UNE INSTITUTION FINANCIERE NOTEE AAA

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EIB Financing for Investment Projects in India
9 November 2006
http//www.eib.org
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EIB THE EUROPEAN UNION FINANCING INSTITUTION
European Investment Bank

• The EUs autonomous long-term financing
  institution created by the Treaty of Rome in 1958
• A policy-driven public bank
• in synergy with the other EU institutions and
  without burdening the public purse, the EIB
  contributes to the realisation of investment
  projects that further the economic, social and
  cooperation priorities of the EU.

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EIB LENDING OUTSIDE THE EU EIB as a partner for
economic development
European Investment Bank

• 11 of EIB lending supports projects outside the
  EU (EUR 5.1 bn in 2005)
• Outside the Union the EIB implements the
  financial components of agreements concluded
  under European development aid and cooperation
  policies
• Supports investment projects in some 150
  non-member countries throughout the world
• The Banks terms of reference outside the EU are
  determined by multi-annual mandates entrusted to
  it by the EU Member States

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ASIA LATIN AMERICA DEPARTMENT
European Investment Bank
ALA Mandate

• Operations in Asia and Latin America (ALA)
  started in 1993.
• To date, the Bank has lent EUR 4.7bn in ALA
  region, with 93 loans in 23 countries.
• During the period Feb. 2000- Jan. 2007, the EIB
  operates in ALA on the basis of a EUR 2.5 bn
  lending mandate.
• In exceptional circumstances, financing can be
  extended outside the Mandate, with the
  authorisation of the Board of Governors of the
  EIB (EUR 500 M for the financing of the Beijing
  Airport expansion).

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ASIA LATIN AMERICA DEPARTMENT
European Investment Bank
ALA Mandate

• Eligibility
• Projects must be in the mutual interest of the
  host country and the European Union (EU).
• The EIB gives priority to private sector projects
  with a European participation, such as
• Projects carried out by subsidiaries of EU
  companies or by joint-ventures involving EU
  companies or, in a second place
• Projects involving significant and visible
  transfers of technology and/or know-how from
  Europe
• but also supportive of public sector projects
  that feature strong mutual interest (climate
  change, regional integration)

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WHO CAN BORROW?
European Investment Bank

• Private sector companies
• Subsidiaries of European companies
• Local-European Joint-Ventures
• Banks global loans to support projects of
  mutual interest (on-lending to eligible final
  beneficiaries)
• Public sector borrowers
• implementing a project of mutual interest for
  the host country and the EU (could be eligible
  Public Private Partnerships that involve EU
  shareholders or technology transfer)

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FINANCING PROJECTS IN ASIA
European Investment Bank

• In Asia, the EIB offers one product only, namely
  medium- and long term loans.
• Typical direct loans have been in the order of
  EUR 20-60 millions
• EIB loans are project-linked, oriented to the
  financing of the fixed asset component of an
  investment
• The EIB loan can finance only up to 50 of total
  project costs (complementarity to other sources
  of financing)
• Eligible sectors industry, mining, public
  infrastructure (energy, transport,
  telecommunications, water supply), services
• For smaller projects the EIB can lend indirectly
  through Global Loans/Credit lines for allocations
  of up to EUR 12.5 million.

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GENERAL OPERATIONAL ISSUES
European Investment Bank

• Projects financed by the Bank must be
• economically justified,
• technically viable,
• financially self-supporting and
• in line with environmental and social standards
• All projects financed by the Bank are appraised
  by a multi-disciplinary team confidentiality is
  always respected.
• Appropriate procurement procedures are required
  (International Competitive Bidding when possible).

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FAVOURABLE LENDING CONDITIONS
European Investment Bank

• Long term maturity of up to 12 years
  (infrastructure projects up to 25 years)
• Fixed and variable rate loans in any of the
  leading convertible currencies (USD, EUR, GBP,
  JPY).
• Low cost financing The EIB operates on a
  non-profit making basis
• it on-lends the funds it borrows in the
  international capital markets, adding a thin
  margin to cover its operating costs.
• For example
• Quoted interest rates are all-in costs the EIB
  normally charges no up-front structuring fees or
  commitment fees, with the exception of a EUR
  40,000 appraisal fee.
• Exemption from withholding tax carve-out of
  selected political risks from the guarantee.
• For private sector projects add guarantee fee
  charged to the borrower by guarantors.

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SECURITY
European Investment Bank

• Security for the EIB loan is negotiated
  individually and involves normally a
• bank or corporate guarantee for private sector
  projects,
• Sovereign guarantee for public sector borrowers.
• For private sector projects, the guarantee covers
  essentially the credit risk of the borrower
  political risks are carved out of the obligations
  of the third party guarantor.
• The political risks that are not assumed by the
  guarantors are the risks of non-transfer of
  currency, expropriation and war, civil strife and
  denial of justice upon breach of contract.

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Break-down of EIB Activity in Asia
European Investment Bank
EIB Loans in Asia Eur bn 2.03 November 2006
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European Investment Bank
European Investment Bank
EIB Loans in Asia Sectoral Distribution EUR bn
2.03 bn November 2006
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COOPERATION TO DATE WITH INDIA
European Investment Bank

• Two loans extended by EIB to Indian borrowers
• EUR 55 M to Powergrid in 1993
• EUR 50 M to Rabobank in 2003
• This accounts for only 2.5 of total EIB
  financing in ALA and 5 of total financing in
  Asia.
• India accounted for only 1.9 of the stock of
  outward FDI from the EU in Asia (excl. Japan) and
  Latin America.
• This level of EIB financing in India does not
  reflect Indias economic potential nor the
  importance of the strategic partnership between
  the EU and India.

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EIB FUTURE COOPERATION WITH INDIA
European Investment Bank

• Our mission contribute to furthering the EU
  cooperation with India.
• EIB aims at stepping-up its support of projects
  of mutual interest in India.
• Engage in a dialogue with companies and banks.
• Sectoral focus infrastructure, environment with
  a particular focus on combating climate change.

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CAPITALISE ON THE BENEFITS OF EIB FINANCING
European Investment Bank

• Will continue to be demand-driven
• The EIB has a lot to offer to support investment
  projects in India
• Long maturities
• Low cost (AAA rating)
• Catalyst for other funding EIB participation can
  facilitate mobilisation of other financing
  through its expertise and experience
• EIB preferred creditor status (exemption of
  withholding taxes and commitment of governments
  to make foreign exchange available to borrowers
  to service debt to the EIB)
• Risk sharing (coverage of political risks)
• We look forward to developing our cooperation
  with Indian authorities, companies, and banks to
  support effectively the deepening of the
  partnership between India and the EU.

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HOW TO PROCEED?
European Investment Bank

• General information on EIB is available on
  www.eib.org
• A brochure that explains more in detail the EIBs
  ALA facility can be obtained from
  http//www.eib.org/Attachments/country/ala_en.pdf
• Loan applications for large-scale projects may be
  sent directly and with no particular formalities
  to Head of Division Matthias Zöllner
  tel [phone] - e-mail
  m.zoellner_at_eib.org
• Deputy Head of Division Philippe Szymczak
• tel [phone] e-mail
  p.szymczak_at_eib.org

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THANK YOU
www.eib.org