68 KB]- CEE Bankwatch Network Urgewald CRBM [235 KB]- Chatham House [30 KB]- Citigroup Global Markets Limited [32 KB]- Climate Bonds [329 KB]- Community of European Railway and Infrastructure Companies (CER) [258 KB]- Confrontations Europe [43 KB] Crédit Agricole-CIB [26 KB]- Dexia [38 KB]- Dutch government [78 KB] Earth Energy Zusammenfassung Geothermie [2 MB]- EDF Energy [81 KB]- EGF BTP [18 KB] EnBW [43 KB] ENI [832 KB]- ENTSO-E [37 KB]- EURELECTRIC [284 KB]- European Aeronautic Defence and Space Company (EADS) [223 KB]- European Association of Public Banks (EAPB) [160 KB]- European Centre of Employers and Enterprises providing Public Services (CEEP) [166 KB]- European Construction Industry Federation (FIEC) [31 KB]- European Federation for Retirement Provision (EFRP) [53 KB]- European Institute of Public Administration (EIPA) [88 KB]- European Wind Energy Association (EWEA) [129 KB]- Fédération Française des Sociétés d'Assurances (FFSA) [346 KB]- Fondazione ResPublica [263 KB]- FTTH Council Europe [314 KB]- Gas Infrastructure Europe (GIE) [381 KB]- Gas Infrastructure Europe (GIE) Annex [316 KB]- German Savings Banks Association (DSGV) [64 KB] Harbourmaster [221 KB]- ICAEW [77 KB]- Institut de la Gestion Déléguée (IGD) [824 KB] Intelligent Energy [200 KB]- Intesa Sanpaolo [43 KB]- Investment Management Association (IMA) [73 KB]- IT PPP Task Force [143 KB]- Jukka Rannila [90 KB]- Kommunalkredit Austria [121 KB]- KPMG [58 KB]- Linklaters [141 KB]- Mainstream Renewable Power [542 KB]- MBIA TRIFINIUM [11 MB]- MEP Sylvia Goulard [20 KB] Meridiam Infrastructure [414 KB]- Ministry of Energy of the Republic of Lithuania [35 KB]- Ministry of Finance, Sweden [59 KB]- Ministry of Finance, the economy and investment, Malta [21 KB]- National Development Finance Agency, Ireland [58 KB]- National Grid [22 KB]- Natixis [98 KB]- Nordic Investment Bank [86 KB]- OSEO [46 KB]- PKP PLK S.A. [4 MB]- Polish Ministry of Finance (en) [70 KB] RBS [66 KB]- Red Eléctrica de España [34 KB] Remy Cohen [43 KB]- Secrétariat général des affaires européennes (SGAE) [40 KB] - SEOPAN [275 KB]- Simmons & Simmons [96 KB]- SUEZ ENVIRONNEMENT [78 KB]- Thales [33 KB]- Third Generation Environmentalism (E3G) [105 KB]- Trans-Adriatic Pipeline [409 KB]- Transport & Environment [197 KB]- UNIFE [215 KB]- Vodafone [64 KB]- WWF European Policy Office [77 KB]- Zurich Annex1 Moodys PPP Construction Risk [4 MB]- Zurich Annex2 Aversarial On Demand Bonds Return [357 KB]- Zurich Global Corporate [46 KB]The way forward
The issues raised in the responses are currently being studied by the Commission services with a view to incorporate them into the legislative proposal and the impact assessment as necessary, before the end of the year.
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