For a body which has failed to ever produce audited accounts the EU seems very keen on distributing cash to promote greater union in the Community, Handy Shipping Guide reports. The latest announcement from Brussels last week promised €50 billion in investment - €31.7 billion of which is to improve private and freight transport infrastructure. The commission further stated that it believed €500 billion would be needed by 2020 to realise a true pan European transport infrastructure, including €250 billion for removing bottlenecks and completing missing links in the core network.
The thrust of the EU argument is that previously all transport projects have tended to run on national, rather than international, lines. This new initiative titled the ‘Connecting Europe Facility’ includes €10 billion ring fenced for the ‘cohesion countries’, which for those unfamiliar with EU double speak means those countries currently seen as needing to survive financially to prevent the break up of the Eurozone i.e. Greece, Spain, Portugal and Ireland.
To finance this new initiative the EU has ‘adopted the terms for the Europe 2020 Project Bond Initiative which will be one of a number of risk-sharing instruments upon which the facility may draw in order to attract private finance in projects’ with a scheduled start for the pilot phase of the initiative next year. Basically this means that with the withdrawal from the scene of specialist ‘monoliner’ insurers (after getting their fingers burnt in the sub prime collapse) no one in the private sector is prepared to underwrite the risks pertaining to major infrastructure projects so the EU intends to boost the credit rating of private developers with ‘Project Bonds’.
The Commission is proposing to launch the pilot phase, managed by the European Investment Bank, within the current Multiannual Financial Framework. The pilot phase will be based on an amendment of the Trans-European Networks (TEN) Regulation and the Competitiveness and Innovation Framework Programme (CIP) Decision and will draw on the budget lines of these programmes up to a total of €230 million.
Similar to the Risk Sharing Finance Facility and Loan Guarantee instrument for TEN-Transport projects, the EU budget would be used to provide capital contributions to the EIB in order to cover a portion of the risk the EIB is taking when it finances the eligible projects. While the EU budget will provide some risk cushion for the EIB to finance the underlying projects, the EIB would cover the remaining risk. When EU budget funds are combined with the EIB financing, the total budget amount of EUR 230 million is expected to mobilise investments of up to €4.6 billion.
In the pilot phase the idea is to focus on 5-10 projects, concentrating on those that are at a relatively developed stage of the bidding and financing process or require refinancing after the construction phase, in one or more of the three targeted sectors of transport, energy and broadband. The EU insists the ‘stronger use of innovative financial instruments is needed to multiply the outreach of the EU Budget’.
Cynics may well say that an organisation that can’t publish its own accounts to the satisfaction of its auditors needs to be careful exactly how it invests in innovative financial projects. Critics will point out that this proposal is simply a guaranteed Public Private Partnership (PPP) which may prove a minefield when it comes to retrieving the outlay if problems such as cost over runs are encountered. Such schemes are often criticised as they remove much of the risk for private investors whilst fetching inordinately large profits for some. EC President Jose Manuel Barroso firmly believes in the future of the investment however praising the possibilities for greener freight and private transport methods and saying:
"The Connecting Europe Facility and the Project Bond Initiative are a perfect demonstration of the value added that Europe can provide. These proposals will help to build the roads and railways that are so important to our citizens and businesses. We are closing the missing links in Europe's infrastructure networks that otherwise would not be built. This investment will generate growth and jobs and at the same time make work and travel easier for millions of European citizens and businesses."
Photo: One successful transport project – the Most Beautiful Bridge in the World – le Viaduc de Millau in Southern France designed by Sir Norman Foster.
The thrust of the EU argument is that previously all transport projects have tended to run on national, rather than international, lines. This new initiative titled the ‘Connecting Europe Facility’ includes €10 billion ring fenced for the ‘cohesion countries’, which for those unfamiliar with EU double speak means those countries currently seen as needing to survive financially to prevent the break up of the Eurozone i.e. Greece, Spain, Portugal and Ireland.
To finance this new initiative the EU has ‘adopted the terms for the Europe 2020 Project Bond Initiative which will be one of a number of risk-sharing instruments upon which the facility may draw in order to attract private finance in projects’ with a scheduled start for the pilot phase of the initiative next year. Basically this means that with the withdrawal from the scene of specialist ‘monoliner’ insurers (after getting their fingers burnt in the sub prime collapse) no one in the private sector is prepared to underwrite the risks pertaining to major infrastructure projects so the EU intends to boost the credit rating of private developers with ‘Project Bonds’.
The Commission is proposing to launch the pilot phase, managed by the European Investment Bank, within the current Multiannual Financial Framework. The pilot phase will be based on an amendment of the Trans-European Networks (TEN) Regulation and the Competitiveness and Innovation Framework Programme (CIP) Decision and will draw on the budget lines of these programmes up to a total of €230 million.
Similar to the Risk Sharing Finance Facility and Loan Guarantee instrument for TEN-Transport projects, the EU budget would be used to provide capital contributions to the EIB in order to cover a portion of the risk the EIB is taking when it finances the eligible projects. While the EU budget will provide some risk cushion for the EIB to finance the underlying projects, the EIB would cover the remaining risk. When EU budget funds are combined with the EIB financing, the total budget amount of EUR 230 million is expected to mobilise investments of up to €4.6 billion.
In the pilot phase the idea is to focus on 5-10 projects, concentrating on those that are at a relatively developed stage of the bidding and financing process or require refinancing after the construction phase, in one or more of the three targeted sectors of transport, energy and broadband. The EU insists the ‘stronger use of innovative financial instruments is needed to multiply the outreach of the EU Budget’.
Cynics may well say that an organisation that can’t publish its own accounts to the satisfaction of its auditors needs to be careful exactly how it invests in innovative financial projects. Critics will point out that this proposal is simply a guaranteed Public Private Partnership (PPP) which may prove a minefield when it comes to retrieving the outlay if problems such as cost over runs are encountered. Such schemes are often criticised as they remove much of the risk for private investors whilst fetching inordinately large profits for some. EC President Jose Manuel Barroso firmly believes in the future of the investment however praising the possibilities for greener freight and private transport methods and saying:
"The Connecting Europe Facility and the Project Bond Initiative are a perfect demonstration of the value added that Europe can provide. These proposals will help to build the roads and railways that are so important to our citizens and businesses. We are closing the missing links in Europe's infrastructure networks that otherwise would not be built. This investment will generate growth and jobs and at the same time make work and travel easier for millions of European citizens and businesses."
Photo: One successful transport project – the Most Beautiful Bridge in the World – le Viaduc de Millau in Southern France designed by Sir Norman Foster.